GovWire

Introduction

What is on the horizon for UK competition enforcement as we approach the 25th anniversary of the Competition Act 1998?That is the question I am aiming to answer today.And to do so in the context of what I see as the important drivers for our work: the strategic aims that guide both what we do and how we do it.

Strategic aims

I will highlight 3 key aims that drive our approach to public competition enforcement. The first is the CMAs role in harnessing the power of competition to drive growth. And in support of that aim, the second is deterring anti-competitive conduct and the third, keeping markets contestable.

The CMA and growth

Turning first to our role in driving growth. Growth is the new governments top priority; a mission that is supported by a modern industrial strategy. And history and evidence tell us that competition is core to growth. Thats why, in early 2023, we made driving productive and sustainable growth a key pillar of the CMAs strategy.

But what is the link between competition enforcement and growth?We know that the pressure of competition, and the rewards from success are what drive firms to keep prices low, to innovate and to operate more efficiently.In this way, competition can act as a direct driver of growth. It follows then that competition enforcement can be an important tool for removing barriers to growth, whether through rooting out collusive arrangements that drive prices higher, or supporting innovative challengers by removing anti-competitive barriers raised by powerful incumbents.

To give just one example: in recent years weve had a focus on tackling cartels in the construction area, from concrete pipes to demolition services, imposing fines of over 136 million across 6 cartel cases.Our work in this sector directly contributes to ensuring prices for inputs in major infrastructure projects remain competitive.

However, we also recognise that, in some circumstances, collaboration between competitors can be beneficial. For example, when firms work together, they may be able to bring new products to market more swiftly and at a lower cost than when they work in isolation.As such, it is important that the competition regime, and the way we enforce it, does not get in the way of pro-competitive, efficiency enhancing collaboration, a theme I will return to later in the presentation.

Deterring anti-competitive conduct

Given that competition drives innovation, productivity and growth, then my second point is that the CMAs role in deterring anti-competitive conduct rightly stands at the heart of our competition enforcement activities.With our enforcement work we aim not only to put an end to egregious and harmful conduct, but also to deter others who might be tempted to engage in anti-competitive conduct.

The reason for ensuring our work has a strong deterrent impact is clear. It amplifies the direct impact of enforcement action by preventing further behaviour that is harmful: harmful to customers (whether consumers or businesses), to fair-dealing competitors and to the wider economy.

The behaviour under discussion is also in many cases carried on in secret, making it hard to detect, as well as typically being expensive and time-consuming to investigate, which provides a reason to prevent it from occurring in the first place.

Deterrence comes about primarily through the imposition of punitive fines with the CMA having imposed penalties of around 600 million in the past decade.But for those who have infringed the law, the consequences of their unlawful conduct do not stop at fines. Company directors are accountable for the conduct of the businesses they run and we have secured the disqualification of 30 directors involved in wrongdoing from holding company directorships or being involved in the management of a company.And going forward, when the Procurement Act 2023 comes into force, expected to be next February, cartelists will face the prospect of mandatory exclusion from future public tenders.

The research is clear that these consequences do have a deterrent impact - the messages about the costs and risks of wrongdoing can be heard far beyond the bounds of any individual enforcement case.Thats why, for me, deterrence must and will always be at the core of our strategic approach to enforcement.

Keeping markets open

This brings me to my third point; keeping markets open. Keeping the door open for rivalry by creating a level playing field is another strategic aim of our work. Competition and contestability are catalysts for innovation, which must be central to growth for any modern economy.

In recent years, much competition enforcement in the UK and internationally has been focused on digital markets where the scope for innovation is clear.For example, last year following investigations we accepted commitments from both Amazon and Meta to address the CMAs concerns to enable fair competition, helping businesses that rely on these platforms to develop their own customer offerings.

The introduction of the DMCCA next year represents a significant development, ushering in a tailor-made regime, designed to unlock growth and opportunities in the tech sector in the UK.

With the advent of a new regime, I am often asked whether there will be a role for the more traditional competition tools in digital markets.And I can tell you that, when it comes to those firms and activities within the scope of the regime, we expect to use its highly bespoke tool-box, with interventions developed through a forward looking, participative process, providing the predictability that is critically important in these dynamic sectors.

However, this tailor-made regime deliberately applies only to the very largest of tech firms those with UK turnover exceeding 1 billion and even for these firms, it only applies to a specific subset of their activities.

At their core, the Competition Act and the DMCC share many aims: they can level the playing field, making sure that markets remain contestable by smaller players, to the ultimate benefit of consumers.However, the DMCC is consciously designed to target a particular type of conduct by a small number of the very largest firms, whereas there is a clear potential for harm in the digital sphere more widely: whether resulting from coordinated behaviour by online retailers or conduct by niche platforms with power in smaller but still significant markets.And while this conduct might not meet the threshold for intervention under the DMCC Act, it is also capable of having a substantial impact on consumers or taxpayers, on businesses and on the wider economy.

To give an example of the type of case I have in mind, in 2022 and 2023 we investigated the conduct of Education Software Solutions Ltd (ESS), a software company supplying a management information system to schools. This software, which allows schools to collate and use student and staff information, is critical to the administrative functioning of schools, and switching to a new provider takes significant time, resources and planning.What concerned us (and, indeed, many schools we talked to) was that ESS was locking schools into longer-term contracts at a time that other cloud-based services offered by competitors were becoming particularly attractive to schools.As a result of our intervention, ESS entered into legally binding commitments which required ESS to give certain schools the choice whether to switch to an alternative software provider.And indeed, when we looked at the market again earlier this year, we found that a considerable number of schools had switched from ESS to new providers since our previous investigation and that ESS share of the relevant software market in England was declining.

Other examples might arise from the use of pricing software, an area that I will address below.

What to expect from the CMA

But what does this mean in practice? I have talked about how helping the UK economy to grow is a key strategic aim for the CMA, underpinned by deterring harmful anti-competitive conduct and supporting innovation in emerging markets. But what does all this mean for what we choose to do?And how we choose to do it?

And both of these are critically important questions, particularly when it comes to making an impact within the limits of, broadly speaking, defined resources.

A big part of making a real impact is about choosing the right things to do; which has implications for both how we go about creating a pipeline of cases that we want to investigate and how we effectively prioritise within that pipeline to ensure that what we do tackles the right problems in the right way: in other words how we generate and pursue work that meets our strategic aims.This includes recognising where we can also make an impact through our non-enforcement work, which Im going to talk about later.

And to illustrate our approach to what we do, I want to talk about 3 separate questions that I

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