GovWire

Introduction

Ill begin by saying a bit about my career up until this point.

I started out as a consultant, had a varied career in government both in the UK and overseas, went back to consultancy, and then I came back to the public sector in my current role to oversee the UKs merger control regime, and as a member of the CMA board. Ive advised some of the largest companies on the globe through some of the biggest mergers and acquisitions (M&A) deals, with both positive and negative outcomes for those clients.

Id like to start with the CMAs purpose. We help people, businesses and the UK economy by promoting competitive markets and tackling unfair behaviour.

Supporting growth is absolutely central to this purpose: creating a competitive environment which drives forward the innovation, investment and productivity our economy needs to grow. Weve made that even more explicit over the last few years, as youll see from our overarching strategy, as well as our recent annual plans and annual reports.

Where does merger control fit into this?

Merger control is one of our tools to deliver the CMAs purpose, and this is what I will focus on in this speech.

I am old enough to have worked for the last Labour government while in the Civil Service, and it was that government which gave the CMA (then the Office for Fair Trading and the Competition Commission) its current legislative basis for the UK merger control regime the Enterprise Act in 2002.

The intent behind the legislation was and is very much about the real-world impact of economic activity, and that for a vibrant growing economy you need markets to remain competitive.

Ill read out a quote from the policy document accompanying the 2002 legislation: 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 UKs international competitiveness.

Ill unpack 2 key points from this. This is largely well-established stuff, but it is worth revisiting.

The contribution of competition to economic growth

Economic theory and history show that where competition is stronger, productivity and wage growth are likely to be higher. That link between competition and productivity has been empirically established again and again at country and sector level. The CMAs own review of the relationship between competition and productivity also identified competitive pressure as a key driver behind firm-level efficiency and innovation.

Effective competition protects consumers from higher prices and lower quality goods and services. It facilitates a level playing field so that businesses large and small can thrive. Competition from other players in the market is a motivating force, incentivising others to be more productive, innovate, and grow.

So, with innovation and productivity at the heart of economic growth, enabling a competitive environment (for sectors, industries, products and services) supports that growth effort.

The impact of open and competitive markets on investment incentives

Access to competitive markets where companies can compete to win market share is also appealing for investors. As Sarah Cardell, CMA CEO, said in a speech earlier this year in the US: in promoting competitive markets, we advance the interests of fair-dealing companies serving UK markets, and advance the interests of investors seeking to make a fair return on their capital by doing business in the UK.

And even more recently our Chair, Marcus Bokkerink reflected on last weeks government investment summit and how the UK can drive growth that lasts. He set out that it relies upon 3 fundamental ingredients working together:

• ensuring that people have choice, an alternative, when they buy/use a product/service

• competition that in any market all innovating businesses get a fair shot at competing

• open markets maintaining a level playing field for all investors

Focusing on that last point about keeping markets open to investors: across the economy, whenever the CMA has stepped in to keep markets open by preventing attempts to lock out competing investors through anti-competitive mergers, cartels or abuses of dominance, we have seen new investment flow in from healthcare and pharmaceuticals to construction and railway equipment. This is because investors deserve to have confidence that theres a level playing field for the businesses they back to succeed on the merits.

Amazingly for me, Ive gotten this far through my speech without quoting numbers at you after all, I am an economist and mathematician who used to provide several ministers, and businesses large and small, with evidence and numbers!

In all seriousness, the CMA does very consciously consider, analyse, and report on the direct financial impact of our work for the UK, across all our tools including mergers. We know this value for money matters. We estimate that our decisions on mergers have put 685 million per year over the last 3 years back into consumers pockets. And this is just the direct effect of merger control so not including the indirect impact on productivity, growth and innovation in the economy as a whole.

And given my role on the CMA board, I do not have a myopic focus on mergers. Beyond mergers, across the whole of the CMAs work, the CMA has delivered at least 20.3bn of direct financial benefits back to UK consumers over the last 10 years. Over the last 3 years, for every 1 the CMA spent on operation costs, the average benefit to consumers was 23.

Let me take you through an example of where competition contributes to growth and positive outcomes for consumers and businesses: the CMAs investigation into the Experian/Clearscore merger, which actually inspired the co-founder and current CEO of the business to join the CMAs board.

In 2019, the proposed merger of Experian and Clearscore was abandoned following the CMAs phase 2 provisional findings, where we found that the merger could stifle product development and negatively impact consumers. Clearscore returned to plan A of their business model to grow as an independent UK based business and now Clearscore serves over 21 million users on 4 continents. They have continued to innovate for users, launching new products and integrating open banking data into their product, among other changes.

If the proposed takeover had gone ahead, the combined entity would not have faced the same competitive incentives as both Experian and Clearscore do today. This may have meant customers never benefited from the range of innovative and high-quality products that were subsequently developed.

And it isnt just consumer-facing markets that matter. Ensuring that competition remains vigorous in the production of important inputs which businesses then use in a variety of settings is vital. This helps their business customers themselves increase productivity and grow.

A notable example on the CMA side is the global remedy agreed in relation to a merger which involved chemical additives for concrete. In respect of this important construction input, innovation (while not as glamorous as tech markets), is fundamental to improvements in building techniques and the construction of large infrastructure projects.

That is why the remedy the CMA agreed to not only included UK production and warehousing facilities, but also had research and development (R&D) capabilities at its heart. I worked on that one for the companies themselves, and saw first-hand the openness and flexibility of process from the CMA, as well as the rigour with which they approached the task of ensuring innovation was protected; leading to greater productivity and growth, for not just the companies themselves but also for their important infrastructure customers.

Merger control in 2024

Now, our key mergers legislation came into force in 2002 and the CMA was formed in 2014 so where are we in 2024 and what has changed?

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