CMA and the search for economic growth: does the UK have an effective competition regulator?

After Britain’s transitional period of leaving the European Union had finished in 2021, The Competition and Markets Authority assumed powers previously held by the European Commission regarding merger clearance and cartel control as well as competition enforcement.

The material consequences of leaving the trading block soon materialised as a drop in GDP, now estimated between 6 to 8 per cent. The government elected in 2024 has since steered the CMA towards its growth agenda, key part of which is to make the UK more attractive to overseas investors.

While conducting research for our UK competition law rankings, we’ve asked several leading practitioners to opine on the government’s realignment of the regulator’s priorities.

One respondent summarised the recent development as follows: "We had a period where they were a tough enforcer: the feeling was that balance was wrong. In The middle of last year the government had had a enough: be proportionate".

Some view this as welcome pragmatism, as another lawyer phrased it: "It has had a reset. They are now a reasonable regulator, willing to discuss remedies but will refer to phase 2 if a merger needs to be blocked".

An aspect of this is the regulator’s reduced headcount. Smaller resources have re-focused attention, as another lawyer suggested that "the CMA is being more careful about putting resources on the most challenging cases".

However, some challenging cases are not in focus. Under the leadership of the new head Sarah Cardell, the agency has been reluctant to scrutinise global deals such as the potential merger between Netflix and Warner Brothers. Clearly then, the current thinking holds that some type of merger control is a hindrance to economic growth.

As one lawyer said: "They are investigating fewer mergers in detail specifically, and the outcomes are better". They continue: "we are now seeing efficiencies arguments looked at property". Indeed, several leading competition lawyers we interviewed have said the clearing of the Vodafone - Three merger was a landmark in this direction.

At its core, the efficiencies argument in merger control proposes that reduction in competition can be acceptable if it results to cost savings to consumers. This was the reasoning behind the clearing of the telecoms merger.  There is a contested intellectual and institutional backdrop to this, arising from neo-classical economics on the one hand, and in recent times the rise of platform businesses such as Amazon on the other.

Critics of the firm’s influence on US competition regulation have argued that anchoring competition policy to short term price effects fails to appreciate the risks of what they call predatory pricing and the resulting anti-competitive effects of consolidation across lines of business.

Indeed, some of our correspondents are rather critical: "The truth is that the CMA is more inclined to clear a merger that would otherwise been seen as problematic".  They continue:

"What we are seeing a clear indication of the UK government to find a way through if there is potential benefit to customers. It is hard to argue that the case by case interference hasn’t increased and may increase still".

Following the efficiencies argument, the CMAs thinking in merger control appears to accept that the benefit of customers is primarily understood as lower prices (precisely like Amazon would have it) at least in the short term, even though it may well turn out that the consequence is concentration of market power.

In this context, it is perhaps symptomatic of the UK regulator’s change of direction that Dough Gurr the former head of Amazon UK, was appointed as the new chair.  One correspondent put’s it clearly: "I think the problem with the CMA is that it is difficult to unpick current decision making from US big tech influence".

Another lawyer suggested that

"We have seen a reduction in their antitrust enforcement.  We have been seeing quite a lot of global deals been put on the table. We would describe it as a weakened regulator but it remains to be seen”.

It is possible that pinning growth—the government’s aim—to what tech companies prefer in merger control is self-undermining. The risk of ignoring accumulated market power is that the latter is likely to dampen innovation and thus, in the long run economic growth itself as Mike Walker, the former chief economist of the CMA, has recently said.

If the thinking preferred in big tech circles has affected the UK’s merger control regulation, some of this has percolated also in the collective action space.  As one practitioner put it: "There is a lot more political involvement in the anti-trust space".

This involvement originates from the same place where the UK government would dearly like direct foreign investment: "There is extremely well funded political lobbying going on by US corporates who don’t like collective actions".

Some of our interviewees have argued that current competition regulation has conflated the interests of the UK economy with those of global corporations, thus ignoring the fact that "a lot of collective actions are to the benefit of small businesses".

That said, there are other aspects to these changing priorities. Our correspondents have told us that while there are fewer CMA investigations and merger control enforcement, more market studies have been carried out. Sectors examined have included the construction industry, veterinarian services, funeral homes, and a major investigation in to cloud services.

Indeed, there is distinction to be made between political influence which involves interference to operational decisions, and political steering towards issues which people care about. As one correspondent put it "consumers the CMA is supposed to protect are also voters". Another correspondent suggested that “the government could think of the UK consumer base as itself as a valuable asset.  It should be protected and not exploited”.