WIREDGOV

A speech by Sarah Cardell, the CMA's Chief Executive, delivered at the Chatham House Competition Policy 2024 conference.

How to watch this YouTube video

There's a YouTube video on this page. You can't access it because of your cookie settings.

You can change your cookie settings or watch the video on YouTube instead: Driving growth: how the CMA is rising to the challenge

Introduction

Much has changed since July, when I was invited to speak at this conference. In the UK, our new government has set out an ambitious programme of reform, underpinned by a national growth mission and supported by a modern industrial strategy. In the EU, we’ve seen the Draghi report on EU competitiveness and the nomination of a new Competition Commissioner-designate. And in the US, the election of a new President.

Much change, and undoubtedly more to come. But also, some valuable clarity. Growth is the new government’s top priority. Competition is core to growth. That’s why we made driving productive and sustainable growth a key pillar of our strategy in 2023.

But without business, there is no competition. That’s why it is important for the CMA to work with, listen to, and act on feedback from a wide range of businesses.

As we focus on the critical part the CMA can play in the success of the growth mission, we must evolve but stay true to our mandate from Parliament: to promote competition, within and outside of the UK, for the benefit of consumers. We know the benefits from promoting competition are profound and far-reaching – not just lower prices, but more innovation, choice, quality, security of supply, productivity, investment and growth.

Since Marcus and I became Chair and Chief Executive, we have pushed hard to make rapid and meaningful progress, delivering change whilst maintaining stability.

An almost entirely new executive team, with competition, consumer and corporate expertise. New non-executive directors with deep backgrounds in business, innovation and investment. Overhauling our strategy and prioritisation processes to maximise the impact of our work. Greater stakeholder engagement and transparency than ever before. A surge in digital and technology capability. And a new strategic, business and financial analysis team to ground our work in commercial realities.

Some of our actions over the last 18 months which promise to have the greatest impact for stakeholders, like the phase 2 merger reforms, are just now coming into effect. And some of our most significant opportunities to unlock competition as a force for growth – especially in the vital UK tech sector – will begin next year with the new Digital Markets, Competition and Consumers Act (DMCCA).

We have made a strong start. We can and will do more. At a critical moment for the UK’s economic growth and prosperity, we must deliver a regime that is swift yet rigorous. Robust but pragmatic. Agile yet predictable. Collaborative yet independent.

We must unashamedly focus on the best outcomes for UK consumers, UK businesses and the UK economy; and always be open and transparent. We must deliver a regime that leaves no one in any doubt that the UK is open to business – whilst remaining true to our statutory duty and Parliament’s intent: to help realise for the UK all the benefits that flow from effective competition. Can the CMA rise to this challenge? Absolutely.

I will cover three main points today:

1. First, that competition is an engine for growth and an essential lever in industrial strategy. But that, in pursuing growth, competition can be balanced alongside other policy objectives.
2. Next, how competition supports investment, and our response to concerns about the impact of the competition regime on investment.
3. Finally, how the CMA continues to progress and evolve, whilst remaining true to our mandate.

1. Competition is an engine for growth and an essential lever in industrial strategy

It should be uncontroversial to say that the spirit of competitive rivalry can be harnessed to drive the innovation, productivity, investment and – ultimately – the growth on which a more secure and prosperous future depends. And consumer protection gives people confidence to spend, spurring growth across the economy.

Evidence and history show that where competition is stronger, innovation, productivity and wage growth will be higher too.

This also benefits investors. They must be confident that the start-ups and scale-ups they back here in the UK have a fair chance of success on a level playing field. And that they can get a return on their investment, whether through growth or exit.

Equally, in an increasingly uncertain and volatile world, competition is ever more important to shore up resilience and self-reliance in our economy.

Logically then, just as skills, trade, tax or energy policy are key levers for sectoral growth, so too is competition policy.

We welcome the government’s commitment in its Industrial Strategy Green Paper to robust and independent enforcement of competition and consumer protection law.

As we set out in our response to the Green Paper, which we are publishing today, an industrial strategy which creates and captures maximum long-term value for the UK must be one in which competition is a core component.

