On 20 January, the Department for Business and Trade published the Government’s long-awaited consultation on a range of changes it proposes to make to the UK competition regime. Ostensibly, the legislative changes are designed to complement the measures already implemented by the Competition and Markets Authority (‘CMA’) to support the Government’s growth and investment agenda. Those measures notably include the CMA’s widespread adoption of its so-called ‘4Ps’ framework, which is intended to improve the pace, predictability, proportionality and process of its work.
Although many of the proposals appear dry and procedural, the political context is significant for assessing their potential impact. This context includes the Government’s unprecedented removal of the CMA’s previous Chair one year ago and a broader trend towards constraining the autonomy of UK regulators. Against that backdrop, several of the proposals – in particular those relating to decision-making and governance – raise issues of constitutional importance and warrant close scrutiny for their potential impact on businesses interacting with the CMA in future.
Decision-making
The most high-profile – and constitutionally sensitive – proposal is the Government’s plan to replace the current ‘panel’ system for decision-making in phase 2 merger and markets cases. Under the current regime, final decisions on such cases are taken by an independent inquiry group of part-time experts (generally former lawyers, businesspeople, accountants, civil servants or economists), who decide the outcome by majority vote. The consultation proposes replacing this with a system in which key decisions would instead be taken by a committee or sub-committee of the CMA Board, or potentially even by the Board itself (the document is somewhat opaque on this point).
Under the proposed model, the decision-making group would include at least one independent expert (presumably drawn from a similar pool as current panel members). At least half of the group would need to be either non-executive members of the CMA Board or independent experts, with the remainder being senior CMA staff. In the most high-profile cases, this could include the CMA’s Chief Executive. The committee would be chaired by a CMA staff member.
The model is based on the structure introduced by the Digital Markets, Competition and Consumers Act 2024 for key decisions in digital markets cases. The origins of that structure are instructive. The ‘Digital Markets Board’ concept was introduced during the passage of the relevant legislation through Parliament specifically to increase the accountability of the CMA’s Digital Markets Unit (‘DMU’), in response to concerns – particularly from large technology firms – that the DMU would otherwise be free to exercise very broad ex ante regulatory powers with insufficient constraint. By implementing the board committee model for key DMU decisions, the Government of the day headed off calls for such decisions to be subject to a full merits appeal, rather than the judicial review standard that it preferred.
The logical basis for transposing that model to merger control and markets cases is not self-evident. Digital markets regulation involves ongoing, forward-looking supervision and, as noted above, the decision-making model adopted for such cases was designed to address a perceived risk of over-enforcement. By contrast, merger and markets cases are adjudicative, fact-intensive exercises, often involving finely balanced assessments of evidence and difficult trade-offs. The investigative and decision-making processes are thus rather different.
The Government argues that moving merger and markets decision-making closer to the CMA Board would improve accountability, pace, predictability and “operational consistency”. The underlying concern appears to be that the CMA Board is accountable to Parliament (and, in practice, to the Government of the day) but is not directly involved in the most high-profile decisions it must publicly defend. Apparently, CMA leadership felt uncomfortable with having to defend high profile decisions, including in the media, in which they had played no direct part. That tension was exposed most clearly in 2023, when a CMA panel initially decided to prohibit Microsoft’s acquisition of Activision, subjecting CMA leadership to intense political and media pressure, before subsequently reversing course when presented with a reworked deal.
This rationale rather downplays the fact that the panel structure was specifically designed to ensure politically neutral, balanced analysis of complex issues, under a model that was very different from the administrative model used in most other systems. While the UK’s panel system is unusual, it has deep roots. The practice of appointing independent decision-makers from the ‘great and the good’ to assess complex issues in a holistic, unbiased manner dates back to the origins of the UK regime in the 1940s and was itself a development of the well-established Royal Commission model. Importantly, final decisions were still reserved for ministers, on the basis that they were the ones who were ultimately best placed to make public policy trade-offs and were accountable to Parliament. The Enterprise Act 2002 removed ministers from phase 2 merger and markets decision-making (save for limited public interest cases), replacing political discretion with explicit competition tests. While it was a relatively small step procedurally to change the Competition Commission’s role from advising Government on such cases to making final decisions itself, the quid pro quo for its enhanced powers was oversight by the Competition Appeal Tribunal (‘CAT’). The panel system was retained to ensure politically independent decision-making, while the institutional separation of the Competition Commission (for phase 2 cases) from the Office of Fair Trading (for phase 1 reviews) reduced the risk of confirmation bias.
