Speech

Making the new framework work: next steps for the Competition and Markets Authority (CMA)

Speech by Alex Chisholm, CEO-designate of the Competition and Markets Authority, on next steps for CMA.

Alex Chisholm

Introduction

Good morning, and thank you to the Westminster Business Forum for the opportunity to address this seminar today. Thank you also to Lord Marland for the introduction and to Professor Hviid for such a strong summary of the competition regime, its strengths and weaknesses and the various reforms underway.

We are now less than a month away from the launch of the Competition and Markets Authority (CMA), at least in shadow form, so this is a particularly exciting time for us and for everyone involved with the UK competition regime. The establishment of the CMA on October 1 2013 will be the culmination of something like three years’ worth of discussion, deliberation and legislative activity. It also marks a personal milestone for me of six months’ work since I took up my position as CEO. Much has been done in this time to prepare for the establishment of the CMA in April 2014, but there is obviously a considerable amount left to do before we open for business.

So, I’ve been particularly looking forward to this event and the outcomes of the discussions to take place over the course of this morning. We have in the room a diverse range of institutional perspectives on the CMA , and as some of our closest external stakeholders you’re also some of the most informed and best positioned people to comment on our work as it progresses. Whilst I won’t be able to stay all morning as I’m attending a meeting of the CMA’s partners in the consumer protection community, I will be studying the transcript carefully to hear what comes out of the sessions to follow.

Today I’ll be aiming to give you a sense of:

  • where we stand in the process of transition to the CMA
  • what our priorities are over the next six months
  • what we see as the key challenges facing us in that period, and the steps that we’re taking to address those challenges
  • and finally, what we want all of this change to mean for business, for consumers, and for the wider economy

But before I get into the more detailed aspects of this presentation, it might be useful to set out briefly how we see the overall role of the CMA, and what it therefore needs to be equipped to achieve.

The role of the CMA in the economy

I am sure that there is no need for me to try to convince anyone here of the importance of competition to the economy, and happily there appears to be a high degree of political consensus on this point. It’s clear that this government – like its predecessors – is very much bought into the need for the best possible competition and markets regime. You can see this in the amount of time and resource it has committed to establishing the CMA – it is not often that a government makes a priority of reform to a set of organisations that it could already justly describe as ‘world class’. It’s also notable that in the recent Spending Review, the Treasury allocated a substantial increase in resources to the CMA for 2015 to 2016.

The CMA must live up to all this attention and investment by ensuring that the maximum possible benefits from competition and competitive markets accrue to consumers, and to the wider economy. This is the key purpose of the CMA, and the one that we will be working to across our various different roles; let me now briefly outline these roles:

  • First, and most obviously, intervening directly in markets in support of more and better competition. This includes effective enforcement of competition law that balances forcefulness and robustness with transparency and proportionality; an efficient merger regime that resolves potential issues at the earliest appropriate stage; markets work that makes a genuine and substantive contribution to consumer welfare; and further establishing the criminal cartel regime as a tangible threat and a credible deterrent to those who would engage in the most serious types of anti-competitive behaviour.

  • Second, the CMA will be taking on the full set of consumer enforcement powers from the OFT, but will be using them in a rather different role from the one the OFT was performing up to April this year, further developing the market focus that has begun to emerge as a key feature of OFT enforcement; and working in close partnership with the Trading Standards Community – of which more anon.

  • Third, relations with the rest of government. There are 2 sides to this coin. One side is that the ERR Act provides for the government to give the CMA a new ‘strategic steer’ as to how it sees the fit between the CMA’s work and the government’s wider economic priorities. It’s arguable that this is more of a transparency measure than a really big change in relations – as BIS has remained clear throughout that the independence of the CMA and the competition and markets regime remains a fundamental principle of its establishment. However, it remains a notable reform, linking the work of the CMA more directly and visibly to the government’s economic policy.

  • The other side of the coin is that CMA is tasked with bringing a strong voice in advising government on how to make use of competition in wider policy. At the last Budget the government stated a strong presumption in favour of accepting recommendations from the competition authorities, and the CMA will be further empowered to act as a source of competition expertise to the government.

Transition priorities

The CMA therefore has a big set of tasks on its hands, and we are working hard to ensure that it is ready to take these on in April next year. We have already put some of the most important pieces of the puzzle into place:

  • The CMA now has a heavyweight board bringing together real depth and range of national and international experience. I’m delighted that we’ve been able to attract such outstanding people – including former heads of the US and European competition agencies - as well as retaining the expertise of Roger Witcomb and Alan Giles from the existing regime. The Board will contribute vital advice and guidance to the organisation as well as significant checks and challenges to our decision-making.

