{"id":91936,"date":"2018-05-16T08:59:47","date_gmt":"2018-05-16T08:59:47","guid":{"rendered":"http:\/\/mostafa.openonline.co.uk\/?guid=5674c6e308f5ccc5c06716a97de92c99"},"modified":"2018-05-16T08:59:47","modified_gmt":"2018-05-16T08:59:47","slug":"speech-a-view-from-the-cma-brexit-and-beyond","status":"publish","type":"post","link":"https:\/\/mostafa.openonline.co.uk\/?p=91936","title":{"rendered":"Speech: A view from the CMA: Brexit and beyond"},"content":{"rendered":"<div class=\"govspeak\">\n<p>I\u2019m going to start by not talking about Brexit. Irrespective of our leaving the EU, there is a lot to be said about the work of the Competition and Markets Authority, a body which is now just over 4 years old.<\/p>\n<p>At 4, the CMA is clearly no longer a newborn baby. Indeed, no longer a toddler \u2013 but, rather, making great strides, I think most people would say.<\/p>\n<p>We have, as you know, one statutory duty &#8211; to promote competition for the benefit of consumers \u2013 and we have regard to this in all that we do.<\/p>\n<p>In addition, the Government has set the CMA an ambitious target of securing \u00a310 of measurable consumer benefit for every \u00a31 of taxpayers\u2019 money spent on our work. We comfortably achieved that in our first 3 years, and we expect to have done so again in our fourth year. If anything, the figures understate what we are achieving, because they count only the direct benefit of our work in a particular case, rather than the much wider deterrent effect. For example, if we make a finding of illegality about a cartel of estate agents agreeing commission fees in a small Somerset town, Burnham-on-Sea, and impose fines on participants \u2013 which is exactly what we did do in May last year &#8211; the direct benefit is that the estate agents\u2019 fees for house sellers in Burnham are lower than they might otherwise be if the cartel continued unchecked. But the wider deterrent effect is, of course, worth much more \u2013 estate agents all across the country are reminded that they will be penalised if they engage in cartel behaviour, which ensures that estate agents\u2019 fees are kept competitive for millions of people up and down Britain.  Not to mention the even wider deterrent effect of signalling to all businesses that it is risky and costly to engage in price-fixing and other anti-competitive agreements and practices \u2013 and that the CMA is earnest in seeking to put a stop to such practices, all for the benefit of consumers.<\/p>\n<p>In the area of competition law enforcement, we have upped our game. In the 5 years April 2010 to March 2015, we (or our predecessor the Office of Fair Trading) opened an average of 6.8 competition enforcement cases a year. More recently, that level of activity has materially increased. In April 2015 to March 2016, we opened 8; in April 2016 to March 2017 we opened 10; and in April 2017 to March 2018, we have opened another 10.  Averaging that out, that\u2019s an uptick these past three years of over 35% in our competition enforcement activity compared with the previous five years.<\/p>\n<p>At the same time we\u2019re endeavouring to ensure compliance with competition law by emphasising directors\u2019 personal responsibility. In the past 18 months, and for the first time ever, we\u2019ve secured 3 disqualifications from UK company directorships of directors of companies found to have breached competition law \u2013 2 of these in April this year \u2013 and we will continue to use our powers in this respect.<\/p>\n<p>And in last November\u2019s Budget, the Chancellor of the Exchequer signalled the Government\u2019s commitment to our increasing enforcement activity still further \u2013 with an additional \u00a32.8 million of Government funding per year for the CMA for this purpose. That funding has started with effect from April this year \u2013 and it\u2019s over and above the funding that was announced by the Chancellor in March this year to prepare for expanded work post-Brexit.<\/p>\n<p>We were gratified that Global Competition Review\u2019s most recent annual ranking of the world\u2019s top antitrust authorities, published in July last year, referred to the CMA being \u2018visibly reinvigorated\u2019, \u2018ramping up\u2019 our activity, with \u2018a real focus on getting things done\u2019 (Global Competition Review, Rating enforcement 2017, July 2017). And that, in April this year, we won Global Competition Review\u2019s award for European competition agency of the year.