Don't mess with the kid
8 July 2002
9 April 2014
13 January 2014
1 May 2014
5 February 2014
1 October 2014
The Office of Fair Trading (OFT) is currently undergoing the most dramatic period of change in its history. Last week a job advert appeared in The Sunday Times seeking "individuals of high calibre and integrity" for its new strategic board. Last year an equally important advert went up - one for a Director of Mergers, the person whom companies merging in the UK have to get their plans past.
Previously, the post has always been filled by career civil servants. Last December, though, the regulator made a revolutionary move by appointing 30-year-old Simon Priddis, a Cleary Gottlieb Steen & Hamilton associate, to one of the most powerful regulatory positions in the UK.
When it convenes next spring, the OFT strategic board will govern a quasi-judicial authority that currently does not even exist in law. The non-existent OFT deals with an area of law that exists in a state of flux. The 1998 Competition Act, followed in quick succession by this year's Enterprise Bill, must have given staff there plenty of bedtime reading.
As Director of Mergers, Priddis will be responsible for both the day-to-day handling of merger inquiries and the implementation of the new legislation. He is an object of considerable curiosity for competition and corporate lawyers due to his relative youth and because a lawyer in the post is something of a novelty.
Above him sits the Director General of Fair Trading John Vickers, who signs off merger advice to the Secretary of State, and Margaret Bloom, who is responsible for the full range of competition issues. If the OFT has reservations about a merger it will be referred to the Competition Commission to make a more detailed investigation. Plenty of mergers simply founder if the OFT turns them down because of the expense and uncertainty of a Competition Commission inquiry, so it is difficult to overstate the importance of the OFT.
So why would a talented young lawyer working at Cleary in Washington DC turn his back from the partnership track to join the OFT? Priddis did not have to think twice. He tells The Lawyer: "It's the sort of thing you'd never walk away from. If somebody offered it to you, you'd take it."
Priddis has an unusual background, which ultimately appealed to the OFT. He began his career in the Government Legal Service, so he already had what he tactfully describes as "experience of the working style that I think you need to have in order to work in Whitehall successfully". He had worked in Cleary's Brussels office before moving to DC two years ago to get a taste of the US system.
In addition to giving it long overdue legal status, the Enterprise Bill will bring big practical changes to the OFT. "John Vickers will be first chairman and chief executive [of the board]," says Priddis. "One thing we're trying to understand, but we're not going to until the new board is in place, is what role it will play in our every day decision-making."
With the legislation still before the House of Lords, no clear hierarchical structure has yet emerged. However, the advert for OFT directors stipulates: "The board will be responsible for overall strategic direction, priorities, plans and performance, although it will also be directly involved in decisions on individual market studies and may exceptionally take enforcement decisions on individual cases of strategic importance."
Day-to-day control is likely to lie with Priddis. In explaining the principles behind the OFT, he says: "What we're here for is to make markets work for consumers. Ultimately, that's our job. I think one can get caught up in making mergers work."
As you would expect, Priddis believes that the Enterprise Bill proposals will benefit all sides. "Taking the Secretary of State out of the process and giving the decision-making power to a specialist body on whether to refer a merger is an excellent move," he claims. "It will make the system more predictable and more transparent; and that in itself promotes efficiency."
The Enterprise Bill will also introduce a new substantive test for mergers. The consensus between lawyers - supported by Priddis and the OFT - is that it will make little practical difference. "Right now, we think of ourselves as applying the substantial lessening of competition (SLC) test; and that's what we are going to do in the future," explains Priddis. "The only change the Enterprise Bill makes is to change the wording of the test on the face of the law."
Most lawyers agree that the OFT needs to have more talented lawyers like Priddis on board. Unlike the US, where cross-fertilisation between the public and private sectors is the norm, the UK has no revolving door between public and private practice. The advantages of crossover, as laid out by Priddis, are obvious. "It brings benefits to both sides," says Priddis. "Government benefits from learning about current practice and from some of the private sector disciplines. Equally, the private sector benefits from learning how the process works on the inside."
