Aspirations and expectations for the Competition and Markets Authority

Speech given by CMA chief executive Alex Chisholm to the Ashurst General Counsel Conference on 14 November 2013.

Alex Chisholm, Chief Executive of the Competition and Markets Authority

Good afternoon, and thank you for the opportunity to speak to you today. I’m delighted to be here, and very grateful to Roger Finbow and Nigel Parr in particular for the invitation.

You have a very full programme, and I’m glad you’ve made room within it for us. It isn’t every year that we have a new competition agency in the UK, with a new mandate, new powers, and new leaders. Our work is relevant to every company represented here today. You all have to compete, and you want to know that the terms of competition are fair, and that there are effective public agencies upholding those terms. Many of you will also sell directly to consumers, so you need to know the requirements of consumer law, and that these requirements are assured by the public authorities.

My brief for today is to talk about our aspirations and expectations for the Competition and Markets Authority. Our overall aspiration is to be a world class competition authority that delivers excellent and timely results, and there is plenty to say on this subject. Indeed, over recent months, both David Currie, the CMA chairman, and I, have been setting out different elements of our shared vision for the new Authority and how it will achieve this end. As Corporate Counsel, I expect you have been following these statements.

Today, given the expert audience we have here, I want to focus on two important elements in our programme for the CMA that we haven’t yet spoken about in public, namely the transparency and predictability of the competition and consumer protection regime. These elements are key to ensuring that the regime delivers for consumers, for business, and for the economy.

I will give just a brief overview on where we are with the making of the CMA, and then I’ll be setting out:

  • why transparency and predictability are so important, and feature so heavily in our thinking
  • how the context that we work in affects these elements of the regime, and the limits and trade-offs we face in achieving them
  • and finally, what all of this means for you, and for the relationship between the CMA and business - and business advisers - in the future

The CMA - as it stands

We are now just 4 and a half months from the CMA taking on its new powers and responsibilities, and closer to that point than to the point when I started in this role. An immense amount of work has been done by a large group of people to help equip the CMA for its task - and I include in that the many constructive and helpful responses to our consultations on guidance and approach.

I won’t go too far into the practical detail of where things stand with the organisation of the CMA, but we are making good progress. The CMA is now a legally constituted organisation under the Enterprise and Regulatory Reform Act, with a heavyweight Board and a very strong senior team in place. Earlier today we announced the latest senior appointments, which we believe gives us a super mix of people with the skills and experience we need to help us accomplish our goals. As private sector lawyers, you will notice that 10 of the 17 appointments are lawyers with private sector experience.

Back in July and September, we updated guidance as to how we will approach our various responsibilities and the new and existing laws that we work within. In October we set out for consultation our vision, our values and our strategy for the CMA. And we’re now working to ensure that the CMA has the body of staff that it needs to do the job, mainly through transfers of staff from the OFT [Office of Fair Trading] and the CC [Competition Commission], but also with some continuing external recruitment where we have gaps.

In our public statements to date we have set out:

  • how we want to bring further efficiency to the merger control regime
  • how we want to refine the markets regime to make it even more impactful
  • how we plan to adopt a more strategic and partnership-based approach to consumer protection
  • how we want to redouble efforts to promote competition and consumer interests in the areas covered by sectoral regulation
  • how we want to build a really professional, high performance and united organisation that commands respect from the outside world, and where our staff are proud to work

I hope you will have noticed that we have also sought to put a strong emphasis on the CMA’s enforcement work. We know that this will be a litmus test for the credibility of the organisation. If the CMA cannot deliver effective enforcement of competition and consumer law, including the revised criminal cartel offence, this will undermine all of its efforts to protect consumers and markets, and it will have little weight to throw behind its arguments for better competition.

We’re pleased with the response we have been getting from other public bodies, notably the sectoral regulators who are joining with us in a new UK Competition Network, consumer bodies such as the Trading Standards Service and Citizens Advice, and other government departments, who have been keen to see the CMA become involved in important sectors such as energy and banking. We’ve also benefited greatly from our engagement with the political, business and consumer communities in the devolved nations, as we take very seriously our UK-wide obligations. And we have had a great deal of instructive feedback from competition advisers to business, including General Counsel.

