Thank you all for joining us today, as the CMA turns 10.
This is a pivotal moment not just for us as an organisation, but for the UK's evolving approach to promoting competition and protecting consumers. It is also an opportunity to both reflect and to look to the future.
As we mark our first decade of promoting competition and tackling unfair practices, it's worth considering how our role, and the environment we operate in, has changed.
Certainly, some of the challenges we considered in our first shadow Board meeting back in Victoria House, more than 10 years ago, were very different from the ones we contemplate now. In the 10 years since then, the UK has exited the EU and we have experienced a global pandemic, a persistent cost of living crisis, mounting concern over the changing climate, and unprecedented digital transformation.
As an institution, we have grown in scale and geography, with offices now at 6 locations across the UK. We have set up new functions - the Office for the Internal Market, the Subsidy Advice Unit and our Microeconomics Unit. And we stand poised to take on substantial new powers to promote competition in digital markets and to deliver robust and effective consumer protection.
I am immensely proud of the positive impact the CMA has delivered for the UK over the last decade. But I am also acutely aware of the very real challenges now facing the people of this country and our wider economy.
Whether it is improving productivity, economic growth, and the resilience of our economy; mitigating cost of living pressures; tackling the housing crisis; or, of course, addressing the power of large digital firms, and the potentially unprecedented opportunities and risks of emerging technologies like AI - across all of these, the CMA has a key role to play.
Staying focused on delivering the best outcomes for people, businesses, and our economy. Prioritising our work where it's needed the most. These are the core pillars of the long-term strategy Marcus Bokkerink, Chair of the CMA, and I set last year which drives our action going forward.
So, 10 years on, there is much for us to do and I'm full of energy and optimism for the future. And I know my feelings are shared by the whole senior leadership team, Marcus and our Board, and of course across the wider CMA. Today is not just a moment to reflect on 10 years of the CMA's work. It is also a watershed moment in the evolution of the UK's competition and consumer protection landscape. What comes next will inevitably be shaped by the new consumer and digital frameworks brought into force by the Digital Markets, Competition and Consumers (DMCC) Bill.
As we consider the new responsibilities being given to the CMA, and the range of issues we seek to address, I'd like to take this opportunity to set out, quite simply, why competition matters. And why a robust and independent competition and consumer protection regime is essential to deliver real benefits for people, businesses and the wider UK economy.
In doing so, I will also address some of the critiques we hear from time to time, for example that competition enforcement stymies growth and chills investment; that a UK competition authority should have a limited remit in a globalised, digital world; and that the CMA is overstepping our role into areas of policy which should not concern us. To be clear, we welcome this debate. Because we should never take for granted the mandate and responsibility the CMA has been granted by Parliament - we should always be able to enunciate, clearly, our purpose, and, coherently, why competition matters.
Why does competition matter?
We are all familiar with the theory of competition. Competition - at its core - forces us to do our best. It has been described variously as 'the keen, cutting edge of business' Footnote 1, 'the mother of invention'Footnote 2, 'the incentive to progress' and 'the basis of protection to the consumer Footnote 3.
The theory may be clear. But we should never presume that a case for competition - as a matter of theory - will mean our work speaks for itself. The CMA's expertise and independence are part of our strengths, but we do not work in an ivory tower. We apply our expertise to real problems facing businesses and people throughout the economy.
So one of my priorities as CEO has been to focus relentlessly on the actual outcomes of our work for people, businesses, and the economy;
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when people hear about our work, I want them to know it's going to improve their lives as consumers, taxpayers and stakeholders in our society
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I want competitive, fair-dealing businesses to know that we are on their side, when we take action against the small minority of firms who would restrict competition and harm consumers
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we all have an interest in the long-term health of the economy - consumers, businesses and government alike. I want all parts of our society to know that the work of the CMA supports the wider agenda for an economy that grows productively and sustainability
So how does the CMA think about the benefits of competition in 2024, not as technocrats or philosophers but as the agents of real, demonstrable positive outcomes for people, businesses and the wider economy?
Let's explore this in a little more detail.
