Sonya Branch speaks about the challenges ahead for effective competition enforcement

Sonya Branch’s speech to the Westminster Business Forum.

Sonya Branch

I am the Executive Director accountable to government for the successful delivery of the criminal and cartel, antitrust and consumer enforcement portfolios of the Competition and Markets Authority (CMA); and a board member of the CMA.

The focus of my brief speech today is on the CMA’s criminal, cartel and competition enforcement portfolio but I will touch also on the CMA’s consumer protection enforcement role. Our consumer protection work complements the other aspects of the enforcement portfolio, while achieving high-impact outcomes for consumers is core to the CMA’s mission.

In particular, I am going to cover 3 themes:

  1. First, a quick recap on the background to the formation of the CMA and some insights into the board’s guiding priorities for the first 6 months of the CMA.

  2. Second, some detail on what the CMA has achieved across its criminal, cartel and competition enforcement portfolio over those first 6 months.

  3. And finally, briefly, some insights into the challenges which I see in the coming months for the CMA’s enforcement portfolio.

Turning to the formation of the CMA and our priorities over the last 6 months:

As I am sure you are all aware, while the CMA was formally launched on 1 April this year it didn’t simply materialise fully formed on this date – a huge amount of work went into creating the new body. The investment of time and money that the government put into establishing the CMA reflects the policy position firmly held within the current coalition that both competition and consumer law are key drivers of economic growth.

Rather like the return to economic growth, the CMA had a gestation period of over 3 years. So, set against this context, at only 7 months into the CMA’s life it is still early days. Moreover, the reforms to the UK competition regime and the formation of the CMA were intended by government as evolutionary rather than revolutionary.

However, I would hope that already you will have seen that the CMA is indeed a new agency with ambitions to be more than the sum of the legacy agencies, the Office of Fair Trading (OFT) and the Competition Commission (CC).

The CMA has been striving from ‘Day One’ to meet the high expectations that we recognise that business, government and consumers have for the new agency.

No doubt you will be familiar with the CMA’s Annual Plan which sets out the deliverables we hope to achieve in the CMA’s first year of existence. This Annual Plan is part of a broader picture that starts with our overall Mission Statement which is a simpler and more direct summary of what the CMA is trying to achieve.

That Mission Statement differs from those of the OFT and the CC of the past – we will make markets work well in the interests of consumers but also businesses, and the economy.

The reference to the economy is a recognition that competition law is an important contributor to UK productivity and economic growth. The reference to business recognises that firms are the locus of competition and that stimulating firms to innovate and improve benefits consumers. So making markets work well, in the broadest sense, is what the CMA will do.

In order to achieve our mission and meet high external expectations, the CMA has published 5 strategic goals.

The board considers that it is the first – to deliver effective enforcement of the law, protecting consumers and deterring firms from engaging in anti-competitive behaviour – which is arguably the most obvious criterion on which our credibility as a new organisation will be judged.

External expectations that the CMA will deliver more and better enforcement are clearly high. The CMA has, therefore, made a wide range of specific commitments across the range of our enforcement work in our Annual Plan.

For example, the CMA has set commitments for itself around improving the robustness and speed of decision-making in our competition and criminal investigations, and regarding the application of new powers, such as interim measures and compulsory interviewing. We also have commitments to incentivise more effective coordination on competition enforcement with the UK’s sectoral regulators.

Aside from the external commitments, as I said, the CMA was not fully formed on 1 April and – it is important not to miss that – as a board, we have been overseeing a huge change or transition management programme. To meet the short-term transition challenges, we have had a number of internal priorities which have been a focus over the first 6 months of the CMA.

I will share 3 such internal priorities:

  1. First, we have focused to ensure a smooth transition of what we have called the ‘in-flight’ portfolio of cases – the legacy casework which the OFT and the CC brought to the CMA. We considered it important that parties being investigated by the OFT or CC did not suffer undue delay or additional burden as a result of the transition so we have worked hard to ensure that these cases have not been adversely affected. In the CMA’s initial enforcement portfolio, there were 14 such cases: 9 Competition Act 1998 (CA98) investigations and 5 ongoing criminal consumer or cartel ‘in-flight’ investigations to oversee.

