Blog: Britain’s competition regulator is beefing up – The Economist

WHAT BRITAIN’S economy needs is “less regulation and indeed less taxation,” declared Boris Johnson in a rambling speech to the Confederation of British Industry on November 22nd. Since the Brexit referendum, politicians have debated which EU regulations to shred and which to strengthen. Just as important, but usually ignored, is the future of thebodies that enforce those regulations: whether they are deep-pocketed or cash-strapped, brave or timid.

In the scramble to retool the state after Brexit, the Competition and Markets Authority (CMA), Britain’s competition regulator, is emerging as a winner. Ministers are loading it up with new responsibilities, resources and powers; it is grabbing them with both hands. As a result, it will loom larger over the high street, and be a thorn in the side of Silicon Valley.

The most muscular arm of the European Commission is its competition directorate. Since the 1980s it has been bringing companies and countries to heel by blocking cross-border mergers, levying eye-popping fines and overruling finance ministries. By comparison, the CMA has suffered from “relative invisibility”, according to Andrew Tyrie, its former chair. Historically it has been criticised as light-touch, levying a fraction of the fines of its peers in Germany and France.Brexit is transforming it. Many British regulators saw the divorce as offering only pointless disruption and urged ministers to stay hitched to the single market. Yet some in the CMA spied a tantalising opportunity to cut loose and shape global competition policy, alongside their peers in Australia and Japan.

The CMA is taking charge of complex cross-border mergers, previously the commission’s domain, which could increase its caseload by up to half in the coming years. A new subsidies advice unit will oversee Britain’s rule book on government handouts, and an Office for the Internal Market will keep watch for trade barriers between England, Scotland and Wales.

The agency is becoming more interventionist. Last year three-quarters of proposed mergers subjected to in-depth reviews were either blocked or abandoned, up from a quarter five years earlier. It is using its wide discretion to investigate foreign mergers, undeterred by the absence of any direct or current link to the British market. Unwilling to be a rubber-stamp for decisions taken elsewhere, it has halted deals granted approval in Washington. The upshot is that deals that once would have appeared straightforward are now more challenging, says Sharon Malhi, of Freshfields Bruckhaus Deringer, a law firm.

Greater powers still are planned. The CMA has persuaded ministers to give it the job of monitoring tech giants such as Google and Facebook. A new Digital Markets Unit will impose tailored codes of conduct on the biggest. A stricter merger regime will aim to halt “killer acquisitions”—purchases of innovative rivals simply to shut them down. Such codes are not so much a divergence from the EU as the adoption of approaches it pioneered, argues Tommaso Valletti, the commission’s former chief competition economist.

Ministers also propose legislation that would give the CMA new ways to tackle consumer sharp practice, including hitting wrongdoers with fines without going to court, as well as greater powers to intervene in broken markets at speed. All this adds up to a bigger agency: staff rolls and budgets (adjusted for inflation) have risen by a third since 2015, and new offices are planned in Manchester and Darlington. It may become more politically attuned, too. The government currently issues a strategic “steer” to the CMA every five years, but ministers want these to become more frequent and prescriptive.

Some lawyers think the agency is straining too hard to make its mark on global mergers, and suspect it will struggle to sustain its new workload. Companies have too few rights under the system as it stands, let alone under a more muscular regime, argues James Webber of Shearman & Sterling, a law firm. But the agency argues that new tools are essential to preserve competition. Andrea Coscelli, its chief executive, argues that regulators were too cautious for a decade to 2018 as tech giants grew. And despite its increased tempo, the overwhelming majority of mergers still go untouched. A report by the CMA published last year found that competition appears to have weakened in the past 20 years, with rising profits in the biggest firms and poor customer satisfaction. Brexit and covid risk worsening the problem by locking out or eliminating competitors. A counterweight is needed.

For more coverage of matters relating to Brexit, visit our Brexit hub

This article appeared in the Britain section of the print edition under the headline “A power in the land”

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