A decade of enhanced concurrent competition enforcement: room for improvement?
30 January 2025In December 2024, the CMA published the findings of its review of the effectiveness of the UK’s competition concurrency arrangements (the Report). Under these arrangements, the CMA and the UK's sector regulators share certain competition enforcement powers, which are aimed at promoting competition in the regulated sectors. In this article, we explore the key takeaways and recommendations from the Report, and what they mean for the future.
Background
The UK’s concurrency arrangements allow the CMA and the sector regulators1 to use their competition powers in the regulated sectors on a shared basis. Within their respective sectors, the regulators have a duty to promote competition, and the power to: (i) enforce the provisions of the Competition Act 1998 (CA98) relating to anti-competitive agreements and abuses of dominance; (ii) conduct market studies under the Enterprise Act 2002 (EA02); and (iii) make market investigation references (MIRs) to the CMA. The CMA retains exclusive responsibility for merger control, including in the regulated sectors2.
The Enterprise and Regulatory Reform Act 2013 introduced various enhancements, with a view to improving use of the powers and enhancing co-ordination between the sector regulators and the CMA. The reforms took effect in 2014 and included:
- the introduction of a “primacy obligation”, which means that sector regulators must consider whether it would be more appropriate to remedy competition law issues in a given sector using enforcement powers before taking regulatory action;
- imposing legal requirements on the CMA and the sector regulators to consult each other on the exercise of their concurrent powers, especially as regards CA98 enforcement;
- an ability for the CMA to require the transfer of CA98 enforcement cases from the sector regulators; and
- establishing the UK Competition Network (UKCN) to create a forum for engagement and discussion between the sector regulators and the CMA.
The FCA (and PSR) also received concurrent enforcement powers shortly after these reforms, and a statutory objective of promoting competition.
With a decade having passed since the introduction of these reforms, the CMA has taken stock and, in August 2023, launched a review into the overall operation and effectiveness of the concurrency regime. The resulting Report considers: (i) whether concurrency is the correct enforcement model; and (ii) what scope there is to improve the concurrency arrangements.
The Report’s findings
Concurrency as a model
The majority of stakeholders that engaged in the CMA’s review were supportive of concurrency. Whilst a small number considered it to be less effective at promoting competition in the regulated sectors than exclusive CMA enforcement, overall the CMA considered there to be stronger arguments to suggest that concurrency supports “more and more effective enforcement”.
The CMA considered that the following features supported this conclusion: the sharing of complementary skills and knowledge; additional capacity and coverage in the competition regime; and improved detection and case selection. The Report is, nevertheless, nuanced in acknowledging that there are some factors that may discourage sector regulators from exercising their concurrent powers, and in recognising that there is scope for improvement.
Scope for improvement
The second section of the Report separately considers specific improvements, across three themes:
- the sector regulators’ capacity for the exercise of their concurrent powers;
- the priority that sector regulators give to CA98 enforcement; and
- cooperation between sector regulators and the CMA on markets work.
1. Capacity
The Report identifies a disparity between sector regulators regarding the availability and expertise of staff to enable effective CA98 enforcement. For example, the CMA notes that generally the FCA and Ofcom are better resourced than their peers. For other regulators, competition enforcement may be “even more resource intensive”, as they may have to re-acquaint themselves with the enforcement process and train staff before exercising their competition powers. In some instances, they may also have to supplement in-house expertise with external advice. This may contribute to lower levels of enforcement overall.
To overcome these challenges, the Report sets out the following main recommendations:
- Secondments: to promote case support and sharing of know-how and expertise, regulators should consider increasing the use of secondments between each other (not just to/from the CMA). Secondment opportunities should also be included as a standing item at UKCN meetings so that regulators can highlight their resource needs.
- Internal reorganisation: regulators may learn from each other’s approach to the internal organisation of staff – particularly the presence of specialised competition enforcement teams (as maintained by the FCA and ORR). While not expressly stated, the Report appears to suggest that maintaining a specialist competition team is more effective.
