BIS

Keeping the UK’s competition regime on the world stage

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I’ve been in my new job for almost 6 weeks now and am quickly getting to grips with my varied portfolio. From employment matters to postal affairs as well as consumer and competition issues. Lots of different complex areas with their own challenges and opportunities.

Today I have published details of our plans to reform the UK’s competition regime to ensure that it maintains its strong reputation globally. So what better time to contribute my first blog for the BIS website and tell you a bit more about it.

So why are we reforming the UK’s competition regime?

In any market, effective competition is essential. Well functioning competition helps to deliver a more dynamic economy which can generate economic growth, more jobs and prosperity. It gives confidence to established businesses in the UK as well as to those wanting to set up here. And it forces firms to innovate and become more efficient.

With competition firms have to find ways to offer consumers better quality and often relatively cheaper products or services. You will have probably noticed this in your local supermarket or with electronic goods, cars and many other sectors.

For example we have seen benefits for passengers and airlines from further competition in the industry since BAA sold off Gatwick in 2009.

Our plans include taking and building on our existing expertise and resources from the competition functions of the Office for Fair Trading (OFT) and the Competition Commission (CC) and bringing them into a new body – the Competition and Markets Authority (CMA) – with the right powers and flexibility to tackle competition issues.

Replacing the OFT and CC with one new body will increase transparency, and deliver a strengthened and streamlined regime as well as eliminating inefficiency and duplication.

But why change the status quo when the current regime seems to function perfectly well and is seen as being one of the very best competition regimes globally?

As our consultation on competition reform highlighted, although we have many achievements to celebrate, businesses have some significant issues.

One is the length of time that is taken to complete cases. In particular, anti-trust enforcement takes too long, imposing very large costs and uncertainty on businesses and potentially leaving consumers disadvantaged. 

For example, since 2006 anti-trust cases have taken an average of more than four years to conclude and some businesses have spent millions defending these cases – both before the OFT and then in the appeal courts.  This means that consumers are likely to suffer the detrimental effects of anti-competitive practices for far longer than they need to.

The recent decision by the Competition Appeal Tribunal to quash the OFT’s decision to fine tobacco companies and retailers for alleged breaches of competition law illustrates that we have not yet got everything right in identifying appropriate cases and taking them successfully through the system.

Therefore, the single CMA, which we currently expect to have fully up and running by April 2014, will also have a greater role in ensuring competition in regulated sectors is being addressed effectively, through more efficient cooperation between itself and the different regulators.

Investigations will be delivered with clear timeframes for anti-trust, markets and mergers, without compromising the quality of decisions. Where businesses don’t play by the rules, or where competition is not working well for consumers, the new CMA will act quickly to put things right.   

These are comprehensive reforms, which I believe will create a regime that delivers better outcomes for business, consumers and the UK economy. And they should be seen fairly and squarely as part of the Government‘s wider objective to establish a more responsible capitalism.

I’d encourage you to read through our response and would be interested to hear your comments.

2 Responses to Keeping the UK’s competition regime on the world stage

  1. Leo Sheer says:

    Dear Minister

    Thank you so much for taking the time to set out your thought. I am someone who has suffered from firms breaking competition law so am all for strengthening the regime.

    But I don’t understand the reasoning behind the changes and am extremely worried that the you will be throwing the baby out with the bathwater. We have, after all, a system that most people say is world-class.

    Specifically you say :

    Replacing the OFT and CC with one new body will increase transparency – why do you need go through the huge cost and disruption of creating a new body to achieve this?

    Length of time that is taken to complete cases – I have not seen a single explanation for why things will be faster in competition act cases because of the merger. It would be great if you or one of your officials could explain the link.

    I am all for getting rid of quango but only if the benefits outweigh the costs.

    Many thanks again

    • Norman Lamb says:

      Dear Leo,

      You raise two points which go to the heart of our reform proposals. It is clear from the consultation process that there is considerable support for and scope to improve the effectiveness of competition enforcement, to streamline processes and to improve outcomes both for business and consumers.

      The aim of these reforms is to reduce instances of anti-competitive behaviour by strengthening the regime’s deterrent effect and thus reduce the detriment suffered by consumers and companies that play by the rules. The objective is not to see a ramping up of cases and prosecutions per se but a more efficient and effective regime that delivers fairness, more responsible behaviour and which contributes to economic growth.

      To give you an example: where market studies currently result in references from the OFT to the CC there can be duplicative requests for information and prolonged uncertainty about the outcome of any investigation. Phase 2 market investigations currently have a 24 month statutory time limit. Almost all take the full period. We propose to reduce this to 18 months in all but the most complex cases.

      And where there are currently no time limits for implementing Phase 2 remedies, with some cases taking months or years, we want to introduce a 6 month statutory time limit for the CMA reducing uncertainty in markets and detriment suffered more quickly. This is only an example from one chapter of the proposals and there are many others in the Government’s response published on 15 March.

      On the creation of the CMA, views were mixed. It is true that we could have introduced some of the reforms we are proposing without altering the institutional framework. But we believe that establishing the CMA and reforming the suite of tools and processes together will have greater and more positive impact.

      Significantly, the CBI, OFT, CC, the FSB and a number of law firms all supported this. Benefits include streamlining processes, greater consistency and predictability for business, more efficient use of scarce public resources and increased clarity and authority to competition policy. If you would like to read more of the detail of these responses and others they can be found on the BIS website alongside the consultation response.

      Yours sincerely,

      Norman Lamb

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