My family and friends do not always show a day-to-day interest in my decision-making role in the UK’s merger control regime.
In 2021, I was not asked – over Sunday lunch – to explain the competition concerns I had about the merger of two suppliers of technology for pensions administration. Important though it was for the millions of people with pensions and other investments.
Nor, in 2022, did my mobile light-up when I chaired a group which cleared the London Stock Exchange’s acquisition of Quantile – a provider of ‘portfolio compression and margin optimisation services’.
A year may go by where merger control decisions are not of any great interest to anyone other than those directly affected by the deal and the specialist competition community, notwithstanding their importance for consumers and the wider economy.
2023 was not such a year. As chair of the inquiry group which prohibited Microsoft’s original deal to acquire Activision, I was aware of the considerable degree of interest from the media, the business community and even some of the general public. This year, it is the proposed merger between Vodafone and Three (in which I have no decision-making role) which is attracting attention.
Microsoft / Activision and Vodafone /Three sit alongside transactions such as Sainsburys / Asda, Kraft / Cadbury, Melrose / GKN and Pfizer’s attempted take-over of Astra Zeneca, as mergers triggering some degree of public debate.
While merger reviews generally may not be at the forefront of public awareness (one does not see merger control feature in opinion pollsters’ lists of major public concerns!) these cases, high profile or not, have an impact on issues that the public certainly do care about such as the cost-of-living and economic growth. That is where the CMA comes in – our job, given to us by Parliament – is to apply statutory tests, and use our skills and capabilities, to defend key economic interests.
Explaining the value of merger control
Given our important public functions and the significant powers we have to fulfil them, it is right that we are ready to explain our work, and the interests it serves. For some parts of the competition regime, the public impact of what we do needs little explanation. Most people understand that businesses meeting in secret to fix prices are – as Adam Smith put it – a ‘conspiracy against the public’. It is not hard to see that public wellbeing is served by vigorous enforcement.
Explaining how merger control contributes to the wider consumer good and economic prosperity is more complex. Partly, because M&A is a fairly standard business activity; it is widespread, usually transparent, and can produce a variety of benefits including a more efficient allocation of capital across the economy as a whole. So when we look at a merger, we are intervening in what would normally be considered an area of commercial autonomy.
A merger might affect investment, growth, resilience, national security, employment, regional development or how the UK is perceived internationally. Mergers can hold promise for, or raise concerns about, any one of these issues. And certainly, parties to a merger will make strong claims for the benefits it will bring.
Labour’s 2024 election manifesto stated that “sustained economic growth is the only route to improving the prosperity of our country and the living standards of working people” [Footnote 1]. Rachel Reeves, in her first speech as Chancellor, said that the new government would “get Britain’s economy growing again” and that there was “no time to waste” [Footnote 2]. It is therefore opportune to ask how competition policy, and in particular merger control, contributes to this growth mission.
For much of the last 45 years, competition policy was a core element of economic policy, with the belief that strong competition enforcement would support productivity, growth and innovation. While other policy instruments were employed to support specific sectors of the economy or places within the UK, these were considered to be complementary to competition policy.
Recent developments – the pandemic, the Ukraine war, advances in technology, increasing focus on climate change, the cost-of-living crisis, and the rise of populist movements sceptical about the benefits of free trade – have prompted debate about whether a more interventionist industrial strategy is needed to protect, shape and grow domestic markets. And, as I mentioned, the new government is committed to developing such a strategy. The UK is not alone in this – commentators have observed what has been described as “a global renaissance of industrial policy”[Footnote 3]. Mario Draghi’s report on the future of European competitiveness is the most recent contribution to this debate [Footnote 4].
