Antitrust regime at crossroads

Merged competition authority must keep the best and eliminate the worst elements of the present system

Peter Crowther
Peter Crowther

On 15 March the Government published its response to the far-reaching consultation paper issued in March 2011 on the proposed reform of ­competition law.

A number of changes have been announced, such as the removal of the ‘dishonesty’ element of the cartel offence and the strengthening of the market investigation process, while other aspects have been largely left alone or just tweaked.

The big news is that the Government has confirmed its decision to create a Competition and Markets Authority (CMA) and transfer to this the functions of the OFT and the Competition Commission (CC).

To put this proposal in context, we have an OFT whose antitrust ­enforcement record is summarised by the Government thus: “There was a widespread view that the system is not working well”; and a CC that is ­respected for the quality and transparency of its decision-making: “The majority of respondents favoured ­retaining the current separation of decision-making structures for ­mergers and markets cases.”

It is far from obvious that a merger of the two roles is the best way to fix the OFT’s enforcement weaknesses while preserving the independence of the CC panel system.

There are strong arguments that a continued separation of functions would enhance the focus on solving enforcement weaknesses, and that a merger is not required to achieve other elements of substantive law ­reform proposed by the Government.

So what is the case for a merger? Certainly not cost-saving, since savings are anticipated to be around just £1m a year (against the savings to the UK economy of the current competition regime of around £700m, according to the OFT).

The case for the merger seems ­instead to rest on avoiding duplication and ensuring the efficient ­allocation of resources. These are laudable objectives but it is not possible to have an independent review system without some duplication – the same sort of duplication that ­results in the widely admired form of control through the CC. Indeed, ­confirmation bias becomes a real problem if, in the interests of ‘efficiency’, some case officers stay with the case from phase one to phase two.

A wish to allocate resources efficiently across staff is also a big risk. Given that the Government wishes to process more cases, if resources are shifted towards early assessment, all other things being constant the role of the independent panel would ­decline. This would increase the risk of bad decisions, ultimately imposing costs on consumers that may ­outweigh any benefits.

Whoever is put in charge of the CMA must make sure that the appointments are non-partisan to ensure resource allocation decisions preserve the elements of the competition regime that are admired.

Although the Government has not adopted a prosecutorial model for antitrust enforcement, part of the decision-making process regarding to the allocation of resources should involve ensuring that enforcement operatives at the CMA act more like litigators than administrative law-yers, to ensure decisions are more ­resistant to appeal than is presently the case.