This engagement and advice have helped shape the goals for the new organisation, which are set out in the Draft Strategy we published on 1 October. We’ll be setting out more detail as to what you can expect from the CMA in our Annual Plan for our first year, which we’ll be consulting on in the New Year.

Transparency and Predictability

So we have an ambitious agenda for the CMA. As I’ve said, overall we want to be one of the world’s best competition authorities, and this requires that we match and exceed the highest standards in our management of cases and projects. Those standards include many elements that are key to making the regime a success, and today I want to focus on two elements that have direct and significant implications for business - transparency and predictability.

All businesses - and public sector organisations, for that matter - have to be able to deal with uncertainty in order to succeed. But we need to have enough certainty to enable us to make rational, efficient decisions, and to plan for the future. So for business to invest and to succeed, it needs confidence in the environment in which it is operating; it needs to be able to see and to understand how the many variables it works with are going to change, and to be able to predict those changes with some certainty. Without a stable environment, investment and confidence are chilled, and in extreme circumstances - as we saw with the 2008 credit crunch - even the entire economy can seize up.

Delivering this transparency and predictability in the service of economic and other policy aims is thus a key aim across government and the public sector. For example, in the multi-billion pound investments being made in UK transport and power infrastructure, and the decisions by potentially footloose digital and financial businesses to build their European or global hubs in London. Over the long term, government and regulators have to deliver a stable environment for business to work within, minimising political uncertainty and maintaining the credibility of the regime.

This, of course, is where the CMA comes in. We are a part of that regulatory regime, a part of the government’s economic machinery and a part of the operating environment for UK business. It’s clear that the government has had the need for stability in these areas in mind in reforming the competition and consumer regime, focusing on the improvements it wants to see in the existing regime rather than tearing it up by the roots. We are taking the same view in setting up the CMA to build on the elements of the current system that already work well, such as use of independent experts in the Phase 2 decisions, and the recent improvements made to Competition Act procedures. At the same time, we are preserving consistency and predictability in approach and process by steering clear of changes to the substantive assessment of mergers or markets, where the law hasn’t changed, and not making changes to procedure where these aren’t required by law or organisational changes, or otherwise clearly justified.

But this isn’t to say that the CMA won’t be doing things differently, or that we won’t be making changes. We need to reflect the important changes made by the Enterprise and Regulatory Reform Act to the CMA’s powers and duties, notably:

  • tighter timetables for different parts of the competition process (for example an 18, rather than 24, month time limit on Phase 2 market inquiries, a 40 working day time limit on Phase 1 merger decisions)
  • stronger powers of investigation and information gathering in competition cases
  • a power to focus a Phase 2 market investigation on a particular feature spanning several markets
  • stronger powers to impose interim measures in mergers and markets, including for mergers greater “hold separate” powers and powers to undo previous integration if appropriate
  • removal of the dishonesty requirement in the criminal cartel offence, but with new defences allowed

We also need take account of the government’s Strategic Steer, published in October following a public consultation. This itself is an admirably transparent approach

Ultimately we need to deliver transparency and predictability by doing strong case work. If we consistently base cases on clear theories of harm, supported by good evidence, then we will be an effective and a reliable competition authority. If we make clear our approach in advance, and our reasoning in retrospect, we will be transparent, providing additional legitimacy to our decisions. By doing so we can give business a high level of confidence that the competition regime will not penalise them for doing the right thing - we are not a rent-collecting agency. Equally it must be clear that we will be active in seeking to stop firms from gaining an unfair advantage by doing the wrong thing. We want to ensure that the competition regime is as transparent and predictable as reasonably possible, so that everyone can understand how it works, and what they can do to ensure that they remain within the law. That is a tough goal - as you will appreciate more than some - but not one that we will shirk.

CMA guidance

One of the key ways in which we’re working to achieve that is through the guidance documents that I referred to earlier, and I’m pleased that Ashurst and many others have been able to contribute to these. In keeping with our overall approach, we are working to be as open and transparent as we can in these documents, although there does have to be a careful balance between this and other factors such as statutory requirements and the need to keep some flexibility to be able to respond to changes in context. We also have to bear in mind issues like commercial confidentiality, the rules of criminal law, and the need to ensure that the integrity of our investigations is not prejudiced. And it’s important that the CMA’s approach continues to develop in the light of the practical experience of dealing with cases under the new regime, rather than fixing an approach now that might later prove unsuitable.

