On 3 December 2020, the UK’s Competition and Markets Authority (“CMA”) opened a consultation on its draft annual plan for 2021 to 2022 (the “Draft Plan”).1 The Draft Plan sets out the key themes on which the CMA hopes to focus in the coming year, inviting views and comments from interested parties by the end of January 2021. The Draft Plan, to no great surprise, is heavily focused on the two issues which have come to define 2020: the COVID-19 pandemic and Brexit. With both issues contributing to a steep increase in the CMA’s workload over the past 12 months, the regulator had indicated that, “quick, effective and high impact enforcement” remains a priority in order that confidence in the markets, and thus the wider economy, can be restored.
The big picture
2020 threw unprecedented challenges at society, and the CMA was no exception. On top of preparing for end of the transition period following the UK’s exit from the European Union, the CMA had to contend with both the immediate effects of the COVID-19 pandemic and the long-term consequences of the economic devastation it brought and will continue to bring. Perhaps as a direct result of such significant additional burdens, the proportion of time that the CMA spent on enforcement action dropped by almost 10% overall, from 42% to 38%, as compared to the previous year. In the same period, it spent 5% of its total time working on COVID-19 related projects – projects which simply did not exist in 2019. In a direct reflection of this expanded remit, the CMA’s budget has been increased from £88.74m in 2019/20 to £109.6m in 2020/21.
The first theme addressed in the Draft Plan is the global COVID-19 pandemic, which presents a dual-stranded challenge for the CMA. Not only has the regulator had to deal with the immediate effects of society effectively grinding to a halt, but, more broadly, will need to tackle the longer-term consequences wrought by the economic downturn caused by lockdown restrictions. Overcoming them will be key to the UK’s economic recovery and in establishing its new position outside the EU.
Immediate effects – an urgent need for consumer protection
In March 2020, as economies and societies shut down the world over, new opportunities for anti-competitive conduct sprung up. The media has reported extensively on stories of consumers unable to obtain timely, or any, refunds for services which could no longer be provided, and price-gouging practices in relation to the sale of essential products. The Draft Plan highlights the CMA’s work in clarifying the law, responding to complaints and assisting vulnerable consumers in enforcing their rights, and asserts its continuing commitment to enforcement against unscrupulous and harmful trading practices.
Long-term consequences – rebuilding the UK’s economy
The CMA clearly views its enforcement efforts as being key to the long-term rebuilding of the UK’s economy. The Draft Plan highlights the regulator’s concern that the failure of many business – both large and small – over the past 12 months has concentrated power in those larger business with deeper pockets, able to more readily weather the storm. Such a decline in competition may pave the way for an uptick in anti-competitive practices, with the CMA highlighting in particular its commitment to, “clamp down on cartels and collusive behaviour which seek to keep prices up.” Given such extraordinary circumstances, we may see the CMA flexing its criminal prosecution powers over the coming year to hold companies to account.
Tackling both the immediate effects and the long-term consequences of the COVID-19 pandemic on the functioning of the markets will be vital in the UK’s efforts to rebuild its economy while simultaneously carving out a new place in a post-Brexit world. The key aspect that the CMA will likely focus on is consumer trust: in order to encourage confident spending and kick-start a healthy economy, it must use the enforcement tools at its disposal both effectively and in a timely manner. Perhaps for the first time in its history, the CMA is faced not only with the challenge of fostering competition but of actively restoring it – no mean feat for any regulator.
The global pandemic aside, the second key theme of Draft Plan is that much of the CMA’s work in 2021 will, understandably, be focused on marshalling its new responsibilities and increased caseload as it becomes the UK’s only competition regulator following the end of the Brexit transition period. Complex anti-trust and cartel investigations with a global dimension, previously handled by the European Commission, will now fall to the CMA.
Although the Draft Plan sets out how the regulator has been steadily building up its capacity in preparation for the transition, this is only half of the battle; what the CMA needs as much, if not more, than resources, is adequate expertise. Large and complicated multi-jurisdictional regulatory and criminal investigations require a unique skill set which the CMA will have had to build almost from the ground up. In direct tension with the need for effective enforcement to combat any anti-competitive behaviour resulting from the COVID-19 pandemic, there may be a downtick in action as the CMA gets to grips with its new role and the global dimensions that come with it.
As part of finding its feet on the global stage, the CMA will be faced with an urgent need to increase its levels of interaction and co-operation with peer regulators around the world. With markets becoming increasingly cross-border in nature, particularly in the digital sphere, the need for strong relationships to facilitate the smooth exchange of information and aligned strategies is more urgent than ever. As a first step, the Draft Plan contains reference to the Multilateral Mutual Assistance and Cooperation Framework for Competition Authorities agreed in September 2020 between the CMA and regulators in Australia, New Zealand, Canada and the USA as a “statement of our collective intent to deepen cooperation on competition enforcement”.2 Although this is a promising start, the memorandum itself contains little substantive detail on how such co-operation will be achieved, and the Draft Plan does little to shed light on it. If the CMA is to develop effective relationships with overseas counterparts, it will need to take concrete steps in 2021 towards implementing the understanding. Perhaps even more importantly it will need to preserve and strengthen its relationship with the European Commission. Such co-operation will be key to effective enforcement in the coming years.
Given the unprecedented challenges of 2020, 2021 may see the CMA scrambling to keep up with fast-paced developments and a new regulatory landscape. It will be a real challenge for the authority to tackle the more urgent need for enforcement that the COVID-19 pandemic has created while, simultaneously, dealing with the fact that Brexit will result in investigations and enforcement that are more complex than ever. Such a coincidence in timing is not a task that any regulator should take lightly. However, it is clear from the Draft Plan that the CMA views regulatory and criminal enforcement as being absolutely vital in rebuilding confidence in the UK’s markets as it emerges from the COVID-19 pandemic into a post-Brexit world, and that such enforcement will be at the forefront of its strategy throughout the coming year and beyond.