Introduction
Thank you for the opportunity to deliver the closing address at the end of a fascinating conference. It's particularly timely for me to follow the panel discussion just now on "Atlantic convergence or divergence" and to provide some perspectives directly from the United Kingdom.
Many of you will be familiar with the work of the UK Competition and Markets Authority to some extent: most likely in the context of merger control, or perhaps the incoming digital markets competition regime in the UK. I would like to take this opportunity to put the CMA's work in context for you all as a predominantly US-based audience, including explaining a little about how we operate as a competition and consumer protection agency - what motivates the outcomes we seek to achieve and the way we work. In doing that, I'll venture a little myth-busting, to address some of the misconceptions I hear from time to time. I will give some particular insights into our merger control and digital markets work, together with a few practical tips on how best to engage with the CMA if you are a US business or advisor. And I'll offer my own perspective on both the importance, and limits, of international coordination.
What makes the CMA tick: our purpose and ambition
The CMA is the UK's principal competition and consumer protection authority. We have a range of legal powers and responsibilities including merger control, enforcing against breaches of competition law and consumer protection law, and conducting wider ranging market studies and investigations. In our 2023 to 2024 Annual Plan we set out the CMA's purpose: "to help people, businesses and the UK economy by promoting competitive markets and tackling unfair behaviour."
We also set out how this purpose shapes our ambition in terms of the outcomes we want to deliver, so that:
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"people can be confident they are getting great choices and fair deals
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competitive, fair-dealing businesses can innovate and thrive; and
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the whole UK economy can grow productively and sustainably"
As representatives of US businesses, you may be thinking that this is of little relevance to your own interests. Perhaps, for you, UK merger control chiefly represents a barrier standing in the way of getting a great deal through.
Unsurprisingly, I am going to offer a different perspective: that it is in the interests of every US company that does business in the UK to have a robust, independent UK competition authority protecting free and open markets. Why? Because those are the market conditions that foster growth and innovation. The conditions which drive genuine competitive benefits for companies - large and small - selling products or services to UK businesses or consumers. The competitive pressure, the dynamism which I'm describing, has been one of the cornerstones of America's economic success. It establishes a powerful drive for value creation. These market conditions which the CMA protects and fosters are exactly those which generate positive returns to investors, as well as delivering a wealth of benefits for consumers and the broader economy.
So, supporting investment, innovation and growth by protecting competitive markets is an explicit focus for the CMA. We do this in the interests of UK consumers, businesses, and our economy. But in doing so, we also advance the interests of every fair-dealing US company serving UK markets that strives to grow and to compete on a level playing field. And we advance the interests of every investor seeking to make a fair return on their capital by doing business in the UK.
UK merger control: a view from the inside - out
I said at the start that I would like to do a little myth-busting, and in particular address some misconceptions that sometimes arise about the scope, purpose, and impact of the UK merger control regime.
Jurisdictional reach of UK merger control
First, when and why do we look at deals involving non-UK companies? I sometimes hear it said that the CMA is over-reaching by reviewing a deal between 2 US companies. Or that a US investor is reluctant to fund a UK start-up for fear a subsequent sell-out would be blocked by the CMA. Let me address these concerns directly.
The jurisdictional tests in our legislation are designed to ensure that we can review deals that have a material effect on the UK, even if the transaction takes place between two non-UK companies, with its 'centre of gravity' elsewhere. More precisely, our legal thresholds give the CMA jurisdiction to review a transaction in 2 scenarios: either where the UK turnover of the company being acquired exceeds £70 million; or where the merging companies will together supply more than 25 per cent of a particular good or service in the UK, or a substantial part of it (and where the merger results in an increment to that share of supply).
In many cases, large international deals will comfortably meet the UK turnover threshold. But some global deals may come within our jurisdiction because they satisfy the share of supply test. This test is a long-standing feature of the UK regime. It is worth noting that the Digital Markets Competition and Consumers Bill currently going through UK Parliament, which I'm going to come to later, will also enable the CMA to review a deal where there is no horizontal increment. This could be a purely vertical or conglomerate merger, or the acquisition of a nascent competitor.
These tests enable the CMA to review a deal. But we must apply a further and separate test before we can block it. That requires us to find that it is "more likely than not" that the transaction will result in a substantial lessening of competition.
A detailed explanation of our approach to jurisdiction is available in guidance published on our website. And there are other mechanisms parties can use to help manage concerns or questions. It's worth emphasising here that the UK regime doesn't require mandatory notifications so for deals where there is genuinely no competitive impact in the UK there is no need for us to review. To assist with understanding whether a review is needed, merging parties can submit a short briefing paper to our Mergers Intelligence Committee for an early view on jurisdiction and whether we think a deal needs to be called in for a what we call a 'phase 1 review'. Do look on our website for more details about this process if you are not aware of it.
