The UK Competition Regime: a Twenty Year Retrospective
By Barry Rodger - Posted on 26 May 2021
On 21 May 2021, Strathclyde Centre for Antitrust law and Empirical Study (‘SCALES’), together with Lancaster Law School and University of Leeds Centre for Business law and Practice, organised a book launch to celebrate the publication of an edited collection by Barry Rodger, Peter Whelan and Angus MacCulloch, entitled The UK Competition Regime: a Twenty Year Retrospective (Oxford University Press, 2021). The book features a range of eminent scholars, and was arranged to mark and reflect on the twenty (and now more) years since the start of the modern era of UK competition law introduced by the Competition Act 1998, which came into force on 1 March 2000. This blog post by one of the editors brings together some of what was discussed at that online book launch.
UK competition law has come a long way since I was introduced to the competition law implications of market behaviour on such diverse markets as breakfast cereals and contraceptive sheaths, by JAK Huntley in a stand-alone competition law class at Strathclyde University Law School, ahead of its time, in the mid-1980s. My second immersion in the subject followed not long after in 1989/1990 on the BCL competition law class at Oxford led by Richard Whish, using the newly published second(!) edition of his leading text, Competition Law (now in its ninth edition with David Bailey as co-author). I became fascinated with aspects of competition law, which I later studied in detail during an LLM at the EUI, Florence. After several years of teaching EU and UK competition law back at Strathclyde in the 1990s, I witnessed UK competition law undergo significant reform in 1998, with the passing of the Competition Act 1998. At that stage, Angus MacCulloch and I co-edited a book (The UK Competition Act 1998: A New Era for UK Competition Law, Hart Publishing, 2000) to coincide with the introduction of the key provisions in the Act and to review the fundamental reforms introduced to the UK competition law landscape. Developments in enforcement and case law, new statutory provisions, and modifications to the UK competition law institutions in the following ten years were subsequently discussed and analysed in a follow-on collection edited by myself in 2010 (Ten Years of UK Competition Law Reform, Dundee University Press, 2010). UK competition law has since continued its trajectory of transformation over the last ten years with for instance the institutional reforms introduced by the Enterprise and Regulatory Reform Act 2013, notably the creation of the Competition and Markets Authority (CMA) as the primary competition law agency in the UK.
The UK competition law landscape has changed considerably and has also had to respond to a changing context and new issues such as the increasing significance of the digital economy. Peter Whelan, Angus MacCulloch, and I considered it important to reflect on how UK competition law has been reformed, revised, and developed in relation to a range of contexts and issues over the last twenty years and to revisit some issues considered in the earlier books and additionally consider newer and increasingly significant themes. The new book, while not aiming to provide comprehensive coverage of every facet of UK competition law and its enforcement, brings together fourteen contributions from a range of eminently qualified academics and practitioners. It seeks to provide an analytical and critical assessment of core issues relating to the policy-making, institutions, enforcement, substance, and direction of travel of UK competition law over the last twenty years (to 1 May 2020) and to suggest how it may further develop in the coming years. The Chapters reflect recent changes, notably the impact of the UK’s withdrawal from the EU following the end of the transition period on 31 December 2020. (For a fuller discussion, see B Rodger and A Stephan, Brexit and Competition Law (Taylor & Francis, 2021)). The Penrose Review Report was published in February 2021 and has not been discussed in any of the chapters. Nonetheless, the Report will not have any direct short-term impact on UK competition policy law and institutions, given its key recommendation in this context is basically for a further review of the decision-making and appeal processes involving the CMA and Competition Appeal Tribunal (CAT).
As noted at the beginning of this post, an online book launch event was held in May 2021 to mark the publication of the book by Oxford University Press. The book launch consisted of brief presentations by those who contributed a chapter to the edited collection, where they considered the key themes covered by their respective chapters. The remainder of this blog post will introduce each of the chapters.
Chapter 1, ‘Towards a World Class Regime—An Overview of Twenty Years of Competition Enforcement’ by Peter Freeman, provides an excellent and informed general backdrop for the remainder of the chapters. It explains the objectives of the competition law regime introduced from 1998 to 2002 and the problems that led to the reforms of 2013. It reviews how the regime has performed in each aspect: antitrust, markets, mergers, the appeal system, and private enforcement, ministers, and the public interest and concurrent application by regulators. It discusses exit from the EU and the ‘digital challenge’ and it comments on the recent reform proposals from the then chairman of the CMA. It gives an overall assessment and considers the way forward, including the possible effect of the Covid-19 pandemic. It is a must-read for anyone wanting to understand the core aspects and direction of travel of UK competition law in one chapter and sets the scene beautifully for the chapters that follow.
