Policy paper

Strategic steer to the Competition and Markets Authority 2023

Published 23 November 2023

Competition in the UK economy drives innovation and productivity and benefits consumers by delivering better value for money.

Ensuring competition remains strong and fair is critical to driving the long-term economic health of the UK, generating greater choice, lower prices and better-quality goods and services, whilst promoting supply-side growth, investment and market resilience. Free, open and competitive markets have consistently generated productivity benefits and driven significant innovation and investment, all central components of the shared economic prosperity of the UK. A world class competition regulator supports each of these goals whilst protecting and enhancing the reputation of the UK as a great place to do business. The UK government has a strong track record of championing robust and fair competition, including the creation of the Competition and Markets Authority and working with regulators to monitor and promote the UK competitive landscape.

The CMA’s State of Competition Report, published last year, recognised that effective competition happens when businesses compete to win customers by offering them a better deal. When firms compete effectively with each other, they cannot raise prices, or cut quality and service, without losing business. It made a convincing case that one mechanism to help increase productivity across the UK is through boosting competition.

The report also highlighted the competition challenges we face in the UK:

• some markets in the UK are dominated by a small number of companies
• consequently, consumers, particularly those on lower incomes, spend more on essential services where this market concentration is most evident
• average mark-ups of prices over costs have increased, delivering less value for money for both individual and business consumers
• competition is particularly weak in some parts of the digital economy which continues to grow and re-shape the way we live and work

The government’s Digital Markets, Competition and Consumers Bill seeks to reverse some of these trends. It will update and strengthen the UK’s competition regime, including through a new pro-competition regime for digital markets, and enhance the CMA’s consumer powers.

As the UK’s independent competition authority, the CMA ensures markets are competitive and operate in the interests of consumers (both individuals and businesses) and the wider economy. It has a range of tools to achieve this, including competition and consumer law enforcement, merger control, market studies and investigations, and the provision of advice to government. Since the UK’s exit from the European Union, the CMA’s remit over mergers and competition law enforcement has widened, allowing it to make decisions that reflect the UK’s interests. It has also been given important new functions in respect of the UK Internal Market and subsidy control.

This strategic steer sets out the government’s expectations for how the CMA should approach its work. The CMA should have regard to this steer when it sets its strategy and when it makes decisions on where to focus and prioritise its finite resources. The government’s overarching expectation is that the CMA should focus on achieving outcomes that help individual consumers and businesses to meet cost of living challenges, while also boosting sustainable growth and productivity, promoting resilience, and maintaining and enhancing the UK’s position as a leading global destination for investment. In particular, the government expects the CMA to:

• support investment, innovation and growth by promoting competitive markets, taking steps to increase the strength of competition across the UK economy, and focussing on markets that have a significant, economy wide impact
• prioritise action that addresses cost of living challenges – the CMA should prioritise proportionate interventions which will deliver better value for businesses and individual consumers
• respond to the challenges and opportunities created by the growth of the digital economy, ensuring new and fast-moving markets develop in ways that benefit individuals, businesses and the wider economy
• act as a thought leader at home and abroad, engaging on competition and consumer issues across the United Kingdom; and using its post-Brexit role to shape the international debate and response on key cross-border issues
• be a strong and independent voice, promoting understanding of competition and consumer law among individual and business consumers, and supporting government to make proportionate pro-competitive policy choices

The government continues to expect the CMA to deliver direct economic benefits to consumers of at least 10 times its relevant costs. It also expects the CMA to be as open as possible about the board’s priorities and decision-making as well as explaining, in its own plans and reports, how it is delivering against the expectations set by government in this strategic steer.

Promoting competition, investment, innovation and economic growth

Government expects the CMA to prioritise outcomes that promote competition, investment, innovation and boost economic growth.

The CMA should focus on:

• creating a pro-competition, pro-growth, pro-investment environment by increasing understanding of why competition in key markets is not as strong today as it could be and the impact that has on economic growth including through full use of its tools for merger control, enforcement action against anti-competitive behaviour and market and advocacy tools
• using the powers granted to it to monitor and intervene in markets where competition is not working well, or consumers are facing detriment. In all cases, the CMA should be bold in its promotion of competition and its benefits
• minimising the burdens on businesses engaging with the CMA. Consistent with businesses’ procedural rights, and the requirement on the CMA to be robust and fair in its analysis, the CMA should seek to deliver outcomes as quickly as possible.^{[footnote 1]}. To help achieve this, the government is proposing to introduce a statutory duty of expedition in relation to the CMA’s competition and consumer functions
• prioritising markets and sectors which have a disproportionate impact on economic growth and competitiveness or who have a low level of resilience
• promoting and developing competition in the growing market for sustainable products and services. Strong competition will support the UK to innovate and capture market share, maximise export opportunities and secure our energy supplies during the transition to Net Zero
• securing post-Brexit opportunities by ensuring its analysis, decisions and remedies are fully focused on maintaining competitive and well-functioning markets in the UK that benefit consumers and allow businesses to thrive, including advising government on opportunities to improve the UK’s pro-competition environment outside of the EU
• continuing to take a proportionate approach to interventions to ensure the CMA delivers the most value and continues to exceed the 10:1 target set by government

Addressing cost of living challenges

Government expects the CMA to prioritise action that addresses cost of living challenges.

