The UK government has published an update and next steps on its Regulation Action Plan. Although the focus of its press release is on the growth duty for regulators, the most important aspect for UK merger control is not mentioned in the release but is found within the document on page 21:
Consistent with the objectives of the CMA’s own reforms, DBT will consult in the coming weeks on proposals to provide greater certainty for businesses on whether transactions will be subject to merger control; proposals to ensure remedies are regularly reviewed; as well as changes to how the CMA makes decisions in mergers and markets investigations. This includes replacing the CMA’s panel model for decision-making by replicating the Digital Markets Board Committee model, for both the CMA’s mergers and markets functions. These proposals, which will be taken forward in close collaboration with the CMA, will not alter the independence of CMA decision-making from Ministers.
What this means is that in future, after the relevant legislation has been passed, decisions on CMA Phase 2 mergers and market investigations will no longer be made by members of the independent Panel (which consists of part-time members appointed by the Secretary of State) but instead by a committee of the CMA Board.
The Panel regime had been a longstanding source of frustration for CMA chairmen and chief executives. As Simon Pritchard writes, “it put the CMA leadership in an untenable position of having no influence over many of the authority’s most important decisions and yet accountable to Parliament and Whitehall for them.”
Another concern was over policy consistency. How predictable can the regime be when each independent group of Panel members is free to make its own decisions and there’s no central oversight? And in market investigations, a regular complaint was over how long the end-to-end process takes e.g. it can be three years from the opening of an initial market study or informal review to the imposition of a final order.
So there are good reasons for Panel reform. But at the same time it brings risks. The CMA Panel has a double degree of independence, from both the CMA Board and from ministers. If decision-making is put in the hands of the Board and executives, it could raise suspicions about whether politicians might find it easier to influence investigations. In addition, without the “fresh pair of eyes” provided by the independent Panel, it could lead to pressure for judicial oversight of CMA merger decisions to be strengthened, perhaps from a “judicial review” to a “full merits” standard.
In coming to a view on today’s proposal, I think we should look at it in the context of a wider and longer-running debate on the respective roles of the CMA, the government and the courts. When I was at the CMA there were three concerns I tended to hear most about the UK merger regime and they related to the interplay between the various institutions:
- One was that the CMA had gone “rogue” and was pursuing a tough approach to merger control that ran counter to government policy and which ministers were powerless to stop (i.e. it was the opposite of the concerns raised more recently about political interference).
- One was that the CMA’s merger decisions were subject to such limited judicial oversight that the rights of merging companies were insufficiently protected.
- Another was about the Panel. It could be confusing for businesses unused to the UK system and even its strongest defenders would concede that nobody would have designed it in its current configuration from scratch. Questions were also increasingly asked about whether it remained fully independent of the CMA.
Having worked closely with Panel Chairs and members I invariably found them to be genuinely committed and independent. Over many years they have led investigations which have delivered real value to UK consumers. But as with questions around political interference, perception matters as much as (if not more than) reality when it comes to maintaining confidence in the regime.
I think long-term confidence UK merger control requires three things: clear accountability within the CMA; a clear role for government (limited to policy not individual case decisions); and a clear role for the courts in reviewing CMA decisions.
We should be honest that in the past few years there were areas where the CMA went too far; this was then followed by politicians seeking to overcorrect; and meanwhile the courts showed a lot of deference to the CMA.
Recently we have seen changes on all three of these fronts:
- The CMA is setting out clearer statements of policy on mergers than we tended to have in my time. Combined with the reforms being announced today, this should make it easier for stakeholders to understand exactly who is making decisions at the CMA and on what basis they are doing so.
- The government has set out its strategic steer telling the CMA the areas on which it wants it to focus. Having done so, ministers have also pledged to avoid interfering in individual case decisions and observers will be watching closely to see if this is followed in practice.
- Last year’s Court of Appeal judgment on Cérélia clarified that the CAT can review CMA merger decisions not only on questions of vires and law; it can also review findings of fact and the CMA’s evaluations of those facts, and in doing so it could expect to be more critical than a non-specialist court.
We should look at today’s news in that wider context. The right outcome from the government’s consultation would be greater clarity on the respective roles of the CMA, the government and the courts, and a more sensible and sustainable balance between them.