<\/p>\n<p>Yet there are no grounds for complacency. Quite apart from Brexit, the \u2018day job\u2019 for the CMA is important and stretching. As a competition authority we face formidable challenges:<\/p>\n<ul>\n<li>There remain many examples of market failure in our economy, harming consumers<\/li>\n<li>Some of our traditional remedies of encouraging choice and switching can result in perverse outcomes for consumers in certain sectors, particularly where technology allows for personalised pricing. As the Government\u2019s April 2018 Green Paper on \u2018Modernising consumer markets\u2019 puts it: \u2018It is often those who are the most vulnerable who are least likely to be on good deals and therefore pay the most\u2019 (Department for Business, Energy and Industrial Strategy, <a rel=\"external\" href=\"https:\/\/assets.publishing.service.gov.uk\/government\/uploads\/system\/uploads\/attachment_data\/file\/699937\/modernising-consumer-markets-green-paper.pdf\">Modernising consumer markets: Consumer Green Paper, Cm 9595, 11 April 2018, paragraph 45<\/a>)<\/li>\n<li>And the latest manifestations of digitalisation, in the form of pricing algorithms and artificial intelligence, pose fundamental, and important, questions for the detection of anti-competitive practices \u2013 as well as conceptual questions for the application of competition law more generally \u2013 questions which competition authorities around the world are having to grapple with<\/li>\n<\/ul>\n<p>But in our 4 years we\u2019ve shown a readiness to meet these challenges \u2013 whether it\u2019s by bringing together two venerable organisations, the OFT and Competition Commission, into a unified seamless single entity; through delivering reports on two major market investigations into key sectors of the economy, energy and retail banking, whose positive results are starting to be felt in the real world, for example in the introduction of open banking;  through the marked uptick in our competition enforcement activity, protecting millions of our citizens from harmful anti-competitive practices \u2013 and whether it relates to residential care homes for the elderly, or price comparison websites, or fun fairs, or medicines sold to the National Health Service. The challenges we face are indeed significant, but in our brief life we\u2019ve shown, I believe, the ambition and the ability to rise to some pretty big challenges.<\/p>\n<p>And then along comes Brexit.<\/p>\n<p>So what about Brexit?<\/p>\n<p>I want to focus on 4 aspects of Brexit as regards the CMA:<\/p>\n<ol>\n<li>What it means for the CMA\u2019s functions and workload<\/li>\n<li>Practicalities \u2013 funding and preparation<\/li>\n<li>Scope for UK divergence from EU law precedent<\/li>\n<li>Wider implications<\/li>\n<\/ol>\n<h2 id=\"what-brexit-means-for-the-cma\">1. What Brexit means for the CMA<\/h2>\n<p>I don\u2019t know about you, but these days I find it hard to have a conversation with competition practitioners without being deluged by worries about the effect of leaving the EU on competition law and policy.<\/p>\n<p>Examples of what I\u2019ve heard people say include concerns about: the duplication involved in parallel investigations of mergers and anti-competitive practices; the risk of an \u2018enforcement gap\u2019 for UK consumers if there are no parallel investigations; the risks to business certainty if there is divergence from EU norms in competition enforcement; the loss of effectiveness from being outside the cooperation mechanisms of the European Competition Network (especially as regards authorities sharing confidential information on suspected anti-competitive practices); the loss of UK voices in the EU institutions to influence the development of EU competition law and policy; and, at the CMA, a lack of adequate funding which might, for example, reduce our ability to conduct the full range of our activities such as market investigations when we have to divert staff to handle mergers that would previously have been examined exclusively by the European Commission.<\/p>\n<p>All the concerns I\u2019ve just listed, and possibly others too, raise important and serious issues. They are real challenges for competition law and policy in the UK, and across Europe \u2013 and they present practical problems which will need to be addressed as the United Kingdom prepares to leave the EU.<\/p>\n<p>It is perhaps inevitable that the competition law community should focus on the negative in all this. The practice of competition law in the UK has, historically, been intimately bound up with our membership of the EU:<\/p>\n<ul>\n<li>although it is true that we have had competition laws in this country since 1948, we all know that many of the biggest competition law cases that affect UK businesses and consumers \u2013 under merger control or the prohibitions on anti-competitive agreements and abuses of dominance \u2013 are dealt with under EU law, enforced by the European Commission and arbitrated by the EU Court of Justice and General Court<\/li>\n<li>as for the cases which are already, pre-Brexit, subject to UK jurisdiction, under the UK Competition Act prohibitions \u2013 which the CMA, as the principal national competition authority, enforces, and which the Competition Appeal Tribunal arbitrates &#8211; even these domestic \u2018national\u2019 cases have had to be undertaken in conformity with EU jurisprudence<\/li>\n<li>and as many of us who have worked in law firms know, the competition or antitrust practice of the firm has often been branded as the EU competition practice<\/li>\n<\/ul>\n<p>Disengaging competition law and policy from EU membership is, for many people, conceptually hard to take. And \u2013 from many discussions I have had in the period since British voters chose, by a majority, to leave the EU &#8211; it is not popular with large sections of the \u2018competition specialist\u2019 community.