Many of the measures governments may consider under the banner of industrial policy – such as skills and training, investment in infrastructure and support for research and development – can be part of a coherent framework with competition policy. Competition authorities can contribute positively to the success of these policies by giving advice and, where necessary, undertaking investigations and enforcement activity to ensure the effective working of markets, as we did recently in our market studies on electric vehicle charging and housebuilding. Indeed, the UK’s markets regime means that the CMA is exceptionally well equipped to support cross-government, mission led industrial policy; and we are seeing a lot of interest in our cutting-edge market investigation system from other countries keen to better connect competition policy to broader economic objectives.
The role of merger control in supporting national economic missions is perhaps more subtle but equally important. I propose, in the rest of this lecture, to discuss how merger control contributes to policies that support a growing, innovative and resilient economy and the impact of effective merger control on businesses in the UK. I shall consider whether we intervene too much and why we are interested in mergers between non-UK companies. Finally, I shall talk about how we are held to account for our activities.
But first, a caveat. As a competition specialist there is a risk that one sees the entire world through the prism of competition policy. We should not understate the significance of competition policy in driving economic growth, but other policies such as monetary and fiscal policy and trade are critical and there are sectors of the economy that may require more direct government support for markets to thrive. And there are aspects of our national life, such as health and education, which affect economic growth but where market forces will always be subsidiary to other important public goals.
That said, given the extensive academic and historical evidence, it is difficult to see how a productive, growing and innovative economy can be built and sustained without competition policy, including merger control, being an important element in the mix. This is one of the reasons we set up a Microeconomics Unit to conduct economic research focusing on issues of competition, innovation and productivity to support growth in the UK economy.
Why focus on competition?
In our day-to-day work, we apply the test that is enshrined in law – whether a proposed merger may give rise to a substantial lessening of competition and what any reduction of competition might mean for consumers. We consider the potential impact of the merger on the prices consumers might pay, the quality of goods and services they may receive and how they might benefit from innovation.
Although the regime is centred around protecting the competitive process in markets impacted by specific transactions, it has a benefit for the UK economy that is broader, because competition is a major driver of productivity, growth and innovation in the economy as a whole.
The importance of competition for the economy was at the core of the reforms that established the modern merger control regime in 2002. The Blair government policy proposal that formed the basis of the legislation said: “Vigorous competition between firms is the lifeblood of strong and effective markets. Competition helps consumers get a good deal. It encourages firms to innovate by reducing slack, putting downward pressure on costs and providing incentives for the efficient organisation of production. As such, competition is a central driver for productivity growth in the economy, and hence the UK’s international competitiveness” [Footnote 5].
So while we apply micro-economic analysis centred on a specific transaction, and what it might mean for competition in affected markets and relevant consumers, the system as a whole has important macro-economic consequences for all people in the UK, businesses and the wider economy.
This critical linkage between decisions on individual mergers and wider benefits to people, businesses and the economy is sometimes overlooked, so let me give an illustration. We recently carried out work in the groceries market as part of our efforts to support consumers and help contain cost-of-living pressures. While we identified some concerns, we found that high price inflation for groceries did not appear to have been driven at an aggregate level by weak competition between retailers. UK consumers benefit from a relatively competitive supermarket sector. That is thanks – in part – to merger control, and the CMA’s decision to prohibit the proposed merger between Sainsbury’s and Asda in 2019 which we said at the time would lead to increased prices, reduced quality and choice of products for all UK shoppers.
This impact of merger control on the price consumers pay is measurable. We estimate that our decisions on mergers have saved consumers £685 million per year, over the last 3 years. But this is just the direct effect of merger control. What is less measurable, but of broader significance, is the indirect impact on productivity, growth and innovation in the economy as a whole.
Productivity and growth
The link between improved productivity and economic growth is well recognised, recent IMF research concluded that reforms that enhance productivity, including actions to enhance market competition, are key for reviving growth in the medium term.
Competition contributes towards productivity in 3 ways: First, more competitive markets dynamically allocate resources to the most productive and innovative firms. Better firms enter and succeed while the worst firms fail and exit. Second, competition is a disciplining device placing pressure on managers to become more efficient, and third competition drives innovation, not just in new products but in more effective ways of doing business.