  • We have also now concluded the recruitment exercise for the CMA’s senior executive team, and we expect the government will be making further announcements on this later this week.

  • We have now reached the end of the consultation period on our first set of guidance documents, setting out in more detail how the CMA will approach its work in the markets and mergers areas as well as on other policy issues such as transparency. I hope that many of you have sent in a response; I am very much looking forward to seeing how the guidance documents have been received.

  • We are also shortly to publish the second tranche of our guidance work for consultation, which will include Competition Act enforcement, cartels, and our consumer protection work. Given that the changes to the cartel offence and the consumer regime are some of the more wide-ranging in the government’s programme of reform, we are expecting these to attract a fair amount of attention and feedback, and of course we welcome this.

  • The next big milestone in the process is of course the establishment of the CMA itself on 1 October 2013, at which point we’ll also be able to set out more detail about the CMA’s procedures, structures and strategic priorities.

These are the visible outputs from a huge amount of work that is going on ‘below the radar’ to build the CMA to meet the objectives that have been set for us – from organisational culture and prioritisation, to the structure of the organisation and the teams of staff that we will need, through to ‘nuts and bolts’ decisions about IT systems and how best to use our accommodation at Victoria House.

There is far more going on across all of these strands of work than I could go into today, but there are some key priorities that we are focusing on consistently across all of our decisions about how the CMA will work:

  • Firstly, we are focusing on delivering more and better enforcement work. We need to bring more cases and for a good proportion of these to stand up on appeal, if we are to achieve a stronger deterrence. The procedural improvements brought in by the OFT in October last year represented a significant set of enhancements to the competition regime, and give us a very promising starting point from which we can go forward. We will be publishing in draft our revised guidance on anti-trust procedures next week. We plan to embed this strong focus on enforcement into the structure of the organisation, with a dedicated Enforcement Directorate within the CMA to ensure consistency and rigour across our enforcement portfolio. And we are mindful that the improvements to the criminal cartel offence will bring expectations that the CMA will take more cases of this type and deliver successful prosecutions.

  • Secondly, we are making the CMA a stronger single voice and source of expertise for the competition regime as a whole, in particular working with partner organisations with concurrent competition powers to help them to make fuller use of those powers within the context of a new UK Competition Network. We will also be looking to make the case for competition and choice in new markets – including ones not previously exposed to market disciplines.

  • And thirdly, we need to set the CMA up to deliver a new and different role in the consumer protection regime. There is already a new institutional split in the way consumer enforcement is delivered, with Trading Standards taking the lead in most cases regardless of the size or location of the firms involved. The CMA will take on the OFT’s new responsibility for using consumer law to address market-wide problems. But arguably the most important aspect of our work in this area will be to play our part in ensuring that the system works as a whole. For example, we will have responsibility for leadership on unfair contract terms work, and also for leadership of the Consumer Concurrency Group that brings together regulators with similar powers.

I expect that we will still have a job to do in setting appropriate expectations for the CMA’s consumer enforcement work – it will take time for people outside of the consumer and competition regimes to recognise that Trading Standards have taken on more responsibility for big national enforcement cases – but the best way for us to do this will be for all of the bodies with consumer powers to deliver effective results under the new regime.

Meeting the challenges

So these are the key areas of focus that we’re working on in implementing the shift to the CMA. This is no simple task, and we face important challenges in achieving the goals that we are set. There are the more general challenges that would occur in any merger of two organisations of this scale, or those that are present across the public sector in the current climate. But we also have a set of distinct issues to face that are particular to our situation, bringing together the Competition Commission (CC) and much of the OFT:

  • Firstly it’s vital that we build on what we have. Our starting point was an existing regime that, as I have already said, was regarded as world-class, and within it is accumulated a vast amount of hard-earned knowledge and experience that we want to hardwire into the CMA. Nobody wants the CMA to have to re-learn the many lessons that the OFT and the CC have already taken on board; we want to build on these lessons, and also to develop a CMA that is self-reflective and committed to continuous improvement so that it is fully equipped to take advantage of future learning as well.

