Welcome everyone and thank you for joining us today. It's an honour to chair the UK's Competition and Markets Authority as we reach 10 years in action. It's a major milestone in the lifetime of any organisation - particularly when we consider how much has changed in the UK, and around the world, over the last decade.
I believe we should use milestone moments like this to look forward. So, with that in mind, on the CMA's 10 year anniversary, the question I want to ask today is this: why is an independent, impartial CMA needed more than ever today and in the future?
And to discover the answer, I'd like to take the vantage point of: what are the opportunities the CMA exists to create and the problems we exist to solve? And I'm going to look across 3 timeframes: the past, the present, and the future. What were the big issues we tackled in the past? How have they changed today? And what are they going to be in the future?
Context setting
The CMA was formed through a merger of the Office of Fair Trading and the Competition Commission. But the goal was not simply an administrative one to improve efficiency. It was to create a single organisation with the resources, capabilities and mandate to effectively enforce the spirit and the letter of the competition and consumer protection laws that had been enacted by Parliament.
And what was Parliament's intent? I think it comes down to a clear understanding that if you want a vibrant economy, if you want a thriving society - and if you want both of these to be resilient to external shocks - well then you need choice, you need innovation, you need investment. And that means you need competition.
The single most effective lever, indeed, the prerequisite for driving innovation, productivity and investment, is to have free, open, effective competition in our markets. And this is inherently understood by every one of us. In life, as in business, we instinctively favour choice over constraint. Diversity over uniformity. Quality and value over rip-offs. Where we encounter barriers, we instinctively seek to overturn them. Faced with old, inefficient ways of doing things 'just because', we have always, in a multitude of creative and determined ways, pushed for advancement. And, where we see that some are not playing by the rules, where we see vested interests imposing their will - in those situations we know that it's not right, and we do something about it.
And of course, Parliament also understood that, while fair, open, competitive markets are clearly in everyone's interests, well, competing day in day out is really hard work. So hard, that there will be a temptation, for those who have amassed market power, to take unfair advantage, to take shortcuts. Shortcuts to do away with competition. To lock out rivals and future challengers. To lock up a market. Competing day in day out is really hard, yes. But that's why it works. Because it forces us to deliver and to improve. And so we move forward, always.
This is the core of the fair, open and effective competition the CMA was established to protect, to foster, and of the consumer protections it was established to safeguard. Markets, where the best products and services win out on their merits. Where fair-dealing businesses can innovate and grow on a level-playing field.
And policymakers across the political spectrum understand that the investment, innovation, productivity, and growth which flow from this fair, open, effective competition are the bedrock of a thriving economy in which everyone has an opportunity to prosper.
With that in mind, what are the biggest issues, shortcuts and opportunities that the CMA has been tackling over the last 10 years?
Broadly speaking, I think these fall into 4 big categories:
First, the consolidation of market power through horizontal mergers. Situations where 2 already major players competing for customers and market share decide to try to combine their businesses. Sainsbury and Asda; viagogo and StubHub; JD Sports and Footasylum. And the common factor in these cases, usually, is that the CMA's independent panel determines that the planned consolidation causes a substantial lessening of competition, resulting in the negative outcomes I described earlier.
Second, anti-competitive behaviour. Effectively, subverting the proper working of fair, open and effective competition. Like using a dominant market position to inflate the price of life-saving NHS medicines by tens of millions of pounds. Or colluding to fix the price of football shirts, robbing fans of a fair deal. These practices are not only exploitative; they stunt the benefits of competition. They are economic sabotage.
Third, opening up markets to create that enormously powerful competitive tension, that 'feet to the fire' dynamism, which I saw first-hand again and again in my 30 years working with businesses of all shapes and sizes. Open banking is a terrific example, but by no means the only one. Opening up electric vehicle charging infrastructure to healthy competition. Recommendations being taken forward by government to overhaul regulation of heat networks . There are many such cases, and each have their own story to tell in terms of enabling more innovation, more choice, more investment, downward pressure on prices, and ultimately contributing to more growth across the wider economy.
And finally, shielding consumers from harm by enforcing against breaches of consumer protection law. This is another core pillar of our work, and our action here has been, and remains, incredibly wide-ranging. From care homes, package travel and events ticket sales; to online marketplaces and the claims companies make about the sustainability of their products, to name just a few. Consumers not only deserve to be treated fairly, but their confidence to engage in markets is a key ingredient of the growth we all wish to see. That's also why you've seen us run national campaigns, like Online Rip-Off Tip-Off, to make sure people know their rights and how to protect themselves.
So, these have been the fundamental opportunities that the CMA has been enabling, the fundamental challenges that we have been tackling. And they continue to keep us busy.