In this way competition forces everyone to do better and separates winners from losers – and as a consequence resources get reallocated to more productive purposes.
For many of us, that will be intuitively matched by our own working experience. I know from my time in law firm leadership that the global growth of UK law firms and service innovation reflects the pressure to keep up with, and outdo, competitors, driven by the demands of clients who can choose between rival firms. Firms who manage this process well thrive and expand, others contract and decline.
This is supported by strong empirical evidence. Within-country studies demonstrate a positive relationship between the strength of competition and productivity growth across sectors and cross-country studies suggest that countries with lower levels of product market regulation, enabling stronger competition, tend to have higher levels of productivity growth.
This is not to imply that market regulation is a bad thing. In some markets it is an essential protection and contributes to ensuring fair competition between reputable businesses. The point is that there may sometimes be a trade-off between the extent of protection, and competition and growth.
The focus of merger control is not on targeting productivity directly but on preserving competition itself, measured by benefits to consumers in the form of lower prices, better quality and more innovation. However, the literature strongly suggests that if merger control is effective “in its own terms” in keeping or making markets more competitive, it will also promote productivity.
When we prohibit an anti-competitive merger there is an obvious direct consequence for competition in the affected sector. Effective enforcement also helps ensure that firms which are considering mergers have in mind the potential impact of their transaction on consumers and innovation. In this way merger control boosts competition across the economy and, as the evidence indicates, competition supports productivity. So, merger control at the level of the individual firm is likely to culminate in the improvement of economy-wide measures of performance such as GDP, employment, prices and aggregate productivity [Footnote 6].
Innovation
Helping to ensure competitive pricing is a major function of merger control, no more so than at a time of cost-of-living pressure. Protecting innovation is just as important [Footnote 7]. Economic growth is, after all, more likely to be driven by innovation than by ensuring that prices are closer to marginal costs.
The competitive process incentivises firms to invest in developing products and services to better meet consumer needs: new medicines, diverse forms of entertainment, improved transportation, energy efficient products, more effective production processes and better communication networks, to name but a few.
Two sectors in which the UK has great global strength are life sciences and technology – high growth and high productivity parts of our economy in which innovation is critical to success and where merger control has a role to play in protecting the innovative process and ensuring that the fruits of the process are available to consumers.
Let me describe 3 ways in which a merger might undermine competition in innovation:
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a merger might involve a loss of ‘static competition’, as where two pharma companies supplying similar drugs, decide to merge
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a merger might involve a loss of ‘future competition’, where one pharma company buys up another which had been about to launch a similar drug
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and then there is ‘dynamic competition’. A pharma company looks over its corporate shoulder and sees another company developing a new generation of drugs. It may not know precisely what competitors are doing but knows that they are doing something that may well affect it down the road. If the incumbent wants to maintain its position it will be strongly incentivised to make investments. A process summed up by Andy Grove, the founder of Intel: ‘Only the paranoid survive’. That rivalry – over investments in future products or processes – is ‘dynamic competition’. It could be lost if the two companies merge
There would not be much disagreement that, depending on the circumstances, the loss of static or future competition could adversely affect innovation or the price and terms on which innovative products are made available to consumers.
But dynamic competition is also core to an enterprise driven economy. Dynamic dimensions of competition fundamentally impact product and process innovations, capital investment, R&D and decisions to enter or exit a market.
Today’s incumbents may have been yesterday’s challengers and will have achieved their strong market position through successful innovation. And it would be a mistake to believe that incumbents stop innovating, albeit that this is usually incremental change rather than more disruptive innovation. Some of the most significant and impactful changes come from challengers outside of the largest companies. And we know that the threat from these challengers can spur further innovation by incumbents.
