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CMA prepares to assert its role post-Brexit

CMA prepares to assert its role post-Brexit

Irina M

08/04/2020

The Competition and Markets Authority (CMA) is the main UK regulator of merger control, competition law and consumer law, and it now finds itself in an interesting and novel position.

As a member of the European Union, the UK has been subject to European competition law – one of the most developed competition law regimes globally. The European Commission is a key investigator and prosecutor and has been handling the most complex cross-border cases.

Post-Brexit, the CMA must prove its ability to uphold competition to a high standard. For the time being, the legislative framework largely carries on the European legacy. Under the European Union Withdrawal Act 2018, EU treaties will continue to apply to the UK until 31 December 2020 and EU Regulations will continue to apply in domestic law subject to subsequent modification or revocation.

From a law enforcement perspective, the CMA has taken an active role recently. It has been more willing to assert its jurisdiction – for example, under the Enterprise Act 2002, jurisdiction to investigate is established if a transaction would result in the merged enterprises having a combined share of supply of goods or services in the UK of 25% or more. In Roche/Spark the CMA stepped in despite the transaction relating to research and development, and not commercialised products or services. While a broad interpretation of grounds to establish jurisdiction can facilitate robust law enforcement, it can also introduce uncertainty and increase the need for court scrutiny.

Another way that the CMA has demonstrated its assertiveness is in its approach to digital markets. It will be interesting to see how the CMA responds to increased pressure to intervene in the so-called ‘killer acquisitions’ – common in the digital market – whereby tech giants acquire nascent companies to avoid future competition. Alongside publishing a major report on its digital markets strategy, the CMA recently intervened in a proposed transaction whereby Amazon offered to acquire a minority shareholding in Deliveroo. The CMA stepped in over concerns that the deal would prevent Amazon from reviving its Amazon Restaurants business – which has been defunct for almost a year – and reduce competition in the grocery delivery market where both parties are active.

Since the CMA’s mandate covers both competition law and consumer law enforcement, a balancing exercise is required. Preventing the transaction on the grounds that it reduces competition may be detrimental for Deliveroo’s ability to continue to provide services to consumers in light of its recent losses. Ironically, taking an overly interventionist approach to protecting a company from being acquired may contribute to its struggles to remain on the market independently.

Ongoing cases could be great opportunities for the CMA to set out its position and objectives for the future. However, the general trend is clear: businesses must be progressively vigilant in the UK.