No jokes as competition and markets authority opens

It IS no April Fool that the Office of Fair Trading and Competition Commission is to be abolished on 1 April 2014. This does not mean that 50 years of merger control and 14 years of competition law enforcement will give way to anarchy in the world of competition law tomorrow.

On the contrary, a new era dawns since, on the same day, the Competition and Markets Authority (CMA) opens for business, replacing the Office of Fair Trading (OFT) and Competition Commission (CC), which will disappear. This should not be daunting for business but it is a fresh start that those doing business in Scotland need to understand from day one.

The Enterprise and Regulatory Reform Act 2013 (ERRA) provides the legal basis for the CMA. Its primary statutory duty is “to seek to promote competition, both within and outside the United Kingdom, for the benefit of consumers”.

The CMA’s own interpretation of its mission is a little more balanced. It says that the CMA “makes markets work well in the interests of consumers, businesses and the economy”.

The UK government has published what it calls its Strategic Steer, which is not intended to be a binding policy but indicative of the government’s expectations of the new CMA. This reflects the CMA’s mission, which is not only to take account of consumers’ interests and behaviour. The CMA is expected to consider potential competition concerns in business-to-business markets and to assess specific sectors where enhanced competition would contribute to faster economic growth.

The main goal is to deliver effective enforcement with swift intervention on mergers alongside rigorous and fair decision-making. This is expected to increase the number of cases and the speed with which they are dealt. While it will not be difficult for the CMA to improve on the OFT’s enforcement record, it will be interesting to see if it achieves the four antitrust decisions a year it has set as a minimum target.

In fact, the CMA looks set to get off to a brisk start following the announcement last week that it had been called upon by the regulator Ofgem to conduct an investigation into whether the “big six” energy suppliers have been preventing effective competition in the UK energy market.

Ofgem has asked the CMA “to consider once and for all whether there are further barriers to effective competition” as part of its investigation, which is anticipated to take around 18 months. Dermot Nolan, chief executive of Ofgem, said: “The CMA has powers, not available to Ofgem, to address any structural barriers that would undermine competition.”

The establishment of the new UK competition authority is certainly likely to lead to a greater focus on competition law enforcement in Scotland together with the greater risk of competition law litigation once the Consumer Rights Bill is enacted shortly, introducing group class actions and greater powers for the Competition Appeal Tribunal. Businesses of all shapes and sizes will need to be alive to the risks of their staff being involved in cartels, whether fixing prices, carving up markets, or bid-rigging with competitors.

In Scotland, in particular, the declared focus of the CMA’s attention in its first five years will mean that competition law compliance takes on a new urgency. The CMA says its targets are regulated sectors, emerging sectors and new business models. Even more controversial is the trend that has already begun of enforcing competition law and merger control in markets in what have historically been public services, including health and education. The CMA will enhance its predecessors’ control over the various economic sectoral regulators, introducing co-operation as well as control through a UK Competition Network.

Ultimately, the personal sanctions of up to five years imprisonment for the criminal cartel offence (which will be easier for the CMA to prosecute following changes in the law), director disqualification and dismissal from work should assist the CMA to put across its message in Scottish markets. Failing that, the adverse publicity, corporate fines of up to 10 per cent of worldwide group annual turnover, damages claims and general disruption to any business caught up in a competition investigation may reduce the likelihood of competition infringement in Scotland.

From tomorrow, the CMA will be well and truly open for business.

• Mark Clough QC (England & Wales), Scottish solicitor, consultant, Brodies LLP