  2. Second, the board was keen to further integrate our consumer protection function so that we put consumers at the heart of our work across the portfolio from the start of the CMA. The OFT did have a consumer protection function previously and had made some progress in integrating competition and consumer enforcement functions but there was still work to be done and we now have the markets and mergers functions to factor into this too. So, the CMA has been working to bring a more consistent consumer focus to all of our work. We are also investing in building up our use of digital technology to identify consumer detriment more effectively and to engage with a broader range of consumers more directly. Also, I am proud that the CMA has successfully applied for the 2015/16 Presidency of the International Consumer Protection Enforcement Network so we can continue to build our reputation as a leading consumer protection agency at a European and international level.

  3. Equally important has been the need to integrate staff from the two legacy organisations and new joiners. The OFT and CC had different portfolios of work and somewhat different cultures. This has involved creating a new CMA culture and ensuring that there is fluidity around resourcing investigations so that staff can move into new areas of work. To this end, we are also investing so that staff are being trained to a high standard across all the skills the CMA needs to deliver. In all of this, we are seeking consciously to build the CMA’s flexibility, capability and resilience to meet future challenges.

Turning to my second theme, I promised some detail on what the CMA has achieved across its criminal, cartel and competition enforcement portfolio over the last 6 or so months. Here, while I could cite much evidence of good progress on our consumer protection and markets portfolios, today our focus is on criminal, cartel and competition enforcement.

So, in relation to the CMA’s CA98 enforcement, since 1 April, the CMA has:

  • closed one CA98 investigation post-statement of objections (sports bras)

  • accepted commitments decisions in relation to another two CA98 investigations. In particular, in June, we accepted commitments in a suspected abuse of dominance investigation in the market for road fuels in the Western Isles of Scotland, opening up that market to the possibility of greater competition. In September, we accepted commitments in an investigation considering the supply of a platform for fleet owners arranging service, maintenance and repairs of their vehicles which we again believe will facilitate new entry

  • the CMA also issued a supplementary statement of objections in one of our pharmaceutical CA98 investigations last month

  • as to expanding the competition enforcement portfolio, since April, we have launched 4 new CA98 investigations (catering supplies; bathroom supplies; healthcare equipment; pharmaceuticals) and may open further cases before the financial year end

That means we now have 10 ongoing CA98 cases in the public domain, four of which are outside of cartels. We also have four ongoing criminal cartel investigations.

Further, it is a relatively balanced enforcement portfolio. Of the CA98 investigations, for example, 8 are Chapter I investigations, one is under Chapter II and one is a combined investigation. The investigations making up the CMA’s enforcement portfolio span a broad range of sectors with an equally board range of market valuations from £12 million to just under £1 billion.

This reflects the CMA’s ambition to deliver a visibly higher level of robust enforcement cases to raise awareness and achieve credible deterrence across the UK economy. This is not only about the CMA delivering a steady stream of enforcement 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, the CMA needs 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.

Aside from the specific investigations, another area of development over the last 6 months has been in relation to the use of case decision groups in CA98 investigations – where the CMA now has the ability to use panel members. The collective decision-making model has been well received but the OFT’s early experience showed that significant senior capacity is required to make it work well. We plan, therefore, to use a model where we have a deputy chair, a panel member and a staff member as the make-up of the case decision groups post-Statement of Objections in the future.

We have also developed our thinking on the CMA’s new or reformed powers, in particular the CMA’s new compulsory interview powers under section 26A and the revised interim measures process. We have used the compulsory interview powers in an investigation already and anticipate using it in other investigations over the next 6 months.

The CMA’s criminal enforcement activity has also progressed well. The CMA aims to be a more intelligence-led crime detection and enforcement agency – reducing a dependency on leniency applications as a source of evidence of cartels. We are doing this through an expansion programme partially financed by additional funding from HM Treasury in the last year’s Autumn Statement and by developing closer partnerships with the police and other criminal enforcement agencies’ investigations. In terms of expansion, we are investing further in building up the CMA’s intelligence, investigation and enforcement capacity. So, for example, we are recruiting 3 new Directors to provide additional senior capacity in Intelligence, Criminal Enforcement and Digital Forensics and Intelligence; and additional funding is being used to develop a more sophisticated digital and forensic capability.