The CMA should focus on:

• using its tools to address cost of living challenges, including prioritising markets where consumers spend large proportions of their income, at all levels of the supply chain. This should include markets for goods and services which are necessary for both businesses and households and where high costs have disproportionate impacts on household budgets
• vigorously tackle consumer rip offs and champion the voice of consumers in case prioritisation
• raising awareness among individual and business consumers of their rights and how to seek redress
• mitigate the cost of living by ensuring well-functioning and competitive markets, including by prioritising robust action against firms that abuse a dominant position or take advantage of consumers through unfair practices or unfair terms
• protecting consumer trust and confidence in the markets for sustainable products and services, including protecting consumers from misleading environmental claims in this rapidly growing sector

Maximising the opportunities for the UK from the growth of the digital economy

Government expects the CMA to enable UK consumers and businesses to capitalise on the opportunities created by the growth of the digital economy.

The CMA should focus on:

• using all its tools to promote competition and innovation in digital markets, ensuring consumers can shop online with confidence, enabling small businesses and start-ups to invest, thrive and grow
• being vigilant to tackle any abuses of dominance whilst recognising the value generated by digital markets in driving innovation and benefits to consumers
• working with other regulators – through cooperation arrangements and through the Digital Regulation Cooperation Forum – to deal with cross-cutting challenges arising from the growth of the digital economy, to maximise efficiencies, and to minimise unnecessary burdens on business
• preparing for its new role in overseeing the pro-competition regime for digital markets which the Digital Markets, Competition and Consumers (DMCC) Bill will seek to establish. The CMA should use the significant new powers due to be given to it by the DMCC Bill to responsibly address the barriers to competition in digital markets, supporting innovation, particularly for smaller and challenger firms
• continuing to build upon its expertise and evidence on competition issues and dynamic business models in digital markets

Leadership

Government expects the CMA to continue to strengthen its thought leadership role in the UK and internationally.

The CMA should focus on:

• reinforcing links internationally to address cross-border concerns and ensure effective co-ordination of regulatory action
• using its casework, and the world-class analysis that underpins it, to provide strong leadership on global competition and consumer issues particularly in relation to digital markets, including influencing other regulators to follow the UK model of proportionate regulation
• adopting an economy-wide approach to working with stakeholders across the UK
• providing guidance to other regulators, including through the UK Regulators Network, to give the benefit of CMA expertise to regulators thinking about future-regulation / wider competition questions
• leading work with sector regulators exercising concurrent competition powers, to ensure the overall competition regime is co-ordinated and that consumers are protected from illegal and anti- competitive practices
• building upon existing expertise to monitor, advise and report on the effective operation of the UK Internal Market. The Office of the Internal Market should continue to engage transparently and regularly with businesses, consumers, devolved administrations and professional bodies to support effective trading of goods and services across the UK

Being a strong and independent voice

The CMA is established in statute as an independent decision-making body, separate from ministers. In line with its powers and its independence, government expects the CMA to promote understanding of competition and consumer law among businesses and the public across the UK, and to support government in making pro-competitive policy choices.

The CMA should focus on:

• reporting publicly on the health of competition across the UK economy and on creating and maintaining markets that work well for all, including the steps the CMA is taking, and identifying issues that require government intervention
• being a prominent voice for all consumers and improving understanding of competition and consumer law among businesses and the public across the UK
• enhancing its role as an economic adviser to government and public bodies, using casework, intelligence gathering and analysis across its functions to make recommendations on regulatory, policy or legislative matters, and their implications for competition, consumers and businesses, at both national and local level
• responding to requests from ministers for advice, information and recommendations, engaging with departments to ensure that they are consistent with this Steer and the CMA’s medium-term priorities; and that any resulting work supports evidence-based, pro-competitive policymaking, representing a good use of its scarce resources
• continuing to share with parties and the public, where appropriate, the reasons behind CMA decisions to promote confidence in the regulatory regime
• raising objections at the highest levels if the actions of Ministers or civil servants are undermining competition in the economy or failing to protect consumers effectively.
• continuing to highlight the positive impact of competitive markets on consumer outcomes, innovation, investment and ultimately, economic growth

Government commitment

Government will listen to the CMA and remains committed to responding publicly to recommendations from the CMA within 90 days, clearly indicating the steps it will take in response to each recommendation or the reasons that it is unable to take a recommendation forward. There will be a presumption that the government will accept all the CMA’s published recommendations, unless there are strong policy reasons not to do so, and we expect other bodies and regulators to adopt this best practice approach in responding to the CMA’s recommendations.

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1. The statutory duty of expedition that forms part of the Government’s proposed reforms to competition and consumer law will support the CMA to make decisions as quickly as possible and reduce uncertainty for business. ↩