Competition and Markets Authority guidance consultation: launch

Opening remarks at the launch of the consultation on part 1 of the Competition and Markets Authority (CMA) guidance.

Good morning, and thank you for joining us for what I’m sure will be an engaging session. The launch of this consultation on the first tranche of CMA guidance documents marks a major landmark in the transition to the new regime. It builds on the hard work of a team drawn from the OFT, Competition Commission, BIS and elsewhere, including secondees from some of your firms. Alex Chisholm and I are grateful for that support and the feedback we have received suggests that secondees are benefitting from the experience. We are currently looking for secondees to work with us from the autumn onwards, and very much hope that your firms will continue to support us in this important work.

Before we turn to today’s primary business, the draft guidance, I would like to take a moment to review our broader progress towards the new regime, and to outline some key next steps.

First, BIS has published for consultation the government’s draft strategic steer for the CMA, which sets out the high level priorities on which the government would like the CMA to focus. This allows for greater transparency about the relationship between government and the CMA, whilst ensuring that the CMA’s independence is protected. It will help the CMA Board, once constituted, to set the agenda for the CMA. BIS is also consulting on draft statutory instruments relating to mergers and administrative penalties, which provide important detail on some aspects of the CMA’s statutory powers. These consultations run in parallel with consultations on the draft CMA guidance.

Second, as we were delighted to announce announced last week, we have agreed the appointment of the CMA’s Non-Executive Directors and Panel Member Non-Executive Directors: Carolyn Fairbairn, Alan Giles, Bill Kovacic, Philip Lowe, Jill May, Annetje Ottow and Roger Witcomb, who will also be Chairman of the CMA Panel. A robust, engaged and independent Board is critical to drive high performance and hold executive functions to account. I am confident that these NEDs – who come from a diverse range of backgrounds, but are all bring highly relevant experience to the Board table and are highly regarded both in the UK and abroad –will deliver this remit, and I am hugely looking forward to working with them. We will make this a Board where, despite the considerable talents of individuals, the collective intelligence is greater than the sum of the individuals.

Third, we have made progress behind the scenes on various operational aspects of the CMA. These include the designation of the CMA’s home in Victoria House – the current premises of the Competition Commission, the provisional design of the organisation (yet to be announced) and various other key matters such as HR processes, IT, document management, project management and communications. Our primary focus in all of these matters is to build on the existing strengths of the OFT and CC, including their talented staff, to create a world-class competition authority.

In addition to these operational aspects, we are currently in the process of recruiting the executive directors who will complete the CMA Board, and will announce these appointments in due course. And work is continuing on the remaining CMA guidance documents, which we expect to publish for consultation in September. Eve Cinnirella will give you some further details on that process next, so I won’t dwell on it, except to say that on a day when the focus is on our competition powers we should also keep in mind the CMA’s crucial consumer enforcement powers which will be the subject of draft guidance to be published in September. I consider consumer and competition powers to be complementary. As the government’s draft strategic steer suggests, consumer behaviour and information asymmetries can have a significant effect on competition, whilst consumer harm can occur not only through uncompetitive markets or anticompetitive practices, but also through unfair terms in consumer contracts. We will make appropriate use of both sets of powers in support of the CMA’s statutory duty.

The CMA Board will be constituted in shadow form in October, in advance of the operational launch of the CMA in April 2014. As you will appreciate, there are a number of aspects of the transition which remain work in progress or which will remain subject to the Board’s decision. In today’s context, I should note that we may not be able to answer all of the many questions you may have on the future operation of the CMA outside the scope of this guidance, although we will provide further details in due course. As regards that guidance, it is fitting that today we are discussing the transparency and disclosure guidance first. This reflects our commitment to conduct the CMA’s work in a transparent and accountable way. We will be open about the reasons for our decisions and the process for reaching them, whilst operating within the legal framework and safeguarding genuinely confidential information submitted to us. And we will be open to feedback and constructive criticism from others, in order to help us to improve the way we work. I hope that you will contribute to this process by engaging in this consultation and I look forward to seeing your responses.

You will also have seen that we are committed to ensuring the robustness and quality of our decisions. Of course, as practitioners or business people, you might expect high quality and robust decisions to be a minimum standard for the CMA. But we recognise that gathering the necessary evidence in order to reach those decisions can be time-consuming and impose a burden on business as well as on the CMA. We therefore intend look closely at the way we select cases, the speed of our investigations and the way we gather and manage information, seeking in particular to exploit the opportunities presented by a new merged organisation. Perhaps the most obvious example is the management of the transition from phase 1 to phase 2. But it will also include work on operational measures such as investment in information and project management capabilities, including a dedicated Project Management Office to assist with allocating resources and promote effective project management skills, which we will continue to develop over time and based on our developing experience.

However, whilst seeking to make the most of the opportunities created by a unitary competition authority, we will ensure that we respect the importance of phase separation, preserving the role of the independent panel at phase 2 in mergers and markets cases, and safeguarding – even beyond such separation – against risks of confirmation bias.

Since we will be discussing administrative penalties this morning, I should also emphasise our determination to pursue our cases effectively. We hope that the quid pro quo for us seeking to minimise burdens on business will be a constructive and cooperative working relationship. However we have a duty to promote competition for the benefit of consumers, and have been granted additional powers by Parliament to ensure that we can do so effectively. These include the powers to impose administrative penalties for failure to comply with our investigations.

Nevertheless, I don’t want to end on a negative note, particularly since we will use such powers only where necessary and our sincere preference will be not to have to do so. We intend to build on the OFT’s and CC’s strong working relationships with the business and advisor communities. We will listen to your feedback and hope you will be generous in sharing it with us. That process has already begun; Alex Chisholm and I have met many of you and listened to your views. It will continue with this consultation, to which I again encourage you to respond. And it will continue after the CMA becomes operational next April, as the Board considers how the CMA should work towards being a world-class competition authority.

I will now hand over to Eve Cinnirella, who will give you some further information about how you can get involved in the consultation.