This is important to emphasise because there is sometimes a perception – wrong in my view – that competition policy and industrial strategy are in tension. Perhaps that’s because industrial strategy is sometimes used as shorthand for ‘national champions’. The Green Paper itself lays out a far richer vision for a modern industrial strategy than that. And a strategy of building UK champions strong enough to compete in global markets is not, in any case, anti-competitive, provided this strength does not result in harms to UK consumers from weak competition at home.

Putting competition at the core of industrial strategy can support the government’s objectives in two ways:

1. First, effective competition drives growth directly in key sectors, removing barriers which stifle the flow of capital, innovation and the scaling of businesses.
2. Second, when government itself acts to drive growth in particular sectors, pro-competitive principles can maximise the long-term impact of those interventions across the economy, whilst minimising the risk of unintended consequences.

Fundamental to growth is public sector productivity. Public procurement represents around a third of public expenditure. Evidence from around the world suggests it’s highly vulnerable to anti-competitive behaviour. We provide advice to government and public authorities across the UK on the design of competitive procurement processes. And we take direct enforcement action – last year alone, the CMA issued fines totalling almost £60m to firms involved in rigging both public and private sector bids.

Alongside this, we are using our extensive AI and data science capability to assist public sector organisations (both nationally and regionally) to identify anomalies in bidding data and indicators of potential illegal conduct. This has the potential to deliver substantial taxpayer savings, and greater public sector productivity.

In pursuing growth, competition can be balanced with other policy objectives

Competition should be a core component of the government’s industrial strategy, but in pursuing growth, competition can be balanced with other policy objectives.

That’s true for industrial strategy, as it is for all government policy.

The CMA has a statutory function to advise government on the competition impact of its policy design, but it is for government to weigh this alongside other objectives.

And even within the competition regime, the statutory framework gives the CMA several levers to take account of wider factors.

The Competition Act prohibits anti-competitive agreements, but it still allows cooperation to drive innovation or other economic benefits, in certain circumstances.

For example, our Green Agreements Guidance helps businesses understand how they can lawfully collaborate to achieve environmental sustainability goals.

Flexibility also exists in the merger regime. There, the statutory question is whether a merger is likely to substantially lessen competition. As part of our assessment, we can evaluate whether the merger is likely to result in competition-enhancing efficiencies that might offset immediate concerns (for example, efficiencies flowing from long-term infrastructure or technology investments).

And we can consider whether remedies are available that lock in efficiencies or preserve relevant customer benefits (including from innovation) – which offset the impact of lost competition.

A case in point is the proposed Vodafone/Three merger – specifically the provisional remedies decision of the independent Inquiry Group.

I must issue a health warning here – highlighting the breadth of possible considerations within the legal framework is not an invitation for advocacy on merger cases based on spurious and insufficiently evidenced efficiencies. The evidential bar is high for good reason.

Firms spending time and money on legal and economic adviser fees in this way would be well advised to channel their investments elsewhere. What would be welcome, though, in the context of our regular stakeholder engagement, is feedback on how these aspects of the regime work in practice.

Additionally, whilst the CMA takes its decisions independently based on a competition test, the system recognises the need for government to intervene in certain limited cases, where the government, rather than the CMA, is better placed to balance wider public interest considerations.

This system works well because it is transparent, predictable and set out in statute.

And finally, the government’s strategic steer provides an important bridge between government policy and an independent competition authority.

2. Competition and investment

The Industrial Strategy Green Paper asks about the interaction between investment and competition, and rightly so: investment is a persistent source of UK underperformance compared to international peers.

Logically, competition drives investment. Because a dynamic economy, which rewards innovation and productivity, is a magnet for entrepreneurs with a keen eye for opportunities to found and grow businesses, and for the investors which back them.

The CMA’s Microeconomics Unit will publish work in early 2025 that will bring greater clarity to this relationship between competition and investment.

We know barriers to effective competition – anticompetitive practices, high barriers to entry and so on – can deter investment. We also know that competition alone is not always sufficient to drive investment – a number of barriers to investment exist. Factors like access to capital and skills, quality infrastructure, and well-designed regulation are also important.

How and where investment flows through our economy also matters – particularly how it translates into value for money and long-term benefits that are felt by people in this country. Investment may flow despite weak competition. But investment into competitive markets drives more equitable and longer-lasting benefits.

And what of the concern that the competition regime itself may deter investment?

We know from investors that the stability, independence, analytical and evidential rigour, and transparency of UK institutions are a powerful attraction. These are hallmarks of the UK competition regime.

