On 21 July, the Institute for Public Policy Research published a discussion paper by the Rt Hon. Lord Tyrie, the outgoing Chairman of the Competition and Markets Authority. The paper comments on features of the UK market (namely rising concentration) which will likely be exacerbated by the economic crisis likely to follow the health crisis (namely the exit of viable firms in response to the short term demand shock) and eloquently outlines the challenges facing competition agencies globally following Covid-19.
An open question is how well-placed competition agencies are to understand the causes of sectoral concentration and to accurately predict the ways in which markets will evolve or could evolve to most efficiently allocate capital and productive capacity. In common with many other global agencies, the CMA has not always been quick to spot inflexion points in the economy and enduring shifts in business models. The paper however serves an important purpose: highlighting the choices which policy makers have as we move into the recovery and the dangers, at a time when pressure on competitive markets is greater than ever, of a reversal of the gains of a belief in the benefit of competition in markets over the past 40 years. Click here to read more.
"Coronavirus is likely to make the economy less competitive and consumers more vulnerable. The problems which may require attention will greatly exceed the CMA's capacity and may challenge its legal framework. .. the CMA can make an important contribution in mitigating a substantial number of them. Taxpayer support to business, and special exclusions from competition law, are liable to create a new group of vested interests, which would stand to benefit from continuing to be insulated from normal competitive forces after the crisis has receded. Competition authorities will need to provide robust and authoritative advice to Government on when and how crisis measures should be unwound, and on any opportunities that may arise from the crisis to address a number of pre-crisis distortions".