Plus ca change: What does “ripping out bureaucracy that blocks investment” mean for the UK's Competition and Markets Authority?

As part of the Labour government’s recent Investment Summit, Sir Keir Starmer promised to “rip out the bureaucracy that blocks investment” and called on UK regulators and “especially… economic and competition regulators” to prioritise growth when taking decisions. These statements were widely reported in the media as the Labour government taking on the regulators and “overhauling” the UK’s regulatory framework to ensure that it does not act as a barrier to growth. 

They were quickly followed by speeches from the heads of several regulators – including the CMA – outlining how their current work is pro-growth. In the CMA’s case, this was followed up swiftly yesterday by its State of Competition Report and the announcement of a new plan of work to support the government’s growth mission. 

But in the absence of any statutory change, how likely is it that this will have a radical impact on the CMA’s decisions and enforcement? This article seeks to answer that question by exploring how the different parts of the CMA’s (soon to be expanded) regulatory toolkit could be impacted by the Labour government’s strategy. 

Does the Prime Minister's statement really represent a change in approach? 

Whilst the PM's statement was widely reported as signaling a change in direction for UK regulators, including the CMA specifically, many may feel that they’ve seen this movie before. The previous government’s strategic steer also called on the CMA to focus on creating a “pro-growth” regulatory framework and to boost “sustainable growth” where possible. Indeed, ‘growth’ is mentioned 15 times in the current strategic steer (published in late 2023) and, along with addressing cost of living challenges, is one of the key themes that the previous government asked the CMA to focus on (see our commentary from when the current Strategic Steer was in consultation here).

When the government published its Green Paper on industrial strategy later on the day of the PM's speech, it committed to “robust and independent enforcement of competition and consumer protection” laws. This language suggests a commitment to the existing framework rather than any plans for a more radical overhaul. 

At the least, it is clear that the CMA's leadership considers it is already supporting growth. The Chair of the CMA made his own statement shortly after the Investment Summit where he reiterated that the CMA was already working hard to spur growth and productivity in the UK, consistent with the Labour government’s strategic aims. Joel Bamford, the CMA’s Executive Director for Mergers, also gave a speech earlier this week in which he outlined how the CMA’s work can act as an engine for growth and productivity. This was followed yesterday with the CMA’s State of Competition Report and the launch of its new, growth-focused programme of work. 

Nonetheless, the CMA – while independent – is acutely aware of the need to not only deliver for UK businesses and consumers, but to appear to be delivering. In the remainder of this article, we examine what this pressure – even if predominantly rhetorical – could mean for how the CMA uses the tools in its (soon to be significantly expanded) toolkit. 

Merger Control 

In recent years, merger control has arguably been the highest profile of all the CMA’s enforcement tools. Initial commentary in the media suggested this was the area most likely to be impacted by the PM's statement. 

While the CMA has attracted significant scrutiny for some of its high-profile interventions in recent years, the vast majority of mergers are either not considered at all by the CMA, or screened through the CMA’s mergers intelligence committee. This is rightly seen by the CMA as the hallmark of a proportionate regime that focuses its time and resources on the transactions that really warrant them. Indeed, Joel Bamford emphasised in his speech earlier this week that out of 900 mergers reviewed in the 2023-24 year, the CMA only formally prohibited one merger. 

For the minority of cases that do go through a formal process however, the current regime affords the CMA significant discretion and flexibility, with limited judicial oversight of its decisions (unlike in antitrust where its decisions are subject to a full merits review). In recent years, the CMA has used its tools expansively to pursue an interventionist approach on substance, as well as interpreting its jurisdictional thresholds broadly to capture a broad range of deal structures, and mergers with limited nexus to the CMA - especially in the tech and other innovation-driven markets. While some have viewed this as a necessary “correction” from earlier overly permissive merger control, others have criticised the CMA for going too far and potentially even chilling investment. 

But do we expect the PM’s statements to lead to a change in the current policy? It could be argued that the CMA’s stance on mergers has already softened somewhat from “peak” intervention. While merger control statistics need to be interpreted with caution given, they are a product of the cases that come before the CMA, intervention is significantly down in 2024 compared with previous years (as outlined in our Platypus Statistics page).  

Joel Bamford's speech also noted that “just because the CMA finds concerns with a deal, that doesn’t mean it can’t go ahead in some form” , a comment that could be interpreted by close CMA followers as a change in tone, especially given the CMA has recently demonstrated a renewed willingness to consider behavioural remedies (Vodafone / CK Hutchinson). In addition - in what could be viewed as either a sign of greater pragmatism, or mere coincidence - the CMA has recently issued two (rare) clearances on the basis of the failing firm defence (as we explored here). 

As part of its State of Competition report, the CMA outlined how an effective merger control policy can help to deliver competition between firms which in turn spurs growth and delivers better outcomes for consumers. Joel Bamford's speech also picks up on a similar theme and explored how recent investigations by the CMA have contributed to growth in the economy and positive results for consumers, as well as highlighting the importance of investor confidence and business confidence, noting the CMA speaks with these stakeholders “all the time”. 