<\/p>\n<p>But I want to suggest to you that, notwithstanding the many potential problems, there are also significant opportunities.<\/p>\n<p>Let\u2019s just spell out in basic terms what leaving the EU actually means for the application of competition law enforcement in the UK:<\/p>\n<ul>\n<li>in merger control: whereas previously the UK authorities were prohibited from examining the competition effects of mergers and acquisitions subject to the EU Merger Regulation \u2013 typically the biggest M&amp;A transactions, and sometimes the most important\u2013 we will now be allowed, and empowered, to examine, and rule on, the competition aspects of all mergers and acquisitions affecting UK markets where they meet our national jurisdictional thresholds<\/li>\n<li>as for cartels, anti-competitive agreements and conduct: whereas until now the national competition authorities were prohibited from applying competition law to cases over which the European Commission chose to exercise its jurisdiction (because of Regulation 1\/2003 articles 11(6) and 16(2), read with article 3) \u2013 again, typically the bigger cases \u2013 post-Brexit we in the UK will be allowed to tackle all anti-competitive practices that affect UK markets, UK consumers and UK businesses, and not just the ones that the European Commission isn\u2019t interested in<\/li>\n<\/ul>\n<p>In short, jurisdiction over many cases affecting UK markets, previously exercised exclusively by supranational institutions in Brussels and Luxembourg, will now be acquired by British authorities and courts. Post-Brexit, it will now be the UK\u2019s own national institutions and courts that will be taking some of the bigger decisions that were previously reserved for determination elsewhere. We have discussed some of the potential difficulties, but of course there are also opportunities here, for the CMA and for the UK regime.<\/p>\n<p>It\u2019s a big and important step change. Is it beyond us? If Australia, Brazil, Canada, India, Japan, South Korea and others can apply their own competition laws \u2013 and can examine any merger or anti-competitive practice, large or small, that affects their consumers, businesses and citizens\u2013 it doesn\u2019t seem to me so unrealistic that the UK should stand alongside them, and alongside the US and China, as among the leading independent players in the world of competition. There is much comfort to be gained \u2013 for us, for our fellow competition authorities in Europe and across the globe, for companies that do business in the UK, and (most importantly) for the UK consumers we seek to protect \u2013 in the fact that Britain\u2019s is a pretty mature and experienced competition regime, with real expertise in our courts, enforcement authorities and institutions, and excellent contacts and relationships across the globe.<\/p>\n<p>Will it be easy? No. Are there serious difficulties in getting there? Yes, but the purpose of identifying them and tackling them is to be in a position where we can make the most of the opportunities \u2013 to the overall benefit of UK consumers, UK businesses and, ultimately, the UK economy.<\/p>\n<h2 id=\"funding-and-preparation\">2. Funding and preparation<\/h2>\n<p>People keep asking us: \u2018How is the CMA going to take on all those cases?\u2019 \u2018Do you have the staff?\u2019 \u2018Where is all the money going to come from?\u2019 \u2018How are you going to recruit enough people in time?\u2019<\/p>\n<p>These are legitimate questions \u2013 and, again, I wouldn\u2019t want to understate the challenges. But it won\u2019t surprise you to learn that, if you are asking these questions, we are asking them too, as are those in Government charged with responsibility for the competition regime and for delivering our exit from the EU. Asking the questions, and working on the solutions.<\/p>\n<p>It is true that we can expect a significant increase in our case load \u2013taking on the mergers, cartels, anti-competitive agreements and abuses of dominance that were previously reserved to the European Commission, which are typically the bigger cases, as well as control of state aid, which will be a new activity for us &#8211; and naturally we need more staff for that.<\/p>\n<p>That in turn requires funding. You will have seen that, in the Chancellor\u2019s \u2018spring statement\u2019 in March, the Government has already allocated an additional \u00a323.6 million to our budget for 2018-19, so as to enable us to prepare for the UK\u2019s exit from the EU (<a rel=\"external\" href=\"https:\/\/www.parliament.uk\/business\/publications\/written-questions-answers-statements\/written-statement\/Commons\/2018-03-13\/HCWS540\">written statement to the House of Commons HCWS540, 13 March 2018<\/a>). This is of course a significant sum, but it was costed carefully and will be prudently and appropriately spent.