in developing countries, the state plays a double role: as ca, and as market player. Thus, the transition to become a developed country requires cas to be indep <> cocoo challenge nations’ [regs/laws that are in breach of their own constitutions/int.treates], by failing to declare the indep of cas
cas have 2 clcp mandates: <> cocoo challenge cas failing to comply with these mandates
a. enforcement
b. advocacy
a. clcp enforcement
in the UK, (though not in most other countries), cma have the power/duty to investigate/remedy anticomps, without targeting any individual company: The CMA first carries out a Market Study ,following which, it can either make recommendations to the industry or to government (e.g. for regulatory action), or it can decide to carry out a full Market Investigation[ = the CMA is required to decide whether there is an Adverse Effect on Competition (‘AEC’).]…..eg: cma marketstudy 2019 on the large 4 audit/acc firms. The CMA then made recommendations to government…. but it might have been better if there had been a full Market Investigation which could have led to the CMA imposing its own remedies, rather than relying on politicians to take on significant vested interests.)
the cma has a Horizon Scanning team, responsible for gathering leads [using these tools]:
• an internal intranet-based ‘Ideas Lab’. This gathers ideas and electronic discussion from OFT staff members;
• an cma Project Ideas Group. This group meets bi-monthly and provides support to R&D
functions within the OFT by bringing together people and intelligence from across the
organisation, and coordinating resource to investigate embryonic ideas;
• the Consumer Direct database. Consumer Direct is a government-funded telephone and online service offering information and advice on consumer issues, operated by the cma in partnership with local government Trading Standards Services. Consumer Direct holds a database of complaints received from consumers. cma monitors trends across sectors in order to inform its market study selection process.
ca settlements/leniency:
are easier to get, if competition authorities use transparent and predictable procedures, so defendants can assess upfront the rewards for agreeing to settle as well as the risks if they decide not to settle
When a competition authority accepts a settlement without admission of guilt, it gets a higher fine, but reduces the defendant’s liability, thus undermining deterrence.
Settlements are usually used to end a case when the initial investigation has been concluded. exceptions: Germany settled during the early stages of an investigation, thus blurring the line between leniency/cooperation/settlement
if the combined discounts from cooperation/settlement/guilty plea, are too generous, Leniency programs will not be used by firms
cma has the right to make an application to the (“CAT”) to increase the penalty over what was agreed under the settlement, if the party to the settlement appeals the cma infringement decision to the CAT
Sometimes cma announces a settlement, without having made public that it had issued a SO (statement of objections) to the firm.
ca MARKET STUDIES
Market studies are part of ca’s advocacy mandate, and serve two primary purposes.
a. as a precursor to litigation: when anticompetitive behavior is suspected in a sector but the source is unknown
b. as a foundation for competition advocacy: when there is no anticomp suspicion, yet it does not appear that the market is functioning well for consumers.
market studies may lead to proposals to deregulate, restrict regulation, reform market institutions, or improve information dissemination to consumers or suppliers….Market studies are a good way to develop the link between consumer policy and competition policy:
eg. ca’ market study found that drug manufacturers were competing for shelf space in Canadian pharmacies by offering pharmacies, rebates of up to 40 percent of the retail price. However, in many provinces, the benefits of this competition were not passed on to consumers or insurance companies….thus, a public drug plan was designed, to give pharmacies incentive to pass rebates on to consumers
eg. the OECD’s Competition Assessment Toolkit was used, to discover that the rules that limit advertising, prices, and restrict entry, go beyond legitimate consumer protection. Rather than protecting consumers, these rules lead to anticomps that translate into higher prices, limit choice of service providers, and restrict consumer information. The study identified numerous examples of rules that regulators should consider revising/removing to promote greater competition, to better serve consumers and to enhance productivity
<> cocoo: press/triggerasupercomplaint, requesting cma to start a market study… to amend some regulations
UK. CMA MARKET STUDIES
cma performs market studies pursuant to section 5 of the Enterprise Act 2002
The cma does not have the power to force undertakings to provide information for the purposes of a market study. It has powers to collect information, but there is no penalty for non-compliance
cma market study’s possible outcomes:
a. a decision that intervention is not appropriate on the evidence available,
b. making recommendations to the Government or regulators,
c. investigation or enforcement actions…. [when cartel prohibition may be needed]
c. a market investigation reference (“MIRs”) to the Cma
eg: • the medicines distribution market study:
• The PPRS market study, in which predatory pricing and price discrimination in the pharmaceuticals sector were found to have been facilitated by the PPRS. The aim of the study was to assess whether the PPRS secures value for money for the (NHS), whilst offering appropriate incentives for pharmaceutical companies to invest in new and useful drugs for the future. the study:
− identified a number of drugs where prices were significantly out of line with patient benefit, including treatments for cholesterol, blood pressure and stomach acid
− recommended that the current ‘profit cap and price cut’ scheme should be replaced with a patient-focussed value based pricing scheme in which the prices the NHS pays for medicines reflect the therapeutic benefits to patients.
