Policy paper

Competition reform: policy summary briefing

Updated 21 December 2023

Introduction

1. Economic growth sits at the heart of government’s drive to build a better future for the UK. Free markets with effective competition and high consumer standards drive growth, innovation and productivity. We intend to reinforce and bolster our successful competition law system, including to make the most of the UK’s position outside the EU. This requires the Competition and Markets Authority (CMA) to have proportionate powers and to use them effectively and in a timely manner.

2. Competitive markets deliver good value, high-quality products for their customers because firms who fail to deliver will be overtaken by their competitors. Competitive markets enable innovative, dynamic companies to enter markets more easily, compete on level terms, grow and gain market share.

3. The existing competition regime works well. In the three years to 2021 to 2022, the estimated average annual consumer saving from the CMA’s competition work was £2.1 billion.^{[footnote 1]} The Bill therefore refines the CMA’s Competition Act 1998, mergers and markets tools, ensuring that its investigation of competition problems is better targeted at the areas of greatest potential harm and that enforcement action will be faster and more effective. It minimises business burdens where possible and safeguards rights of defence.

4. Overall, the competition reforms will help deliver a level playing field for business, where those that innovate and respond to customer demands can be rewarded by increased market share while those that seek to use unfair practices will be tackled quickly by the regulator. The reforms will support productivity gains and economic growth across the UK and benefit consumers by helping to ensure they can choose from a range of goods and services which are priced competitively.

How do the changes to the regime work?

The Bill brings together a series of reforms across the CMA’s competition tools. Where relevant, these apply to the sector regulators^{[footnote 2]} when exercising their concurrent competition powers. The reforms include:

1. Rebalanced merger controls

The Bill will focus CMA merger assessments on those transactions with the greatest potential to weaken competition. For example, the CMA will be better able to examine mergers between businesses in different parts of a supply chain, as well as acquisitions made by big multi-industry companies. Mergers involving smaller companies will no longer be reviewed as they are less likely to damage competition. To speed up merger review in some cases, the Bill will introduce an enhanced ‘fast track’ process allowing some merging businesses to avoid an unnecessary initial investigation.

2. More efficient, flexible, and proportionate market inquiries

The Bill will better enable the CMA to narrow its investigations to focus on the particular aspects of a market where competitive concerns arise. It will introduce a power for the CMA to accept resolutions to competition problems from businesses at any stage in a market inquiry. In addition, the Bill will introduce a new power for the CMA to trial certain remedies to competition concerns to ensure they work as well as possible. There will also be a power for the CMA to vary remedies that are not effectively tackling the problems they were designed to address.

3. Stronger powers to investigate illegal anticompetitive conduct

The Bill will ensure that anti-competitive agreements that harm UK markets and consumers are prohibited under UK law, regardless of where the agreement was ‘implemented’. Currently the CMA can only examine agreements ‘implemented’ in the UK which is too restrictive in a digital age. The Bill will also strengthen the CMA’s evidence gathering powers in Competition Act 1998 investigations. These include a new duty to preserve evidence and powers to interview a broader range of individuals and obtain information stored remotely when executing a warrant.

4. Faster and more effective investigation and enforcement

The Bill will place a new duty of expedition on the CMA, emphasising the need for swift decision-making while preserving the importance of robust decisions and procedural rights. The CMA will have greater powers to sanction companies that refuse to comply with investigations and remedies, serving to deter egregious behaviour. Further, to facilitate greater cooperation between competition regulators in globalised markets, the Bill will make overseas disclosures of information more efficient and enable the CMA to use its powers to provide investigative assistance to overseas authorities.

What do these reforms mean for UK business?

The Bill will refine UK competition investigation and enforcement to be better targeted, faster and more effective, while also continuing to be accompanied by appropriate rights of defence. For UK businesses this means:

1. More targeted CMA investigations

For example, the Bill will focus the merger regime on those transactions most likely to be harmful by increasing the turnover-based threshold for the target of a merger from £70 million to £100 million. In addition, a new safe harbour will provide small and micro enterprises with the certainty that mergers between them will not be examined. These measures balance effective consumer protection with reduced regulatory burden on businesses.

2. Greater scope for firms involved in CMA investigations to be freed up sooner

For example, a new duty of expedition on the CMA will help to ensure that companies are not tied up in regulatory process for any longer than necessary. An enhanced fast-track will shave weeks off the process for some merging businesses by allowing them to go straight to an in-depth investigation. In addition, by enabling the CMA to focus its market investigations on the areas it is most worried about, the asks of businesses will be minimised. There will also be more opportunities for firms to offer solutions to competition problems and bring market inquiries to a close.

3. The vast majority of businesses who play by the rules will be able to compete on a level playing field, flourish and grow

The competition reform package in the Bill will help ensure that the free market can operate effectively with anticompetitive activity swiftly tackled. For businesses this means, for example, that those purchasing supplies from other companies will have a range of products to choose from and will pay no more than they should. Equally, entrepreneurs with innovative ideas will be better able to enter markets, compete and grow.

What do these reforms mean for UK consumers and families?

For consumers more competition in markets means lower prices and greater choice of innovative products and services, all delivered with excellent customer service. The Bill will strengthen the CMA’s ability to drive competition in markets, to the benefit of consumers by:

1. Better enabling the CMA to examine activity which raises competition concerns and ensure solutions work as well as possible

For example, the Bill will enable the CMA to investigate and enforce against anti-competitive agreements which affect UK markets and consumers regardless of which country the agreement is ‘implemented’ in. Reforms to the CMA’s market inquiry tool will allow it to test consumer facing remedies to make sure they are as effective as possible as well as allowing solutions to competition problems to be replaced if they’re subsequently found to be ineffective.

2. Supporting the CMA to conduct case work faster, therefore bringing competition concerns and related consumer harm to an end sooner

For example, the new duty of expedition will bolster the CMA’s ability to combat delaying tactics to reach its conclusions and restore competition faster. New opportunities for companies to offer resolutions to competition concerns earlier in market inquiries will see some cases closed faster and related consumer detriment curtailed sooner.

3. Delivering an enhanced toolkit to deter rogue traders from engaging in anti-competitive activity in the first place, thereby avoiding associated consumer harm

For example, stronger evidence gathering powers in Competition Act 1998 investigations combined with new civil sanctions for companies who attempt to obstruct, delay or provide false information during investigations or who refuse to comply with solutions to competition problems will help make rogue traders think twice before engaging in anti-competitive activity.

1. CMA. 2022 CMA Impact Assessment 2021 to 2022 ↩

2. The sector regulators involved in the concurrency arrangements alongside the CMA are: Civil Aviation Authority, Office of Communications, Gas and Electricity Markets Authority, Financial Conduct Authority, Payment Systems Regulator, Office of Rail and Road, Water Services Regulation Authority and Northern Ireland Authority for Utility Regulation. ↩