  • Secondly, we must take full advantage of the opportunities to do things better that the shift to the CMA brings. Some examples of the improvements that we’re expecting to implement are:
    • making processes more efficient, particularly around the handover between Phases 1 and 2, and to comply with the new statutory deadlines
    • taking advantage of the wider range of staff experience and specialist skills that we will have in a combined authority
    • learning from the experiences that both organisations have had when cases go to appeal – and managing all our casework with a view to future litigation
    • maximising the benefits to the organisation from the experience and expertise of panel members
    • putting more resource and expertise into the areas covered by sectoral regulation
    • working to avoid unnecessary burdens on business, and other organisations we deal with
  • We need to make sure the CMA is a fully integrated organisation, a challenge which comes with several dimensions. The different parts of the organisation need to be fully integrated so that we can concentrate our efforts and foster a common culture; integrate our economic and legal analysis (as Morten was saying earlier); we need to use our tools in an integrated manner so that the CMA can tackle market problems in the most efficient and effective way possible; and we need to ensure integration between the CMA and its partner organisations so that there is the right level of collaboration and cooperation between us.

  • To help us to get this right, we are putting considerable effort into external consultation and engagement, so that we can get the widest possible perspective on the changes that we’re putting into place. We want to be as open and transparent as we can throughout this process and into the lifetime of the CMA. Informally, David Currie and I have in recent months had more than 100 meetings with different stakeholders with experience of working with the OFT and the CC to hear their views, and I have already mentioned our more formal consultations on CMA guidance. If any individuals and organisations today have views on how we can do things differently and better, please let us know.

  • We also need to recognise at all times that most of the resource available to the CMA will of course be its body of staff, and this is an area where we are particularly conscious of the need for balance between continuity and change. We are keen to retain the valuable knowledge and expertise of staff at all levels of the existing bodies, but at the same time we have opened up recruitment for a substantial proportion of the CMA’s senior roles to external competition so that we can have the option of bringing in new perspectives and voices to the team. The outcome of this open competition will be that we can be confident we have the best leaders possible, and in the optimum positions within the organisation.

  • The need for the CMA to be internally integrated has been prominent in our thinking about how it should be structured, and to that end we are planning to introduce strong internal coordination mechanisms such as a Project Management Office to look across the work of the organisation. On the external side, the Consumer Protection Partnership is already bringing together all of the bodies with powers in this area, and we are working closely with the Department for Business to establish the UK Competition Network that I mentioned earlier.

Aspirations for the CMA

This has been by necessity a fairly broad overview of where we are in the process of establishing the CMA, the priorities and key factors that we are applying across this work, and the most important challenges we face in achieving our aims. But the CMA is not an end in itself, and we will ultimately be judged on the benefits we deliver, so I will close by talking about what we want the organisation to mean for those with a stake in its success.

  • We want to be a fully accountable organisation at all levels, so that it’s consistently clear where responsibilities lie and those responsible for oversight of the CMA can be confident in our work. Internally, that means a strong senior team making full use of the challenge and scrutiny brought by our heavyweight board to keep standards and quality of output high. Externally, we will take full account of the strategic steer given to us by government, whilst retaining our independence from Ministers, and we will of course remain fully accountable to Parliament – particularly via the National Audit Office and the Public Accounts Committee.

  • For the economy, we know that competition has much to contribute to achieving and maintaining growth by sharpening incentives to innovate, to improve productivity, to better satisfy customers and to allocate capital efficiently. We want the CMA to mean that this market process can work to the maximum possible benefit of the wider economy, from resolving individual market problems and tackling specific breaches of the law in faster and more efficient ways, to bringing all of the UK’s competition regulators together and providing a stronger voice for competition.

  • For businesses, we want the CMA to be an easier organisation to do business with, bringing tighter management of investigations through removing duplication and streamlining processes, as well as full transparency, robust decision-making, and appropriate support for those working to achieve compliance. We will of course remain committed to strong enforcement of the law against businesses that do not comply with their responsibilities, and this will in itself be beneficial for those businesses that do, given the harm done to competitors when anti-competitive behaviour is left unchecked.

  • And finally, for consumers, we want the CMA to mean better experiences in the markets that they interact with every day – not just through our consumer law powers but across the full range of our work. The ultimate metric for our performance remains the measure of benefits we provide to consumers as compared to the cost of the organisation, and as such the interests of the consumer will be very much at the heart of everything that we do.

Thank you very much.

Delighted now to take a few questions and to hear your comments.

Published 18 September 2013