But we take seriously any concerns that the way in which the regime is applied could chill investment. Our engagement to date with stakeholders often reveals these concerns to be more based in perception than reality. Even so, we know perceptions matter, and we must act to address this.

In my discussions with stakeholders, I’ve heard four major concerns, often in relation to merger control: proportionality, predictability, process and pace.

Proportionality

Proportionality matters to investor confidence. And it is sometimes said that the CMA is overly interventionist, compared to other authorities. Some numbers may be helpful here. Over 50,000 M&A deals are announced annually. Last year, the CMA conducted just 54 phase 1 investigations. Of the nine we took to phase 2, five were cleared unconditionally and a further two with remedies. Only one was subject to a prohibition decision at the end of phase 2. And the numbers of digital mergers subject to remedies, prohibition or abandonment show these to have been no more likely to face intervention than any other type of case.

Proportionality is always front of mind in our approach. That’s why we recently raised our de minimis thresholds from £15m to £30m, helping us concentrate our efforts on the mergers that truly require our attention.

But for those businesses who do come into the system, we want to make sure the experience is not just proportionate in outcome, but is also proportionate in approach.

That brings me onto the other points I’d like to address.

Predictability

For every merger control jurisdiction globally, some uncertainty of outcome is inevitable as a feature of an independent, evidence-based review process.

But for the UK regime, that’s overlaid with concerns about whether the CMA will investigate at all – in other words, our jurisdiction.

The UK merger regime – unlike many other countries – operates on a voluntary basis.

Companies choose whether to file and the CMA may ‘call in’ unnotified deals if they meet the legal tests. This introduces a degree of jurisdictional uncertainty, though extensive guidance and precedent is available to help.

It’s also worth noting that there are real benefits from a voluntary regime, in terms of reducing burdens on business. We typically investigate far fewer cases annually than economies of a similar size. 54 phase 1 reviews here last year; 266 investigations opened in France; 800 in Germany; as well as investigations by the European Commission.

But through our regular stakeholder engagement, we will redouble our efforts to provide greater clarity on jurisdiction where we can, and welcome feedback on this.

Process

We know businesses need confidence in the CMA’s processes – how transparent, streamlined, open, and consistent we are in the way we operate. What does it feel like to go through a CMA merger review? How does this compare to other jurisdictions?

We want to make sure that every business coming out of a UK merger review feels that they have been treated fairly and consistently, regardless of the outcome.

The major overhaul of our phase 2 investigation process, which is just now being implemented, marks a significant milestone on the path to the best in class experience we want to offer stakeholders. This will deliver a more transparent, collaborative, less adversarial approach, with better opportunities for constructive engagement between the independent CMA Inquiry Group and the parties.

Transparency is also a two-way street – the merger regime must not live in an ivory tower; but neither should companies believe the way to success is through backroom lobbying.

Pace

And, finally, pace is crucial. Businesses tell us the protracted uncertainty of a lengthy investigation can be tough, especially for startups and smaller companies. We understand.

We will be relentless in our pursuit of the quickest possible outcomes to minimise uncertainty for business while protecting the rigour of the system. That includes not just hitting our statutory deadlines, but also tailoring our approach to the issues at hand and moving quickly to remedies in appropriate cases.

How the CMA continues to progress and evolve, whilst remaining true to our mandate

I said at the start that we could do even more to deliver a regime that supports the growth mission.

As we plan our portfolio of work for next year we will have a laser focus on growth.

And we will also continue to progress and evolve in the way that we work. Let me close with three specific examples:

• the new digital markets competition regime
• our approach to mergers, and in particular merger remedies
• our external engagement and reporting

Digital markets competition regime

A landmark new digital markets competition regime comes into force at the beginning of next year. I want to emphasise quite what a step change this represents in our ability to drive competition and create opportunities for growth across the UK tech sector:

• opportunities to harness the benefits of continued investment and innovation by the very largest firms
• at the same time, opportunities to create a level playing field for start-ups and scale-ups (many UK based) to succeed, enabling them to access key inputs, infrastructure and ecosystems on fair and reasonable terms and maximising their opportunity to bring forward innovative challenge to existing products and services
• and opportunities for UK business customers across the economy, who rely on core platform services and for whom greater choice, more innovation and lower prices will fuel much-needed productivity gains diffused across the whole economy

This is a unique moment to deliver a new regime that is targeted on driving benefits for the UK economy. But also to do so in a bespoke, proportionate and participative way, addressing many of the areas of feedback that I just discussed.