But I want to assure that we are listening to the views of stakeholders on transparency and predictability issues, in particular through considering comments on our draft CMA guidance documents, but also from other feedback we gather as we make our way towards CMA launch in April. And we are looking very carefully at what changes might be needed to address these comments.

Key issues in this context raised by stakeholders include:

  • access to the decision maker in Phase 1 merger cases
  • how the new tighter timetables will be met and how case team transition will work between phase 1 and 2, in both markets and mergers cases
  • the identity of the decision-maker and the review procedure that will be used when assessing administrative penalties

So thank you again for your input here.

We have also received submission seeking more detail about the use of confidentiality rings and data rooms. I truly appreciate this last is an issue of real interest and concern to a number of firms and legal and economic advisers, and we’d like to address this so far as we can. However I should note our review is affected both by the need to reflect existing judgements of the Competition Appeal Tribunal, and not to pre-judge relevant cases that are currently before the CAT.

That same issue of needing to respect the judicial realm will also tend to limit our freedom to be more definitive in our guidance to the new criminal cartel offence.

Wider limits on transparency and predictability

There are also a number of wider limits on our ability to provide transparency and predictability as to how the CMA’s regime will operate - not least that we have other factors to balance against these aims and a range of other expectations to meet.

One of the key drivers for reform of the competition regime was the desire from government and from business to speed up investigations. The Secretary of State for Business described the length of time taken by the OFT and CC to complete their work as a “significant challenge” in the government’s consultation on the reforms. The CBI, in its response, said that “a more efficient and fast-reacting regime” was “critical for business restructuring and creating new jobs”.

We will thus be working to deliver faster and more efficient enforcement, and while we don’t see this as incompatible with transparency and predictability, there will inevitably be areas in which they have to be reconciled. We can only pile on so much process, procedure and rigour - however positive our aims in doing so - before we start to make the CMA slower and more cumbersome than anyone would want it to be.

This would obviously be unwelcome to business in cases such as merger inquiries. But even when we are investigating possible breaches of competition or consumer law, or assessing markets that do not seem to be working well for consumers, business is much better served by an authority that is able to complete its work within reasonable time periods. The reputation of firms under investigation can be adversely affected by the uncertainty. And where there has been anti-competitive behaviour, the victim firms will want it stopped as soon as possible, and may well want to seek speedy redress from follow-on actions.

It is of course not only business that operates in an uncertain environment: we have our own unpredictable variables to deal with. Right now, we are implementing the biggest reform of the UK markets regime in a decade and the biggest institutional reform in this area for 40 years. Most of this work is being done by staff from the OFT and the CC, setting up the new authority whilst keeping the existing ones delivering ‘business as usual’. It has given me great confidence for the new regime to see that the OFT and CC have continued to put out high-quality, important work throughout this transition period - the OFT’s workplace pensions study and the CC’s review of the audit market, to name but two - as well as outputs on a number of enforcement cases.

There are many other moving parts that we have to deal with in the form of other regulatory changes in progress at present. An indicative but not comprehensive list would include:

  • the government’s reform of consumer protection and education
  • new competition powers and roles for Monitor, CAA and the FCA, as well as more emphasis on competition for the other sectoral regulators
  • legislation on consumer rights that is currently being scrutinised by Parliament
  • government reviews of regulatory appeals and the balance of UK and EU competencies in competition and consumer policy
  • continuing changes in EU competition policy, practice and case law

Given all that we know about the value of certainty, we may be approaching the point at which it makes sense to take stock, and see how these various competition and consumer reforms bed in, before embarking on more.

In addition, there has been much recent political and media discussion about how best to deal with markets to ensure that they provide the kind of competition needed to get the best outcomes for consumers, especially in goods and services which affect the daily costs of living for UK households. Although it has been argued that this has increased uncertainty in some markets, a public debate about how best to serve consumers has to be welcome.