People
Why does competition matter for people? We know that when competition is weak, the real cost of that is borne by all of us in the form of higher prices, lower quality, reduced choice, and poor incentives for companies to treat customers fairly.
And too often those who can afford it the least are hit the hardest: vulnerable customers and those struggling with the cost of living, who are less likely to switch to a better deal or more likely to fall victim to unscrupulous practices. So, we are committed to promoting an environment where people can be confident they're getting great choices and fair deals.
Here, our competition work dovetails with our critical role enforcing consumer protection law. We've cracked down on unfair contract terms - our work on leasehold property has freed thousands of homeowners from doubling ground rents that stopped them from being able to sell their homes or remortgage. We're looking at online sales practices that can make people feel under pressure to buy things they don't want or aren't right for them. And we've followed up our clear guidance on making 'green' claims about products and services with enforcement cases to show that we're serious about creating a level playing field - most recently securing key changes from fashion firms Boohoo, ASOS and George at Asda.
All this serves to ensure people are protected and can be confident when they engage with markets. That they don't feel powerless in the face of large corporations or those who seek to exploit them. That confidence, underpinned by effective markets and strong consumer protection, drives growth across our economy.
The DMCC Bill will give new powers for the CMA to directly enforce consumer law against firms who don't play by the rules, with penalties of up to 10% of worldwide turnover. This will be a step-change in our ability to safeguard people's engagement in our economy, and we are carefully considering and preparing for our first cases.
One example which goes to the heart of why competition really matters to people's daily lives is being able to access and afford food. The CMA has worked hard for a decade to keep supermarket competition strong in every town and community in the UK. We stepped in to protect shoppers when Morrisons and Marks & Spencer breached an order not to bar rivals from opening stores nearby. We blocked Sainsbury's proposed acquisition of Asda in 2018, after the evidence showed it was likely to leave consumers worse off. We used our consumer powers to make sure supermarkets display prices clearly and fairly.
Now we're looking at whether loyalty schemes are operating fairly and if it can be made easier for shoppers to identify savings. We are also taking forward a market study into baby formula, where we've seen average prices rise by 25% over the last 2 years. Groceries is just one example among so many, but I think you'll agree it's a fundamental one.
Why does competition matter for businesses?
We're also committed to promoting an environment in which competitive, fair-dealing businesses can innovate and thrive.
Why? Because ultimately, without competitive pressure, we see hunger for innovation and efficiency decline into apathy and stagnation. And we see incentives for investors and fair-dealing businesses wane, as the unscrupulous behaviour of a few goes unpunished. Of course, we recognise that businesses and investors want to earn a fair return - and indeed the ability to do so is what spurs innovation in the first place, to steal a march on others. But as challengers and innovators gain ground, we want market conditions that encourage rivals to snap at their heels, creating a constant, virtuous circle of investment, innovation, reward and competition.
Restrictions to effective competition come in many forms: markets dominated by a small number of powerful firms using their positions to prevent challengers from entering and expanding; unequal access to key inputs; and, of course, cartels and collusion. The result is the same - poorer outcomes for customers, poorer outcomes for investors and businesses and, ultimately, harm to our wider economy.
Again, let's look at tangible outcomes. Take Open Banking. Following the CMA's investigation into weak competition and stagnant innovation in retail banking, Open Banking was created, spurring an explosion of digital and data-driven innovation, not just by the big high-street banks but by smaller companies. Today, over 8 million users benefit from those innovative products and services. This is phenomenal from a consumer and SME perspective, but that's just part of the story - the UK's open banking regime has also been called 'the envy of the European FinTech community', as hundreds of ambitious, scrappy challengers (many with international investor backing) piled into a market now worth £4bn to the UK economy.
At the more bricks and mortar end of the spectrum, quite literally, in this case, is construction - a critical sector on which almost every other part of our economy depends. Across 2019 and 2020, the CMA fined 12 firms providing construction services or materials more than £68m over 4 cases for breaching competition law, including through price-fixing and market-sharing. 11 company directors were disqualified.
