The State of the UK Competition Law Landscape in 2023

The results of this research point toward an ever-evolving market that is beginning to bear the fruits of the Competition and Markets Authority’s (CMA) growing, post-Brexit independence.

Last year’s research into the UK Competition scene shone a light onto the difficulties lawyers report to face when dealing with the CMA as it establishes itself as an independent player on the global competition market following Brexit, and these problems apparently continue to linger.

Ever since Brexit, the CMA is said to have been significantly more active than it was in the past now that it has more jurisdiction and lawyers are allegedly seeing this increased activity in the realm of merger control. The authority is said to be taking more of an interventionist approach, with more requests for information and surveys. This increased scrutiny of transactions means that lawyers and clients are finding this process increasingly burdensome, especially with other areas of law now falling onto the shoulders of competition lawyers like foreign direct investment (FDI) and the National Security and Investment Act 2021 (NSIA).

However, with changes at the top level of the CMA through the appointment of Marcus Bokkerink as Chair and Sarah Cardell as Chief Executive in the latter part of 2022, it remains to be seen if the CMA’s future approach will adapt to some of the concerns that lawyers are voicing. Several lawyers already point to the increased bandwidth of the authority since Brexit and its pragmatic approach to speeding up reviews as positive changes.

In the CMA’s annual report for 2021/22, it details that 827 transactions were reviewed in the time period, an increase from 600 in the previous year. However, when reflecting on the year 2022/23, the outlook on the market often appears to be less optimistic according to some firms.

Upon speaking to lawyers during the research period, some compared the boom in merger control levels during the COVID-19 pandemic to the current level of activity and remarked a certain slowing down in this stream of work, potentially as a result of the global political and economic landscape. Others were quick to comment that they view this as less of a downturn and more of a return to normal market levels experienced before the pandemic, thus warranting less cause for concern. They additionally point to the fact that the authorities are also looking at deals in much more detail, in fact creating a more burdensome, lengthy and challenging process for legal counsel.

On the other hand, several do speak of the existence of a “race for quality” in the UK market whereby clients are allegedly flocking to top-ranked firms with their most strategic matters. As a result, larger firms seem less likely to wrestle with a perceived downturn in the market whereas smaller firms may face more difficulty. Coupled with this is the increased trend of parallel filings between the CMA and the European Commission, for example. Firms that can leverage established practices in multiple jurisdictions, notably Brussels, may therefore be more likely to win significant, global deals.

While the merger clearance market faces an uncertain future according to some lawyers, most are in agreement that clients and authorities are increasingly setting their sights on the competition litigation space, with one source asserting that “the next decade in the UK will be a milestone for competition litigation.”

Last year, lawyers spoke about the opening of a floodgate when it comes to class actions and collective proceedings before the Competition Appeals Tribunal (CAT) following the Supreme Court’s ruling on the Merricks v Mastercard case, and this trend gains more and more traction.

Claimant firms are supposedly being increasingly creative in how they design collective actions and there is apparently a real appetite for these cases, with a lot of the claims being brought by litigation funders. Claimants are also said to be willing to take on more challenging matters.

This growth is also reflected in law firms themselves with the number of firms now operating in the area as well as the expansion of established teams with strategic hires. For example, Anna Morfey moving from Hausfeld to Ashurst or the team led by Boris Bronfentrinker joining Willkie Farr & Gallagher from Quinn Emanuel Urquhart & Sullivan. Some sources claim that in the future “those without competition litigation practices will be left to the wayside.”

The digital sector continues to face lots of scrutiny across the competition field, with regulators looking to investigate and crack down on anti-competitive behaviour in the industry, whether this be in transactional or contentious work. As a result, large technology companies like Google, Amazon, Facebook and Apple (commonly referred to as GAFA) are key targets for competition authorities. For example, the European Commission’s Digital Markets Act outlines thresholds that would qualify these companies as “gatekeepers”.

This sector is equally of importance to the CMA whose own Digital Markets Unit (DMU) will similarly aim to regulate large technology players. Certain lawyers view the CMA’s ambition in this area as an attempt for it to increasingly establish itself as a key player in the competition field following Brexit.