2. Priority given to CA98 enforcement
Whilst the Report acknowledges that competition enforcement is one of numerous tools available and that regulatory enforcement may sometimes be preferable (particularly as CA98 investigations can be very lengthy), the CMA believes that CA98 enforcement may not be being prioritised by regulators due to:
- a lack of familiarity with CA98 enforcement at senior levels within the sector regulators;
- the relatively diffuse impact of CA98 enforcement (including its deterrent effect), when regulatory enforcement may be more noticeable within the given sector; and
- the discretionary nature of CA98 enforcement, in the context of acute pressure on resources.
To overcome these issues, the CMA recommended the following:
- Sharing best practice: sector regulators should share best practice and consider ways to improve their pipeline of potential cases, including through a new UKCN workshop convened by the CMA.
- Deterrence: sector regulators should be made more aware of the deterrent effects of CA98 enforcement, to help inform future prioritisation decisions. This can be articulated through the UKCN.
- Advocacy: the CMA should continue to advocate for sector regulators to make effective use of their concurrent powers, including by sharing approaches and resources.
3. Cooperation on markets work
The sector regulators have concurrent powers to carry out market studies under EA02 and refer markets to the CMA for formal market investigations (even without first conducting a market study)3. If a sector regulator opens a market study or makes an MIR in its given sector, the CMA cannot exercise the same function in relation to the same matter (and vice versa).
Some stakeholders commented that cooperation between the CMA and sector regulators was under-developed in this regard, and that MIRs had been made in cases that were inappropriate (or not made when they should have been). Further, in relation to the three market investigations the CMA has conducted in the regulated sectors (retail banking, energy, and investment consultants), some stakeholders considered that the CMA had been overly involved in implementing and monitoring the remedies.
To address these concerns, the CMA made the following recommendations:
- Greater engagement: More focus should be placed on markets work in bilateral meetings between regulators and the CMA, to identify where closer engagement will be of most value.
- Clearer expectations: Upfront expectations should be set as to how the CMA and sector regulators will cooperate on markets work, including on the sharing of their provisional thinking at various stages of their investigations. This can be done as part of the CMA’s intended update of the Memoranda of Understanding between the CMA and the sector regulators (the CMA did not think there was a case for for new statutory rules on cooperation, akin to those which exist for CA98).
Commentary
Whilst the Report identifies certain growing pains and a need amongst the sector regulators for more resources and transparency, there is no suggestion that a wholesale overhaul of the concurrency regime is warranted. Indeed, the CMA concludes that “on balance, competition in the regulated sectors is being promoted more effectively than it would be under an alternative model”. We can, therefore, expect more of the same from the CMA and concurrent sector regulators, albeit with greater communication and cooperation between them.
As to whether the Report’s recommendations will lead to more enforcement, only time will tell. Inter-regulator secondments may not be enough to address deficiencies in enforcement capacity and/or expertise. And even regulators such as the FCA, with large, dedicated competition enforcement teams, have not successfully concluded many cases (two in a nearly 10-year period in the FCA’s case)4. A tendency to prioritise regulatory action persists despite regulators long having been obliged to first consider using CA98 enforcement. It remains to be seen whether advocacy by the CMA will be sufficient to address this reticence.
1 Specifically, the: Civil Aviation Authority; Financial Conduct Authority (FCA); Gas and Electricity Markets Authority (Ofgem); Office of Communications (Ofcom); Office of Rail and Road (ORR); Payment Systems Regulator (PSR); Northern Ireland Authority for Utility Regulation; and Water Services Regulation Authority.
2 In certain sectors (namely water and energy), the CMA has an obligation to consult the relevant regulators. In the others, the regulators will usually provide their views on a merger to the CMA.
3 Sector regulators may also, under their sectoral powers, carry out “market reviews” which may be similar in practice to market studies.
4 More broadly, the Report notes that concurrent enforcement substantially increased following the 2014 reforms. In the decade preceding the reforms, only two infringement decisions were issued by sector regulators. In the subsequent decade, eight were issued. Some might still question whether this remains too low: the CMA issued 40 infringement decisions in the same period (including two in the regulated sectors), and the regulated sectors are estimated to account for around a quarter of UK GDP.
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