<\/p>\n<p>With that money we need to recruit. At this stage we don\u2019t know exactly when the CMA will acquire jurisdiction over cases (or their UK aspects) previously reserved to the European Commission. These matters are subject to negotiation between the UK and the EU. We have had to be prepared for all contingencies:<\/p>\n<ul>\n<li>first, for Britain as a whole, will there be an \u2018implementation period\u2019 after exit day next March, or an immediate acquisition of jurisdiction on exit? That one now looks clearer \u2013 it seems that we\u2019ll have a 21-month implementation period, with the change of jurisdiction at the start of 2021<\/li>\n<li>second, for individual cases that are \u2018in-flight\u2019 when overall jurisdiction changes, are there to be transitional provisions, by which the European Commission retains exclusive jurisdiction over some cases that are \u2018in-flight\u2019, or rather what is sometimes called a \u2018cliff edge\u2019 whereby the European Commission\u2019s exclusive jurisdiction over those cases ceases immediately?<\/li>\n<\/ul>\n<p>Yes, we are planning to recruit substantial numbers. We cannot, and will not, compromise on quality in our recruitment; we all know that the CMA\u2019s decisions are subject to stringent judicial scrutiny &#8211; and in any event we want to make the right decisions, rigorously and with procedural fairness.<\/p>\n<p>People often ask, \u2018How are you going to recruit, if your pay scales are significantly lower than those in many of the \u2018talent pools\u2019 where you fish \u2013 such as the competition practices of leading private-sector law firms, barristers\u2019 chambers and economic consultancies?\u2019 All I can say to that is that, although in many cases that will be true, as someone who has experienced both private-sector competition practice and working at the CMA \u2013 and as someone who has talked to many other people with experience of both \u2013 the experience of working at the CMA is superb. The quality of the work is unmatched. You are at the centre of all the important competition cases in the UK. Pre-Brexit, that excluded the bigger cases that were under European Commission jurisdiction. Now, it will mean all the important cases.<\/p>\n<p>And I know that many people who have experienced both find it fulfilling that, in doing their work on these cases, they are not just advocating for particular client\u2019s business interests (although that is, in my view, a necessary and good thing to do) \u2013 but are attempting to do the right thing for the overall public good. It is work that has a real and direct impact on the well-being of millions of ordinary people. They are also having to think of the wider commercial, economic and policy context in which their work is being done.<\/p>\n<h3 id=\"funding-and-recruitment-are-challenges-for-us-at-the-cma\">Funding and recruitment are challenges for us at the CMA.<\/h3>\n<p>But of course there are practical challenges for business and their advisers too. We do not yet know the shape of any transitional arrangements, but when they come we will all need to familiarise ourselves with them, to know which jurisdiction to contact and submit notifications to. More than that, we all need to be prepared well in advance of the date when jurisdiction transfers. A merger case typically involves early contacts and pre-notification, often 6 months or more in advance of the \u2018clock starting\u2019 by way of formal notification. For mergers which, post-Brexit, will fall to be notified to the CMA rather than (or in parallel with) the European Commission, that means that we at the CMA need to be in a good position to take on those additional cases efficiently, once we have jurisdiction, without avoidable delays &#8211; and that businesses will want to facilitate that and need to be in touch with us early in order to manage that pre-exit, pre-notification stage.<\/p>\n<p>We will of course do everything we can, as the legal framework permits, to liaise with the European Commission on these cases \u2013 both merger cases and competition enforcement cases. From experience, we know that there is significant goodwill among our counterparts at the European Commission to liaise and cooperate on an interagency basis in the practical, sensible way we are all used to. We have worked well for many years with our colleagues at the European Commission, and we are confident that we will continue to do so whatever the final arrangements for future parallel investigations.<\/p>\n<h2 id=\"scope-for-uk-divergence-from-eu-precedent\">3. Scope for UK divergence from EU precedent<\/h2>\n<p>Moving from these procedural issues to the substance of UK competition enforcement post-Brexit, a critical question arises, about the scope for UK divergence from EU precedent in the application of the UK Competition Act prohibitions on anti-competitive agreements and abuse of dominance. To what extent will the CMA, the Competition Appeal Tribunal, and other UK competition authorities (the sector regulators with concurrent competition powers) and courts, be obliged to apply the prohibitions consistently with EU jurisprudence \u2013 as is the case at present \u2013 or, rather, be free to diverge?<\/p>\n<p>It is highly relevant that the UK Competition Act prohibitions were modelled on, and mimic the wording of, the equivalent EU prohibitions in Articles 101 and 102 (save as regards territorial scope).