Another day, another trip to Downing Street for the nation’s regulatory chiefs as the chancellor attempts (again) to “kickstart” growth and chop back red tape. A novelty this time was the suggestion that the Competition and Markets Authority would be told to restrict the number, or at least the type, of deals it investigates. There could be changes to the “share of supply” and “material influence” tests that determine whether the watchdog barks.
What does that mean in practice? Is it merely a tweak that removes a few administrative blurs in the current setup? Or is the definition of “anticompetitive” being quietly rewritten under consumers’ noses? There is a very big difference between the two visions. Unfortunately, no one seems keen to offer clarity.
In her public statements, Sarah Cardell, the CMA’s chief executive, tends to emphasise the uncontentious parts of her chancellor-pleasing mission, such as making decisions more quickly. No one objects to that. Then there’s the strong hint that the CMA will be inclined to stay away from deals between foreign companies, such as the Microsoft/Activision proposal that caused a lot of fuss a couple of years ago. That is slightly more controversial but still not groundbreaking stuff.
What UK consumers – and UK businesses for that matter – want to know is if there has been a deeper philosophical shift. For instance, are there significant UK-only deals that would have been blocked in the past but could now be cleared?
Take a controversial deal from the recent past that was stopped – the proposed merger of Sainsbury’s and Asda in 2019. Would that still be a non-runner on the grounds that it would lead to increased prices and reduced quality and choice of products, which is what the CMA said at the time? Or would the regulator now be slightly more open to the idea (however unpersuasive it still seems) that the two supermarkets in combination would have the muscle to reduce prices on popular foods by 10%?
We’ll probably never find out because the CMA can’t opine on “what if?” scenarios and there is no suggestion the supermarket duo are planning to resuscitate their merger idea. The best guess here is that the deal would still be blocked. In current wounded form, Asda has just knocked 10% of Tesco’s share price by threatening a price war, which suggests the stock market still thinks the private equity-owned business hasn’t been completely hobbled as a competitive force by its excessive borrowings.
The point, though, is that the new political ambition to turn regulators into “pro-growth” vehicles is simply confusing. One can understand the desire to clear out bureaucratic clutter that can cause CMA investigations to take ages, but is the government also suggesting that the competition policy dial is currently set in the wrong place?
On one hand, we have the CMA emphasising that it will continue to take an “effective and proportionate” approach to deals, which makes the agenda sound entirely in line with the traditional understanding that a strong competition policy is good for growth. On the other hand, we have Rachel Reeves and her motorcycle metaphors that seem to imagine regulators can kick the economy into life by doing something differently.
There is too much talking in code. It would be better all round – especially for companies who have been promised greater “predictability” from the CMA – if everybody spelled out what they meant.
