DMU Insight #5: The CMA’s Strategic Steer - a tech perspective

Last week the government published its draft Strategic Steer to the Competition and Markets Authority, setting out its priorities for the CMA (the last strategic steer was issued in 2019). The Strategic Steer is intended to guide the CMA’s strategy across all the areas on which takes decisions, and where to focus and prioritise its finite resources.  Given the focus on new pro-competition regime for digital markets to be delivered by the Digital Markets, Competition and Consumers (DMCC) Bill, this iteration is particularly interesting for the tech sector.

Coming at a time in which the CMA’s CEO and Chairman have been grilled by MPs in the Business and Trade Select Committee, the Strategic Steer will be welcomed by the CMA as an indication that the Government is broadly supportive of its work with respect to digital markets to date. However, as, the content of the Strategic Steer suggests that there are potential challenges on the horizon for the CMA as tries to balance being one of the leading digital regulators globally while ensuring that the UK remains open to business to new and established technology firms.

Aspirations for digital markets - the balancing act

The Strategic Steer sets out a number of aspirations for the CMA with respect to digital markets, including:

1. Using the CMA’s tools, including the new powers it will gain under the recently published DMCC Bill, to promote competition in digital markets and ensure that the benefits of innovation flow through to consumers (unsurprisingly prioritising the interests of consumers features heavily across all parts the Strategic Steer).
2. Being vigilant in tackling abuses of dominance “whilst recognising the value generated by digital markets in driving innovation and benefits to consumers”.
3. Using its significant powers under the DMCC to “responsibly” address the barriers to competition in digital markets while supporting innovation.
4. Continuing to demonstrate global leadership on cases where there are cross-border concerns, especially in digital markets.

Many of these of the aspirations contain a dual aim of requiring the CMA to take a robust approach towards big tech, whilst at the same time ensuring that it does not get in the way of innovative new products or services that could benefit UK consumers. This is a balancing act that the CMA has had to grapple with for some time and has been accused by some groups of getting wrong in the past.

Decisions reserved for the CMA Board

Going forward this challenge will likely become more acute as the CMA – and the CMA Board in particular – are handed additional powers and discretion as part of the DMCC. Under the DMCC’s proposals, the most consequential decisions are reserved for the CMA Board. 

For example, it will be left to the CMA Board to decide whether to launch an investigation into whether to give a firm “strategic market status” (SMS) or make a pro-competitive intervention. Similarly, other important decisions like whether to make a SMS designation or impose, vary or revoke conduct requirements for SMS firms may only be delegated to a sub-committee of the CMA Board.

This represents a policy shift from the approach in merger control and market investigations, where typically the most consequential decisions, particularly with respect to remedies, are taken by a CMA Panel (a group of independent decision markers) rather than the CMA Board. However, the government has been clear that for this new digital regime, it has deliberately reserved these “market-shaping” decisions for the CMA Board on the basis that it has the greatest accountability to government and Parliament.

Looking ahead

The Strategic Steer is subject to open to public consultation until 23 June. The CMA will undoubtedly take confidence from this draft which serves as an implicit endorsement of its approach to date.

However, it will also be wary that a time in which it being been handed new and significant powers under the DMCC, that it is being asked to achieve two distinct sets of goals that have the potential to be in conflict with one another. The CMA will face a difficult tightrope exercise over the next few years as it navigates these challenges.