It is important to emphasise that the CMA only looks at deals where there is an impact on UK markets. So, for example, we would not on our own initiative review a merger between 2 US companies which had no competitive impact in the UK, regardless of whether it exceeded our jurisdictional thresholds. Equally, we do not review a deal simply because the target company happens to be based in the UK. This applies to start-ups in exactly the same way it does to established businesses - if an acquisition impacts UK consumers in the way I have outlined, a start-up based here in Miami will be equally within our jurisdiction as one based in the UK. So the scope of UK merger control really shouldn't be a relevant factor for investors considering whether to fund a UK start-up.
The CMA is a more active global merger control authority than previously but we are not "anti-mergers", and our interventions are proportionate
Turning from jurisdiction to the substantive purpose of merger control in the UK - the second misconception I'd like to tackle is around the reason for the CMA's intervention in more of these larger, international mergers in recent years. In large part this reflects a legal change brought about by the UK's exit from the EU. Prior to that, the UK element of many of these transactions would have been reviewed by the European Commission. Now, that is the responsibility of the CMA.
I have heard it suggested in some quarters that the CMA is "anti-mergers" almost by default, particularly when it comes to deals involving the so-called GAMMA firms. Fortunately, our well-documented track record on merger control demonstrates that we take an objective, evidence-based and proportionate approach. It is certainly correct that we have evolved our analytical approach when assessing mergers in digital markets, in part reflecting well-documented and widely recognised historic under-enforcement in this area. But each case we consider is reviewed objectively on its own merits.
And you don't have to just take my word for it, let's look at the numbers. The latest estimates that I've seen suggest that there were around 50,000 M&A deals last year (PWC, Bloomberg) during which period the CMA looked at around 700 cases. The large majority of these, including the great majority of those involving start-ups, were considered by our Mergers Intelligence Committee and dismissed without any formal review. In fact, in the 2022 to 2023 financial year (from 1 April 2022 to 31 March 2023), we conducted only 14 in-depth phase 2 investigations and prohibited only 3 deals (with a further 3 abandoned during the review process). And this balanced approach applies in the tech sector too. Over recent years, we have cleared a number of high-profile transactions either unconditionally or subject to remedies. Recent examples include: Broadcom's acquisition of VMware; Viasat's acquisition of Inmarsat; Facebook's acquisition of Kustomer; Amazon's acquisition of iRobot; and Microsoft's acquisitions of Nuance and, following a substantial restructuring of the transaction, Activision.
I hope this data is making clear what is not, perhaps, always clear from reading media headlines. That whilst the CMA will not shy away from taking, and defending, robust decisions to prevent anti-competitive mergers which would harm UK consumers or businesses, our interventions are proportionate and focus only on the handful of deals that are problematic each year.
And coming back to start-ups again briefly, our merger control regime exists to safeguard and nurture free and competitive markets in which all businesses can grow and thrive. But it also helps maintain a range of exit strategies for investors. In many cases a trade sale will be unproblematic from a merger control perspective, including to a larger company, provided there is sufficient competition remaining in the market. Of course, if the only exit route that has been contemplated is the sale to a dominant incumbent competitor, that might suggest an unduly narrow exit strategy.
UK merger control is subject to robust and effective scrutiny
I have talked about when we intervene, and why we intervene. Now I want to turn to how we intervene, and to explain the safeguards that have been built into the UK merger control regime to ensure robust, independent and effective scrutiny.
First, it's important to emphasise that the CMA is set up by law to take its merger control decisions free from political influence.
Turning to our process, the UK merger control system (in common with many other jurisdictions but unlike here in the US) provides for 'administrative decision-making'. This means it is the CMA taking decisions in the first instance, rather than a court. Because we are decision-makers, we must weigh up both sides of the argument and set out an objective, balanced view of the evidence underpinning our decision. We engage extensively with the merger parties to make sure we understand their arguments, and to give them a fair opportunity to present their views around the potential competition concerns that have been identified, and any possible remedies. We also consult widely with third parties and gather a large amount of information from multiple sources. As a practical tip for engaging with the CMA, I really would emphasise that we welcome and encourage early contact with merging companies, and we are genuinely open to discussions and early feedback.
I am going to become a bit technical about our process here, but bear with me - because this is one of the key features which should give businesses and investors confidence in the integrity of the UK regime.
