UK voters elected a new parliament on 4 July, resulting in the first handover of power in over 14 years. With Labour having secured a historic landslide victory – and, arguably, a clear mandate for change – in this article we consider what the new government might mean for competition policy in the UK.
Introduction
The last Labour government (1997 to 2010) introduced very significant changes to UK competition law, and merger control in particular. This included the de-politicisation of the merger regime, with the removal of the Secretary of State's powers to refer to the MMC, accept undertakings in lieu or block mergers, and a fundamental change in assessment of mergers and acquisitions from a broad public interest test to an economics-based pure competition test.1 Those changes, which were designed to increase transparency and predictability of outcomes, also brought the UK more in line with the EU model of competition law enforcement. The question now is whether the new Labour government will also seek fundamental changes to the current competition regime, such as a return to proactive government intervention in CMA processes, with a renewed focus on public interest issues. In the absence of any pronouncements on this issue since the election, we have looked at Labour's pre-election statements and publications, including its manifesto, for clues as to its likely approach.
Potential reform of competition policy
First and foremost, Labour's manifesto focused on economic growth; more specifically, how to address the UK's lack of it in recent years. Central to Labour's promise to "kickstart economic growth" is the proposed introduction of a new industrial strategy, through which Labour intends to "ensure a pro-business environment, with a competition and regulatory framework, that supports innovation, investment, and high-quality jobs". Additionally, in relation to economic infrastructure, the manifesto promises "Labour will ensure economic regulation supports growth and investment, promotes competition, works for consumers, and enables innovation." The precise details of that new industrial strategy are, however, yet to be articulated. And the manifesto makes no mention of any changes Labour intends to make to the UK's competition regime (nor does it reference the significant changes introduced by the recently passed Digital Markets, Competition and Consumers Act, discussed below).
For indications of whether we can expect (further) reform of competition policy, one might look to the policy document Labour published in September 2022, entitled "Prosperity through Partnership: Labour's Industrial Strategy", in which competition and regulatory policies featured relatively heavily.2 This document, which focused on partnerships with business to "ensure strong, secure growth and a fairer, greener future", set out four Missions: delivering clean power by 2030; harnessing data for public good; caring for the future; and building a resilient economy.
A potential change in competition regulation was referred to under the "data" heading, which notes that there is a crucial role for the state and regulators in "de-risking and nurturing new data uses which are at an early stage of development, whilst also providing predictable and secure regulatory frameworks". The document noted that Labour is pro-innovation, but that as long as a disproportionate amount of data is held by a small number of firms, the country cannot benefit from the full potential of this new resource. It sees this tendency for concentration and digital business models as requiring a "robust and agile competition and regulatory regime", which would assist to level the playing field for smaller firms, create more competitive markets, and enable new services to emerge. This seems to be a goal that could be addressed by the incoming CMA Digital Markets Unit (discussed below).
There is also an interesting reference to the public interest test in a section which considered what Labour sees as the four pillars of the economy: sovereign capabilities; global champions; future successes; and the everyday economy. As part of the importance of sovereign capabilities, the document noted that, to ensure that the economic and security benefits of British ownership are adequately reflected, the Labour Party is committed to strengthening the public interest test on takeovers.
The broad message from the Industrial Strategy document seemed to be that the UK economy is less competitive than it should be, and that a "robust and agile" competition regime is needed to improve offerings for consumers and deal with opportunities in the digital world, whilst monitoring further concentration in digital markets. In this regard, it is perhaps instructive that the last word on competition was given to the CMA, as the Industrial Strategy document refers to the CMA's 2022 report on the state of competition in the UK. Having summarised the benefits of competition in a relatively trite way: "competitive markets are vital to long term economic prosperity, driving innovation and promoting higher quality goods and services", it notes the CMA's conclusion that there are signs that competition is weakening across the UK economy, with greater concentration, and mark-ups (i.e. uplift from cost) increasing from just over 20% in 2008 to around 35% in 2020. The document uses this to reiterate that Labour will "ensure that the competition regime remains fit for the modern economy and that it will include a pro-competition regulatory regime that addresses the novel challenges posed in digital markets".