There is research that suggests that the relationship between competition and innovation is an ‘inverted-U’: moderately competitive markets are likely to be the most innovative, while monopoly markets innovate less as do highly competitive markets [Footnote 8]. So in technology markets, many of which are highly concentrated, more competition will drive more innovation as we are on the upward sloping part of the inverted-U. A merger that eliminates a potential innovator could, depending on the circumstances, be particularly harmful to innovation in such markets. Other more recent studies indicate a strong positive relationship between the stringency of competition laws and innovation [Footnote 9].
These models are interesting context for our focus on innovation, though in our everyday work we are fact specific and evidence based considering the circumstances of each case.
This is not about protecting specific businesses, but the competitive process. The innovator may be the challenger, the incumbent or both.
It is not the job of competition authorities to pick winners by seeking to identify what potential innovations might succeed. Our role is to ensure that a structural change in a market does not reduce competition to the detriment of the innovation process. Our function may be compared to that of a car mechanic whose job is to make sure that a vehicle works – the mechanic, having done their job, has no role in deciding what the vehicle is used for or where it goes, that is up to the driver.
A merger might support innovation, for example the merged business might be able to deploy resources, such as complementary R&D assets, to make investments that will benefit consumers that would not be possible for the individual businesses concerned. This is very much fact specific requiring a proper assessment of the relevant evidence.
Innovation across a market may mean that an otherwise problematic merger will not give rise to competition concerns. Last year we cleared the proposed merger between Viasat and Inmarsat, close competitors in the supply of satellite connectivity. We found that the satellite communications sector is evolving at rapid pace – new companies entering the market, more satellites being launched, and firms entering into new commercial deals. These developments would ensure that consumers, and the economy, would continue to benefit from strong competition [Footnote 10].
Start-ups and innovation
Start-ups, by their disruptive nature and ability to take on more risks, play a vital role in supporting the transformative innovation needed to contribute to economic growth and address wider social and economic challenges [Footnote 11]. The ability of start-ups to scale up is particularly important. A House of Lords report on the life sciences sector notes, “the real economic value comes not from funding start-ups but from enabling scale-up” [Footnote 12]. It is well documented that UK start-ups across a range of sectors are struggling to reach commercial scale, and when they do are often being merged into international corporations [Footnote 13].
There are real challenges for scaling up in the UK that the investment community, and the companies they back, talk about regularly. These include talent and skills, infrastructure and planning, energy costs, taxation, access to capital and, until very recently, aspects of the London Stock Exchange listing rules. The UK finance sector’s appetite for risk overall is a major concern for them. These are all issues which limit the viability or attractiveness of organic growth or a UK listing which place promising companies under pressure to sell out when there may be better alternatives for them, and the UK economy.
A concern that has occasionally been raised is whether the prospect of a future merger being prohibited under the merger control process might deter investment in start-ups by making it difficult for investors to eventually sell to incumbents.
In reality, the likelihood of a prohibition of such a sale is very small indeed. Of the 50,000 or so reported deals each year, on average we prohibit about 2 or 3 mergers, with perhaps another 2 or 3 being abandoned when referred to a phase 2 inquiry. Last year, we prohibited one. We have never prohibited the acquisition of a UK start up by a large tech company. This is not to say we never would and a new jurisdictional threshold under the Digital Markets Competition and Consumers Act will bring a small additional number of such acquisitions within our scope. But, if we were to prohibit such a merger, it would be because of good evidence that the merger would undermine competition in the UK and, in the context of the acquisition of a growing start-up, such concerns might centre on the prospect of the acquisition reducing the incentive to innovate. The likelihood of that happening is no greater than other major jurisdictions and we have seen in recent months, examples of technology mergers cleared in the UK but found to be detrimental to competition in other jurisdictions, for example, the proposed acquisition of Roomba by Amazon.