<\/p>\n<p>In legal terms, there are two main potential constraints on divergence.<\/p>\n<p>First, section 60 of the Competition Act itself, which has been there ever since the Act came into force twenty years ago. This requires the UK institutions applying the prohibitions \u2013 the CMA, the CAT and so on:<\/p>\n<ul>\n<li>to deal with questions under the prohibition \u2018in a manner which is consistent with corresponding questions arising in [EU] law\u2019 \u2013 with the qualification that this is \u2018so far as possible (having regard to any relevant differences [between the two regimes]\u2026)\u2019<\/li>\n<li>to secure no inconsistency with judgments of the EU Court of Justice (including the EU General Court)<\/li>\n<li>to have regard to relevant European Commission decisions, notices and other statements<\/li>\n<\/ul>\n<p>There is a question of whether section 60 is to be retained, retained in modified form (for example, with a \u2018softer\u2019 duty to have regard to EU jurisprudence) or repealed altogether.<\/p>\n<p>Separately, a second possible constraint on UK divergence from EU competition case law relates to the European Union (Withdrawal) Bill currently going through Parliament. The Bill is designed to establish the legislative framework for UK laws no longer being subject to the supremacy of EU law. As part of this, the Bill creates the concept of \u2018EU-derived domestic legislation\u2019. The question is what happens if the Competition Act prohibitions count as \u2018unmodified\u2019 \u2018EU-derived domestic legislation\u2019. On some readings, the effect could be that the UK Competition Act prohibitions would have to be applied in conformity with EU Court of Justice judgments made before the date of the UK\u2019s exit from the EU, unless those EU Court judgments were superseded by subsequent judgments of the UK Supreme Court (similarly to section 60, this requirement is qualified by \u2018relevance\u2019 considerations).<\/p>\n<p>If that were the correct reading, that in turn would have the consequence that pre-March 2019 jurisprudence of the EU Court of Justice could be binding on the CMA, the CAT etc for many years into the future, because cases under the competition prohibitions are very seldom heard at the Supreme Court \u2013 but EU Court judgments after exit day in March 2019 would have no such binding effect. A curious outcome of this would be that, in UK competition law, EU jurisprudence as at March 2019 would be effectively ossified. If EU jurisprudence then developed after March 2019 to reflect changing legal and economic thinking on competition issues in the UK we would still have to conform with the \u2018old\u2019 pre-March 2019 jurisprudence, whereas other European countries, and the European Commission, would be applying the law reflecting more up-to-date jurisprudence after March 2019.<\/p>\n<p>It is far from certain that that curious outcome would, really, be the consequence of the European Union (Withdrawal) Bill. Whether this will in fact be the case is likely to depend on the proper construction of certain core concepts in the Bill, including in particular:<\/p>\n<ul>\n<li>the concept of \u2018EU-derived domestic legislation\u2019, and specifically whether the Competition Act prohibitions are within its ambit<\/li>\n<li>the concept of \u2018modifying\u2019 such EU-derived domestic legislation, and specifically whether any changes to section 60 of the Competition Act (repeal or amendment) are sufficient to count as having \u2018modified\u2019 the Competition Act prohibitions<\/li>\n<li>the \u2018intention\u2019 behind any such changes to section 60 (the Bill provides (in clause 7(6), using the numbering as at 10 May 2018) that \u2018Subsection (3) [which requires consistency with EU legal interpretations] does not prevent the validity, meaning or effect of any retained EU law which has been modified on or after exit day from being decided as provided for in that subsection if doing so is consistent with the intention of the modifications)<\/li>\n<\/ul>\n<p>It will therefore be important \u2013 for businesses which need to comply with the Competition Act prohibitions, and their advisers &#8211; that the Government and Parliament provide clarification on these points. Such clarification will indicate the extent to which the Competition Act prohibitions will, after the UK\u2019s exit, need to be applied consistently with EU case law.<\/p>\n<p>But, over and above these specific points, there is the bigger question of whether, and to what extent, the UK institutions should be free to diverge from EU jurisprudence, or alternatively should continue (one way or another) to be constrained by EU Court judgments.<\/p>\n<p>Certainly, there are advantages in businesses being subject to competition laws that do not differ too radically from each other, particularly in the case of businesses that operate multi-nationally. But that is in any way the case \u2013 in most respects, competition law imposes the same requirements on businesses across the globe. Whether under the UK or the EU regime, the US or the Australian, the Russian or the South African, it\u2019s unlawful for businesses to collude on price, for example, or to engage in bid-rigging when tendering for contracts.