Are any changes necessary?
An obvious question is how much of this proposed approach to competition policy is genuinely new, and indeed whether there will need to be any departure from the recent direction of progress to achieve Labour's apparent goals.
Taking first the need for a reformed regime to deal with opportunities in the digital world, the Digital Markets, Competition and Consumers Act (DMCCA) received Royal Assent shortly before the dissolution of Parliament and is expected to come into force in the Autumn. The Act received broad cross-party support and was welcomed at its second reading by then Shadow Business Minister Seema Malhotra. Objections raised by Labour were broadly limited to concerns that the bill did not go far enough in outlawing certain unfair consumer practices.
This legislation will establish a new pro-competition regime to address the conduct and market power of "Big Tech" firms. The CMA has already set up its Digital Markets Unit (DMU), and is consulting on detailed guidance setting out how the DMU will use its powers to intervene and regulate firms with "strategic market status" on an ex ante basis. One particular example given in the Industrial Strategy document is that Labour will consider giving open access to data held by those sorts of firms, in order to assist smaller companies and level the playing field. Although yet to be put to the test, it does appear that the new powers that will be given to the CMA are already extensive enough to meet Labour's objectives in this regard. Beyond regulation of digital markets, the DMCCA strengthens the CMA's powers in relation to competition investigations, including by enhancing its ability to pursue overseas cartels and introducing new powers to secure compliance with measures imposed in merger, market and antitrust investigations.
As regards merger control, one reading of the messaging is that, to achieve its industrial strategy goals, a Labour government may need to be more interventionist with the CMA. Regular strategic "steers" are already given by the Government to the CMA; it might be that such a steer or other form of guidance in relation to merger control (or indeed competition enforcement in general) is not considered sufficient and that Labour envisage a more directly interventionist approach. It does however seem very unlikely that there would ever be a return to former times of direct political interference, to the extent that a future Secretary of State would have the power to block a merger (save in certain prescribed and exceptional circumstances). Certainly though, any more intervention than a general steer will make the merger regime more unpredictable than it is already.
Linked to this of course is the reference to a strengthening of the public interest test in relation to takeovers of British companies, in light of economic and security concerns. Of course, security concerns are already dealt with by the National Security and Investment Act which entered into force in 2022, allowing government scrutiny of acquisitions in various sectors linked to national security. Also, the Government can already intervene in acquisitions that raise other public interest concerns such as financial stability, media plurality and public health, added to which the DMCCA provides for a new power, allowing for the prohibition of transactions giving foreign states control or influence over UK newspapers. It is unclear whether the intention in the Industrial Strategy document is to reintroduce an additional public interest element to sit alongside the existing test of a substantial lessening of competition, in order to deal with economic concerns. Again, if there is a return to assessments of mergers also considering, for example, their impact on labour markets or the environment, then this is likely to increase the unpredictability of outcomes.
Conclusion
In short, although the new government may surprise us by increasing existing powers of direct intervention in competition enforcement, thus reverting to a regime that lacks transparency, this seems unlikely.
Additionally, the now passed DMCCA will soon see the CMA's regulatory toolkit significantly broadened and enhanced. It has been designed to equip the CMA to address the challenges posed by today's fast-moving and powerful digital players, and was supported by Labour in opposition. It therefore seems unlikely that Labour will choose to re-tread the same ground, at least any time soon.
In sum, assuming Labour does not seek to increase the Government's powers of direct intervention in the competition regime, there is not much that is new in what has been proposed to date in support of its new industrial strategy.
Footnotes
1 Indeed, the last Labour government also proposed a consolidation of the OFT and MMC into one body, though that did not in fact occur until 2013, when the OFT merged with the Competition Commission to create the Competition and Markets Authority (CMA).
2 There is also a reference to competition law reform in a more recently leaked policy platform document that some believed might form the basis for the 2024 Manifesto. That reiterated that a Labour government will reform the competition and corporate governance regimes, to ensure that the competition regime remains robust and fit for the modern economy, promoting innovation while protecting consumers, and that the corporate governance frameworks embed long-termism, enable investment and ensure businesses act in the interests of their workers, customers and the environment.
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