The CMA has published its latest annual report on the concurrency regime.
In a nutshell, concurrency refers to the fact that both the CMA and sector regulators (such as the regulators in the communications, energy, water, aviation, rail, healthcare, financial services and payment systems sectors) have powers to enforce the prohibitions against anti-competitive agreements and abuses of a dominant position in the regulated sectors and can also carry out market studies and refer markets to the CMA for a detailed investigation.
Competition in the regulated sectors is particularly important, as almost every household and business in the UK relies on their services; from basic utilities like heat, light and water to financial services such as banking and insurance. These sectors are also estimated to represent around 25% of GDP.
It's important to have a concurrency regime that works well. This is to ensure that the benefits that competition can bring to us all – including bringing prices down, and increasing quality standards – are secured in the regulated sectors. The government recognised this importance and developed an enhanced concurrency regime which came into effect in 2014 as part of the reforms to the UK’s competition regime. It introduced several mechanisms to facilitate greater and more effective use of competition powers in the regulated sectors, to create a system of case allocation between the CMA and the regulators, and to encourage closer cooperation.
So, how well have things been working?
- almost every regulator has now launched at least one Competition Act (CA98) investigation
- the CMA and the regulators have also undertaken significant markets work
- the regulators and the CMA have developed strong relationships, regularly sharing best practice on both substantive and procedural issues in competition cases
- regular secondments take place between CMA staff and the regulators, effectively sharing resources and expertise
- cooperation extends beyond concurrent CA98 and markets work to other policy projects promoting competition in the regulated sectors, as well as remedies work and mergers
As we look back on the fourth year of the new regime, we are very pleased with the progress we have made since the new concurrency arrangements came into effect, and particularly the noticeable step change in the relationships that have developed between the CMA and the regulators.
So, what are some of the recent highlights?
This year, the number of new cases in the regulated sectors has increased from 2 in each of the previous 2 years, to 4 in the last 12 months. Interestingly, 2 of the cases this year have been launched by the sector regulators and 2 by the CMA, reflecting which authority was better placed to investigate. In all 4 cases, the authority leading the investigation is relying on expertise from the other relevant authorities, demonstrating the effectiveness of the concurrency arrangements at harnessing the CMA and the regulators’ complementary skills.
This year also saw the launch of the Payment Systems Regulator’s (PSR) first ever CA98 investigation. This case is a good example of how we are working together. While the PSR is leading the investigation with its sector expertise on payment systems, the CMA has provided advice and operational support in the conduct of the inspections as well as the use of its data forensics team.
Investigations like this demonstrate the benefits of concurrency and the sharing of resource and expertise that it supports. Over recent years, the CMA has offered support to the regulators on procedural and substantive issues, providing its expertise earlier in cases to facilitate effective enforcement. We have also shared innovations in the way that we enforce CA98 cases with regulators. For example, we have recently undertaken 2 director disqualifications, and have shared our approach and learnings with the regulators.
It would be wrong, however, to assume that the provision of support is one way. Regulators are increasingly sharing their own enforcement experience, as well as their sector expertise with the CMA and other regulators.
Alongside casework, we have worked collectively on a number of important policy initiatives, including providing clarity to stakeholders about how leniency operates in the regulated sectors.
We often focus on CA98 when talking about concurrency, but we should not overlook the very important markets and mergers work that is carried out in the regulated sectors (whether or not under concurrent powers). This year we have seen:
- the launch of an in-depth CMA market investigation into the investment consultancy services and fiduciary management services markets following a referral by the FCA
- significant other markets work including the FCA’s market study into how investment platforms compete for both advised and non-advised retail investors, Ofwat’s review of the New Appointment and Variations market and the ORR’s market study into automatic ticket gates and ticket vending machines
- cross-regulator work on remedies implementation following the CMA’s Retail Banking and Energy market investigations and DCT and legal services market studies, as well as ongoing work on a project on consumer remedies
- sector regulators providing advice and assistance to the CMA for a range of mergers in the regulated sectors (such as the Fox/Sky merger, the joint venture between Anglian Water and Northumbrian Water, the South Western Rail franchise, the Manchester Hospitals merger and the SSE/Npower merger)
Ultimately, we see a renewed focus on competition and development of strong working relationships as practical benefits that have arisen from the concurrency regime. These benefits go beyond CA98 to facilitate closer working and more effective competition enforcement, regulation and policy, helping to ensure that markets work well for consumers in the UK.