The UK competition watchdog risks “killing” rising British tech companies by launching lengthy investigations while global rivals are free to pull ahead, startups have warned.
In a letter to chancellor Rishi Sunak, seen by City A.M., industry body the Coalition for a Digital Economy (Coadec) said the Competition and Markets Authority’s (CMA) “eleventh-hour interventions” risked undermining the success of the country’s booming tech sector.
“The recent actions of the CMA reflect an ignorant one-size-fits-all approach to tech acquisitions, investment and mergers that can only damage the tech ecosystem in the UK,” wrote Dom Hallas, Coadec executive director.
The watchdog has made a number of high-profile interventions in recent tech deals, including Just Eat’s merger with Takeaway.com and Amazon’s investment in Deliveroo.
It comes amid a wider tightening of tech regulation as the UK aims to clamp down on the unchecked growth of digital behemoths.
However, Hallas said an interventionist approach risked deterring both scaling companies trying to grow in global markets and the investors backing them.
“These interventions not only create investor uncertainty but also starve scaling companies of capital at the very moment they need it most,” he wrote in the letter, which was first reported by Sky News.
A report published yesterday by law firm Allen & Overy revealed the CMA had become a “standout enforcer” among global antitrust authorities, blocking three deals last year and causing a further five to be abandoned.
Hallas cited the Furman Review into digital competition, which last year warned that enforcement could be “slow and unpredictable, which is even more costly than normal in rapidly evolving technology markets”.
“The CMA now risks making the very mistake that the review identified – killing British companies with lengthy investigations whilst global digital markets move on around them,” Hallam added.
“There must be a more appropriate approach than stifling British companies of investment whilst their global competitors grow.”
Venture capital funding for UK tech firms reached £10.1bn in 2019, surpassing growth in all other countries, including the US and China, and beating the funding levels of Germany and France combined.
Hallas said this success had been driven by a “huge pool of diverse talent, strong investor networks, and forward-thinking regulators.”
He acknowledged that digital markets required a bespoke approach to regulation, but said the CMA’s recent interventions “do not display this awareness”.
CMA chief executive Andrea Coscelli has played down concerns that the watchdog had become more interventionist, arguing instead that a wider range of evidence and more dynamic modern markets had changed how it approached mergers.
“We still believe our merger control regime is largely fit-for-purpose,” he said during a speech in London yesterday.
“But we are continuing to think about whether there is a case for legislative changes to jurisdictional and/or substantive tests as we review more mergers and gain more experience of digital and dynamic markets.”