<\/p>\n<p>Yet at the margins, there are issues on where there are legitimate differences \u2013 loyalty rebates, for instance, which have been the subject of intense economic and legal debate, or price discrimination.<\/p>\n<p>The question is whether, for those cases at the margins, we should be bound to some degree to follow EU Court judgments.<\/p>\n<p>There are arguments both ways. It is for the Government and Parliament to resolve this question.  As a mere unelected official, it is certainly not my place to do so. But let me try to sketch out the arguments each way.<\/p>\n<p>I think it is relatively uncontroversial that it makes sense for any competition regime (including the CMA\u2019s) to have regard to international best practice \u2013 whether expressed in the EU Court of Justice or the US Supreme Court, or by the US Department of Justice or Australia\u2019s ACCC or Germany\u2019s Bundeskartellamt, or in other respected and distinguished forums. The point at issue is whether, in the UK regime post-Brexit, it is right or appropriate to privilege EU Court of Justice jurisprudence over all the rest.<\/p>\n<p>On the one hand, it is argued that yes, we should conform with EU jurisprudence \u2013 continue to conform with EU jurisprudence \u2013 because that will provide business with the consistency, predictability and stability they crave.  It\u2019s what we\u2019ve always done (for the past 18 years). EU countries are our nearest, and largest, trading partners, and so it is helpful to have the same competition laws that they have, applied and interpreted in pretty much the same way.<\/p>\n<p>Alongside these arguments for conforming with EU jurisprudence, there is also the argument that it\u2019s good for the integrity of the UK competition law regime. The point that is made on this is that it would be unfortunate if the UK competition authorities and courts had to operate in a vacuum, with no precedent basis for their decision-making, other than the relatively limited basis of 18 years of domestic precedent under the Competition Act.<\/p>\n<p>But there are also powerful arguments against \u2018privileging\u2019 EU Court of Justice jurisprudence over all other international precedent and best practice, and over our own independent thinking. Again, we are talking not about the bulk of competition law (on which there is consensus across the globe \u2013price collusion and bid-rigging are unlawful everywhere). As I\u2019ve said we are talking only about those issues at the margins over which there is genuine and legitimate debate \u2013 fidelity rebates or price discrimination, for example. Once we are outside the EU, if the view of the UK competition authorities or courts is that the better view on one of these issues is X, why should they be constrained from applying X just because one particular foreign court, the EU Court of Justice, has case law which says Y, case law which might be outdated?<\/p>\n<p>Where are we headed? We await the Government\u2019s specific proposals on these points.The Prime Minister, in her Mansion House speech on 2 March &#8211; setting out the UK\u2019s negotiating position for future relations with the EU &#8211; left open the possibility for at least some conformity with EU jurisprudence. She said:<\/p>\n<blockquote>\n<p class=\"last-child\">we may choose to commit some areas of our regulations like state aid and competition to remaining in step with the EU\u2019s.<\/p>\n<\/blockquote>\n<p>More specifically, at the end of March, the Government published its response to a report on Brexit and competition that had been produced by the House of Lords EU Internal Market Sub-committee. Turning to this question, the Government said that, after exit, \u2018it will no longer be appropriate to maintain the primacy of EU law over UK law\u2019 and yet, nevertheless, the Government \u2018welcomes the arguments\u2026 on the retention of some form of duty on UK courts to take account of CJEU jurisprudence\u2019 (<a rel=\"external\" href=\"https:\/\/www.parliament.uk\/documents\/lords-committees\/eu-internal-market-subcommittee\/brexit-competition\/290318-Government-Response-to-HoL-EU-Internal-Market-Sub-Committee-competition.pdf\">Government response to the House of Lords EU Internal Market Sub-committee report on the impact of Brexit on UK competition and state aid, 29 March 2018, Response to recommendation 2<\/a>).<\/p>\n<p>Precisely what that will entail in practice remains to be fleshed out.<\/p>\n<p>These are plainly difficult issues &#8211; with, as I\u2019ve said, powerful arguments either way. Of course it would be na\u00efve to view them in isolation, and to fail to recognise that they are bound up with the wider political debates over our departure from the EU \u2013 about the balance between business convenience and political sovereignty, about whether we should have a \u2018softer\u2019 or a \u2018harder\u2019 Brexit. These are politically-charged matters, which it is for our political leaders, rather than unelected officials, to resolve. But I am sure that, wherever we stand, we would all welcome some clarity on these points, as soon as is reasonably practicable.