The UK's New Market Studies And Market Investigations Regime

Following our Commentary titled The UK's New Competition and Markets Authority: Reform of the UK Merger Control Regime," which discusses the main changes to UK merger control, this Commentary addresses changes brought by the UK's new competition enforcement regime to market studies and investigations. These studies and investigations are a powerful tool available to UK competition regulators to examine markets they believe may not function sufficiently well—even if there is no evidence of unlawful conduct—and to demand wide-ranging changes to how those markets operate, including requiring companies to divest parts of their businesses. Markets that are currently the subject of such investigations include private health care, cement/ready-mix concrete/aggregates, and statutory audit services.

Detailed guidance as to the new UK market studies and investigations process is set out in the Competition and Markets Authority ("CMA")'s Markets Studies and Market Investigations: Supplemental guidance on the CMA's approach ("Guidance"). The Guidance explains the changes introduced to the markets regime by the reform.

The new regime introduces shortened time limits, new types of references, and wider powers for the CMA. This Commentary summarizes the main changes, which are effective from April 1.

WHO WILL BE RESPONSIBLE FOR MARKET STUDIES AND INVESTIGATIONS?

Market studies and market investigations enable the competition authorities to examine any market in the UK, assess whether there are obstacles to competition functioning well in those markets, and propose actions (often wide-ranging, including business divestments) to address any such obstacles. Under the current regime, the Office of Fair Trading ("OFT") (and sectoral regulators, such as Ofgem) carries out market studies and can refer markets to the Competition Commission ("CC") for a market investigation. During market investigations, which are more detailed examinations into particular markets, the CC must decide whether there is an adverse effect on competition in the markets in question and, if so, what remedial action is appropriate.

In the future, the CMA will take over the OFT's role in respect of market studies (Phase 1) as well as the CC's role in respect of market investigations (Phase 2). Sectoral regulators—such as Ofcom (communications), Ofgem (gas and electricity), and Monitor (health)—will continue to be able to ask a separate body to carry out an in-depth investigation into particular markets (that body used to be the CC and is now the CMA), and indeed Ofgem has recently proposed doing so in respect of the UK energy market.

The new regime has put safeguards in place to take account of the fact that the CMA will be responsible for the conduct of both phases. The decision to make a market...