On 5 February 2015, the National Audit Office (NAO) published a report entitled ‘The UK Competition Regime’. The report assesses the performance of the UK competition regulators, focusing on the Competition and Markets Authority (CMA). It concludes that the CMA has inherited certain strengths, including a positive legacy of merger and market investigation work. However, it has also inherited problems in competition enforcement, which derive, according to the NAO, from a difficult legal environment, very low business awareness of the organisation and competition law more broadly, and reputational damage caused by a series of high profile losses in court.
The NAO report notes that businesses’ awareness of the CMA and competition law is low, which may harm compliance. According to the CMA’s 2014 survey of UK industry, less than 2% of businesses knew the CMA well or very well. Although only recently formed at the time of the survey, the CMA compared very unfavourably to the Financial Conduct Authority, which had only been created in 2013. In terms of competition law, only 23% of businesses felt they knew competition law well, while 20% had never heard of it at all and a further 25% did not feel they knew it well.
These statistics are fairly surprising. Clearly the CMA has a lot to do to increase awareness about competition law. Their current agenda indicates that this is an important priority for the CMA.
The NAO concludes that, using the current statistics, it is difficult to effectively capture the impact of the CMA’s work and its individual tools. In particular, it is unclear whether market investigation references which the CMA has been focusing on provide real value to markets and consumers. It is suggested that for these reasons it is difficult for the CMA to set its priorities. The NAO also notes that the CMA is hampered in its choice of tools and processes due to the legal criteria which affect its decision making, and recommends that the CMA does more work in calculating the impact of its work. The Report states that the Government should regularly report the full cost of the competition regime and keep its cost-effectiveness under review. In addition, the NAO recommends that the Government should develop indicators of the competitiveness of the markets, such as their profitability and the cost of entry and exit into the market.
In terms of competition law, only 23% of businesses felt they knew competition law well, while 20% had never heard of it at all
The Report notes that the CMA has improved the robustness of its investigation procedures, and that it has been successful in 15 of its last 19 civil court cases. However, the competition regime faces big challenges in increasing the number of enforcement decisions to date. Since 2012, the CMA has made on average four infringement decisions per year (16 in total). By contrast, in 2013 alone, the German competition authorities made 36 infringement decisions and their French counterparts made 23. This is replicated in the volume of fines levied. Between 2012 and 2014 the Office of Fair Trading and the CMA levied £65m of fines compared to almost £1.4bn in Germany. The NAO notes that there is a view among some stakeholders that because the UK is the best jurisdiction in which to contest an adverse finding, and because the CMA is more focussed on market studies and market investigation references, the CMA is reluctant to take enforcement action.
The CMA responded positively to the report and said it demonstrates that the CMA “has made significant progress in improving how the competition regime works”. However, it recognised that there is still more to be done in terms of increasing the number and speed of competition enforcement cases. It remains to be seen whether the increased case flow which the NAO has noted in its Report is a sign of things to come and whether it will result in an increased number of enforcement decisions.
In response to the worrying numbers relating to lack of competition law awareness, the CMA said it is delivering a multi-sector compliance programme to raise awareness amongst small and medium sized enterprises of competition law and the CMA’s role in enforcing it. If successfully rolled out, this training could have an impact on awareness within businesses, which in turn should have an impact on competition law compliance. Ultimately, however, some high profile, successful enforcement cases would go a long way to increasing awareness of and compliance with competition law.
Featured image credit: Panorama of the City of London from Michael Cliffe House by Alexander Kachkaev. CC BY-SA 2.0 via Flickr.