It remains to be seen whether or not Priddis is the first of a new breed, but the signs are positive. "I think John [Vickers] has said he sees the benefits in it," he says. "I think part of the intention is that there will be open competition for posts; and by that I mean internal and external candidates compete openly for the same posts. However, I don't think we'll ever get to the stage where we say, 'This post is only open to external candidates'."
How the OFT will get the talented lawyers in is another matter altogether. In January, the regulator set out to hire six new lawyers for its legal division and asked for City-calibre applicants. Although Priddis is employed by an organisation that does not yet exist in law, he is presumably drawing a salary. However, his salary expectations at the OFT will be far lower than those of his colleagues in private practice.
The OFT does have some other attractions though - Priddis listed quality of work and quality of life. "We can say to people, 'Come and join us at a time when the merger rules are changing; and we've got this new competition regime which is bedding down. What better time to do it? You can be at the sharp end'." Should financial considerations be overcome, though, a remaining obstacle is that no senior administrative post in the OFT is likely to be on offer for some time.
Few UK competition lawyers have come across Priddis yet, but from those who have yet to do so a first comment is generally a reference to his youth. The tone is curious rather than deprecating and, once lawyers find themselves across the table from Priddis, it is hardly likely that age will be on the agenda. Priddis says: "I think it [the age issue] has been a red herring. If you're good enough to do the job it doesn't matter what age you are. To be candid, a lot of lawyers I see across the table aren't any older than I am."
Priddis joined the OFT four months ago and has presided over a particularly quiet period for UK M&A activity. Lawyers will be surprised to hear that he feels that the OFT has in fact been unusually busy. "A lot of smaller transactions often require just as much time because they tend to be in smaller markets, which can be more concentrated and raise more competition issues," he claims.
Busy or not, Priddis has already pushed through his first major internal reform. He has created a key new post of policy coordinator and filled it with an experienced case officer. The appointee is a civil servant who will report directly to him, but her name has yet to be announced. The decision to appoint an internal candidate to such a key role was deliberate. "We're not bringing in somebody new who would have to try and understand the system," he states. "We've got somebody who already understands, and we've said to them, 'Turn a critical eye on everything we do'."
The policy coordinator will have a broad remit. According to Priddis, she will look at "how we develop our internal policies, both substantive and procedural. She'll assess how we analyse mergers, making sure we approach everything in the same way so we get more consistency, which will allow us to deal with issues faster. It will hopefully make for a much more effective first stage process for business users."
Priddis says that the appointee will consider the timing of the process with particular attention. "She'll assess whether, given the different types of case we have to look at, we're getting our timing and administrative deadlines right," he says. She will also assess what internal reforms are required to deal with the implementation of the Enterprise Bill, the key issue being transparency. Priddis admits: "One criticism levelled at the UK process in both the first and second stages is that it's relatively opaque."
Transparency is one of the key drivers of the Enterprise Bill - one of Priddis's favourite words and no bad thing. However, competition lawyers have sounded out a warning note on both deadlines and transparency. One partner comments: "Remember that transparency works two ways. Some of the efforts made by other regulators have skewed transparency towards third-party complainants who intervene in merger inquiries and away from the people under investigation. The white paper that led the Enterprise Bill talked about timescales. Personally, I'm not sure that the present timetables are too slow, provided that they're stuck to."
A key part of the current regime that will remain is the confidential guidance given to companies by the OFT before an official merger filing is made. "We plan to continue confidential guidance in broadly the same terms as it works at the moment," explains Priddis. "Ultimately, it's likely to be given by the Director General, although we haven't finalised any of this."
While departments of the OFT that deal with cartel and market abuse cases have come under fire from lawyers for an increasingly combative approach, Priddis is proud of the relationship the mergers unit has with law firms. "I'm lucky because I'm in the privileged position of having a very good relationship with law firms that my predecessor built over a 10-year period. That's a tremendous legacy to inherit," he beams. "When I took on this job, someone told me that the legacy was mine to waste."
In terms of developing the OFT, Priddis has a tough task on his hands in order to balance the needs of business and the consumer. In handling merger cases he will also have to sit across from the UK's best competition law practitioners. Priddis's mantra is simple: he says when he leaves his post the test of what he has achieved will be "do companies think we're predictable?; do they think we're transparent?; and do they think we're faster?".
Judge him by that, not his age.