The cma recommended that changes should be made to the government’s Pharmaceutical Price Regulation Scheme (PPRS) to ensure that NHS medicines costs do not increase as a result of the changes in distribution. It also recommended that the government consider legislating to provide for minimum service standards, if it was concerned that these would reduce under the new distribution arrangements. The government response accepted the recommendations for alterations to the PPRS, and said that it would keep service standards under review.
The PPRS is the method by which the UK Government seeks to control the prices of branded prescription medicines. The scheme comprises two main components: profit controls that apply to all the branded products sold by a company to the NHS, and price controls that allow companies freedom to set the initial price of new active substances, but restrict subsequent increases to the NHS list price.
eg. the private dentistry market study:
was triggered by a super-complaint that highlighted six problem areas (encompassing both competition and consumer concerns): a lack of price transparency; a failure of competition; little impact from new entrants to the market to trigger increased competition; the absence of a complaints system; a reduction in competition because of problems with access to NHS dentistry; and a failure to comply with professional guidance….The study recommended improving consumer information through better self regulation and reducing restrictions on the supply of dentistry services; that each practice should have an indep. complaints procedure; All of the recommendations were implemented by gov.
eg. cma market study into the fairness of unauthorised bank overdraft charges, and got them removed.
eg. the public subsidies [to private firms] market study:
gave recommendations for changes to state aid rules, guidance to subsidy providers in the UK and improved data collection on subsidies. The study produced:
− a practical framework to identify the costs and benefits of a proposed subsidy, including its potential impact on competition…UK Treasury incorporated this into its government guidance on public subsidies (known as the Green Book);
− proposals to the EC for reforming state aid controls to avoid distorting competition. These are now reflected in the Commission’s state aid framework for R&D and risk capital for SMEs
eg: the property searches market study:
complaints made by private search companies about access to information held by local authorities, and by a single central electronic search provider. The study made a number of recommendations, aimed at opening up access to private search companies to the raw property information held by local authorities….all of the recommendations were accepted by the government and the reg.body
b. ca advocacy
cas have a duty to press [eg via market studies…] for the amendment of clcp harmful economic policies, and to build a competition culture: informing firms and citizens about the value of competition…..so that firms/consumers can raise their own complaints : section 11 of the Enterprise Act 2002, certain designated consumer bodies have the power to make what is called a ‘super-complaint’ to the cma. This collective complaint is unique to the UK. When the cma receives a super-complaint, it must publish a reasoned response within 90 days… One of the possible outcomes of a super-complaint could be a market study
<> cocoo v nations that fail to give their cas powers to resist anticomp
-to inform citizens and firms: it’s harder to persuade a jury of the harm caused by anticomps, than, say, shoplifting. I don’t think people get it. eg. flights are now cheaper etc.; airports: in 2009 cma ordered competition between London’s 3 major airports, by ordering Heathrow’s owner, BAA, to relinquish ownership of Gatwick and Stansted. It also ordered BAA to relinquish ownership of either Edinburgh or Glasgow airport, so as to introduce more competition between Scottish airports.
-to promote trade liberalisation…but domestic firms lobby gov, to promote anticomps: eg to keep existing entry barriers to foreign competitors.