<\/p>\n<h2 id=\"wider-implications\">4. Wider implications<\/h2>\n<h4 id=\"changes-in-competition-policy--wider-public-interest-issues\">Changes in competition policy \u2013 wider public interest issues<\/h4>\n<p>On 11 July 2016, in the aftermath of Britain\u2019s vote to leave the EU and as she stood on the brink of becoming Prime Minister, Theresa May said:<\/p>\n<blockquote>\n<p class=\"last-child\">Make no mistake, the referendum was a vote to leave the European Union, but it was also a vote for serious change.<\/p>\n<\/blockquote>\n<p>This is a common theme. Many commentators have viewed Brexit as being inextricably linked with a wider demand for change in the way things are run and, specifically, a challenge to the \u2018market competition\u2019 consensus that has prevailed in policy-making, at least in the advanced industrialised world, for the past three decades or so. Any such change clearly has implications for competition policy and, in practice, for us at the CMA as implementers of competition policy.<\/p>\n<p>One obvious aspect is the extent to which, in merger control \u2013 and in our market investigations \u2013 we should continue to focus almost exclusively on effects on market competition or revert to the previous position of looking at wider public interest effects, such as the effects on employment, or research-and-development, or the country\u2019s economic strength internationally, or the economic position of regions in our country. Such wider public interest considerations have in the past been part of the competition authorities\u2019 remit. Indeed, it is already the case that, in certain sectors, other considerations can come into play, both under UK and under EU merger control &#8211; such as preserving plurality in the media, or defence and security considerations, or questions of financial regulation and stability.<\/p>\n<p>But should we go further? Should we care, for example, about takeovers that increase foreign control of the economy? Or that involve asset-stripping? Or weakening our R&amp;D base? Or threats to British jobs? Should considerations of fairness, or economic inequality, enter into the picture? Alternatively, should we focus almost exclusively on competition, and leave it to market dynamics to sort out the rest? Over the past ten years or so, and particularly since the 2008 financial crisis shook confidence in existing policy assumptions about market competition, these questions have arisen in the context of mergers \u2013 some of which actually happened, some of which were just proposed &#8211; such as Kraft\/Cadbury, Pfizer\/AstraZeneca, SoftBank\/ARM and, this year, Melrose\/GKN.<\/p>\n<p>Again, these policy decisions are for elected politicians to make, rather than for technocratic officials like us. We just implement. But let me make a couple of observations.<\/p>\n<p>These wider issues are linked to Brexit in two ways. One is the thought that, once we are outside the EU, the UK will be free to run its own merger control policy as it chooses. That is partly because the larger mergers affecting the UK will be for us to decide, rather than just for the European Commission, and partly because we\u2019ll be freed from constraints on blocking such as the EU law rules on free movement of capital (which limit Member States\u2019 ability to block acquisitions by entities in other EU Member States). But a word of caution is in order here. If we are to have effective free trading agreements with the EU, and indeed globally, how likely is it that those agreements will allow us \u2013 even if it were felt appropriate to do so &#8211; to impose significantly greater restrictions on foreign takeovers than we have now (at least without reciprocal restrictions on takeovers by UK entities of their companies)? It is far from obvious that, in practice, Brexit will, by itself, allow for this.<\/p>\n<p>The second aspect is that, as I\u2019ve said, the referendum result was seen by many people, including the Prime Minister, as part of a wider vote for change to the way we run our economy, which might entail less of a focus on market competition and more on wider public interest considerations in merger control and more generally. But, in so far as that is true, many commentators have noted that such an expression of the public mood is not peculiar to the UK and the 2016 referendum. It is arguably discernible in other democratic outcomes, such as the election of Donald Trump to the US presidency and the rise of \u2018populist\u2019 political parties, of left and right, in countries across Europe. And the policy response \u2013 to review assumptions about market competition \u2013 is not unique to Brexit Britain.  