Regulatory revamp must not erode UK’s good reputation

AT the CBI last week the business secretary Vince Cable fleshed out some earlier comments made by David Cameron on the future direction of competition policy in the UK. The merger of the OFT and the Competition Commission has already been floated, but in his speech the business secretary raised three more specific issues: an apparent difficulty in the prosecution of antitrust cases; a paucity of market investigation cases; and a query over the effectiveness of dividing up competition enforcement among a number of sector-specific regulators.
Competition policy does appear in need of a tune-up. In recent years the OFT has focused on a few significant case prosecutions, perhaps believing that the publicity increases awareness and acts as a deterrent. As a result, the number of cases taken by the OFT has been lower than anticipated – only 22 infringement decisions in the first 10 years of the Competition Act.
It has also taken a number of non-infringement decisions. Two features have arisen from the OFT’s policy choices: the length of time taken to adopt decisions, and the unexpectedly high number of appeals involving case closures.

Both have implications for resourcing of the regulator in terms of staff and time. The case closure challenges, additionally, impact on the regulator’s willingness to close a case and also on its use of competition powers in the first place. Some have said that sector regulators with specialist knowledge would be better placed to enforce the competition rules in their sector. This has not been borne out by experience. Over the last 10 years there have been only two infringement decisions taken by sector regulators.

If the government’s emerging plans seek to accelerate the processing and also increase the number of prosecutions, then it is vital that they do not erode the reputation for quality, rigour and impartiality which the existing system has earned. In itself this forms part of the attraction of the UK as a market for business.

The headline comparison of UK enforcement with larger numbers of investigations in France and Germany does not in itself mean either that UK businesses are more competition-compliant, or that processes on the continent are necessarily less rigorous.

This is not to say that efficiencies can’t be achieved. The merger of the OFT with the Competition Commission is one proposal which could create greater efficiencies by removing the need for the Commission to start all over again when a case is referred to it.

Removing or limiting concurrent powers could also improve efficiency and remove the risk (inherent in concurrency) of inconsistent decision-making. It would also be worth considering giving the regulator a greater margin of economic discretion in coming to its decisions, which might raise the bar a bit for appeals and offer more encouragement to the regulator to take on cases in the first place.

However, in the current fiscal conditions the OFT would also need to change its priorities. Also, parts of its current workload could be transferred elsewhere. For example, the concerns about the OFT being properly equipped to handle criminal competition prosecutions have re-surfaced in light of the failed prosecutions in the BA case. Such cases could instead be passed to the Serious Fraud Office.

Over the coming months the government will bring forward more detailed proposals which it will consult on in the New Year. The challenge will be to ensure that the shake up in competition investigations does not compromise the UK’s attractiveness to business.

Charles Whiddington is partner and head of Competition & EU Regulatory at Field Fisher Waterhouse LLP