Whatever your views on the various proposals for changes within and across markets, it has been gratifying to note that all parties seem to agree that wherever markets are the right mechanism to deliver for consumers, ensuring that those markets are competitive in the long run is the best way to make sure that they do so. In our view, what we are seeing is not a lack of confidence in markets per se, but a growing frustration where the public feel that certain markets are not working well for consumers. And that is where the CMA has a key role to play, with its strong mandate to promote competition and make markets work well for consumers and for business through a judicious mix of investigation, enforcement and compliance work.

Enforcement and compliance

Whichever tool we are using, transparency and predictability will be key tenets of our work. Within the limits that are placed on us, the CMA is committed to appropriate openness and transparency about the work it does, how long that work is likely to take, and how it will engage with those directly involved in, or otherwise affected by, its work. Thus, both parties and other firms - for example those indirectly affected by our action such as competitors, or those in downstream markets affected by a matter we are investigating - should have confidence in the robustness of our investigations and that they will receive ‘due process’.

On the enforcement side, we need to select the right cases to investigate, and then deliver robust, well-reasoned and timely outcomes in those cases. Deterrence requires that no area or business considers itself exempt from competition law enforcement by virtue of its size or other characteristics. Over time, therefore, we will need a portfolio of cases covering both large and small markets and businesses, infringements that are more established and those that are less familiar, for example because they relate to new or developing business models, markets or behaviour. Fortunately we believe we will inherit a promising pipeline, including such cases, from the OFT.

As regards case delivery, we have a diverse toolkit to help facilitate enforcement action, some of which is new or expanded and some of which is retained from the existing regime. Some elements relate to making sure we can carry out our investigations effectively. For example, our new powers to impose penalties for failure to comply with investigatory requirements in Competition Act cases, and across our markets and mergers work, will allow us to incentivise swift compliance where parties do not provide us with relevant information we have required, or do not comply with mergers interim measures. Such penalties can help to deter future procedural non-compliance.

Other parts of the toolkit relate to sanctions for breaches of the law, such as financial penalties, director disqualification and imprisonment. Still others give us remedies to address the adverse consequences of deficiencies in competition in markets and merger cases. But we also know that the vast majority of firms want to comply with the law and to treat their customers fairly, and we want to build on the work and experience of the CC and OFT to facilitate that. This will include setting out our strategy, so that people can have a fair sense of our concerns and priorities, sharing our thinking through corporate documents and economic studies. It will include publishing guidance that enables people to predict with reasonable confidence how we will take our work forward.

And, as the existing authorities do, we will be setting out our thinking in detail in our decisions. Consider for example the recent very detailed CC provisional finding on the audit market - no light read at just under 1,500 pages - which set out very clearly and at great length the CC’s thinking. Similarly, OFT clearance decisions in mergers, and OFT infringement, commitments and no-grounds-for-actions decisions in CA98 cases, all provide rich detail on the application of the law.

I will also want CMA officials to assist businesses through appropriate advocacy with businesses and their advisors, at conferences, meetings of trade associations and similar fora. We want to explain our beliefs and priorities to business in the interest of compliance, and to government in order to influence policy where this is appropriate. And we will be making available practical materials and tools to help businesses to comply, building on well-received initiatives in this area from the OFT.


In closing, what I’m hoping that you’ll take from today is a sense that the CMA is serious in its ambitions, including to be effective in our enforcement, but also to be as transparent and predictable as we can be. We understand just how important that is for you, for your clients, for business in general, and for public confidence in the quality and fairness of our work.

We invite you to support us in our work to make markets work well for businesses and consumers, by ensuring your companies comply with the law. Be in no doubt of the adverse consequences for firms of any failure to comply with these laws: we mean to be energetic, determined and skilful in our enforcement work. But equally, be assured that we are holding all firms to the same account, so that business can feel confident in fair and open markets, undistorted by cartels or other anti-competitive behaviour, and with a shared commitment to serving consumers.

We are very grateful to you for the work you’ve already done in engaging with us and responding to consultations to help us better understand how we can achieve these aims. I’d ask you to continue to push the CMA to be an effective enforcement agency, and to be as transparent and predictable in its dealings with you as it can be. David Currie and I want the CMA to be a listening and learning organisation that is always open to constructive suggestions and positive engagement. Wherever we can take your feedback on board to improve our work, we will seek to do so.

On that note, I’m happy now to take questions and to hear your thoughts.

Published 15 November 2013