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Wednesday, 9 January 2013

Regulators and competition law enforcement

One of the slightly mysterious aspects of competition law enforcement in the UK is that, although a number of the independent regulators have concurrent competition powers alongside the OFT, they only use them rarely. The BIS consultation on the reform of competition law in the UK identified only two infringement decisions and there have not been any since the consultation paper. As one of the aims of the reforms has been to increase the number of enforcement decisions, the Enterprise and Regulatory Reform Bill included a number of changes to the legislation in order to encourage the regulators to use their competition law powers (contained in Clause 54 and Schedule 14).

Before Christmas, the government introduced a new clause into the Bill (http://www.publications.parliament.uk/pa/ld201213/ldhansrd/text/121218-gc0001.htm#12121867000429 at column GC 509). This clause would allow the Secretary of State, using a statutory instrument, to amend the Competition Act and/or the Enterprise Act to remove the concurrent competition powers that the regulators currently have (with the exception of Monitor). There are certain consultation requirements and the affirmative resolution procedure would have to be followed. The Minister, Lord Marland, explained that this was a reserve power, to be used if the new concurrency arrangements do not work or if there was "abuse of the system". This is a strong signal to the regulators that they will have to do better.

It is easy to state this, but more difficult to work out what it means. Presumably the regulators will not only have to bring more cases, but these cases will have to be successful, because bringing lots of unsuccessful cases would show that you are not using the system properly. How many cases could be expected in particular sectors of the economy? Some of the regulators, Ofwat, the CAA and the Northern Ireland regulator, might well struggle to generate all but the occasional case, for perfectly understandable reasons. The focus will presumably be on the performance of Ofcom, Ofgem and the Rail Regulator. Ofcom in particular, may well be under the spotlight, given that the CMA is to be chaired by Lord Currie and the chief executive designate, Alex Chisholm, has come from the Irish communications regulator. More decisions would mean more appearances in front of the CAT, something Ofcom, in particular, will not relish.

Who knows what the target will be? Where will the Minister obtain the information to assess the regulators' performance? Government departments are not in close contact with the relevant industries, except perhaps in rail, and the specialist consumer bodies have been closed down. If the nuclear option is exercised, there will be great pressure on the CMA to bring a case or cases soon after this has been done.

This is a policy based on assumption, for which there does not seem to be any evidence, that there are a number of competition problems in these industries, which the regulators need to solve through using their competition law powers. As Lord Berkeley spotted in the debate on the clause, this is a government impinging on the independence of the regulators through a strong suggestion that there are a series of correct decisions to be made.

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