As all of you know, we published the consultation on reform of the Competition Framework last Wednesday.
I’d like to start my remarks tonight by putting this consultation in context.
Competitive markets are the bedrock of a successful, dynamic economy - so we need to ensure they function as effectively as possible.
That’s an important part of our strategy for achieving sustainable economic growth, which is this Government’s overriding priority.
The current framework of competition law, and its associated institutions, is good - but still far from perfect.
This consultation covers one of fours pillars of Government’s competition and consumer reforms. These are to create:
- A single, strong, competition authority, promoting effective competition in the interest of consumers.
- One clear advocate for consumers in Citizens Advice.
- Effective enforcement of consumer law by trading standards, who will be equipped to take on most of the OFT’s consumer enforcement functions, in addition to their current local enforcement role.
- A set of clear principles for the framework of economic regulation.
We will be consulting separately on the second and third pillars, which are designed to reform the consumer protection landscape - strengthening front-line consumer services, while slimming down the complexity, confusion and waste of resources that result from having so many organisations in the field.
And we will be publishing our principles of economic regulation very shortly.
Even before the formal consultation on competition was launched, the debate on how to improve the competition regime had started. The CBI, for example, had produced a brief, and the European Policy Forum had published an interesting paper on competition reform.
So I have been pleased to see that our consultation on competition is already receiving a lot of interest and lively debate. This is important. It is a consultation and we are very interested in hearing everyone’s views. Quite rightly we need to debate the proposals in the consultation. And tonight’s roundtable presents a fantastic opportunity to do this.
In my remarks tonight I thought I would address some of the key issues.
Understandably, one of the key questions being asked is: why are we doing this? What’s the point? A fundamental question - which we need to be clear on.
And within this I am hearing two themes. Firstly, why make any changes at all? After all both the OFT and CC are internationally highly regarded - and we have a competition framework which some might say is the envy of others. Why fix what isn’t broken?
And secondly, is a merger really needed? Some say that most of the reforms could be achieved without one. A merger could be disruptive and could risk what we have already achieved.
Changes to the Competition Framework
So I’ll take these both in turn. Our consultation is entitled “a competition regime for growth” and growth really is the driver behind these changes. Growth matters more now than ever.
It is central to the Government’s agenda, and my Department is doing everything it can to promote sustainable and balanced growth. Both businesses, particularly SMEs, and consumers have been hit hard by the economic crisis.
And whilst our competition framework is very good - I’m sure no-one here would claim it was perfect. And in today’s economic climate, very good just isn’t good enough. There really is no room for complacency.
We need to be continually improving, continually enhancing and continually excelling so that we create the best environments for business to emerge and enter new and existing markets.
Let me give some examples of areas where the framework could be improved.
First, the current regime is too slow in achieving outcomes. Market Investigations have taken up to 67 months to complete. For example, it took 60 months to complete the market investigation on Payment Protection Insurance and 42 months to complete the investigation into BAA airports - a case which still continues. This prolongs delays in getting the benefit to consumers.
Second, half of all mergers investigated by the CC are already completed. This can hinder the effectiveness of the competition framework as the effects of the merger can be difficult to undo and appropriate remedies more difficult to apply.
Third, in successfully prosecuting antitrust cases at reasonable cost and in reasonable time - thus deterring others from harmful behaviour. The UK makes fewer antitrust decisions than any large EU member state.
And the cases can be enormously protracted. For example, the tobacco price-fixing case is (for some parties) still at the appeal stage, eight years after the OFT opened the investigation.
Fourth, in improving the operation of concurrent competition powers. Sector Regulators deal with some of the largest, most important and least competitive markets, but have only made 2 references to the Competition Commission.
Why the merger?
So, the competition framework can be improved, but why a merger of OFT and CC?
Of course it would be possible to make many of the changes without merging the OFT and CC, but creating a CMA provides a number of opportunities from improvement which can only be fully realised with a single body.
The opportunity to use the full range of competition powers and processes in the most flexible and dynamic way possible. While there are separate institutions with separate powers, there will always be some bias within the system towards the use by each body of its own powers to the maximum extent possible. A single CMA will be better incentivised to use the full range of competition tools.
The opportunity to create a combined body of competition expertise and capability and to deploy these resources flexibly and efficiently across the whole system depending on need and priorities. It makes no sense to have overstretch in some parts of the competition regime, and under-utilisation of resources in others.
The opportunity to create a single powerful advocate to speak for competition and to influence the development of competition in the UK, in Europe and internationally.
The opportunity to eliminate unnecessary overlap or duplication and take a fully “end-to-end” view of competition processes.
The opportunity to build more predictability into decision making, by having an authority with a single “guiding mind” - without of course undermining the vital safeguards and objectivity of judgement and decision-making provided by two-stage processes.
Our consultation covers proposals and questions on the competition tools, decision making, cost recovery and the proposal to merge the competition functions of the OFT with the Competition Commission. I thought it would be useful to highlight a few areas to start the debate.
First, options on merger reform - perhaps the proposal attracting the biggest reaction when we published. We are asking for views on ways to help the competition authority identify potentially anti-competitive mergers and address the difficulties of applying appropriate remedies when the merger in question has already been completed.
The consultation sets out a spectrum of options, from ways to improve the voluntary merger notification scheme to the alternative of mandatory pre-notification of mergers, including an option of notification without suspensory effect.
Understandably business and their legal advisers are concerned about the cost impact of mandatory notification. We recognise this but we need to consider the costs and benefits of all the options.
Second, streamlining the handling of antitrust cases. We are keen to see more cases to deter activity which harms businesses and consumers. So we are exploring how the process can be streamlined whilst retaining fairness and robustness of decision making.
The new regime must continue to ensure that decisions on infringements are not be undertaken by investigators. We are proposing options ranging from building on the improvements OFT is already making; or a new approach with an internal tribunal in the CMA, appealable by judicial review; or an approach where the CMA and sector regulators would prosecute cases before the CAT, which would take the decisions.
Third, strengthening the operation of concurrent competition powers. Sector regulators are working hard to protect consumers and to deliver their other objectives. We think concurrent competition powers give them a useful tool, so we are not minded to end concurrency.
But there may be scope for competition law to be used more proactively in the regulated sectors, and for coordination between competition authorities to be improved.
Streamlining antitrust and markets cases should make competition tools less resource intensive to use, and we are exploring whether there are barriers to the use of concurrent powers that can be removed, or whether the sector regulators need more support.
Should the obligation on sector regulators to use their competition powers in preference to other tools, in certain circumstances, be strengthened? Could the CMA act as a central resource on competition cases, working with and for sector regulators? Or should the CMA be given an oversight and case allocation role?
Our proposals do not change the competition focus of the regime or extend Ministers’ involvement in public interest considerations. But they do raise some very important questions, including:
How can we deliver independence of decision making in a unitary authority. Including separation of the investigative ands decision making roles?
How should a CMA be made accountable?
How do we balance strengthening of powers against business intrusion?
I’m sure all of us in this room agree that we need to preserve what is good about our competition regime: its robust independence, its clear competition focus, its integrity and fairness.
We are embarking on a once in a decade opportunity of reform and we are at the beginning of that reform process.
As I said at the beginning of my remarks - this is a consultation. There is an enormous amount of expertise in this room and it is important that we harness it.
So please do take the opportunity to engage with BIS and the team as they develop the proposals and respond as fully as you can to the consultation.
Finally, I would like to thank the European Policy Forum for organising tonight’s event and I look forward to our debate tonight and hearing your views.