On 16 March the UK’s Department for Business, Innovation and Skills (although as regular readers will know, no longer telecoms) published a consultation on options to reform the UK’s competition regime. The lengthy consultation’s aim is to introduce reforms to stimulate growth and it covers a variety of topics including:
- merging the Office of Fair Trading with the Competition Commission to form a new body, the Competition and Markets Authority;
- measures designed to strengthen the ‘behavioural’ anti-trust rules and enforcement process;
- widening the scope of the criminal cartel offence; and
- modernising and strengthening the market investigation regime.
Two aspects that caught my eye (if you want a fuller commentary, do have a look at my partner Howard Cartlidge’s summary) were the reform of the merger regime and changes to the way that the proposed new Competition and Markets Authority and sector regulators (such as Ofcom) will work together.
Merger regime reform
Whilst I directly deal with telecoms sector regulation, my involvement with the merger regime is as a straightforward deal lawyer executing M&A transactions. For a consultation that is aimed at promoting growth, it is quite extraordinary to read proposals that would subject a much larger number of mergers to a mandatory pre-notification process than is currently the case.
The consultation starts by identifying two potential drawbacks with the current system. The first is that some anti-competitive mergers escape review and the second is the difficulty of imposing appropriate remedies post-closing. Although some evidence is cited, it seems to me that DBIS has not yet engaged with a realistic substantive cost/benefit analysis, yet it is consulting on options that could include:
- the strengthening of powers allowing the Competition and Markets Authority to require companies to ‘stand-still’ on any post-merger integration activities;
- introducing a wide mandatory pre-notification regime, which would dramatically increase the numbers of deals needed to be notified, increasing cost and time for the parties involved; and
- to rub salt into the wound, increasing notification fees.
As readers may have detected by this point, the Watcher is not a fan of these proposals.
Interplay with sector regulators
The consultation notes that very few sectoral regulators have completed behavioural Competition Act 1998 cases (Ofcom being no exception – the Wholesale Calls Margin Squeeze case being the only current open case, with most closed cases have been pursued in a somewhat desultory fashion). The consultation, quite rightly, sees this as a problem and is consulting on proposals including whether:
- sectoral regulators should be obliged to use competition powers in preference to sectoral powers where legally permissible and appropriate. I am not sure that this is a good idea as an aggrieved party is generally interested in as swift and effective a remedy as possible and Ofcom has often used its sector powers in preference to Competition Act powers for that reason;
- the Competition and Markets Authority should ‘consult’ to sectoral regulations on Competition investigations. This seems to be a good idea, although could lead to some ‘turf-wars’ and resentment if not implemented with care; and
- the Competition and Markets Authority should coordinate and take a strategic leadership role, my comment is the same as on the last point.
Perhaps of more benefit to sectoral regulators such as Ofcom is the streamlining of behavioural enforcement mentioned above.
Next steps
The consultation closes on 13 June, and I would expect to see a significant number of responses.