The United Kingdom boasts a rich history of wielding market-wide investigations to combat competition concerns. This journey began with the Monopolies and Restrictive Practices Act of 1948, empowering the Monopolies Commission to tackle potential monopolies across industries. This early framework laid the groundwork for continuous evolution.
The Fair Trading Act of 1973 introduced the “scale monopoly” provision, allowing investigations into markets where competition appeared stifled. Subsequent advancements came with the Competition Act 1980 and the Competition and Service (Utilities) Act 1992, further broadening the scope of market investigations.
The current framework, governed by the Enterprise Act 2002, established the Competition Commission and empowered it to conduct in-depth inquiries into markets suspected of harboring impediments to competition.
Funeral Services Investigated
In the funeral services market, despite no anti-competitive agreements or dominant players, UK consumers faced excessive price increases and poor quality services for over a decade. The Competition and Markets Authority’s 2020 investigation revealed large funeral firms earning persistently high profits, indicating consumer detriment averaging at least £400 per funeral.
Key issues included low customer engagement due to challenging circumstances, lack of transparent pricing and quality information. Rather than price controls, the CMA imposed “sunlight” remedies to increase transparency around pricing, business practices, and regulatory scrutiny.
A later review found these remedies helped constrain funeral prices after years of rises, demonstrating the market investigation regime’s effectiveness in addressing consumer detriment where Competition Act powers were insufficient.
A Rigorous and Transparent Process
Market investigations in the UK adhere to a meticulous and transparent process, encompassing extensive information gathering, stakeholder consultations, and robust economic analysis. Here’s a breakdown of the key stages:
- Market Study: The Competition and Markets Authority (CMA), formed in 2014, conducts an initial market study to assess whether there’s sufficient justification for a full-fledged investigation.
- Market Investigation Reference: Upon identifying competition concerns, the CMA issues a market investigation reference, outlining the investigation’s scope and rationale.
- Information Gathering: The CMA possesses broad powers to acquire information and documents from involved parties, including mandatory information requests and oral hearings.
- Consultation and Analysis: Stakeholder consultations are a cornerstone of the process. The CMA publishes working papers and analyses for comment, while economic advisors conduct in-depth quantitative and qualitative assessments.
- Provisional Findings: The CMA releases provisional findings, including any identified adverse effects on competition (AECs) and potential remedies.
- Final Report: After considering responses to the provisional findings, the CMA publishes its final report, presenting its conclusions on AECs and any recommended remedies.
Strict statutory time limits govern the process, with investigations typically concluding within 18 months (extendable by 6 months for complex cases).
Remedies and Enforcement
Should the CMA identify one or more AECs, it has a comprehensive arsenal of legally enforceable remedies at its disposal to enhance future market competitiveness. These include:
- Structural Remedies: Mandating divestitures of businesses or assets to address market concentration issues.
- Behavioral Remedies: Imposing conduct requirements or prohibitions on firms, such as mandating access to infrastructure or information disclosure.
- Recommendations: Formulating recommendations for government or regulatory bodies to address issues through changes in regulations or public policies.
The CMA’s remedies are legally binding and enforceable through the courts. Parties that fail to comply face potential fines or other sanctions.
Judicial Oversight and Global Influence
The CMA’s market investigation decisions are subject to judicial review by the Competition Appeal Tribunal. While not a full appeal on the merits, this oversight helps ensure adherence to the law and procedural fairness.
The UK’s market investigation regime has garnered international influence, with jurisdictions like South Africa, Australia, and certain European Union member states adopting similar frameworks.
Notably, the CMA’s approach, emphasizing rigorous economic analysis, transparency, and effective remedies, has been widely recognized as a best practice model.
Success Stories and Ongoing Considerations
The market investigation regime has yielded significant consumer benefits across diverse sectors. Here are some noteworthy examples:
- Store card credit services (2006): Remedies mandated full information disclosure and the unbundling of payment protection insurance, benefiting consumers.
- Domestic bulk liquefied petroleum gas (2006): Measures were introduced to facilitate customer switching between suppliers, addressing the identified AEC.
- Personal current account banking (2016): Remedies included requirements for banks to share customer data and implement open banking standards, fostering competition and innovation.
Present Day Challenges
However, the regime isn’t without its challenges. Market investigations can be resource-intensive and time-consuming, particularly for complex markets or cases involving significant legal disputes. There are also ongoing debates concerning the appropriate scope of remedies and the delicate balance between interventionist measures and preserving commercial incentives.
Despite these challenges, the UK’s market investigation regime remains a crucial tool in its competition policy arsenal. It facilitates comprehensive examinations of markets and the implementation of tailored remedies to address competition concerns, ultimately delivering benefits to consumers and the economy.
Sources: THX News, Competition and Markets Authority & Martin Coleman.
