Thursday, May 24, 2012
Posted by D. Daniel Sokol
Despoina Mantzari & Valentine Korah (UCL) discuss It Takes One to Tango: The Single U.K. Competition and Markets Authority.
ABSTRACT: The focus on good institutional design, as an important component of strong competition policy and enforcement, has become a priority of antitrust agencies around the globe. Both the "external design" of the agency, i.e. the place the authority occupies in the administrative structure of a state and the "internal design," i.e. the system and procedures for antitrust enforcement and for the development of competition advocacy have been the subject of deliberation among trans-governmental participants in networks (i.e. the ICN, the ECN, and the OECD). In the research community, the work of industrial organization and developmental economists on the relationship between competition and productivity growth has been further enriched by the recognition that institutions and their performance also affect society's ability to generate economic growth. The U.K. competition regime is widely perceived as one of the best in the world and could not remain inattentive to calls for growth, particularly in the aftermath of the financial crisis. Improvements in its institutional performance and the level and length of decision-making were envisaged as fundamental to the Government's strategy to support the recovery of the economy and the country's prosperity. Following a lengthy consultation process, the Government decided to go down the path of institutional reform, by announcing the merger of the two principal U.K. competition authorities, i.e. the Office of Fair Trading ("OFT") and the Competition Commission ("CC"), into a single Competition and Markets Authority ("CMA"), to be fully operational by April 2014. Changes are being introduced also to each of the regimes for antitrust, mergers, and markets, aiming to improve the robustness of decisions and to streamline the regime.
Such radical institutional changes are hard to accomplish. Partly because institutions are path dependent, and partly because any change in the status quo involves costs, actors are not attracted to an alternative institutional arrangement, even if it may provide higher aggregate returns in the long run. Furthermore, because "institutions work in complex ways akin to an ecosystem," interference in the operation of one body may affect the working of another body. Nevertheless, it will be shown that the proposed merger is not followed, at least at this stage, by profound changes in the decision-making process of the two institutions; a fact that mitigates the risk of externalities to the judicial bodies of the U.K.'s competition landscape. Overall, the institutional reform falls short of the expectations of a watershed event, rather suggesting the symbiosis of the two authorities under a single roof.
Given the breadth of the developments we will not discuss each of them in detail, but rather concentrate on certain features of the CMA, which may render the symbiosis and interaction with other bodies of the U.K.'s competition ecosystem less harmonious.