It is a great pleasure to be back at this annual dinner of the Law Society Competition Section – a very important event in the competition diary. You were kind enough to invite me 2 years ago, when I had formally been in my new post as Chairman of the proposed Competition and Markets Authority (CMA) for some 3 months, though my practical engagement started immediately my appointment was announced in July 2012. Then I was the only person appointed to the CMA. It could have been a lonely position. But I quickly found huge support from the staff of both the Office of Fair Trading (OFT) and the Competition Commission (CC), including from many that I knew from previous lives. Expectations were high, though, and the risks associated with a merger of this kind not inconsiderable. I like to think that we have navigated a course to where we are now without the major mishaps that could have happened. In large part, that is because of the commitment of the merging organisations to make a success of the merger. Very many staff at all levels were involved in making it work. But I particularly pay tribute to Philip Collins and Clive Maxwell of the OFT and Roger Witcomb and David Saunders of the CC, and also Bernadette Kelly and her team at the Department for Business, Innovation and Skills (BIS), especially Colin Sharples who led the transition team that managed the many complexities of the transition.
I also owe a big thanks to you, the law firms who are such a key part of the competition regime. You helped us in several key ways. You gave very frank feedback on what you saw as the areas where the workings of the regime could be improved, continuing a process of dialogue that helped the OFT enhance its processes, from which we are now benefiting. You highlighted a number of risks associated with the reforms introduced by the Enterprise and Regulatory Reform Act, which allowed us to take mitigating action to derive the benefits of reform while avoiding the perils. You seconded talented staff to support the necessary revision of the voluminous guidance, very necessary to be in place ahead of our launch at the start of April this year. And perhaps most importantly you emphasised how important it was to get this reform right, and provided invaluable advice, both publicly and privately, to help us do that. I have become very aware how much you feel that this is your regime, and how committed you are to making it work well. I am conscious that this means I and Alex Chisholm and the board carry a weight of responsibility. But we are grateful to you for the sense that this is a shared enterprise.
I looked back at my speech of 2 years ago, which was full of promise, to see what I got wrong, what I omitted, and what I got right. Let me ‘fess up’ to one seriously wrong thing I said. Speaking on the eve of the launch of the report of the Leveson Inquiry, on which I was serving as one of Brian’s assessors and which entailed a very lawyer-intensive process, I said that “my new role means that my interaction with lawyers will continue long after Leveson has been implemented, as I am sure it will”. The first part of that statement has proved entirely correct; the second not, as government and Parliament chose a different route.
But in other respects I think the promises of that speech stand up quite well, though you will be the judge. I laid out 3 key objectives. First we needed “to ensure that the new authority is a high performance organisation at least as effective, if not more so, than the 2 organisations that it replaces”. Second, we needed “to ensure that the casework of the 2 organisations continues unimpeded and that the transition to the new organisation is seamless”. Third, we needed “to ensure that all colleagues are treated fairly during the transition”.
Let me take those 3 objectives in reverse order. The processes of staff transition to the CMA were long drawn out and complex. We first had to appoint the Chief Executive, then the 3 executive directors and General Counsel and Chief Economic Adviser, and 25 or so further senior colleagues at the next level. Then followed the complex job-matching process of mapping colleagues in the OFT and CC into the new and different organisational structure for the CMA. That all took time. So it was only around last Christmas that staff learnt of their position in the CMA. As I had said in my speech, the vast bulk of positions were filled from the legacy organisations. But everyone faced a long period of uncertainty before knowing that they had a position. That was tough. But all credit to the professionalism of both the OFT and CC staff – despite the uncertainty they remained focused on the day job. And despite the complexity and length of the process, I have not heard complaints that the processes were unfair – that is a testament to the professionalism of the HR staff largely drawn from the OFT and CC who led this process.
On the second objective, in terms of caseload, I think we can reasonably claim that the transition has not got in the way of progressing cases. That doesn’t mean that everything has gone our way: you will be aware of developments in the Competition Appeal Tribunal (CAT) on private healthcare (though that is not a finished tale). We are dealing with a host of legacy cases such as tobacco, construction, IRI-Aztec, and Skyscanner from the OFT, and Eurotunnel, Ryanair, aggregates and private healthcare from the CC – 3 of these were in the courts over the last fortnight. This legacy work will continue to absorb a considerable amount of CMA resource, especially that of senior staff. But we secured prosecutions in Bristol for a pyramid-selling case with prison sentences, again an OFT legacy, as was the market study into residential property management, published on Tuesday.
The Competition Act 1998 (CA98) caseload is growing and will bear further fruit over the coming year or so to add to the 2 commitment decisions completed early in the CMA’s life, and we have a significant portfolio of criminal cartel cases, again building on the work that the OFT did to enhance effectiveness in this area. From the CC end, independent groups have progressed the delivery of a final report into the private motor insurance market and provisional findings in the payday lending market.
And of course, in terms of new activity, we have launched market investigations into energy and retail banking. These are sectors that touch the lives of very many consumers. Together with our growing work on online markets, this means that we will be kept busy.
This takes me to the first objective that I laid out, that of creating a high performance organisation, at least as good as the legacy organisations that it has replaced. I said in my 2012 speech to you that I saw “real benefits from the creation of the CMA. The combined organisation will be able to deploy resources more effectively and flexibly. It will deliver decisions in a more timely way with no diminution of quality, to the benefit of consumers and business. It will provide a single, and therefore stronger, voice, both at home and internationally, on competition and consumer issues. And for the staff it will provide a wider range of work, opportunity and experience.” I think we are delivering on all those things, though it is early days to judge.
