Guarding Competition in a Dynamic Economy
The UK government’s policy on monopolies and mergers reflects a long-standing commitment to maintaining competitive markets, protecting consumers, and ensuring economic efficiency. While large firms and consolidations are not inherently anti-competitive, they attract scrutiny when they threaten to distort market dynamics. This article examines the theoretical and legal underpinnings of UK competition policy, the institutions responsible for enforcement—most notably the Competition and Markets Authority (CMA)—and recent trends in merger investigations and monopolistic practices.
Historical Evolution of Competition Policy
Post-War Origins
UK competition policy began to take shape in the aftermath of World War II, amid growing concerns over industrial consolidation and collusive practices. The Monopolies and Restrictive Practices (Inquiry and Control) Act 1948 laid the foundation for modern antitrust policy by enabling the investigation of firms controlling one-third or more of a given market.
Strengthening the Framework: 1970s–1990s
The Fair Trading Act 1973 and subsequent creation of the Office of Fair Trading (OFT) and the Monopolies and Mergers Commission (MMC) expanded the scope of regulation. Key developments included:
- Broader powers to investigate monopolies, mergers, and restrictive trade practices
- Formal merger notification procedures
- Public interest tests as criteria for merger evaluation
Modernization and European Alignment
The Competition Act 1998 aligned UK policy more closely with EU competition law, introducing prohibitions on abuse of dominant position (similar to Article 102 TFEU) and anti-competitive agreements (akin to Article 101 TFEU).
Current Legal Framework
1. Competition Act 1998
This act introduced two core prohibitions:
- Chapter I prohibition: Restricts anti-competitive agreements between firms.
- Chapter II prohibition: Bans abuse of a dominant position in a market.
2. Enterprise Act 2002
The act restructured merger control and granted the CMA independent powers to investigate mergers and markets. Key features include:
- A “substantial lessening of competition” (SLC) test for mergers
- Mandatory Phase 2 investigations for significant mergers
- Criminal sanctions for cartel behavior
3. Enterprise and Regulatory Reform Act 2013
This act dissolved the OFT and Competition Commission, consolidating them into the CMA, which now serves as the UK’s principal competition regulator.
Institutional Structure: The Role of the CMA
Mandate and Responsibilities
The Competition and Markets Authority is an independent non-ministerial department responsible for enforcing competition law and consumer protection. Its remit includes:
- Investigating mergers that may reduce competition
- Conducting market studies and market investigations
- Pursuing anti-competitive conduct and cartels
- Advising government on competition issues
Enforcement Tools
The CMA wields significant investigative and enforcement powers:
- Compulsory document production and interviews
- Interim measures to prevent harm during investigations
- Imposing fines up to 10% of a firm’s global turnover
Merger Control Regime
Thresholds for Scrutiny
Under UK law, a merger qualifies for investigation if:
- The combined entity has a UK turnover exceeding £70 million
- The merger results in or strengthens a share of 25% or more in any UK market
Phase 1 and Phase 2 Investigations
- Phase 1: Preliminary review to determine if there’s a realistic prospect of an SLC
- Phase 2: In-depth investigation involving hearings, economic analysis, and potential remedies
Remedies
If an SLC is identified, the CMA may:
- Block the merger
- Require divestment of overlapping businesses
- Impose behavioral commitments to restore competition
Policy Towards Monopolies
Identifying Dominance
A firm is considered dominant if it holds a market share over 40% and can act independently of competitors and customers. Dominance alone is not illegal; abuse of that dominance is.
Forms of Abuse
- Excessive pricing
- Predatory pricing
- Refusal to supply essential facilities
- Exclusive dealing or tying practices
Recent Enforcement Examples
- Pharmaceuticals: CMA fined Pfizer and Flynn Pharma over excessive pricing of anti-epilepsy drugs.
- Digital markets: The CMA scrutinized Apple and Google for potential abuse of app store dominance.
Recent High-Profile Cases and Trends
Microsoft / Activision Blizzard (2023)
Initially blocked due to concerns over cloud gaming competition, the CMA later approved the deal following restructuring. This highlights a more cautious stance on tech mergers.
Facebook / Giphy (2021)
The CMA ordered Facebook (Meta) to divest Giphy, arguing that the merger reduced competition in display advertising and social media features.
Asda / Sainsbury’s (2019)
The CMA blocked the supermarket merger, citing higher prices, reduced quality, and fewer choices for consumers.
Broad Trends
- Increased scrutiny of digital platforms
- Emphasis on protecting nascent and potential competition
- Coordination with international regulators
Post-Brexit Competition Policy
Divergence from EU Law
Post-Brexit, the UK is no longer bound by EU competition decisions. This has enabled the CMA to take a more independent and proactive stance, particularly in tech and pharmaceutical sectors.
Dual Filings
Mergers with European relevance now require separate filings with the European Commission and the CMA, leading to potential regulatory divergence.
Proposed Reforms and Future Direction
Digital Markets, Competition and Consumers Bill
Introduced in 2023, the bill aims to:
- Grant the CMA greater powers over digital “gatekeepers”
- Enable swift intervention against unfair practices
- Enhance consumer rights enforcement
Focus on Proactive Regulation
The CMA is shifting towards a proactive model that addresses competition concerns before they become entrenched, particularly in fast-moving markets like fintech and AI.
Striking the Balance: Competition and Innovation
UK policy on monopolies and mergers reflects an ongoing tension between enabling business growth and protecting market integrity. While large firms may bring scale, investment, and innovation, unchecked dominance can harm consumers and stifle competition. The UK’s evolving regulatory regime—especially under the CMA—demonstrates a commitment to dynamic oversight, particularly in digital and emerging sectors. As markets globalize and concentrate further, the effectiveness of UK policy will depend on its ability to adapt rapidly, coordinate internationally, and prioritize both fairness and economic resilience.