Like many other jurisdictions, we operate a two-stage review. In both our phase 1 and phase 2 processes, the UK model allows parties to make their arguments directly to the decision makers who take their decisions independently, and in circumstances that minimise the risk of confirmation bias. But for phase 2, meaning the most complex merger cases requiring in-depth investigation, the decision to approve or prohibit the merger (or to accept remedies) is taken by an independent Inquiry Group. The group members are selected for each case from an independent CMA panel appointed by the UK government and are not CMA employees. They have deep expertise drawn from a variety of relevant professions. This independence is hard-wired into the statutory regime and deeply embedded in the long-standing practice of the CMA. This is a crucial piece of institutional governance design, which has earned the UK a strong reputation for high-quality independent decision-making.
And, of course, our decisions can be challenged before the courts. The UK Competition Appeal Tribunal (or CAT) is a specialist appeal body which holds the CMA accountable for the legality and rationality of our merger decisions, and the fairness of our decision-making process. The CAT's scrutiny is every bit as challenging as you would expect, as some of the lawyers in the room who may follow these cases will know.
Merger investigation process reforms
It is worth noting that we are currently in the process of consulting on planned reforms to our phase 2 merger investigation process with the aim of maintaining "best in class" procedures for merger control in the UK which are clear, transparent, agile, and efficient. Proposals include an earlier focus during the phase 2 investigation on the key issues at stake in the case, as well as improving the opportunities for all businesses affected by a merger to engage with the CMA Inquiry Group overseeing the investigation and changes to our process for considering remedies. We'll be publishing an update on those reforms in the next couple of months so do look out for that.
A new UK regime to promote competition in digital markets
Turning now from merger control - one of the CMA's most established regimes - to a new regime for competition in digital markets, which the UK government has designed with the intention of making the UK one of the best places in the world for technology innovation and investment.
The pace and scale of digital transformation has been extraordinary, bringing enormous benefits for people, businesses and economies across the globe. In the UK, the digital sector is growing rapidly, attracting substantial investment, contributing billions of pounds to the economy and creating millions of jobs.
At the same time, we've seen the concentration of market power in the hands of a small number of technology firms across various digital markets. Many jurisdictions around the world have concluded that traditional competition law regimes and powers are insufficient to address the impact of that concentration of power in a timely and effective way. We are now seeing new powers being introduced, for example in the EU and Germany.
The UK's trajectory on this has been consistent for some years. In 2018, the UK government commissioned Professor Jason Furman (a former advisor to President Obama) to lead a review of the UK's own competition framework in relation to digital markets. In response to recommendations in that review, and recognising the many benefits of digital markets, the UK government is now introducing a new pro-competition digital markets regime to address the market power of a small number of technology firms.
It is important to understand that this is not broad brush, one-size-fits-all regulation of the sort that creates barriers to innovation or an unnecessary burden for businesses. Quite the opposite. The regime has been consciously designed to be highly flexible, bespoke, and targeted in its approach. It will focus on what we expect to be a very small number of firms with substantial and entrenched market power in a digital activity linked to the UK; a position of strategic significance; and a global turnover of more than £25 billion or UK turnover of more than £1 billion. These firms will be designated with Strategic Market Status (SMS) in relation to one or more digital activities.
Tools - CRs and PCIs
Once the CMA designates a firm with SMS, 2 tools become available: Conduct Requirements and Pro-Competition Interventions.
The CMA will be able to impose Conduct Requirements where this would be proportionate to achieve one or more of 3 legislative objectives: fair dealing, open choices, and trust and transparency. The requirements would then be used to guide the behaviour of SMS firms not only to address existing issues, but also to prevent them taking advantage of their powerful positions to exploit consumers and businesses or to undermine fair competition.
Through Pro-Competition Interventions, we will be able to address factors underpinning these firms' market power in a particular activity. This might include giving people the power to easily transfer their data between providers, or requiring interoperability so that different products and services work with each other. The aim is to create longer-term, dynamic changes in these activities, opening up opportunities for greater competition and innovation.
What I am describing here is a modern, fit-for-the-future digital markets competition regime. One designed to prevent harmful practices that hold back innovation and growth, opening up new paths for entrepreneurs, challengers and start-ups struggling to enter, grow, and compete in digital markets. A regime which can keep pace with developments in fast-moving digital markets. And one which, crucially, will include ongoing dialogue with potential designated firms and broader stakeholders, to ensure the CMA maintains a deep understanding of relevant markets and technologies to inform our assessments and any potential interventions.