At the heart of the regime is proportionality – it’s been carefully designed to apply only to the very largest companies and to individual designated activities within that.

The new regime is bespoke and tailored to fast-moving digital markets – with interventions developed through a forward looking, participative process, providing the predictability that is critically important in these dynamic sectors.

The process for designing any intervention will be collaborative and transparent, with the aim of keeping innovation-led markets open and bringing firms on the journey with us.

And we are committed to move at pace, taking a solutions-first approach wherever possible whilst respecting due process. Under the DMCCA the CMA will be subject to a new duty of expedition, which means we will focus more sharply on pace across all of our work.

We are also keen to see what we can learn from operating the new digital markets regime that we can bring back to the rest of our work.

Approach to mergers

As I said earlier, we want to make sure that every business coming out of a UK merger review feels that they have been treated fairly and consistently, regardless of the outcome.

And we know that two key areas of feedback are around pace and proportionality. A critical element to delivering both is how the mergers remedies regime operates. We’ve already started to address this through the phase 2 reforms.

But as those reforms bed in, the logical next step is a more focused review of our approach to merger remedies.

The goal for merger control is simple – and this has always been the case: every deal that is capable of being cleared either unconditionally or with effective remedies should be. Only a truly problematic merger, where the harm to businesses and consumers cannot be effectively addressed through remedies, should not proceed.

Today I’m announcing the launch, in the New Year, of a review of our approach to mergers remedies.

Amongst other issues, it will cover:

• when behavioural remedies may be appropriate (including any distinction for regulated sectors)
• the scope for remedies that lock in genuine rivalry-enhancing efficiencies
• the role for remedies to preserve relevant customer benefits which may offset anti-competitive effects
• building on the phase 2 reforms, we will also consider how we move to effective remedy discussions as quickly as possible, informed by a clear understanding of our potential competition concerns and a sound appreciation of the commercial reality of the parties’ business operations

As with the phase 2 reforms process, I hope this review can be conducted in the spirit of collaborative endeavour to deliver a best-in-class merger regime. The CMA will approach it with an open mind and a readiness to listen, making sure the regime works as well as it can, while protecting UK businesses and UK consumers from the harms of an anti-competitive merger.

External engagement and reporting

In that same spirit of collaboration, we will further enhance our engagement with the business, investment and start-up communities. In the last year, we’ve engaged with a greater range of stakeholders than ever before. From the largest global businesses to challengers, new entrants and entrepreneurs. From consumer groups and civil society to diverse industry bodies – the CBI, FSB, techUK, Start-Up Coalition, Founders Forum, and Scale Up Institute, to name a few.

But we are particularly keen to hear more from the investment community and from the UK’s vibrant start-up community. So I am pleased to announce the launch of a new CMA outreach series for investors and startups, with a particular focus on mergers. I hope this will help us continue to learn from these communities, whilst further strengthening their understanding of and confidence in the CMA and our work.

The stakeholder engagement that we have already done has provided valuable insight into the work that we do and how we can improve. We are now embedding this across the CMA.

Going forward, we will use our regular engagement with a wide range of stakeholders to seek clear feedback on how we are working, and report on that on an annual basis. This will enable us to play back in a more consistent, transparent way, the feedback we receive and how we have acted on it.

Finally, we will include in our Annual Report and Accounts a review of the impact of our work on economic growth, and will seek feedback on the best approach to this.

Conclusion

I will finish where I began – with stability and change. As an independent competition and consumer protection authority, we are set up to provide long-term stability. But we are also on a continuous path to delivering greater value for the UK.

We will continue to ensure that the power of competition drives the growth and prosperity we all wish to see. And we will continue to evolve in the way that we work.

To support growth.

To build stakeholder confidence.

To deliver outcomes at pace.

And to bring ever greater clarity and transparency around our decisions and our processes.

We will further strengthen our engagement with businesses whose success is critical to a more prosperous future for the UK.

In doing this, through all of our work, we will remain true to our statutory purpose: to promote competition in the interests of UK businesses and UK consumers.