But the big issues the CMA is tackling today have also shifted in 3 ways. This reflects the macro-economic forces underway that will shape our economy and society for years to come - in particular, heightened economic and geo-political volatility, the continuous, accelerating technology revolution, and a destabilising climate.
With the CMA coming under new leadership in 2022, we thought hard about how we should anticipate these forces, and adapt what we do and how we do it, to make sure we can continue to drive the positive outcomes we all wish to see for this country. And so at the start of 2023, we set out a new long-term strategy.
Our strategy has a clear purpose: to help people, businesses and the UK economy by promoting competitive markets and tackling unfair behaviour. We set 3 ambitions, with tangible outcomes we're committed to help deliver over the medium and long-term. Those ambitions help us prioritise and focus our actions on the areas that really matter for people and business in the UK, and where the CMA can have the most positive impact in line with the duties given to us by Parliament.
So, what are the 3 ambitions, and how are they driving the CMA's focus today?
First, to ensure people can be confident they are getting great choices and fair deals
In today's times of economic hardship, that means you see us focusing on areas of essential spend: having somewhere to live, feeding and caring for ourselves and our families, being able to travel and get around, buying the things we need online. Making recommendations for government on bringing down some of the barriers to getting more homes built and making those homes more affordable. Stepping in to drive more transparency and choice in petrol and in the groceries we buy every day. Investigating the markets for funeral care and vet services - areas close to our hearts, where we may be particularly vulnerable to exploitation.
Alongside these, we've also seen a shift toward tackling ever more sophisticated, often technology-enabled, methods used by unscrupulous actors to mislead or exploit when we buy goods and services online. Dark patterns in online choice architecture, misleading or pressurising online sales tactics, fake reviews, drip pricing. It is challenging to stem the proliferation of these sorts of harms, but we are constantly alert and active here today.
Our second ambition is for competitive, fair-dealing businesses to be free to innovate and thrive
You will not be surprised that the biggest shift here has been the way we approach digital markets. We know and understand a great deal now, which was not clear a decade ago, about the unique features of digital markets from a competition and consumer protection perspective. Massive fixed costs and near zero distribution costs. Unprecedented network effects, at a global scale, thanks to the universality of the customer proposition. Leading to extremely high scalability and platform dependencies; and resulting winner-take-most dynamics. The critical strategic advantages of data and computing power - particularly where these make it possible for a position of power in one market, or economic activity, to be leveraged into multiple others. And, of course, the searing pace of technology development and adoption, so that harms to competition and to consumers can quickly spread, becoming locked in or endemic.
So, how are we tackling this today?
We've built up a great deal of expertise, around both the technologies and the business models they underpin. And we've learned valuable lessons, about what sorts of harms can result from all of this and how we can tackle them effectively. And so, to the extent possible, we have been using our existing tools to apply those lessons.
For example, securing binding commitments from Amazon and Meta to ensure fair competition on online retail platforms, giving independent sellers a fair chance to compete on their platforms. Looking into mobile ecosystems and digital advertising to identify potential solutions to protect choice and offer a fair deal for consumers and business customers alike.
And taking a conscious decision, transparently signalled over several years, to adapt our approach to digital and technology mergers to the distinct characteristics of digital markets. Merger control has always been forward-looking; but the rapid pace and curve-jumping nature of innovation in digital markets mean that the forward-looking picture is much more dynamic here.
We also need to take account of distinct bases for competition in these markets, which means considering, for example, the power of data across activities, as well as ecosystem theories of harm. And, of course, the fact that consolidation of market power can occur not just horizontally - in cases like Adobe/Figma - but up and down the value chain, with the potential to lock up critical inputs, or lock in access to customers, or even both, in an existing or emerging ecosystem. We saw this with the attempted integration of Nvidia/Arm and with the cloud gaming parts of Microsoft/Activision, for example.
Our third ambition is to help the whole UK economy grow productively and sustainably
To a large extent, if we execute our first 2 ambitions well - if we enable choice and a fair deal for people, and if we foster open, effective competition for businesses - then that takes us a long way toward the ongoing innovation and productivity and growth we all wish to see.
We also know the dividends can be even greater if we prioritise markets of strategic significance. Emerging or developing sectors with particular potential to drive broad-based innovation and productivity, like digital. And because a strong economy must be resistant to shocks, we've also looked at the drivers of market resilience, and the role we can play in preventing supply disruption.
Finally, this growth needs to be sustainable - and becoming competitively advantaged in the climate technology of the future will in turn help accelerate the country's growth. So we've been playing our part in helping the UK reach its Net Zero ambitions through tackling greenwashing and enabling the markets for new technologies to develop competitively.