It is also important to bear in mind that, in the small number of cases where a merger is blocked, we are only prohibiting the sale of the business to a specific purchaser – one who might, among other things, inhibit further innovation. It is not a blanket prohibition on the sale of the business, so investors are able to recoup their investment elsewhere. And that is what happens in many cases. In 2020 we prohibited the purchase of Farelogix, an innovative challenger, by the incumbent Sabre. Farelogix was subsequently sold to Accelya, a leading provider of technology solutions to the global airline and travel industry. The Farelogix CEO said that the acquisition would enable the company to deliver ‘essential, pro-airline solutions needed by our current and future airline customers’.
Merger control and a resilient economy
Another context in which competition authorities should think ahead is where a merger might impact market resilience. Economic security in most cases is likely to be enhanced by ensuring multiple sources of supply rather than having to rely on monopolies or oligopolies. Bigger is not necessarily better and concentrated economic power, as well as reducing dynamism and innovation, can lead to excessive dependence on a few players, creating systemic risks – not least at times of economic vulnerability – resulting in supply shortages and higher prices.
Consider what happened to the semiconductor supply chain in 2021 when a series of events caused the shutdown of plants of two key suppliers in a highly concentrated sector. Car manufacturers missed production targets and chip shortages caused supply problems for a range of goods from electronics to medical devices to technology and networking equipment.
Robust merger control, which prevents excessive concentration of market power, and protects growing businesses, can be an important contribution to ensuring resilience. An example of where, most would now agree, competition authorities could have done a better job in ensuring future resilience is the market for statutory audit services. Before 1987, there were eight large international audit firms in the UK. That number fell to four following a series of mergers between 1987 and 2002 which were cleared by the European Commission with little, if any, consideration of resilience with the result that we are now highly dependent on a small number of firms, In fact rules around conflicts of interest and “rotation” of audit providers mean that, in practice, there may be two or fewer firms available to choose in particular cases. A CMA working paper concluded that this meant that: “not only is there little real choice, but the current setup is also a threat to the resilience of the system. The Big Four are too few to fail” [Footnote 14].
The business perspective
As someone who spent most of their career advising clients in private practice, I appreciate how strongly merging parties can feel about the merits of a transaction. Businesses do not embark on a proposed merger lightly. Merger processes are time consuming, resource intensive, may carry reputational risks and can be a distraction from other business activities.
Parties to a merger believe it will give rise to shareholder value, and in the vast majority of cases they are free to follow their commercial interests, But in a handful of instances the merger will have consequences for the broader public interest in an effective competitive process and, on those occasions, it is our statutory responsibility to protect the consumer interest.
While parties to a prohibited merger will have strong views, and it is important that we take these into account, there are often also other opinions. Where a merger is potentially problematic, other businesses – competitors, challengers, suppliers, purchasers – will often have concerns about the impact of the merger on competition. Consumer groups, unions, sometimes customers, will also have a perspective. Our job is to listen to all opinions and conduct an independent analysis.
The diversity and strength of views is part of why it is important that these decisions are made on robust evidence and established principles, and subject to judicial oversight. As an independent agency, we are well placed to decide cases on their merits regardless of any surrounding noise. And we know from our continuing engagement with the investment community that, though there may be strong views about a particular deal in the heat of a transaction, overall the impartiality, certainty and transparency of the UK process is a powerful attraction to investing in the UK and stands up well to global comparisons.
Even in the small proportion of mergers where there might be concerns that the merger will significantly reduce competition, we carefully consider the potential for efficiencies to influence that assessment. A merger could result in an economy of scale. It could bring together complementary assets or skills. It might enable lower costs, facilitate investment in parts of the economy, or unlock innovation that can help drive competition in the market. In other words, the merged entity might be a more able competitor, and this is good for both competition and the parties to the merger. It is perhaps not sufficiently widely known or understood that the UK merger process caters for the weighing up of all these considerations.