Chapter 2, by Richard Whish, considers the application of the Competition Act 1998 to ‘horizontal agreements’, and in particular to cartel behaviour, since that piece of legislation entered into force on 1 March 2000. It is a tour de force of enforcement practice. The chapter notes that early years of the legislation were somewhat disappointing, with a fairly low level of enforcement, although the Office of Fair Trading (the predecessor of the Competition and Markets Authority) did score success with pioneering investigations of so-called ‘hub-and-spoke’ cartels in the Football Shirts and Toys and Games cases. From about 2006 onwards, there were more decisions from the Office of Fair Trading, and some of the cases, such as Construction bid-rigging and Fuel surcharges, were high-profile ones. Despite this, criticism of under-performance was voiced, not least by the National Audit Office. It is noted that in due course the Office of Fair Trading was replaced by the CMA, and there has been a noticeable increase in enforcement in recent years. Whish suggests that in a post-Brexit world it can be anticipated that there will be yet more enforcement, including of larger cartels which historically would have been investigated by the European Commission in Brussels.
Alison Jones looks at ‘vertical agreements’ in Chapter 3. This chapter charts the development of UK competition law and policy towards vertical agreements over the twenty years since the Competition Act 1998 came into force. It traces how UK policy has evolved, before examining the UK jurisprudence that assesses the compatibility of vertical agreements with competition law. It notes that although many UK cases initially focused on resale price maintenance, more recently a number have analysed vertical restraints affecting online selling, which have proliferated since 2000 with the rapid growth of e-commerce. The chapter also considers how the law could, or should, develop in the future, especially now the transition period following the UK’s departure from the EU has ended. An important issue considered is whether, post-Brexit, the UK authorities should continue to follow EU competition law in this sphere (which has in significant respects been influenced by internal market considerations) or whether it should take a different course.
Chapter 4, by Renato Nazzini, deals with ‘exclusionary abuses’ under the Competition Act 1998, covering both public and private enforcement cases. The analysis concerns the approach to dominance as well as tests for abuse, focusing on retroactive rebates and bundled discounts, exclusion in multi-market settings, exclusivity, most favoured nation and equivalent clauses, discrimination, and exclusionary abuses in the pharmaceutical sector. This chapter argues that, in its second decade, modern UK competition law continued a trend that was already clear in the first decade: the prohibition of abuse of dominance is applied in a more economically robust and commercially reasonable way than it is by the EU institutions, the Commission, and the EU Courts, and in certain other Member States. The chapter notes that the third decade of the Competition Act 1998 will see the UK develop its competition policy free from the constraints of EU law and may allow for some divergence in the approach to exclusionary abuses in the future.
Chapter 5, by Robert O’Donoghue, provides a detailed and comprehensive description and analysis of the major ‘exploitative abuses’ cases considered by the English courts and competition and regulatory authorities since the inception of the Competition Act 1998. This decisional practice and case law have been widely cited and adopted by the EU Courts in Advocate General opinions and in the judgments and opinions of overseas authorities and courts. The chapter also contains a critique of the case law and decisional practice and highlights important practical points and points of principle that have received insufficient (or no) attention, as well as issues on which the case law and decisional practice are arguably wrong. This analysis is timely, since it is clear that the topic of exploitative abuse remains an important one for the UK competition authorities, regulators, and courts, perhaps even more so than authorities and courts in EU Member States.
Chapter 6 allows Christian Ahlborn, together with Will Leslie, to revisit his earlier analytical critique of market investigations in UK competition law (published in Ten Years of UK Competition Law Reform, Dundee University Press, 2010), in a chapter entitled, ‘“Jack of All Trades, Master of None”: The Ever-increasing Ambit of the Market Investigation Regime’! Whereas the beginning of the decade saw the National Audit Office criticizing the market investigation regime’s low profile, market investigations had figured amongst the Competition and Markets Authority’s most high-profile interventions by the end of it. This chapter considers the extent to which this unique UK competition policy instrument has simultaneously undergone significant legislative reform, as well as a slew of judicial challenges. These events have undoubtedly matured the regime and put its procedures on a firmer statutory footing. However, the same question posed in 2010 has not yet been fully answered: the authors remain unclear at the end of this enlightening chapter just what market investigations are actually for.
