Functional Separation in the U.K. Competition Regime

Renato Nazzini, May 14, 2012

In March 2012, the U.K. Government published its Response to a consultation on options for reform of the competition regime issued one year earlier, on March 16, 2011. The Foreword to the Response presents the proposed changes as “far-reaching reforms, aiming at creating a competition regime that delivers better outcomes for business, consumers and the economy.” In fact, many of the proposals may be described as a desirable “tidy-up” of the system, addressing practical problems that have arisen in the past decade or so.

One change, however, stands out as a deserving the description as a “far-reaching” reform: the merger between the Office of Fair Trading (“OFT”) and the Competition Commission into a newly established Competition and Markets Authority (“CMA”). The CMA will combine the functions of the OFT and the Competition Commission. Such a change is certainly significant in the United Kingdom, where business and the legal profession are used to a structural separation model in mergers and market inquiries. Under the current system, the OFT, if a certain threshold is met, refers a merger or a market to the Competition Commission, which is responsible for the final decision.

The perceived benefits of the current system are many but, on the whole, they can be boiled down to two: (1) clear independence of the decision-maker from the “prosecutor,” which dispels any suspicion of bias and provides a “fresh pair of eyes” in complex cases; and (2) high quality of decision-making, given that the Competition Commission is structured in such a way as to be able to draw on significant expertise and focus its resources on phase 2 investigations without any other conflicting calls on its priorities.

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