CMA challenges call for new UK merger laws

Out-Law News | 27 Mar 2019 | 12:37 pm | 2 min. read

Changes in legislation are not necessary to "prevent mergers in digital markets which could harm existing or potential future competition or innovation", the Competition and Markets Authority (CMA) has said.

The regulator challenged calls for legislative reform in a letter to the government (8-page / 189KB PDF) eight days after an independent panel of academics said that the UK's merger control regime needed to be updated.

The digital competition expert panel, which was commissioned by the government to make recommendations on how the UK's competition regime could be updated to account for developments in digital markets, called for legislative amendments to clarify "the standards for blocking or conditioning a merger" and said a new 'balance of harms' test could be adopted to better account for "the scale as well as the likelihood of harm in merger cases involving potential competition and harm to innovation".

However, the CMA said it had taken a "more active approach" to scrutinising mergers in digital markets in recent times and that this would help alleviate the need for legislative reforms.

Andrea Coscelli, CMA chief executive, said in the letter: "We believe the existing UK legislative framework provides the scope to fully assess concerns raised by mergers in digital markets, and to take enforcement action where appropriate. We have therefore not identified any fundamental changes to the existing legislative regime that we believe would support us in our work in this sector at this stage."

"While we support the need for effective merger enforcement in digital markets, which underpins the panel’s recommendation to introduce a new ‘balance of harms’ test, we believe there are practical challenges in applying this kind of test in a transparent and robust way and are worried about unintended consequences."

"In addition, in our view, the test would also bring about a fundamental shift in merger policy," the letter said. "While the panel’s report recognises that the new test would broaden the set of mergers which may be found problematic, our initial review suggests that the likely extent of this change should (notwithstanding the ‘substantiality’ threshold suggested by the panel) not be underestimated," he said.

Coscelli did, though, outline the CMA's support for other recommendations the digital competition expert panel set out. These include proposals to tighten rules around appealing CMA antitrust rulings to the Competition Appeals Tribunal, although he said the panel's call for "more independent CMA decision-making structures for antitrust enforcement cases" needs further thought. The CMA is also of the view that existing procedural rules applicable to appeals should be reviewed, he said.

In his letter, Coscelli also reflected on the digital competition expert panel's recommendation that a new digital unit is set up and given new powers to intervene in digital markets, including in opening up access to data.

Coscelli said that the CMA could play a role in helping to inform the precise "regulatory functions" the new unit should perform.

He said: "The CMA’s markets regime could be used to gain the evidence needed to establish the scale of the issues identified, and on this basis to develop clear recommendations for the new regulatory functions. However, as the panel rightly recognises, the CMA’s markets regime was not designed to provide the powers or capability to perform an ongoing role where it acts as a dynamic counterparty to market participants, adjusting solutions in response to innovations and market dynamics. These new regulatory functions will likely need to be established in statute with accompanying new legal powers."

The CMA last month outlined its own recommendations for "legislative and institutional reforms" aimed at better safeguarding consumer interests and improving public confidence in markets. The proposals were set out ahead of an anticipated competition review that the government is expected to commence by April. The review will look at whether the powers that the CMA has at its disposal are fit for the digital age.