– to intervene in the lawmaking process by filtering out the many law proposals, to single out those that present significant clcp issues: trade policies, state aids and subsidies, and procurement procedures….cas have a duty to urge gov, that anticomps originating from [trade policies, state aids and subsidies, and procurement], should be limited to restructuring programs, and should be temporary, and that gov should consider alternatives [that cause no anticomps]…..Governments are notoriously inefficient buyers. Their procurement procedures invite collusion and corruption. …thus, cas should be proactive in advocating procurement reforms, which will translate into savings for the country’s citizens
– to resist:
- reg.exemptions in some sectors (eg banking)….. cl and wpi regulation is necessary in some markets, but regulation should be kept to a minimum…. such regulatory reform results in higher productivity, lower prices, the elimination of shortages, the stimulation of innovation, while ultimately boosting GDP.
CMA is not a regulator, but both a competition and consumer agency regulation is a poor proxy for competition. The UK’s sector regulators – Ofcom, Ofgem, Ofwat, ORR and so on – apply direct regulation only where there is no other option: where there is no scope for competition – where there are ‘natural monopolies’, which is typical for utility networks. It is very often economically wasteful, and sometimes environmentally wasteful, to duplicate gas pipelines or water reservoirs and pipes or electricity networks or broadband wire networks
- Privatisation. the tendency of governments is to confer a private firm with map, or even monopoly power, to maximise its sale [privatisation] value. Thus, it should be the goal of the competition agency to introduce as much competition
The ca should have a role in the privatisation process, so that public monopolies do not become private ones.
The state has a strong incentive to create an enterprise (eg a SOE: [state owned enterprise] ) and give it map, with the sole purpose of selling (privatisation) it later, making a large profit…this could be a blatant breach of clcp….. BUT…The ca’s duty is to offer resistance to this, which is easy if , in that nation (eg uk), cl can be applied to Privatisation… But, of course, developing countries only give to their cas, powers of advocacy, and not powers to resist Privatisation [that harms clcp]
cma as a consumer protection body
cma proposed trustpilot and comparison websites, as a positive solution to misleading online reviews, fake positive reviews, or the suppression of bad reviews
Our 2 biggest fines last year were in medicines supplied by pharmaceutical companies to the NHS – an anti-epilepsy drug and an anti-depressant. NHS was paying too much for them
The CMA’s powers are in some ways quite extraordinary. They can make Orders which are legally binding on businesses that were not part of the original investigation. For instance they can require a range of businesses to publish information which would make the market work more effectively. And they can force companies to sell large chunks of their businesses. For instance, they forced BAA (the owner of Heathrow Airport) to sell both Gatwick and Stansted.
Ofcom’s reluctance to refer the broadband final mile was better understood, despite BT’s clear unwillingness to allow its broadband competitors to access its exchanges and use BT’s wires to competitors. this reluctance was understood because a near two year Market Investigation would have slowed the needed (wpi) internet expansion…Ofcom and BT came to an agreement in 2006 intended to ensure that rival telecoms operators had equality of access to BT’s local network, resulting in the creation of BT Openreach.
NAO recommendations to cma
-Like all other cas, the cma failed to identify major and persistent breaches of competition law in the financial sector….Following applications for leniency, in 2013, the Ec fined financial institutions €1.71 billion for participating in cartels in interest rate derivatives. as a result, competition powers were given to the Fca and the Psr (payment Systems Regulator)
-“the cma has failed to produce a substantial flow of enforcement decisions. Awareness of competition law and the competition authorities is low, and there is limited evidence on the VFM of their work….Thus, BIS and HM Treasury should liaise with cma, to report costs in the CMA’s annual report on concurrency. This would increase transparency and help the government to judge whether it is achieving value for money…“The low caseflow we identified in 2010 has continued, with the CMA making 24 decisions and the regulators just eight since 2010. The UK competition authorities issued only £65 million of competition enforcement fines between 2012 and 2014 (in 2015 prices), compared to almost £1.4 billion of fines imposed by their German counterparts”
-cma should Commission an external review of the costs (including those of business), processes and their anticipated outcomes of its two major market investigations, including whether it could achieve greater vfm using smaller expert teams