But crucially, improvements in a merged entity’s ability to compete need to be matched by its incentives to do so. This is where our responsibility to promote competition for the benefit of consumers comes in. Consumers will not benefit from, for example, an economy of scale, unless the merged entity has the incentives to use that advantage to compete more vigorously, through lower prices, higher quality, stronger innovation. Efficiencies need to enhance rivalry in a way that counteracts any restriction of competition. This is reflected in the CMA’s statutory remit, we: ‘must seek to promote competition … for the benefit of consumers’ [Footnote 15]. Our merger assessment guidelines state at the very beginning that the welfare of consumers is at the heart of our role in merger control.
This approach to considering efficiencies is illustrated by the recent provisional findings in the Vodafone / Three merger inquiry where the independent group assessed the investment the companies say they will make in enhancing network quality and boosting 5G connectivity and weighed the extent of any likely and timely efficiencies against the significant costs to customers and rival virtual networks that were provisionally identified. The Group is now considering how Vodafone and Three might address its provisional concerns about the likely impact of the merger on retail and wholesale customers while securing the potential longer-term benefits that may result from the merger, including by guaranteeing future network investments.
Levels of intervention
Because merger control involves a government agency intervening in the operation of capital markets, it is legitimate to ask whether the extent of that intervention is proportionate. In a market economy, such interventions should be exceptions not the rule.
There are two ways of evaluating this for the UK. The first is quantitative. Is the CMA in fact reviewing more cases at phase 2, or prohibiting more mergers, than previously, and how do we compare to other jurisdictions? And the second is qualitative, are we intervening in mergers which we should be leaving alone or not intervening where we should?
Unlike most jurisdictions, the UK merger control system is voluntary – companies do not need to notify their mergers to us. So the regulatory process – in terms of burden on businesses – reflects the level of potential concern. This compares to mandatory regimes where the requirement to notify often depends on turnover based thresholds regardless of whether a merger gives rise to potential issues.
The number of detailed phase 2 investigations and prohibitions in any year will depend on what deals are done, so we do see fluctuations year-on-year. However, the absolute numbers are low. In each of the last ten years fewer than 15 mergers were investigated at phase 2 and no more than 3 were prohibited in any year. There is also not a general trend towards greater intervention – the numbers go up in some years and down in others.
As I mentioned earlier, in the last financial year, out of about 50,000 global M&A deals, 54 were subject to an initial UK phase 1 investigation. Of the 54, 3 were referred to a detailed phase 2 review and of these two were cleared and one was abandoned.
And how do we compare to other authorities? Are we more likely to find concerns than the European Commission, for example?
We need to be careful making comparisons given that the impact of a merger may not be the same across jurisdictions. The European Commission formally reviews many more mergers than we do, in part because it is a mandatory regime. Also, the EU has a dual system of merger control – some mergers are reviewed by the Commission and others by national competition authorities – so looking at the Commission alone does not give a proper comparison between the UK and the EU as a whole.
We may compare the 54 phase 1 investigations in the UK last year with approximately 266 investigations opened in France in 2023 [Footnote 16] and approximately 800 investigations opened in Germany [Footnote 17]. European Commission cases were on top of these.
If we look just at interventions and – for comparability – mergers that both we and the Commission investigate, the figures do not suggest we are more interventionist. If we focus on the 11 mergers that the CMA and European Commission reviewed in parallel in 2023: Both agencies cleared six mergers at phase 1 and both cleared 4 of the 5 that each referred to phase 2 [Footnote 18].
One must hope these numbers give confidence and reassurance to parties considering a business opportunity which touches on UK markets. But a focus on the numbers risks obscuring the more important question, which is whether our interventions are properly justified. The context in which we operate is not static. Since 2021, we have had responsibility for a wider range of mergers than in the past because of our exit from the EU. And those mergers are more complex (not least because of the rise of digital, technology and particularly AI), so one might have anticipated that there would be a higher number of phase 2 investigations, though this in fact has not been the case.
We are a learning organisation and we continually look at past cases to try and glean, with the benefit of hindsight, how we can do better. We commission independent reviews of past merger decisions, and these have led to our gaining a better understanding of how we might approach topics such as barriers to entry, digital markets and vertical mergers.