In Chapter 7, entitled ‘UK Merger Control: Finely Tailored but Time for a New Suit?’, David Reader observes that the introduction of the Enterprise Act 2002 formally ended a much-maligned public interest approach to merger control in the UK, oft-criticized for the uncertainty permeated by ministerial decision-making. In its place came a new competition-based test to be applied by independent competition authorities with new powers and resources at their disposal. Despite encountering some teething problems as the authorities sought to interpret their respective roles at Phases 1 and 2, the reforms have proven largely successful in delivering one of the most transparent and predictable merger regimes in the world. This chapter reflects on the evolution of UK merger control under the Enterprise Act, observing that a combination of major—and finer tuning of the competition authority’s Phase 1 enforcement powers has enabled it effectively to deliver upon its mandate. New challenges lie in wait, however, and Reader stresses that the Competition and Markets Authority must be allocated the resources and statutory remit to contend with the increased workload implications presented by Brexit and the novel theories of harm associated with mergers in the digital sector. Of further concern are recent reforms to extend the national security public interest ground, which risk a return to the ‘dark ages’ of opaque ministerial decision-making if further safeguards are not implemented.
Chapter 8 on institutional reform is entitled ‘Unfinished Reform of the Institutions Enforcing UK Competition Law’. Written by Bruce Lyons, it notes that the period since 1998 has seen major changes in competition law, including: the public interest test was replaced by promotion of competition as the primary duty; anti-competitive agreements and abuse of a dominant position were prohibited, with significant penalties for breach; and politicians were (largely) removed from case decisions, making the institutions determinative. There were also major organisational changes, including the merger of the Office of Fair Trading and the Competition Commission to form the Competition and Markets Authority, and establishment of the Competition Appeal Tribunal as a specialist appeals body. In the chapter, Lyons considers the evolution of these institutions from the perspective of how they frame and influence the quality of first instance determinations. Institutions are hostages to their history, and he traces some of the problems faced by the CMA to its institutional roots. New challenges beyond its control are also identified. The chapter concludes that some of the CMA’s suggestions for legislation are misguided, particularly in replacing its competition duty with ‘the consumer interest’, and reducing the standard of review by the CAT. Alternative proposals are appraised, including a potential change to a prosecutorial system. Lyons argues convincingly that genuinely independent decision-making within the CMA should be preferred and would permit a more limited standard of review.
In Chapter 9, entitled ‘Human Rights and the UK Competition Act: Public Enforcement and Due Process’, Arianna Andreangeli discusses the approach adopted in the UK towards questions of human rights compliance in UK competition enforcement processes. It examines the nature of competition proceedings in light of Article 6 of the European Convention on Human Rights and the implications that that issue has for the fairness standards applicable to those proceedings. It is argued that, while the recognition that competition cases may have a ‘criminal nature’ does not justify the wholesale extension of all the safeguards that the Convention reserves to criminal cases, it nonetheless means that investigated parties are entitled to some basic protections that Article 6 of the European Convention on Human Rights enshrines (in relation to a fair hearing). The chapter explores the Competition Appeal Tribunal’s powers of review of infringement decisions and suggests that at the root of the conferral of a power of scrutiny ‘on the merits’ is the need to ensure that the public enforcement competition proceedings are ‘human rights-proofed’. It concludes that, while demands of effectiveness in the application of the UK competition rules cannot be overlooked, maintaining the CAT’s rigorous review role for competition decisions is indispensable for compliance with human rights’ standards and for the integrity and reputation of the UK competition framework.
In Chapter 10, Niamh Dunne tackles a key and developing enforcement issue which had not been dealt with in either of the preceding collections: ‘concurrency’. The concurrency regime empowers certain sector regulators in the UK to apply the competition rules in tandem with the Competition and Markets Authority. Reflecting a strong ideological preference for the benefits of competition over more prescriptive forms of regulatory supervision, the regime has, however, struggled to deliver effective enforcement in practice. This chapter discusses the evolution of the concurrency framework with particular emphasis on the enhancements introduced by the Enterprise and Regulatory Reform Act 2013, which sought both to encourage regulators to make greater use of their concurrent powers, and to give the CMA a more formal leadership role in assisting them to do so. Subsequent enforcement activity is discussed, alongside the future prospects of competition law in the regulated sectors.
