The proposals to reform decision-making in CMA merger cases and market investigations have sparked a lively debate in the competition community.
Some of my former colleagues at the CMA have been critical, including Mike Walker and David Stewart, while others including Emily Chissell have been supportive. In this post I want to consider the key concerns that have been raised, as well as the suggestions put forward by Simon Pritchard, who is a must-read on these issues even if we don’t always agree.
The case for reform
The fundamental case for reform is that the Panel system is being asked to do mutually incompatible things – and the incompatibility is becoming more apparent over time.
In 2012, David Cameron’s government decided to merge the Office of Fair Trading (OFT), which was responsible among other things for conducting Phase 1 merger reviews, with the Competition Commission (CC) which did Phase 2 reviews, into a new Competition and Markets Authority (CMA). This was on the basis that:
the Government is committed to reducing the number and cost of public bodies, and to reduce the burden that such bodies impose on the businesses with which they deal. Having two wholly separate competition bodies imposes some additional costs, and more importantly for the economy, prevents more flexible allocation of resources across the competition regime.
However, at the same time, the government wanted to maintain the independent decision-making and “fresh pair of eyes” in Phase 2 investigations that had hitherto been achieved by the institutional separation of the OFT and the CC.
The solution it hit upon was to create the CMA Panel:
the Government will legislate that those decisions currently taken by the OFT will be the responsibility of the CMA Board (with appropriate powers to delegate decision making to individuals or to committees). Those decisions currently taken by the CC will be the responsibility of groups of independent panellists, drawn from a pool of panellists and appointed to investigate and report on the inquiry to which they are appointed.
The Cameron government hoped it could have its cake and eat it. It could get the efficiency savings and quicker reviews from merging the two bodies, and at the same time it could keep the fresh pair of eyes at Phase 2 by legislating that its decision-making would still be independent. It is only fair to acknowledge that some people warned at the time of the consultation that this would be challenging to achieve, but the government went ahead anyway.
Since then, successive Panel Chairs and members have done their jobs to the best of their ability. I worked with many of them closely at the CMA and I invariably found them to be committed and independent, but the incompatibility of the objectives being asked of the system remains. Indeed, it is being thrown into ever sharper focus.
First, the Panel is asked to be independent of the CMA Board and staff, but the set-up and growth of the CMA make this harder over time. The Panel Chair and one of the Inquiry Chairs are also non-executive directors on the CMA Board so they have institutional responsibilities to the CMA that members of the CC never had towards the OFT. Plus, in the final days of the CC, there were 40 members and only 175 staff, whereas now at the CMA there are 33 Panel members and over 1,100 staff. As the various CMA mergers, legal and economics teams become bigger and more expert – and as there is more continuity between the staff teams at Phase 1 and Phase 2 (in order to provide the efficiency savings mentioned above) – they inevitably wield greater influence in investigations. That is not a comment on the relative quality or integrity of the staff or Panel members. It is simply a product of the institutional configuration.
Second, the government and the CMA want to ensure that the regime is clear and predictable for businesses. Under Martin Coleman’s leadership, the Panel has done a great deal to explain its role and its work publicly. Despite all these efforts, the government finds that international businesses often say the UK system is more confusing than other merger regimes that they have to deal with. Businesses are told that the Panel is both part of the CMA and yet at the same time not under its control; and that the leaders of the CMA have nothing to do with their case, something that CEOs either find odd or simply do not believe to be true. As the current consultation gently puts it, “This can create confusion regarding accountability for those impacted by decisions.” Furthermore, the government thinks this has become a bigger problem post-Brexit because the CMA is now responsible for scrutinising many more international mergers that would previously have fallen to the European Commission to review. For many leaders of global businesses, the CMA is their first interaction with the British state and so it takes on greater significance as a shop window for the UK’s regulatory environment. At the moment, the shop window looks quite confusing.
