Merger of Competition Commission and OFT meets with muted response

Competition lawyers have offered a lukewarm response to Government proposals to streamline and improve the UK’s competition regime.

The Government has unveiled its plans to merge the Competition Commission and Office of Fair Trading (OFT) to create a single agency – the Competition and Markets Authority (CMA).

A Department for Business, Innovation & Skills (DTI) consultation paper, launched today, says that the new single body will reduce the duplication of costs and increase confidence in the system. It is further aimed at making it easier to take on anti-competitive merger cases.

Minister for employment relations, consumer and postal affairs Edward Davey said: “The UK competition regime is regarded as one of the best in the world. But it can and should be even better. Competition is the cornerstone of growth, innovation and consumer choice. That means we also need to have a strong regime to promote effective competition in markets.

“This is an excellent opportunity to strengthen and streamline the competition regime to deliver better outcomes for consumers and increase business confidence and certainty. At the same time we’re taking advantage of this chance of reforming it to assist small and medium enterprises. I hope that everyone interested in this consultation will take the time to respond to our proposals.”

But some lawyers believe the new plans may restrict some mergers unnecessarily.

Eversheds competition partner Stephen Rose said: “Today’s announcement considers a switch from voluntary to mandatory notification of mergers. Whilst potentially simplifying the law, this move would also add cost and red tape for many deals not currently caught.”

Norton Rose competition and regulatory partner Michael Grenfell added: “The question of mandatory notifications for all mergers, whether or not anti-competitive, remains an option, but the Government has not yet made up its mind. Many businesses will agree with the Government’s recognition that a mandatory system ’would increase the regulatory burden cost both of businesses and the CMA [new competition authority]’.”

Reaction to the proposals:

Eamon Doran, Linklaters competition partner: “The Government is making a major effort through this very wide-ranging consultation to deliver high quality competition enforcement at lower cost for Government and business. This opens the cartel enforcement, mergers and market investigations regimes to the possibility of significant change. That is, in itself, no bad thing. A focus purely on process engineering, however, will not necessarily deliver better outcomes or the efficiencies that Government seeks. It is also critical that the foundations of the CMA are set so as to achieve good governance, due process and maintain an independent review stage in its decision making. Whilst there are legitimate questions about case selection and efficiency of process under the current regime, the OFT and CC are recognised internationally as high quality competition authorities and the Government needs to ensure that it does nothing to undermine that reputation.”

Robert Bell, Speechly Bircham Head of EU and competition: “In general we welcome most of the proposals in the Government consultation paper on the reform of the UK competition regime. Many of the proposals are designed to increase the flexibility and responsiveness of the competition enforcement regime for business. What is less welcome are proposals to introduce mandatory merger control. The mandatory options proposed in the consultation will only serve to drive up business costs and increase the regulatory scrutiny of many mergers which have little or no anti-competitive effect. We don’t think the introduction of a mandatory notification regime for business is justified. It will needlessly increase red tape on business, increase the proposed Authority’s costs and will catch many transactions that are in no way anti-competitive. We believe the current voluntary system, which keeps a turnover and market supply test as alternatives, works well and does not overregulate business.”

Stephen Rose, Eversheds competition partner: “The Government is proposing reform to UK merger control. Today’s announcement considers a switch from voluntary to mandatory notification of mergers. Whilst potentially simplifying the law, this move would also add cost and red tape for many deals not currently caught. It will be essential for business that the Government also moves to a shorter, light touch process for non problematic mergers and reduces its fees – which are currently up to £90,000 even for the simplest deal.”

Michael Grenfell, Norton Rose competition and regulatory partner: “The proposed reforms are far more wide-ranging than people originally expected. It’s not just a case of amalgamating the existing competition authorities, but also introducing greater procedural fairness in cartel investigations, making it easier to bring criminal prosecutions for cartels, and introducing statutory timetables into competition investigations of markets and cartels. The Government has clearly given much thought to these proposals, and listened to the concerns that were expressed by businesses and competition lawyers. Business will welcome many of the proposals – such as greatest safeguards for fairness in cartel investigations, and tighter timetables in all competition investigations.”