We also look at what other competition authorities are doing and how well it is working; we consider academic research and the views of stakeholders including law firms and economic consultancies and we have frequent dialogue with businesses, consumer groups and public bodies.
So, where we have evolved our approach, this is the result of looking at hard evidence and assessing how we could make better decisions.
The CMA’s jurisdiction
The openness of the UK economy to international investment, and the huge importance of global businesses, imports and international supply chains for the UK mean that a merger between two non-UK companies can have a material effect on UK markets, and real consequences for UK businesses and consumers, even if the merger may affect other markets too. Key parts of the UK economy and UK consumer spending are controlled in whole or part by foreign businesses – technology, motor vehicles, energy, fuel, air transport, food. I could go on.
If we were to confine our consideration to mergers only involving UK headquartered or domiciled companies, we would be leaving UK competitors, suppliers and customers of non-UK merging businesses with operations or sales in the UK defenceless against global mergers that could have a significant impact on their costs, choices, prices and quality.
This is why Parliament entrusted the CMA ‘to promote competition, both within and outside the United Kingdom, for the benefit of consumers’ [Footnote 19]. The question we are required to address when considering a merger is will it result in a substantial lessening of competition in a UK market [Footnote 20], that is regardless of whether the merger is within the UK or elsewhere.
A number of the mergers we review are also of interest to other competition authorities and we understand the value to business and the economy of joined up thinking when that is possible. An aspect of running an efficient process includes cooperation with other authorities and our experience is that it is generally beneficial to have open channels of communication [Footnote 21].
Nevertheless there are a few occasions, for example because market circumstances diverge or the evidence base differs, where different authorities reach different conclusions on the same case. Such cases are uncommon. For me the really significant thing about global merger control is not the small number of cases where there is divergence, important as these are, but the fact that for the vast majority of mergers there is no divergence at all. There can be few other areas of international decision-making where countries across the world with different legal systems, economies and cultures align so often around a common set of economic principles to ensure consistent outcomes.
Accountability and predictability
I have described how competition policy is an important contributor to consumer welfare and economic growth. So how do we reconcile the independence of our process and decision-making from government with these significant contributions to national policy? First, we operate under a mandate given to us by Parliament and we work within this statutory framework. This includes the focus on consumer interests. Second, our merger control work is subject to review by a judicial body, the Competition Appeal Tribunal, which ensures that we operate fairly and within our statutory powers. Third, at a policy level (though not in individual cases) government gives a steer which we take into account. Fourth, we regularly appear before parliamentary committees to explain what we do and answer questions and, as our responsibilities have grown, we have proactively ramped up this activity, last year appearing at more parliamentary committees across the UK than ever before.
In addition to these higher-level accountabilities, it is important that the quality of work on individual cases and the processes we follow gives parties confidence in the fairness of the system. We seek through this process to ensure that practical judgements can be made within a clearly understood legal and economic framework. Predictability of the principles we apply is itself an important contributor to ensuring business and public trust. Businesses and their advisers are given certainty over the metric against which transactions will be assessed. Decisions against that metric are driven by analysis of the evidence, and we minimise the trading-off of different objectives with the unpredictability that involves.
Confidence in the system comes not just from the test we apply, but also from who applies it, particularly in the small minority of mergers which are ‘hard cases’ – where the application of established principles does not give certainty as to the possible outcome.
It is an unusual feature of the UK regime that there is a ‘hard-wiring’ of independence into the system. Decisions on phase 2 mergers are not made by the CMA’s staff, nor by the CMA’s Board but by members of an independent panel of experts, which I chair.
Alongside independence, the panel adds to the system deep expertise and experience in a number of disciplines from outside the competition authority, and outside the narrow community of competition lawyers and economists. This includes hard-headed senior business people, the professions including law (not just competition law) and accountancy, academia and consumer advocacy, as well as competition policy.