Peter Whelan assesses a developing and increasingly significant enforcement tool in the UK competition authority’s armoury in Chapter 11, entitled ‘The Emerging Contribution of Director Disqualification in UK Competition Law’. In his chapter, he notes that the enforcement of UK competition law is deterrence-focused and comprises both criminal and non-criminal (i.e. civil/administrative) elements. The chapter concentrates on the non-criminal enforcement apparatus that has been developed over the last twenty years. More specifically, it critically evaluates a particular enforcement mechanism that has been gaining increasing importance throughout the recent development of UK competition enforcement practice: the use of director disqualification. It first establishes the normative role of director disqualification in the UK’s armoury of non-criminal antitrust sanctions (i.e. its complementing of the deterrent function of corporate antitrust fines), following which it highlights their potential for performing this role effectively. It then outlines the legal basis for the use of director disqualification within the UK and evaluates the policy and enforcement practice to date with respect to such orders, before proceeding to outline some of the insights that the UK director disqualification regime can provide to other jurisdictions. The chapter ultimately concludes that, on the basis of the promising (albeit nascent) UK experience to date, director disqualification should be seriously considered by jurisdictions that wish to operate a robust competition law enforcement regime.
In Chapter 12, ‘Private Enforcement in the UK: Effective Redress for Consumers?’, the author of this blog post retraces his footsteps in relation to his contributions in both earlier collections on the theme of private enforcement in the UK, with a particular slant on the extent to which consumers have benefited, or may benefit, from statutory and case law developments in the area. Accordingly, this chapter assesses how private enforcement of competition law rights has developed in the UK over the last twenty years. Key legislative developments, inter alia the Competition Act 1998, the Enterprise Act 2002, and the Consumer Rights Act 2015, have transformed the private enforcement architecture, notably with the introduction, and increasingly significant and enhanced role of the specialist tribunal, the Competition Appeal Tribunal, and the availability of an opt-out collective redress mechanism. The chapter assesses the key UK statutory and case law developments, in comparison with the US private antitrust enforcement model, to reflect on the disappointing extent to which effective redress for consumers has been provided to date, despite those legal and institutional developments. Nonetheless, the recent Supreme Court ruling in Merricks, as discussed in this chapter, should be pivotal in this context.
In Chapter 13, entitled ‘The Quiet Decline of the UK Cartel Offence: A Principled Victory in the Face of Practical Failure’, Angus MacCulloch focuses on criminal enforcement. The UK Cartel Offence was introduced in the Enterprise Act 2002 to challenge hard-core cartels (for example, blatant price-fixing) and enhance the deterrent effect of the UK competition regime. In its initial phase of operation there was some success. However, a number of significant cases failed to secure convictions. This damaged confidence in the ability of the UK competition authorities to bring successful prosecutions, and ultimately questioned the usefulness of the Cartel Offence. This chapter examines the problems that beset the original Cartel Offence and the lessons learned from the small number of prosecutions brought before the courts. It goes on to examine the reforms in 2013, that removed the controversial ‘dishonesty’ element from the offence, and replaced it with carve-outs for openness and publication. Alongside the practical issues in relation to the development of the UK Cartel Offence consideration is also given to a parallel process which saw a form of consensus developing in the academic literature as to the nature of the wrong at the heart of individual cartel activity. It is suggested that this greater understanding can be used to direct efforts to rebuild confidence in the reformed UK Cartel Offence. Increased importance should be given to the securing of good evidence of individual culpability in relation to cartel activity during the investigation phase. The chapter argues that, once good evidence is secured, better prosecution cases can be built on the basis of the new narrative of wrongfulness for hard-core cartel activity.
In Chapter 14, ‘Competition Law and the Digital Economy in the UK and Beyond’, Liza Lovdahl Gormsen considers the contemporaneous debate on how best to address aspects of the interaction between competition law and the digital economy. She stresses that data is the pinnacle of the digital economy. Data has fuelled amazing innovations in all sectors of the economy, but the accumulation of data in the hands of a few global companies may lead to lock-in, bottleneck issues, and leverage. The chapter notes that, according to the report Unlocking Digital Competition, which was prepared for the UK Treasury, competition policy will need to be updated to address the novel challenges posed by the digital economy. Some of these updates can happen within current powers, but legal changes are important to ensure that this job can be done effectively. The Competition and Markets Authority’s market study on Online Platforms and Digital Advertising recommends establishing a Digital Markets Unit and ex ante regulation as a possible way forward. Building on the outputs from the Furman Review, the government asked the CMA to lead a Digital Markets Taskforce. In December 2020, the latter published its advice A New Pro-competition Regime for Digital Markets, where it sets out the role of the Digital Markets Unit and an overview of its proposed regulatory framework for digital firms. This chapter looks at some of the challenges for UK competition policy in digital markets, in particular in relation to data, enforcement, and regulation. It also touches upon some of the potential issues that the UK faces in the digital economy following Brexit.
Tune back in in ten years’ time for the Thirty Year review of UK competition law!!