The European Commission launched its own Digital Markets Act last November, putting them at the forefront of these issues alongside other jurisdictions like the US, whereas the CMA’s response to this sector, the DMU, is still yet to be fully introduced on a statutory basis. The government’s Autumn statement from 2022 pledges, however, that the Digital Markets bill will be brought forward during the third Parliamentary session in 2023, with the goal of empowering the CMA to tackle large technology players operating in the UK. Until it is brought in on a legislative footing though, one source states that the CMA remains “a bit of a bête noire for the big platforms trying to take over smaller players in the industry.”

There is additionally crossover between Ofcom’s Online Safety Bill and the CMA’s Digital Markets Unit to allow for cooperation on digital regulation for the benefit of consumers, with both bodies issuing a joint statement in July 2022. Lawmakers are aware of the connections between the two regimes and state that the “synergies will allow us to shape interventions in both areas [competition law and online safety] to maximise the benefits to UK customers.”

Alongside this attention to the digital market, other sectors like automotives, pharmaceuticals and energy remain of key importance to the CMA, with significant investigations into pay-for-delay cases in the pharmaceutical field and online advertising matters.

The beginning of 2023 also signaled further transformation in the competition field with the introduction of the new UK Subsidy Control regime, replacing the EU’s state aid process. Lawyers are in the process of advising their clients on these new changes and, while there are some uncertainties currently, most predict this new legislation will become a major part of the legal landscape in the UK.

Please see below an in-depth article written by Principal Research Specialist for Competition law, Michael Foulkes, that explores the intricacies of this new regime and its potential impacts on the UK Competition market:

UK Subsidy Control Regime - Michael Foulkes

In addition to subsidy control regulations, competition lawyers find their workload increasingly growing with foreign direct investment and National Security and Investment Act filings now falling under their remit when assisting clients with merger clearance matters.

Given the mandatory nature of the NSIA if certain thresholds are met, clients and lawyers alike originally voiced concerns about the introduction of this regulation due to the perceived increased burden on transactions. The threat of heavy fines for non-compliance or errors was additionally a worrying thought for clients. However, over the past year, now that decisions have been filed, many lawyers are finding their footing with the regime, and some have appreciated the extra guidance provided by the government.

Some lawyers have begrudged the lack of transparency in the filing process for NSIA cases when comparing it to merger clearance though. Once the notification has been lodged with the Investment Security Unit (ISU), some teams take issue with the faceless nature of the procedure with its automated responses and lack of designated case teams, unless there is a concern that is flagged.

The foreign direct investment regime faces similar opacity, with one lawyer describing it as a “black box”. This lack of insight is said to add friction and complexity to transactions. There are lawyers that support or are understanding of this lack of transparency, however, due to the very nature of the regime which deals with issues of national concern, even though they may find it frustrating. Nevertheless, after the notification has passed through the ISU and returned to clients, certain lawyers do praise the regulator’s responsiveness.

The ex-Chancellor of the Exchequer, Kwasi Kwarteng, issued a statement on the efficacy of this system last year though, stating that: “Given there are literally hundreds of these things we review every month and the vast majority don’t have any real problem, there is a case for saying we should be more restrictive.”

These concerns about the mandatory nature of the regime and its lack of transparency have continued to surface this year. In an interview with the Financial Times, Cabinet Office minister Oliver Dowden spoke about a “need to be more open and transparent,” following worries that the UK was being viewed as less attractive for foreign investment. Therefore, there is still potentially room for the government to adjust how restrictive this regime is so that it can further encourage investment into the UK and not overstretch regulators.

Sustainability was a topic that was hot on people’s lips last year as lawyers spoke about the potential threat of greenwashing in the competition landscape, whereby companies could propose collaborations that would allegedly have positive environmental impacts in order to face more leniency before competition authorities when undergoing merger control. With companies increasingly incorporating ESG principles into their core goals, lawyers and authorities must continue to monitor these developments.

In March 2022, the European Commission investigated this topic of sustainability further through its revised Horizontal Block Exemption Regulations (HBERs) and while some lawyers have viewed the CMA as being less committed to this area, the authority has been drafting its own guidance this year.

It’s consultation ran between January and March 2023, with the full results yet to be published. However, it points towards a market that will consider sustainability in a more serious manner in the future.