The process is highly transparent. Parties have extensive opportunities to make written representations and we have recently revamped our phase two procedures to allow for more direct interaction with the decision-making group; more opportunities for parties to state their case orally and to facilitate earlier discussion of potential remedies.
Conclusion
I have explained how a system of merger control focussed on protecting competition in the consumer interest adapts and develops to reflect changing circumstances and learning from experience, most recently enabling us to better address concerns about dynamic competition and market power in digital markets. I have described how the system supports productivity, innovation and growth in the economy, within a fair and proportionate framework.
No system is perfect and there are always refinements that can be made to reflect changing policy objectives, such as the recent introduction in the UK of broader national security scrutiny of mergers.
Our focus in our casework continues to be on our statutory responsibility to address mergers than may substantially reduce competition in the UK to the detriment of UK consumers. We do that on a case specific basis. In fulfilling that duty we are not only benefitting consumers in the markets affected but contributing to the vibrancy, efficiency, productivity and growth of the UK economy,
Footnote 1: Labour Party manifesto 2024, June 2024, p 13.
Footnote 2: HM Treasury, ‘Chancellor Rachel Reeves is taking immediate action to fix the foundations of our economy’, 8 July 2024.
Footnote 3: Réka Juhász and Nathan Lane, A New Economics of Industrial Policy, Finance and Development, IMF, June 2024.
Footnote 4: The future of European competitiveness – A competitiveness strategy for Europe, European Commission, September 2024.
Footnote 5: A World Class Competition Regime, Cmd 5233, July 2001, para 1.1.
Footnote 6: Modelling the macroeconomic impact of competition policy, European Commission, 2022.
Footnote 7: Gürkaynak, Innovation Paradox in Merger Control, Concurrences, 2023.
Footnote 8: Aghion, P., Bloom, N., Blundell, R., Griffith, R., & Howitt, P. (2005). Competition and Innovation: an Inverted-U Relationship. The Quarterly Journal of Economics, 120(2), 701-728.
Footnote 9: Ross Levine, Chen Lin, Lai Wei, and Wensi Xie, Competition Laws and Corporate Innovation; NBER Working Paper No. 27253; May 2020.
Footnote 10: Anticipated acquisition (the Merger) of Inmarsat Group Holdings Limited (Inmarsat) by Viasat, Inc (Viasat), CMA, 9 May 2023.
Footnote 11: The Role of Regulation in Supporting Scaling-up The Regulatory Horizons Council, January 2024.
Footnote 12: House of Lord Science and Technology Committee (2017): Life Sciences Industrial Strategy: Who’s driving the bus?
Footnote 13: Centre for Process Innovation, (2023) Challenges and Opportunities for UK HealthTech Manufacturing Scale-up Report
Footnote 14: Andrea Coscelli and Gavin Thompson, Resilience and Competition Policy: Economics working paper, CMA, March 2022.
Footnote 15: Enterprise and Regulatory Reform Act 2013, s25(3).
Footnote 16: Autorité de la Concurrence, Rapport Annuel 2023, p. 22.
Footnote 17: Bundeskartellamt, Jahresbericht 2023/24, p. 9.
Footnote 18: We imposed remedies in two cleared mergers and the EU imposed remedies in 3. We blocked the fifth merger (Microsoft/Activision) although a restructured deal was subsequently cleared at phase 1. For the EU, the fifth merger was abandoned (Amazon/iRobot).
Footnote 19: Enterprise and Regulatory Reform Act 2013, s25(3).
Footnote 20: Enterprise Act 2002, s22(1)(b).
Footnote 21: There is also a role for cooperation outside of the confines of a specific case. See for instance the Australian Competition and Consumer Commission (ACCC) and Bundeskartellamt’s joint statement on merger control enforcement in 2021: Joint statement on merger control enforcement – GOV.UK (www.gov.uk).