We attracted a very strong international board to provide effective oversight of, and strategic direction to, the new organisation. Alex Chisholm and his senior team provide real leadership to the organisation. We are, of course, aiming to deliver to shorter timetables, and have so far done so, for example in the merger area. We are deploying resources more flexibly and effectively: for example, the remedies expertise hitherto deployed at phase 2 is being deployed at phase 1 where appropriate, and of course in such a way that does not in any way weaken the independence of the phase 2 process. We are playing our full role internationally in the competition networks, ECN, ICN and the OECD, as well as bilateral engagements, and in the consumer area we have just taken on the presidency of ICPEN for 2015 to 2016.
At home, we have strengthened our lines of communication to the devolved nations, with the board having already met in Scotland and Wales and convening in Northern Ireland next year, and for the first time a representative office in Cardiff and Belfast, as well as Edinburgh. And my meetings with staff confirm that they do appreciate the possibility of working on both phases of work, broadening and developing their experience and expertise.
We have also benefited from the support of government. In a period of hefty government cuts, it is a vote of confidence to give us a major increase in funding, ramped up through this financial year to a 30% uplift in 2015 to 2016 compared to the baseline funding of the legacy organisations. We are deploying that to increase our frontline enforcement capacity; also to resource our new activity through the UK Competition Network, a major enhancement to the concurrency regime required by the legislation which will lead to a stronger competition regime in the regulated sectors, which account for around 25% of the economy.
Crucially we have also been allowed more flexibility in pay for our frontline competition experts, to correct the gulf that was opening up between us and other regulators. All of this represents a real commitment by government to the competition regime.
We have also benefited from the advice and wisdom that you, key observers and participants in the competition regime, have shared with us. And I hope you agree that we have listened. You expressed concerns that putting phase 1 and phase 2 under the same roof would lead to confirmation bias. We listened and have worked hard to maintain the full independence of phase 2 while delivering the aims of government reforms, namely greater pace and efficiency. You raised concerns about the lack of access to phase 1 merger decision-makers, and although we considered the OFT process to be fair, robust and efficient we listened, and we have strengthened the senior merger team so as to provide such access wherever possible and we will keep this under review.
You made representations about CA98 decision-making, and we have maintained the recent OFT move to formalise collective decision-making in case decision groups, and that has been welcomed and seems to be working well. You made representations to use the panel members and Deputy Chairs (now called Inquiry Chairs) more widely than just at phase 2, and we have done just that by involving them in case decision groups. And properly to resource this and other activity we have expanded the number of Inquiry Chairs. I know we have disappointed some in not providing more detailed guidance on the new criminal cartel offence, but that reflects the fact that in such cases the courts, not us, are the decision-maker. So while we can provide guidance about our processes in such cases, as we have done, we cannot provide guidance on the offence itself since that would usurp the proper role of the courts.
I hope you agree that this is all good progress in improving our competition regime. It is, of course, work in progress: we want to go on looking for ways of making our processes and work more effective and efficient. ‘Even better’ is an important message for the CMA. We have made good progress in integrating the staff who came to us from the OFT and CC, as well as the very considerable number of new joiners, and in seeking to create a new integrated culture that builds on the best of the old with some new. But culture change takes time, and that organisational transformation will be an ongoing preoccupation. We also inherit from past casework and decisions a very large number of remedies, the oldest of which goes back some 40 years. We are thinking how best to review the relevance of those to see whether they need adaptation or indeed if they are no longer relevant. As importantly we want to look at the way markets have evolved around such remedies to see if there are lessons to be drawn for remedy design going forward.
This work is greatly aided by having remedy design, monitoring, enforcement and adaptation all in one organisation, not split between the OFT and CC as before. This is just one area where we can derive real efficiency gains from the recent reforms.
Before concluding, let me mention 3 other areas of ambition for the CMA. The first is compliance. We have set ourselves the aim of a wider, more comprehensive record on enforcement. But the flipside of that is that we want to raise awareness amongst businesses, their leaders and boards of the requirements of competition and consumer law so that they can ensure that they and their employees comply. That is why we are putting a major emphasis on explaining the law in ways that non-lawyers (like me) can understand. Last month I spoke at the annual conference of the Institute for Risk Management, where we launched a simple, joint guide to competition compliance – that is just one example of how we plan to work with professional bodies to ensure that business advisers are more fully aware.
Second is competition advocacy within government. With the backing and encouragement of the Treasury and BIS and with changes in the Enterprise and Regulatory Reform Act and the Consumer Rights Bill, we are expected to play a bigger role in ensuring that government policies in a number of areas help promote competition or at the very least do not impede it, as can so often happen. Much of that work will be behind the scenes, but important nonetheless. Third, we want to build a better relationship with business.
Of course, we do not expect to be always welcomed when we intervene. But we do want to ensure that business leaders understand what we do and do not rely solely on their legal advisers, important though their role is, as interlocutors with us. So Alex and I are very happy to meet with business leaders to talk about our work and its relation to business. And we are inviting senior business leaders to come to talk to our staff so that we get a better understanding of the concerns of business.
We will not get everything right and will need to learn constructively and with humility from our mistakes. I hope that you will continue to help us in that, giving us advice as in the past 2 years about what we can improve and giving us honest feedback when we get things wrong. The competition regime, technical though it is, is vital to the well-being of everyone. Open, competitive markets benefit consumers and businesses, and promote innovation and economic growth. In difficult times that truth can be forgotten or ignored. All of us in this community have a responsibility to be powerful advocates for competition in all parts of our economy. You can be sure that the new CMA will be to the forefront in that. Thank you.