A targeted, evidence based, proportionate and participative approach
The new powers that the Digital Markets competition regime will grant the CMA are substantial and we are committed to taking a demonstrably targeted, evidence-based and proportionate approach to implementing them. Understandably, stakeholders are keen to know more about what this means in practice. I would encourage anyone with this in mind to read the overview document the CMA published last month providing further detail on how we will operate the new regime. Once the UK Parliament passes the DMCC Bill (which we hope will be later this Spring), we will release more detailed draft guidance for consultation so do please look out for that. We expect the operation of the new regime will formally commence towards the end of this year. We anticipate launching the first SMS investigations soon after we receive the powers to do so and expect to initiate approximately 3 to 4 SMS investigations in the first year of the new regime. In our Overview document we emphasise how important it will be for this regime to be truly participative, built on wide-ranging engagement with stakeholders large and small and we encourage you all to play a part in that.
CMA perspective on international cooperation
Now, perhaps it goes without saying, as I deliver this speech at an international conference, that in this globalised world of interconnected markets, international cooperation and communication is more important than ever for the competition community. To have positive impact in the UK, the CMA must be an active member of that community internationally.
One reason for this, which I think we are all conscious of, is the importance for businesses of international alignment. Whilst all competition authorities remain independent and sovereign in their decisions, we do strive for close relationships and knowledge sharing with our fellow enforcement agencies in the US, the EU and elsewhere. International fora like the OECD and ICN offer great opportunities to bring agencies together. Businesses themselves can also help facilitate a joined-up approach, through waivers and through keeping agencies updated on international developments, for example.
Areas of cooperation and overall approach
How does this inter-agency cooperation play out in practice?
Well, in mergers, our experience is that open channels of communications between different authorities internationally reviewing the same transaction are generally beneficial - both for the authorities themselves and the merging parties. We see procedural benefits in allowing us, as far as possible, to align on process and timing. And where the markets concerned have regional or global dynamics, it can assist our substantive assessments, including resulting in more aligned outcomes across different jurisdictions.
The recent Adobe/Figma deal, for example, involved a merger in the creative design sector. A number of agencies were reviewing the merger alongside the CMA, including the US Department of Justice and the European Commission. The Commission published its Statement of Objections on 17 November, followed closely by the publication of our Provisional Findings on 28 November. Soon after that, on 18 December 2023, the merger parties abandoned the deal.
Having recognised some efficiencies in coordination, I do want to be clear that consistency of outcome is not an end in itself. With different statutory regimes and different decision makers, as well as variances in market features and evidence bases, instances of divergence are inevitable and entirely proper. This is true both for assessments of competition concerns raised by a merger, and the appropriate solutions to remedy them.
The Microsoft/Activision merger is a case in point. The CMA intervened to prevent Microsoft from reinforcing its incumbency advantage in cloud gaming, an important and rapidly growing form of entertainment for millions of UK consumers. These concerns were shared by the European Commission, with whom we engaged closely throughout. However, while the Commission accepted Microsoft's original behavioural remedy, we did not. Ultimately the parties put forward a substantially restructured deal to the CMA which addressed our concerns.
International cooperation also extends beyond merger control. For example, in March 2023 we launched an investigation into anti-competitive conduct in the fragrances sector simultaneously, and in consultation with, the Antitrust Division of the US Department of Justice, the European Commission, and the Swiss Competition Commission. That cooperation is important because again, post-Brexit, the CMA's remit now extends to the UK impact of global cartels and anti-competitive conduct where that UK element might previously have been investigated by the European Commission.
An absolutely key area for international cooperation, as you will no doubt have anticipated, is digital markets which, by dint of their global nature, mean that similar competition issues arise in multiple jurisdictions. For example, the CMA and many of our counterpart organisations in the EU, US, Australia, Japan and beyond are investigating or have investigated issues related to Google's position in ad tech, Meta's use of advertising data, Apple's restrictions on browser engines, Amazon's use of third-party seller data, and so on. Whilst each authority naturally focuses on what is right for businesses and consumers in its own jurisdiction, none of us wants divergence for its own sake, and it is in all our interests to maximise synergies where we can.
This is why, during the UK's 2021 G7 Presidency, the CMA worked with our counterparts to develop a compendium of approaches to improving competition in digital markets.
This need for international cooperation will be particularly important as we and other jurisdictions move towards the sorts of ex-ante pro-competition regimes for digital markets I described earlier. The Overview document I referred to earlier makes clear that cooperation with other authorities is front of mind, particularly in relation to the EU Digital Markets Act.
Conclusion
To conclude, I hope this speech has served to demystify the CMA a little, and to lay to rest some of the misconceptions surrounding competition enforcement in the UK. We are rigorous and robust: we will take action where we identify competition concerns that impact UK consumers and businesses. But we are also open-minded, evidenced-based and proportionate. And we are keen to talk - especially directly to businesses, including those from around the world for whom the UK's free, open and competitive markets offer powerful opportunities for innovation and value creation.
Thank you for listening this afternoon and I look forward to engaging with you all further.
