GovWire

Introduction

Good morning, and thank you for your kind introduction.

It was a great honour to become Chair of the UKs Competition and Markets Authority almost exactly a year ago, and it is a role I am passionate about. Why do I say that? Well, over the 30 years leading up to this post, its been my privilege to help businesses of all shapes and sizes from long-established multinationals to scrappy start-ups to compete, to innovate, to grow, and to create value. And if that experience has taught me anything, its the phenomenal power of competition. Ive seen first-hand, time and again, how competitive rivalry unlocks the creative potential in businesses and the people working there. The result is an immensely powerful, positive force. Positive for people, who get greater choice and quality at more affordable prices. Positive for businesses, which are free - and motivated - to innovate, grow and reap the rewards. And positive for the economy, which benefits from higher productivity, investment, job creation and real wage growth.

So, I have been surprised to hear suggestions that competition authorities are becoming too interventionist. Even, from some, that we are anti-business. As someone with a deep business mindset, I think its important to correct this suggestion. And in doing so, its timely to revisit and be really clear about the fundamental principles driving the purpose and actions of agencies like the CMA.

A changing environment requiring competition authorities to evolve and adapt

First, Id like to step back and highlight some of the fundamental shifts underway in the broader external environment, and how the CMA and other competition authorities are adapting to these. I will then focus in on digital markets and then more specifically on AI.

Let me touch on 3 broad forces. The first of these is The rising cost-of-living and deteriorating trust in business. And I think there is an important link between them. Tough economic times are precisely when we need markets to work well, with thriving competition bringing people affordable choices and people being treated fairly. That means competition authorities doubling down on their responsibilities, particularly in the areas that matter most to people - having somewhere to live, being able to travel, to feed and look after ourselves and others. Im proud of the CMAs recent work in all these areas, most recently around transparency of road fuel prices, for example.

But a persisting cost-of-living crisis against a backdrop of rising business profits in certain sectors can cause some people to question whats happening here and whether its right. So, where competition authorities find businesses breaking the law with cartel behaviour, or exploiting dominant positions to limit choice or raise prices, it is important to act quickly and unambiguously. Whilst most businesses play by the rules, any wrongdoing by a few during straitened times risks damaging consumer trust and igniting broader anti-business sentiment in a way none of us wishes to see.

So, weve been cracking down on cartels in sectors like construction; as well as taking action to protect household and taxpayer budgets against, for example, anti-competitive wage fixing and excessive pricing of medicines.

Secondly we are also facing far-reaching macro-economic and geopolitical challenges. Economies around the world, with the UK no exception, are striving for growth against an increasingly turbulent backdrop: stagnating productivity, pervasive debt; fragmenting global supply chains; military conflict; a deteriorating climate. And the global consensus needed to tackle these challenges is increasingly fragmented. A polycrisis, is how it has been described.

Its understandable and right during such a time that public institutions are called on to play their part in supporting badly needed growth and productivity. But how can we, as competition authorities, do this most effectively? That brings me back to our fundamental purpose: using our powers to create, and safeguard, open and competitive market conditions, level playing fields, and consumer trust in commerce. Taking action where individual businesses seek to undermine that. Ensuring that the innovators and disruptors can continue to push boundaries and expand choice without constraints; that there are no competitive barriers, today or in the future, for the creative thinkers striving for better solutions; for the problem solvers, single-mindedly focused on ever better choice, quality, efficiency and value for the customer.

These are strong drivers of productive and sustainable growth. Arguably, the strongest. As competition authorities, we should be making that link clearer, day-in-day-out, between competitive rivalry, innovation, productivity, and growth. The CMA has a clear and deep sense of our role here. Its central to our strategy. To what were about and what we do.

The third major force is the ever-accelerating technology revolution and the multitude of new, often disruptive business models this brings and which are transforming how we live and work. What should that mean for competition authorities? Despite all the disruption and novelty, the core questions we should be asking have not (and should not) change, namely: What is the impact on customer choice and alternatives? What about the basis for competition and sources of competitive advantage? How is that advantage created and sustained? Will the power of that advantage eventually yield greater choice, greater innovation, greater value for customers, or less? Will it allow, spur, creative rivalry, or freeze out rivals, freeze out new entrants and future innovators?

The questions to ask are not changing, but the answers are. Nowhere more so than digital markets, which have taken us into very different territory than the brick-and-mortar business models that characterised industry in the past. Theres been much discussion in recent years about what makes these markets so challenging from a competition perspective. Massive fixed costs and near zero distribution costs; unprecedented network effects, at a global scale thanks to the universality of the customer need and proposition; leading to extremely high scalability and platform dependencies, and the resulting winner-take-most dynamics. In addition the strategic advantage of a data empire in a world where these are the key raw materials needed to compete - particularly where that data have value in more than 1 market, meaning market power can quickly bleed across into multiple others. And, finally, the rapid pace of scaling and of technology development mean that competition harms can quickly spread and become locked in.

Competition authorities, including the CMA, are consciously and explicitly adapting to this third major force, and Ill explain a bit about what that looks like in practice for the CMA.

Firstly, merger control: Time and again, weve seen that the most effective path to open markets and healthy competition is preventing dominance from developing in the first place. By protecting competition, effective merger control plays a crucial role in driving innovation, productivity, investment and growth. And it is, by definition, forward-looking, looking to pre-empt and prevent a significant reduction in competition. And clearly, a forward looking- analysis is particularly important in dynamic and rapidly evolving markets.

Does that create a presumption or ideology that all mergers should be blocked? Of course not. The facts speak for themselves. The vast majority of deals proceed under the UK system.

But let me be clear: where already dominant companies argue for further market consolidation, they are effectively arguing for weaker competition. For an outcome which will impede markets operating freely. Even in some cases, it might be suggested, for monopolies or oligopolies free from interference. And to do so in the name of innovation or growth is to present an entirely false, and disingenuous, choice between this and the proven benefits of competition.

Complementing merger control, the second lever is ex-ante regulation of those digital markets in which power is already substantial and entrenched. Was entrenched market power something of an inevitability given the fundamental economics at play, or would a different approach to merger control have prevented it? Hindsight is always 20/20, as they say. What is clear today is we must address the effects and the root causes of entrenched market power in these markets, many of which are so central in all our lives. Systemic, even. So, what are the options now? Post-hoc interventions are important but tend to be complex and adversarial in nature. We see a more pragmatic, pro-active, and participatory path forward, in the form of a new legislation - the Digital Markets, Competition and Consumers Bill, which we hope will become law next year.

The Bill has been specifically designed to address challenges that have dogged traditional competition law approaches to digital markets, while avoiding overly burdensome, rigid regulations which could impede innovation and growth. These are fast-moving, cutting-edge sectors, brimming with diverse activities and business models, all prone to disruption. No set of perpetual, one-size-fits-all rules will work here. The principles and tools in the Bill make sense for exactly these reasons. Ill outline them for you, briefly:

• firstly, a more bespoke approach. Standard principles of healthy competition apply, of course - open choices

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