Third, the government has become concerned about the democratic accountability of the CMA. I sat on its executive committee from 2019 to 2023 when it significantly toughened its enforcement stance. Some in the competition community argued at the time that the CMA leadership did not have a mandate for such a shift and that it had not done enough to announce or explain it publicly. The current government, like its predecessor, was increasingly sympathetic to these concerns. It also worried that, at a time of rising geopolitical tensions, for the CMA to pursue an aggressive stance against the biggest companies on the planet would impact the UK’s foreign policy; and that an unelected technocratic body like the CMA was simply not in a position to make the relevant policy trade-offs. (I have written in more detail about this issue here.) The government has sought to address this by giving the CMA a new strategic steer but the Panel traditionally took the view that the strategic steer did not apply to it.
All this combines to leave the Panel in an uncomfortable position. It is supposed to have a ‘double independence’ from the CMA Board and from the government but it is difficult to square this with the desire for greater business clarity and democratic accountability. Something has to give. Today, many users of the system fear that something has indeed given, and that the ‘something’ is one or both elements of the Panel’s ‘double independence’. And this is where perception matters as much as the reality. If the users of the system believe that the Panel has lost its raison d’être, then even if they are wrong, its credibility is undermined and it is hard for it to continue in its current form.
The government’s proposals
Many people – possibly including those I mentioned at the start of this post – might accept the case I have made so far. But they believe that the government’s proposed solution is the wrong one.
The consultation proposes aligning decision-making in Phase 2 merger cases with the approach already used for the CMA’s digital markets functions under the Digital Markets, Competition and Consumers Act:
Specifically, we propose to replace Panel-led Inquiry Groups with decision-making involving sub-committees of the [CMA] Board, appointed by a Mergers Board Committee and a Markets Board Committee…This would ensure that those ultimately accountable to Parliament are directly involved in the most significant mergers and markets decisions, improving predictability and consistency, as well as reinforcing institutional accountability. The reforms also aim to improve the pace of decisions.
In response, two main concerns have been raised. The first is that by bringing decision-making under the control of the CMA Board it will be less independent of the CMA staff, thereby increasing the risk of confirmation bias and reducing an important check and balance in the system. The second is that it will also make political interference in decision-making more likely.
Since I have argued that the credibility of the system is affected by the perception as much as the reality of how it operates, I cannot simply dismiss the above concerns. Let’s assume that under the new system there will be a perception that decision-making lacks independence; and that this perception is a problem for the regime. What, then, should be done about it?
The answer can hardly be maintaining the current system, given that a loss of independence is precisely the allegation that is already being made – rightly or wrongly – about recent cases decided under the Panel system, including Vodafone/Three.
The most common alternative suggestion is that there should be a change in the standard of review that is used when CMA merger cases are appealed to the Competition Appeal Tribunal (CAT): from judicial review to full merits. Full merits (or ‘on the merits’) is the standard already used in appeals against CMA decisions in cartels and abuse of dominance cases. To simplify, this would mean that the CAT not only looks at whether an action of the CMA was illegal, irrational or procedurally unfair but can also look at whether the CMA substantively reached the right or wrong decision. The argument goes that by enabling the CAT to look at questions of fact as well as questions of law, this would provide a much stronger check on the CMA, making its decision-making more robust and reducing the likelihood of either confirmation bias or political interference.
I agree that Panel reform is a major change to the regime, and I also agree that it warrants a review of checks and balances in the CMA’s decision-making, but I do not think that full merits appeals is the right solution.
Preventing political interference
If you think political interference is already happening under the current system, despite the fact that it should theoretically be prevented by the existing legislation, it is highly unlikely that the problem will be solved by putting in place a different legal construct. We need to look at why political interference happens and address the interests and incentives of the parties involved.