It is clear that CMA officials view its current approach to merger control as already fully aligned with the government’s growth mission, so any drastic change would be surprising. However, on the margins, in particular on high-profile and close-call cases, PM Starmer’s statement could result in a weakening of some of the CMA’s more hardline policy positions, especially in cases where a merger would bring significant investment to the UK. 

Market Studies and Market Investigations

One area where the CMA has significant discretion is in choosing when to a launch a market study or investigation (often in response to feedback from consumers or broader stakeholders, and on occasion at request of government / another regulator). The CMA’s market study / investigation tools are flexible and have historically been more directly influenced by political considerations (see the high-profile investigations into banking and energy) and a desire to use this tool in a way that delivers the greatest benefits for UK consumers. 

The CMA’s prioritisation most recently has been heavily impacted by cost-of-living considerations (see its investigations into housebuilding; vets; infant formula; fuel; children’s social care). However, these investigations come with cost for the companies under review and in global markets, remedies need to be carefully designed to ensure they don’t undermine the UK’s competitiveness. 

We expect that the CMA will be mindful of the need to balance the impact of its markets work, with any political push to mitigate the red tape associated of investing in the UK.

Competition and consumer enforcement 

On paper, the use of the CMA's enforcement functions across both competition and consumer law (where the CMA's powers are soon to be significantly enhanced) is an area where less political influence - rhetorical or otherwise - would be expected. Certainly, where the CMA identifies obviously problematic conduct (on its own investigation or in response to whistleblowers), we expect a hardline approach to persist regardless of the sector. 

However, the CMA has taken a range of cases, especially in relation to abuse of dominance, which have pushed the boundaries of the law and its enforcement action has tended to come in sector-focused waves. The late 2010s saw a spate of cases in the pharmaceutical sector, while the 2020s so far have seen the CMA's dominance docket focused almost exclusively on digital markets. The CMA has wound down most of its cases in the digital sphere in anticipation of its new regulatory regime, and we would expect enforcement to be an area where the CMA will look for “popular” cases - especially those that relate to cost of living concerns.  

Digital Regulation 

The CMA is soon to receive significant new powers to administer a new regime for the largest tech companies under the Digital Markets, Competition and Consumers Act (DMCC). These powers will come into force at the start of next year and are perhaps the area most likely to be influenced by the government’s proposed strategy. 

The SMS regime is inherently more political than the CMA’s other powers in that it is redistributive: it aims to curtail the power of the largest tech companies (unlike competition enforcement, regardless of whether they have done anything “wrong”) and hand some of that power back to other businesses. Additionally, the DMCC Act confers quasi-legislative powers on the CMA, coupled with enormous discretion, which in turn calls for prioritisation decisions about both the sequence and the scope of SMS designations.

The DMCC reserves the “most market shaping” decisions for the CMA Board, on the basis that they are accountable to Parliament.  The CMA Board will decide whether to launch an investigation into whether to give a firm “strategic market status” (SMS) or make a pro-competitive intervention. Ultimate decisions on those processes will be taken by the Digital Markets Board Committee, which will have a mix of CMA staff and independent members. This differs from the approach taken in merger control and market investigations, where the most consequential decisions are typically taken by a CMA panel (a group of independent decision makers). 

The framework of the SMS regime certainly gives significant scope for the CMA to at least appear more “business friendly” than the EU with its Digital Markets Act (DMA). It is likely that at least over the medium term, the list of SMS firms will be shorter than the list of EU “gatekeepers”. In addition to the number of regulated firms, the bespoke nature of the codes of conduct gives room for “easy wins” where the CMA can look more targeted and proportionate than the pre-defined EU rules, (albeit the CMA may also look for opportunities to go further and close perceived DMA loopholes).  

Ultimately it may prove challenging to assess the impact of the government’s proposed approach on digital regulation, as the SMS regime is new and there is no historical comparison (or counterfactual) that can be easily made. However, given the way in which the DMCC is drafted and the discretion it affords to the CMA Board, it is the area that could (and perhaps should) most easily be influenced by the will of Parliament. 

Plus ça change…

All eyes now turn to the next strategic steer for the CMA, which should be out for consultation in the coming months. The CMA is acutely aware of the need to not only deliver for UK businesses and consumers, but to appear to be delivering. If nothing else, the PM's speech creates an atmosphere in which the CMA will be under even greater pressure to demonstrate the positive impact of its work. 

This is not new and has always been an important factor in CMA prioritisation and decision making, albeit one which has come into sharper focus since the Brexit vote. If anything, this pushes for more “popular” enforcement in areas that matter to everyday citizens and means that where the CMA steps outside this realm, it will ensure it's ready to justify itself to politicians and the public.