CMA told to make growth and international investment top priority

That agenda was explicitly set out in a draft new ‘strategic steer’ that the government issued to the CMA. Competition law expert Giles Warrington of Pinsent Masons said that, whilst the steer is non-binding, this is likely to have a significant impact on the approach of the CMA in the enforcement of competition and consumer protection laws in the UK.

“The draft steer is a very significant departure from the steers given to the CMA by previous governments,” said Warrington. “Consistent with the government’s messaging to the CMA to date, the document starts with a strong growth message, and notes the importance of international direct investment in the UK. The steer makes it clear that the CMA’s role is to contribute to this overriding priority, and that this calls for swift, certain, proportionate and transparent regulation. The government also gives a strong steer that it expects the CMA’s approach ‘to clearly, and unambiguously, reflect the need to enhance the attractiveness of the UK as a destination for international investment’.  This focus on growth and international investment is repeated throughout the draft steer.”

According to the document, the government wants the CMA to have “growth and investment in mind” when it uses the various regulatory “tools” at its disposal.

For example, it has been told to “give appropriate consideration to prioritising pro-growth and pro-investment interventions” and to “supporting growth and international competitiveness” in the eight sectors that are at the heart of the UK’s industrial strategy – such as advanced manufacturing, clean energy, life sciences and financial services – when deciding which sectors to focus on, under its discretionary powers, and “considering remedies” following reviews, studies or investigations.

Warrington said it is notable that there was no mention of cost-of-living issues or the CMA being a thought leader internationally in the draft steer, which are notable departures from the last steer given the CMA by the previous government in November 2023.

As regards its consumer enforcement powers, which are shortly due to be enhanced under the Digital Markets, Competition and Consumers (DMCC) Act 2024, these are to be used “to, where appropriate, grow the economy through promoting consumer trust and confidence, while deterring poor corporate practices”.

The new digital markets powers of the CMA under the DMCC Act are also to be exercised “proportionately and collaboratively to unlock opportunities for growth across the UK digital economy and the wider economy”, with the CMA asked to ensure growth and innovation benefits are prioritised, including through supporting the government in delivery of the AI opportunities action plan. 

Warrington said: “This is a call to the CMA to exercise caution when exercising its new digital markets powers and to avoid regulation which may stunt growth and innovation.  The appointment of Doug Gurr, the former country manager of Amazon UK, as interim chairman of the CMA is presumably targeted at the same aim. The CMA is also being encouraged to consider the actions of agencies outside the UK where parallel regulatory action may also address UK-specific issues, to ensure parallel action is coherent and avoids duplication. Action by the European Commission under the EU’s Digital Markets Act is likely to be particularly relevant in this respect.”

Other features of the draft steer include the CMA being directed to focus on UK-specific issues; expedite its work; be transparent with business; engage with business; and ensure a collaborative approach to resolving issues.  

The CMA must report on how it has complied with the steer requirements and is encouraged to seek regular feedback from business and consumers.

Warrington said that a blog by CMA chief executive Sarah Cardell, issued shortly in advance of the publication of the draft steer, suggests that businesses can expect some material changes to UK merger control processes. Those changes can be expected in relation to four aspects, Cardell said: pace; predictability; proportionality; process.

“The changes suggested seek to address many of the concerns which have been expressed in relation to the enforcement of the UK merger control regime,” Warrington said.

On speeding up decision-making, Cardell announced that the CMA has committed to a new KPI of completing the pre-notification phase – the period during which the CMA considers a draft notification before accepting it as complete and starting the clock on its formal 40-working day timetable – within 40 working days, compared to the current 65 day average.

“This may be challenging for the CMA but could materially cut the time involved in UK merger processes,” Warrington said. “In recent years, the pre-notification process has been somewhat  open-ended for some deals, often lasting well in excess of two months. The promised focus on prioritisation of potential concerns at an earlier stage and focused information requests should help the CMA meet this new deadline.”

“It remains to be seen whether the CMA will seek to share some of the ‘pain’ associated with these tighter timetables with merging parties through shorter deadlines for information requests. Under the merger control provisions of the DMCC Act, which entered into force at the start of the year, the risk for parties failing to meet CMA deadlines in merger cases has greatly increased, through much larger fines, and so it is to be hoped that the CMA approach to parties is proportionate,” he said.

In relation to predictability, the CMA is proposing to give further guidance on its jurisdictional tests for determining whether a transaction is within scope of the UK’s merger control regime. 

“Parts of the UK test can be difficult to apply and so further guidance would be helpful, particularly in the light of the new jurisdictional threshold introduced by the DMCC Act earlier this year designed to catch ‘killer acquisitions’ – which allows the CMA to intervene in a merger where one party has UK turnover of over £350 million and a share of supply of 33% or more and the other party has a UK nexus,” Warrington said.

On proportionality, the CMA has committed to dealing with as many problematic deals with remedies, rather than by prohibiting them altogether. The CMA referred to its conditional clearance decision in relation to the Vodafone/Three merger late last year as an example of a case where deals which offer pro-competitive investment benefits may receive clearance. The CMA is due to consult on updated remedies guidance in March. The CMA has also promised to take a more proportionate approach to global deals that are subject to scrutiny by other competition authorities around the world too.

Warrington said: “The suggestion is that the CMA will focus more on deals with a distinct and direct UK impact and less on deals where action by other authorities, such as the European Commission, may also resolve any UK concerns. This is in response to criticism of the CMA taking a close interest in global deals, sometimes leading to different timetables in the UK and, in some cases, a different approach being taken in the UK to that taken by other authorities.”

On process, the CMA intends to publish a ‘Mergers Charter’ next month, to firm up the commitments contained in Cardell’s speech as well as more transparency over the merger control regime processes.

“One of the promises this will contain will involve more engagement with senior officials at an early stage in investigations,” Warrington said. “Again, this has been another criticism of the CMA’s mergers work, where business have often felt that they have not been able to engage with senior officials until late in the process.”

Warrington said: “These changes appear to represent a significant change for the better. Businesses will be anxious to see the practical impact of the reforms promised.”

“Of course, the question will be raised as to whether the CMA’s new approach, combined with the draft steer, will lead to more business-friendly merger control enforcement in the UK. The CMA still has to apply the statutory tests in UK merger control legislation to mergers it reviews – these have not changed – and, in many cases, it has no discretion as to which mergers to review, when mergers are notified to it. However, the commitment to greater consideration of remedies in problematic cases could be significant: the Vodafone/Three case suggests that there may be greater willingness to accept behavioural remedies, as opposed to divestment, remedies in certain cases. This may open up greater opportunities for parties to present behavioural or investment commitments, in particular those which are aligned with the government’s growth agenda,” he said.

The UK government has asked for any views on its draft strategic steer by 6 March 2025.