The reason UK competition policy has become more politically sensitive in recent years is not because the CMA was quietly going about its business as usual when an alliance of short-termist politicians and business lobbyists came along and conspired to hobble it. The CMA decided to take a much more aggressive approach to which mergers it would review and how tough it would be when assessing them. Its leadership did so because it concluded that there had been historic underenforcement which needed to be corrected and that it could not rely on its US and EU counterparts to protect British consumers in international deals. This toughening coincided with Brexit, which meant that many more international companies found themselves having to deal with the CMA, and the UK government was acutely sensitive to the attractiveness of Britain as a destination for investment. Then the election of Donald Trump meant that the CMA’s enforcement against American companies coincided with the transatlantic alliance coming under the greatest strain in its post-war history. These are remarkably important policy tensions, and yet when the government sought to address them, it felt that the CMA Board and Panel were standing in the way of not just its short-term political interests but broader British national interests. In that situation, conflict was inevitable and it would have happened even if Rishi Sunak and Jeremy Hunt had still been in power rather than Keir Starmer and Rachel Reeves.
Preventing political interference in competition enforcement is not going to be solved by passing a law. It will only be solved by addressing the underlying potential for conflict. This requires several things to happen.
First, the CMA – as with any public body granted a degree of autonomy – will be shown greater deference by the courts and by the government if can demonstrate it is sticking closely to it statutory duties and is being careful in interpreting and applying them. Second, there needs to be a transparent route for legitimate political involvement in overall policy-setting, which the current government has sought to put in place through the new strategic steer. Third, the CMA needs to show how it is implementing that steer, which Sarah Cardell and Doug Gurr have sought to do with their public speeches, updates and changes to guidance. Fourth, there needs to be transparency from the CMA over any attempts by ministers to go beyond this and to influence individual cases.
Those are the things which, in practice, will make politicians less likely to intervene in individual cases and give the CMA a stronger ability to resist attempts at interference if they do happen.
Checks and balances
This then takes us to the question of checks and balances. An argument against the proposed reforms is that the existence of the Panel was supposedly a prerequisite for merger appeals being decided by the CAT on a judicial review rather than a full merits standard. Hence, abolishing the Panel requires changing the standard of review.
But looking back at the legislative history, the rationale for using full merits in appeals of cartel and abuse of dominance cases was much more about the quasi-criminal nature of the penalties and the human rights of those found to have infringed the law, rather than about the then OFT’s decision-making processes. Later, when there was an attempt to amend the Enterprise Bill to allow CC merger decisions to be appealed on the merits, this was explicitly rejected by ministers on the grounds that mergers are not like cartels which are prohibited by law from the outset; instead, decisions in merger cases are based on the facts and economic analysis of individual cases. The minister went on:
Considerable discretion must be exercised, so it would be difficult for the CAT to assess whether the decision made was right or wrong in objective terms. In that context, we clearly need to ensure that the process followed by the authorities was fair and that the parties were given the opportunity to put their case. A judicial review-type appeal is appropriate.
Only when questioned on the differences between the OFT and the CC did the minister then refer to the two-stage process as being a further reason why judicial review was appropriate. (And incidentally, at the time, decision-making by a board was considered not to be a retrograde step that necessitated greater oversight, but as a new and substantially improved form of governance compared with decision-making by an individual director-general, which had been the practice in most regulators, including the OFT, until then.)
This view of the rationale for full merits vs JR has also been reinforced by judges at the CAT. The then President of the CAT gave a speech on this topic in 2023 in which he said that the reason for cartels and abuse of dominance cases being reviewed on the merits was, “Because they are quasi-criminal in nature, and no-one should be exposed to quasi-criminal sanction without full judicial supervision.” He also disputed that there was necessarily a great difference between how the CAT approached judicial review and on the merits cases. (“I defy anyone to find a difference of approach between the CAT’s decision in Meta (JR) and BGL (Holdings) Ltd v. CMA (OTM).”)
If the government’s reforms take effect, I think that the CAT will, in fact, subject CMA merger decisions to closer scrutiny, and that this will happen without any change to the standard of review. The proposals are based on the decision-making process that now applies in digital markets cases, and when the government proposed a JR standard for those appeals, the former CAT Chairman Peter Freeman predicted, “You’ll get JR plus through the actions of the judges who will strive to look in great detail at these decisions and not just to do a light skimpy analysis.”