Fortunately, we are not building from a standing start. The CMA is already increasingly thinking and behaving like a mainstream criminal enforcement agency, with over half of new cartel cases opened since 2010 having been intelligence-led. We are already undertaking larger-scale operations and drawing on police expertise and collaboration in the conduct of searches and arrests – so, for example, last year the Cartels and Criminal Group recently undertook the execution of search warrants across 7 sites throughout the UK, including Scotland and Northern Ireland which involved 6 police forces and the simultaneous arrest of 7 individuals.

In this context, it is worth noting that in June the CMA charged 2 men with the cartel offence in its criminal galvanised steel tanks case, a third man having previously pleaded guilty to the same offence.

And September saw the successful outcome in a long-running OFT criminal case into a pyramid selling scheme which resulted in the conviction of 9 individuals and a number of custodial sentences. Achieving 9 convictions out of 11 on an offence that was being prosecuted for the first time and on a case of this scale and as hard fought as this over 3 years, and involving multiple trials out of London, is an achievement which the CMA can be proud of. It speaks to the CMA’s increasing criminal enforcement capability – as well as our resilience!

So, finally, some insights on the challenges ahead in the coming months for the CMA’s competition enforcement portfolio.

As I have mentioned already, the most immediate and obvious challenge ahead for the CMA is to meet the high external expectations there are for a ‘step change’ in the enforcement track record of the CMA. I think Mark Hoskins QC of Brick Court Chambers described it recently as the CMA having the ‘chance to transform itself from an ugly duckling into a beautiful swan’, but it had to focus on winning cases in order to do so. The CMA has to deliver more decisions, at greater pace and without jeopardising the robustness of its analysis – not an insignificant challenge, particularly on competition, criminal and cartel investigations.

Further, the CMA will be expected to meet or at least manage these high expectations during a period of considerable external economic and political uncertainty. In such an operating environment, failure to meet or manage those high expectations on any of the many relevant fronts will leave the CMA possibly vulnerable to further change to its remit or functions.

Moreover, there is no one-size-fits-all mitigation available to the CMA to avoid this uncertainty entirely for 2 simple reasons, namely:

  • some of our functions are demand-led so we cannot control the ebb and flow of the throughput and/or sectors we are drawn into

  • some of the factors leading to the uncertain context are external to the CMA, and we will have very little or absolutely no influence – let alone control – over them, such as the devolution debate, the wider implications of the general election or the UK’s relationship with the EU

We are not totally without a handle on the tiller, however.

As I have just mentioned, the CMA can largely meet or at least manage some of these high expectations by pushing through a steady stream of high-impact, good calibre enforcement outputs across its portfolio. I think our progress on the enforcement portfolio outlined earlier augurs well for our future capacity to do so.

Some of the risks of further flux in the CMA’s remit in the consumer protection landscape can be reduced considerably if we continue building the right sort of partnerships.

Similarly, some of the risks of further flux in the CMA’s role across the UK enhanced concurrency regime can be reduced considerably if we continue building the right sort of relationships with the various sectoral regulators, and deliver on the statement of intent given by the UK Competition Network last December. Newly strengthened institutions and enhanced cooperation contribute here.

Finally, as important as it is that we take strong enforcement action to protect consumers, the CMA needs to balance tough sanctions – where appropriate – with compliance and awareness-raising. Enforcement and compliance are necessary complements in achieving impact, so I anticipate that compliance will also be a key part of how we meet and manage high expectations.

So as you can see, the CMA has had a busy 7 months. It has certainly been hard work. I think we have made a strong start but I am far from, and indeed cannot afford to be, complacent.

I am also clear that over the coming months our main leadership focus must continue to be on ensuring the successful transition of our in-flight enforcement portfolio and on integrating OFT and CC colleagues into a cohesive team within our new single home. We will be focused on delivering a steady stream of high-impact robust outputs across its portfolio. But also, I am keen that – despite all the potential political and economic change ahead – the CMA stays ambitious to do things differently, to continue to improve and so to be far more than just the sum of the legacy agencies.

Published 10 November 2014