In one investigation, a supplier was secretly recorded at a cartel meeting saying: "guys, look at all our financial numbers, we've all had a good year… And that's come about by all sitting here". This is the ugly reality of anti-competitive conduct harming UK businesses and our economy today.
Why does competition matter for the economy?
As the Nobel Prize-winning economist Paul Krugman famously put it: "Productivity isn't everything, but, in the long run, it is almost everything".
That's why we're committed to promoting an environment where the whole UK economy can grow productively and sustainably. Because economic theory and history both tell us that where competition is stronger, productivity and wage growth are likely to be higher. That link between competition and productivity has been empirically established again and again at country and sector level. Notably, that correlation has also been consistently found between the existence and effectiveness of competition policy and overall productivity Footnote 4.
The CMA's own review of the relationship between competition and productivity also identified competitive pressure as a key driver behind firm-level efficiency and innovation; and an important factor in weeding out lagging firms to create the space for more productive new entrants.
Our new Microeconomics Unit is exploring this theme through multiple different research workstreams, including the CMA's third State of Competition Report (due to be published in May). All of which forms part of the CMA's contribution to government's, and the broader policy community's thinking, on ways to stimulate and strengthen our economy. We're laser focused on this goal and fully committed to playing our part.
It would be remiss of me to speak of stimulating our economy without talking about the role of merger control. I could talk at length about cases like Microsoft/Activision, Sabre/Farelogix, Nvidia/ARM and Illumina/PacBio. About the markets which were kept open for challengers and innovators, prices which remained fair for consumers, investment which flowed.
I read with interest that Footasylum - which at the time we blocked its acquisition by JD Sports was described as "a declining force, […] facing serious short-term issues" - has posted record sales and profits and is now expanding internationally. I am pleased for them and, of course for their customers. But I am also delighted by the story of turnaround, growth and expansion, and the wider benefits these cases have for the UK economy.
And what do all these benefits across people, businesses and the wider economy add up to?
Since the CMA was created, we have routinely measured the direct financial benefit that the CMA delivers to UK taxpayers.
In the 3 years from 2020 to 2023, for every £1 we spent on our operating costs, the average benefit to consumers was £26.
Since 2014, the CMA has delivered at least £15.6 billion of benefits for consumers Footnote 5 directly related to decisions we have made about mergers, markets, cartels and so on.
And of course, 'direct consumer benefit' does not include the potentially much greater indirect effect of our work. How many businesses are deterred from breaking the rules because they see the penalties for those who do? How many companies double down on their own strategies for growth and innovation, because they know an anti-competitive merger would be blocked? Analysis suggests Footnote 6 the overall positive impact of our work could be much higher again than the figures I have just given you.
Present day challenges and critiques
Now some might respond that of course I would say all of this, as Chief Executive of the CMA. That makes it no less true. But I would like to address just 3 of the challenges and critiques we hear levelled against us.
Firstly, that the CMA is anti-mergers and anti-business. And that effective competition enforcement deters investment.
Let's start with mergers. It is true that, post-Brexit, the CMA has played a greater role in reviewing global deals. These can involve large numbers and big names. Headline-driven hyperbole can get in the way of the facts.
So, let me lay out some facts for you now: over 2023, approximately 50,000 M&A deals were identified. Across 2022 to 2023, the CMA looked at around 700 cases. Of those, we carried out 43 Phase 1, and 13 Phase 2, investigations. We prohibited 3, with a further 3 abandoned during the review process. This is less than 1% - just the truly problematic deals where appropriate solutions cannot be found.
So, whilst we will not shy away from taking, and defending, robust decisions to prevent anti-competitive mergers which would harm the UK, we are about evidence and outcomes. Not ideology.
And what impact does the UK's competition regime really have on investors?
Competition enforcement, merger control included, is not a bureaucratic hurdle that runs contrary to free market principles. It is a fundamental safeguard for them. It is in the interests of every fair dealing company operating or investing here to have a robust, independent UK competition authority, protecting free and open markets.
Our independent authorities, courts and tribunals; our robust and transparent processes - these are all major reasons why the UK is an attractive destination for investment.