This is made even more likely now that the Court of Appeal has encouraged the CAT in this regard. In its judgment in Cérélia, it made clear 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 can expect to be more critical than a non-specialist court.
In response, some would say that even if it is possible that the CAT will be tougher on the CMA in merger cases after these reforms, why take the chance? Why not just legislate now for full merits appeals? But here we have to remind ourselves of the range of objectives that the government (and hopefully all involved in the competition regime) want to achieve – including pace and predictability – and the need to strike a balance between them.
We also need to remember that any decision on whether to legislate will be taken by politicians, and they approach this issue from a very different standpoint than that of lawyers. They might agree with many lawyers that the CMA went ‘rogue’ in recent years, but they are highly unlikely to think the answer lies in giving greater control to a group of people who are subject to even less democratic accountability than the CMA. This is especially because they see the problem as not being one of the CMA exceeding its lawful authority (which the courts would be well-placed to correct) but one of balancing competing policy trade-offs (which requires democratic involvement). And to the extent that politicians have views on the subject of judicial review, they are more likely to see it is a powerful, growing and potentially excessive constraint on government decision-making. To convince them that it is, in fact, a light-touch form of review that must be further strengthened in the case of a public body that already seems mired in process will be no easy task. That is why I think those who have concerns with these reforms would be well-advised to think of possible solutions that do not involve giving a bigger role to the courts.
Conclusion
Notwithstanding my scepticism about full merits appeals in merger cases, I do agree that the abolition of the CMA Panel is a significant change and the issue of checks and balances needs to be addressed.
One option is to give merging parties in CMA cases ‘access to file’ i.e. the right to see the evidence the CMA is relying on before it takes an adverse decision. This would allow companies to understand the basis of the case against their merger; to inspect the evidence for and against it in the CMA’s file; and to make informed representations in their defence. Such a change would place a significant bureaucratic burden on the CMA (and indeed on the companies themselves) so the need for it should be balanced against the impact on pace and proportionality, but it seems to me it should at least be considered.
Another idea is that in cases where the CAT decides to remit a case to the CMA, it could require that a different decision-making group could be formed from the one involved in the original decision. I don’t think this needs legislation, and it may not be necessary in cases where a remittal follows an essentially minor procedural shortcoming rather than a significant flaw in the decision, but where relevant it could help address the risk of confirmation bias.
More broadly, in coming to a view on these proposals, I think each of us needs to take a step back from our own particular position within (or outside) the system, and look at the issues in the context of a wider debate on the respective roles of the CMA, the government and the courts.
I think long-term confidence in the UK merger control requires three things: clear accountability within the CMA; a clear role for democratic oversight (limited to policy not individual case decisions); and a clear role for judicial oversight 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:
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- The recent proposals seek to enhance clarity and accountability of decision-making within the CMA. Combined with the CMA’s clearer statements of policy, this should make it easier for stakeholders to understand who is making decisions at the CMA and the basis on which they are doing so.
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- The government has published a strategic steer setting out how it thinks the CMA should navigate the policy trade-offs in applying its statutory duties. Having done this transparently at the overall policy-setting level, ministers have pledged to avoid interfering in individual case decisions and observers will be watching closely to see if this is followed in practice.
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- The current proposals combined with the Court of Appeal’s judgment on Cérélia should lead the CAT to scrutinise CMA merger decisions more closely, including on findings of fact and the CMA’s evaluations of those facts. “JR-plus” may soon become a reality without the government having to legislate for it.
In conclusion, all of us who want a world-class competition regime have an interest in seeing the CMA, the government and the courts each playing their proper role. Each of us comes with our own particular perspective and so none of us will find that the overall outcome delivers everything we might wish. But we need to debate how to reach a more sensible and sustainable balance between enforcement, democratic oversight and judicial oversight than the UK has had in the past few years.