Indeed in September 2017 the EU itself unveiled a proposed framework for \u2018screening of foreign direct investments\u2019 in European companies, with the view being expressed by the EU\u2019s Commissioner for Trade that the framework \u2018will allow us to respond collectively and defend our European strategic interests when they are at risk\u2019<br \/>\n(<a rel=\"external\" href=\"http:\/\/europa.eu\/rapid\/press-release_IP-17-3183_en.htm\">European Commission press release, \u2018State of the Union 2017 &#8211; Trade Package: European Commission proposes framework for screening of foreign direct investments\u2019, Brussels, 14 September 2017<\/a>).<\/p>\n<p>In short, the coming years may well see changes to competition policy to reflect these wider public concerns and policy trends. But the present Government has said it is not minded to move far in this direction; although it has lowered the thresholds for examining mergers that involve the acquisition of \u2018critical national infrastructure\u2019 with national security implications, and is considering further changes on this, its response to the House of Lords Sub-committee report on Brexit and competition emphasised that it<\/p>\n<blockquote>\n<p class=\"last-child\">recognises the importance of not moving away from a regime driven by the economic analysis of the impact of mergers on competition.<\/p>\n<\/blockquote>\n<p>(Government response to the House of Lords EU Internal Market Sub-committee report on the impact of Brexit on UK competition and state aid, 29 March 2018, Response to recommendation 11.)<\/p>\n<p>In any event, any such changes to competition policy are neither an inevitable consequence of Brexit, nor specifically attributable to it. They are part of a much bigger, and more global, debate.<\/p>\n<h3 id=\"state-aid-rules\">State aid rules<\/h3>\n<p>I want to turn to another implication, which definitely is a direct consequence of Brexit. This relates to state aid rules and the establishment of a national UK regime for controlling state aid (i.e. by governments and public bodies in the UK). In late March this year, the Government said that \u2018the UK should be prepared to establish a full, UK-wide subsidy control framework\u2019. In the same statement the Government added that this regime would be operated by the CMA as \u2018an independent UK State aid authority\u2019 (<a rel=\"external\" href=\"http:\/\/data.parliament.uk\/DepositedPapers\/Files\/DEP2018-0337\/280318_-_Letter_Andrew_Griffiths_to_Rt_Hon_Lord_Whitty.pdf\">letter from Andrew Griffiths, Minister for Small Business, Consumers and Corporate Responsibility, to Lord Whitty, Chair of House of Lords EU Internal Market Sub-Committee, 28 March 2018<\/a>).<\/p>\n<p>This is a major new function for us at the CMA. It is one that we are determined to make a success of, building on our expertise in applying legal and economic principles in the service of effective competition. There is much to be worked out on the practical implementation of this, and it would be premature to say a great deal at this stage. But we are preparing for this new post-Brexit responsibility with vigour, just as we are for the expansion of our jurisdiction over biggest mergers, cartels and anti-competitive practices, previously reserved to the European Commission, which I have already referred to.<\/p>\n<p>This new role for us presents new challenges for us \u2013 in addition to the other challenges of Brexit we\u2019ve already discussed. Specifically, we\u2019ll be making our decisions on questions that are often politically charged and contentious \u2013 although of course that\u2019s not unique to state aid, given that, as many of you know, many of the mergers and markets we\u2019ve investigated recently have been pretty politically contentious too. We will need to be sensitive to local conditions in each nation and region of our country. In these contexts, we face the challenge of ensuring, as we must, that the CMA retains its reputation for rigour, fairness, respect for the rule of law, and political impartiality and independence \u2013 and doing so in our state aid decision-making, and across all our activities.<\/p>\n<p>As I say, all this adds to the challenges of Brexit that I mentioned earlier. It\u2019s not easy. But there are huge opportunities.  We are determined to address the challenges seriously, soberly and thoroughly. For if we can get it right \u2013 if we can tackle, post-Brexit, the increased caseload of mergers, cartels, anti-competitive practices and state aid effectively, rigorously and fairly &#8211; the prize, in terms of real benefits for UK consumers, businesses and the economy, is one well worth having. We are determined to do so.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Keynote speech given by Michael Grenfell, CMA Executive Director \u2013 Enforcement, at the Advanced EU competition law conference.<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"_links":{"self":[{"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/91936"}],"collection":[{"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=91936"}],"version-history":[{"count":0,"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/91936\/revisions"}],"wp:attachment":[{"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=91936"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=91936"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=91936"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}