Mark Clough: Rottweiler or soppy poodle – we’ll just have to wait and see

The creation of the Competition and Markets Authority, to take on the competition functions of the Office of Fair Trading and the Competition Commission, has been heralded by the UK government as a fundamental reform that is designed to improve the efficiency and effectiveness of the UK’s competition regime.

But is it really a fundamental reform, and is the institutional reorganisation likely to work  in practice?

The Competition and Markets Authority (CMA) is expected, by 2014, to rise phoenix-like from the embers of the Office of Fair Trading (OFT) and the Competition Commission (CC) following the so-called bonfire of the regulatory quangos. A brainchild of the Department of Business Innovation and Skills (BIS), its creation follows a consultation on how the government could stimulate economic activity by reducing the regulatory burden on business and raise both corporate and consumer confidence. The CMA will assume all functions of the CC and the competition functions of the OFT. Lord David Currie has already been appointed chair designate of the CMA.

The Enterprise and Regulatory Reform Bill, which proposes to establish the body, last week began its second reading in the House of Lords. The clamour for a cull of the regulatory quangos was initiated by the CBI (formerly known as the Confederation of British Industry) to improve the efficiency of the sectoral regulators which enjoy concurrent competition  powers with the OFT.

One of the options contemplated by BIS was the introduction of a “prosecutorial” approach such as that applied in the United States of America. This would have required the prosecution of all competition enforcement cases before the Competition Appeal Tribunal, the specialist competition court. The OFT (or the new CMA) would have had to prove its alleged infringements with evidence subject to cross-examination. In BIS’s view, this would improve the quality of the decision-making process and protect the rights of business to be defended. However, the government  has decided not to pursue this once-in-a-lifetime opportunity to improve radically the  antitrust enforcement process, preferring to listen to the OFT rather than business and the Competition Law Association.

On the other hand, the bill gives the impression of strengthening the criminal cartel offence introduced in June 2003 by the Enterprise Act, by removing the requirement for dishonesty to be established. The government has also decided not to pursue any of the options for substantive change to merger control and the market investigations regime.

Is closing down one institution that works well (the CC) and amalgamating it with another (the OFT) that is considered by the government to be in need of greater encouragement actually going to succeed? In reality, much is going to depend on the new antitrust enforcement procedures to improve the quality of decision making introduced in mid-October by the OFT. Arguably, the necessary improvement in this area could have been achieved without such an institutional upheaval.

Despite the apparent institutional focus, the reforms will need to be monitored closely since they have major significance for business, whether big or small.  Today, businesses in the  UK pay close attention to competition compliance  largely because of the potentially severe consequences of infringement: from fines to prison sentences for individuals involved in criminal cartels and director disqualification, reputational damage and civil claims for damages.

Increasingly, business sees the value of competition law and exploits the opportunities to bring complaints and, ultimately, to claim compensation. A fairer and more efficient competition law enforcement regime can only be a good thing. Whether this will be delivered by the proposed body is very much a moot point and can only be judged as and when the new watchdog bares its teeth.

• Mark Clough QC is  a partner in the public law  and regulation team at Brodies LLP. He is chair of the EU law committee of the Law Society  of England and Wales.