And we have seen what happens when competition is absent. Markets characterised by high concentration, or even monopolies, leading to higher prices, lower quality, and stymied innovation.
A business which distorts competition to hike prices might well feel like lucrative investment for its backers. But we want an economy where returns to investment are earnt by serving consumers, innovating to outstrip your rivals, spurred on by healthy competition, and backed by effective competition enforcement.
Second, it has been suggested that the CMA oversteps its role in the global economy.
The CMA's mandate, post-Brexit, is to promote competition in the interests of UK businesses and UK consumers. If there are global mergers involving non UK companies which would lead to higher prices or less choice for UK consumers, if there are global companies exploiting their positions of market power to exclude an innovative UK start up, or setting unreasonable terms to use their essential trading platforms, we won't hesitate to take action - that is our job, and we can't rely on the US or EU competition authorities to do it for us.
The CMA will take independent decisions to deliver the best outcomes for UK consumers. But we don't carry out our work in isolation. In this globalised world of interconnected markets, international cooperation and communication are more important than ever. That's why we work increasingly closely with our partners across the globe. Sharing information and best practice, leveraging one another's skills and experience, aligning where appropriate on timing and process; whilst, of course, retaining sovereignty over our decisions.
All of this has demonstrably strengthened the impact of our interventions - whether that be in mergers, cartels, or increasingly in technology-driven global markets like digital, data and AI. And it often results in more aligned outcomes across different jurisdictions, which helps minimise regulatory burden for business.
Finally, it is sometimes said that the CMA oversteps the bounds of its role as a competition and consumer protection authority.
That we are meddling in areas that have little to do with our remit. What have AI safety, labour markets, or Net Zero to do with us, goes the argument.
We recognise that competition policy cannot solve all of the challenges facing the UK. And we rightly operate within a legal framework that imposes appropriate limits on our powers. Nonetheless, we think we have a valuable role to play in broader debates ensuring the connections with competition and consumer protection concerns are recognised and understood. You see this through our work on AI foundation models, which has spurred an international conversation about how these markets can be guided toward positive outcomes. Through the Sustainability Taskforce we established and the Green Agreements Guidance we published, so companies can be confident in fulfilling their sustainability potential without breaking the law. And through our Microeconomic Unit's flagship research on labour markets which, when functioning well, are widely recognised as an important driver of economic growth.
Conclusion
I hope it has been evident in what you've heard so far today that the CMA at 10 is more clear-sighted than ever about the challenges that lie ahead. That each new challenge or critique we face deepens our resolve to deliver for the UK. And that we are actively evolving in the face of widespread change.
All of which gives me great confidence that the next 10 years will be even more impactful for the UK than the last 10.
It is a pleasure to start that journey here, with you, today. Thank you.
Footnotes
Footnote 1: Henry Ford.
Footnote 2: H. Jackson Brown Jr.
Footnote 3: Herbert Hoover.
Footnote 4: Buccirossi et al. (2013), Benetatou et al (2020), Peterson (2013), Gutmann and Voigt (2014), Clougherty (2010), Voigt (2009), Ma (2011) Broadberry and Crafts (2000), Symeonidis (2008), Petit, Kemp and Van Sinderen (2015) The CMA's own review of the relationship between competition and productivity also identified competitive pressure as a key driver behind firm-level efficiency and innovation; and an important factor in weeding out lagging firms to create the space for more productive new entrants. Productivity and competition: a summary of the evidence.
Footnote 5: This cumulative figure does not include the CMA's estimate of the direct financial benefit to consumers in 2023 to 2024, which has not yet been finalised.
Footnote 6: Evidence from existing academic studies (collated in the CMA's 2017 literature review), previous OFT research (See The impact of competition interventions on compliance and deterrence, OFT1391 and The deterrent effect of competition enforcement, OFT 962) and an ex-post evaluation of 5 antitrust enforcement cases by DotEcon in 2018 (Evaluation of direct impact and deterrent effect of CA98 cases) indicate that such deterrence can be significant albeit very difficult to measure precisely. The impact of this deterrence is likely to be particularly strong in the areas of competition and consumer protection enforcement.