So that's the focus today. Now, when I look ahead, I see the issues shifting again.
I want to talk particularly about one critical shift, again caused by the emergence of new, disruptive technologies. I'm talking, of course, about AI. And let me just emphasise the tremendous potential benefits I believe AI can bring for business, for people, for our economy.
But the shift, the discontinuity, that I'd like to focus on is not the technology itself. Rather it is the fact that, unlike previous waves of technological innovation, the new disruptive technologies are not disrupting the established market power of established incumbents. Instead, they could be entrenching this power further.
To date, a diverse ecosystem of researchers, startups, investors and large players have combined a wealth of resources, expertise and capability to accelerate advances in AI models and their practical applications. But the true potential and value creation of these advances will only be realised - and shared widely in society - if conditions of fair, open and effective competition are sustained in the future.
And there lies the issue. As highlighted in our second report on AI foundation models that came out last week, we see 3 key interlinked risks to fair, open and effective competition.
First, that a handful of incumbent corporations, which already hold positions of market power in today's most important digital markets, start to control the critical resources required to develop AI models going forward - most importantly computing power, data and talent. Our report explained that firms controlling these critical inputs may restrict access to them to shield themselves from competition in the development of AI foundation models.
Second, a risk that those same corporations could start to control how consumers and businesses can practically access and deploy these models in their daily life and work, through control of key routes to market, like mobile ecosystems, apps and platforms. These pre-existing positions could be exploited to restrict choice for customers, and to limit competition in the development and deployment of these models.
Third, the CMA has identified an interconnected web of over 90 partnerships and strategic investments across foundation model capabilities involving those same few corporations. Through investments, licensing, partnerships and other arrangements, the most successful and promising innovators are being drawn into the ecosystems of the established players. And this could exacerbate their market power across the value chain.
As a result, market power risks concentrating ever further, faster, around a handful of corporations, across an ever broader sphere of economic activity. When does such market power become entrenched, irreversible? And where will that lead? History suggests that when this happens, economic freedoms suffer - freedom for customers to choose what's best for them, freedom for fair-dealing businesses to access customers, freedom for challengers to innovate and invest. And, in the long run, freedom for economies to grow and democracies to thrive.
So what actions is the CMA is taking today to mitigate these risks, and what further actions can we anticipate?
I will touch on 3.
First, we have established principles we expect firms developing and deploying models to have regard to:
- access to key inputs
- diversity of models and model types
- choice for business and consumers in which models they deploy and how
- fair dealing, by which we mean no anti-competitive bundling, tying or self-preferencing
- transparency for consumers and businesses about the risks and limitations of models
- accountability of developers and deployers for the outputs of models
We believe these are fundamental to sustaining vibrant innovation and guiding markets toward positive outcomes.
Second, we're carefully considering how to apply the full range of legal powers we have today most effectively. For example, in the CMA's cloud market investigation, the independent panel carrying out the inquiry is including an assessment of the potential impact of foundation models on the provision of cloud services. We're also keeping a very close watch on current and emerging AI partnerships, and last week announced we will be stepping up our merger review activities; we're already reviewing Microsoft's partnership with OpenAI.
Third, although competition is the best form of regulation to drive positive market outcomes, it only works where there really is genuine competition. In situations where market power has become substantial and entrenched, where effective competition is lacking, we need targeted and proportionate regulation to do the job that competition is not around to do for us. It is for that reason that the Digital Markets, Competition and Consumers (DMCC) Bill is passing through Parliament. This will give the CMA new powers to safeguard and promote competition in digital markets more effectively. We haven't yet taken any provisional decisions on which digital activities to tackle first, but our update last week did make clear that we will evaluate developments around AI foundation models as part of our prioritisation.
Across all of these activities - reflecting the collaborative approach that underpins the operation of the new digital markets regime - we are encouraging the incumbent firms to work with us, to help us shape these markets towards the positive outcomes that will benefit participants and users alike.
Conclusion
I want to close by saying that I think we are living through a pivotal period in economic history. Where global forces - macro-economic, technological, environmental - could bring us closer together on a path to unprecedented progress; or could drive us further apart. Where technology that has the promise to fundamentally reshape our economies, and by extension our lives, has reached a tipping point. And, underpinning this, where the balance of power between people, their elected governments, and corporations could shift in ways which will define how we live, work and advance for generations to come. I believe these are challenges we can and will rise to meet, and protecting competition and tackling unfair behaviour have a critical role to play in helping us do so.
I am hugely privileged to be here with Sarah, with our Board, and everyone else at the CMA, in this room, with you - our partners and stakeholders - to commit to playing that part.
