There have been two significant announcements today relating to the CMA. The UK government has published a draft strategic steer and the CMA has published a set of proposals for change.
In addition, the government has done two different pieces of communications about them: an initial media briefing which emphasised the need for change at the CMA (for example here and here) and then a speech from the Business Secretary which emphasised his strong support for the CMA’s proposals and its leadership. That all makes for quite a complicated set of messaging, so to get a clear picture of where the government and the CMA stand, it is important to look at all of the announcements together.
The coordinated timing and content show this is not something that has been dropped on the CMA out of the blue. Both the draft steer and the CMA proposals begin by emphasising that competition is good for growth and investment. They then note that how the CMA carries out its work also matters to perceptions of the UK as a great place to do business. (The steer reiterates this point several times.) The bulk of the announcements then focus on addressing the most common criticisms of the CMA:
- that it is unpredictable, especially in its approach to international mergers with only a limited UK nexus;
- that when it does launch a review it is slow and burdensome to deal with; and
- that when it finds a competition problem it is too unwilling to accept remedies to address it.
On international issues, the steer says that the CMA “should consider the actions being taken by competition and/or consumer protection agencies in other jurisdictions internationally, and, where appropriate, seek to ensure parallel regulatory action is timely, coherent and avoids duplication where these parallel actions effectively address issues arising in markets in the UK.” The CMA is upfront in acknowledging the problem – “UK law gives us an unusually broad jurisdiction by international standards” – and it commits to updating its guidance on how it applies the tests for whether it will review a deal or not. It also says it is “carefully exploring how far (under existing law) we might be able to more clearly distinguish between deals with a distinct and direct UK impact, versus those where it may be more appropriate to watch closely whether action by other authorities could resolve UK concerns.”
On process, the steer says that the CMA should provide “proactive, transparent, timely, predictable and responsive engagement with businesses” and that it should be “attuned, and responsive to, feedback from business.” It adds that the government will amend the CMA framework agreement to require regular feedback from CMA stakeholders, including businesses and consumers, and that results will be published. The CMA says that it will publish a “Mergers Charter” in March to “include our firm public commitment to pace, predictability, proportionality and process, as well as laying out what will be needed – from the CMA, businesses and advisors – to ensure the success of this new approach.” As part of this, the CMA pledges “more direct engagement, both outside of and during investigations” including “more senior meetings early in the review process”. It also says it will “establish a new KPI to complete the pre-notification phase within 40 working days, against a current average of 65” and “reduce the current target for straightforward Phase 1 cases from 35 working days to 25”.
On remedies, the steer says that “in all cases where the CMA is considering remedies”, the CMA should “give appropriate consideration to…prioritising pro-growth and pro-investment interventions”. The CMA says, “Our objective is for as many of the deals as possible which raise competition concerns to be cleared with effective remedies, rather than be prohibited.” It refers to its forthcoming remedies review and adds, “We will also consider the potential for deals to deliver pro-competitive investment benefits, as we saw recently with Vodafone/Three.”
The steer counsels caution on the Digital Markets Unit’s approach to its new powers under the Digital Markets, Competition and Consumers Act, and that it should be careful not to conflict with government policy: “Recognising that the development of markets driven by new and emerging technologies is not always easily predictable, the CMA should take particular care to ensure growth and innovation benefits are prioritised, including through supporting the government in delivery of the AI opportunities action plan.”
The CMA emphasises that it cannot deliver success on these measures alone. It depends on a collaborative relationship with companies and their advisers: “To be successful, they rely not only on the CMA’s commitment to change, but also the willingness of businesses and advisors to engage constructively and co-operatively with what we are proposing.” That is why, for example, the Mergers Charter will set out “what will be needed – from the CMA, businesses and advisors – to ensure the success of this new approach.”
In thinking about how much difference the steer will make in practice, there are a few points to note:
- Previous versions of the strategic steer didn’t make much difference because it didn’t have much ministerial involvement. That is different this time, as shown by the fact that the draft steer was launched with a speech by the Business Secretary.
- When the previous government issued a strategic steer in 2023, it downplayed its significance. The government said at the time, “The CMA should reference this steer when it sets its strategy and makes decisions on where to focus and prioritise its resources” (i.e. not necessarily when making its decisions on cases). That wording is missing this time. I think the government will expect the CMA to have regard to this steer across the range of its work.
The CMA believes it is going as far as it can under the current statutory framework to address the concerns that have been raised: “It is open to government to go further, through legislative change, both by locking some of these changes into the statutory framework and making further legislative changes to embed our 4Ps approach. We will continue to work closely with government should it wish to do so.” However, at this stage there is no indication the government is in the market for legislative change. Indeed, in his speech Jonathan Reynolds went out of his way to praise what Sarah Cardell and Doug Gurr are doing:
“I know, under Sarah Cardell and the new Interim Chair, Doug Gurr, the CMA has already taken significant steps in adopting this approach…in always having growth and investment in mind.
Its extensive work around the merger of Vodafone and Three is a fantastic example of that…as is the CMA’s launch of a Growth and Investment Council to identify opportunities for greater competition.
And there is more to come.
I know Sarah and the CMA have set out their plans to deliver real, meaningful reforms to the merger control processes already today. Its eyes are trained firmly on more direct engagement with businesses. On speeding up its decision-making to deliver more certainty for investors. On adopting a faster, more agile approach to protecting competition.
I fully endorse these measures because this Government believes in effective, independent institutions. In promoting competition and protecting competition – that is fundamental to our growth mission. And with the current CMA team in place, we want to support them every step of the way in the changes they’re making.”
In a nutshell, the government is trying to do two things here. It wants to ensure that businesses’ concerns about the CMA are addressed, and in doing so it wants to reiterate its support for the CMA’s leadership and its independence. The risk is that the market will hear the first message clearly but not the second, so ministers are likely to have to find other opportunities if they want to get that across.