That logic survived the creation of the CMA in 2014, with phase 2 panels providing a “fresh pair of eyes” on in-depth cases and reducing the risk of confirmation bias inherent in a single-agency system. While longevity is not an argument in itself, and the panel system is not without flaws (including issues of transparency and consistency), it is well understood and broadly respected by parties. Against that background, it is surprising that the consultation document does not set out its reasons for dismantling it more robustly, nor give serious consideration to alternative decision-making models that might ensure independence in a more transparent manner.
It is possible that a Board-level committee could provide rigorous internal challenge, particularly if composed of senior and experienced individuals. However, significant questions remain. Senior CMA executives are already subject to heavy demands on their time, and it is unclear how they would be able to engage meaningfully across multiple complex cases. Non-executives and independent experts, for their part, may be inclined to defer to staff views, particularly as they will not form a majority on the decision-making committee, which will be chaired by a CMA executive. Conversely, it is difficult to envisage circumstances in which the combined views of non-executives and experts would lead CMA staff on the committee to overturn a strongly held internal position. The net effect may therefore be fewer checks on case teams and an increased risk of confirmation bias.
A more serious concern is that, despite the consultation document’s repeated emphasis of the importance of independent decision making, the proposal creates greater scope for political influence to be exerted behind the scenes. In this context, “accountability” risks becoming code for greater caution and a reduced willingness to take unpopular decisions, even where the evidence points clearly in one direction. By removing panels, without replacing them with an equally robust mechanism for ensuring independent decision-making, the proposals would give CMA leadership greater control over outcomes. While that may improve formal accountability, it also creates a clearer route through which ministerial pressure could influence case results, particularly under a different leadership or a future Government with an even more interventionist approach. The clear benefits of independent decision-making, in particular that decisions are made on the facts, risk being forgotten.
In such a scenario, affected parties would be forced to rely more heavily on the CAT to police the CMA’s conduct. Given the Government’s and the CMA’s firm commitment to retaining a judicial review standard of appeal, that safeguard may prove insufficiently robust to compensate for the loss of independent panels.
Merger control
As previously trailed, the Government is also proposing changes to the statutory basis for the CMA’s merger control jurisdiction. At present, the CMA may investigate a transaction where (among other things) the parties together supply 25% or more of certain goods or services in the UK. This is not a market share test, and the CMA enjoys wide discretion in how it measures “supply”, with the relevant legislation setting out an open-ended list of metrics including capacity and the number of employees engaged in a particular activity in the UK.
The concept of what constitutes a “merger” is also unusually broad. In addition to acquisitions of control, UK law captures situations in which one business acquires “material influence” over another. This concept is inherently nebulous and can arise in circumstances involving minority shareholdings well below 15%, or even in the absence of any shareholding at all. Taken together, the share of supply and material influence tests give the CMA unusually wide and uncertain jurisdiction, which it has used in recent years to review a number of global transactions, including most recently several AI-related partnerships.
In response to sustained criticism, the Government proposes modest constraints on the CMA’s discretion. These include a moving to a closed list of factors that the CMA may use to assess whether the 25% share of supply threshold is met and implementing a new statutory list of factors relevant to the assessment of material influence.
While these changes are welcome as far as they go, they do not address the core sources of unpredictability in the regime. The CMA would retain considerable flexibility to define supply by reference to metrics with little or no relationship to market power, including headcount or “quantities”, and the CMA would remain free to try to find a way to assert jurisdiction on this ground throughout of its phase 1 investigation. As regards material influence, while the consultation hints at a 15% shareholding as a potential bright line where shareholdings alone are concerned, that threshold would remain only one factor among many. The CMA would still be able to consider a wide range of factors, including access to information, commercial relationships and other contextual elements, without addressing the central difficulty with material influence, which is not its breadth but its indeterminacy.
Although it is clearly possible for arrangements short of a majority shareholding to confer control in exceptional circumstances, the key problem with material influence as a test of whether a merger has arisen is that it is very hard to determine when it is present, simply because (unlike with control) it is often uncertain precisely when the influence held by any large shareholder or commercial counterparty becomes material. This makes it very difficult to assess in advance whether the line has been crossed.
In this context, the consultation represents a missed opportunity to bring meaningful clarity and predictability to the UK merger control regime. In practical terms, following implementation of these proposals parties will still need to assume a wide and uncertain scope for UK merger control jurisdiction, particularly for minority investments and strategic collaborations.
Markets
The consultation also proposes replacing the current two-phase markets regime (a market study followed, where appropriate, by a more detailed market investigation) with a single-phase “market review”. This reform should help speed up simpler cases and address long-standing concerns about the market study process.
Market studies were originally conceived as relatively quick, exploratory exercises to determine whether a full investigation was warranted, with the relevant legislative provisions being introduced to provide a legal framework for mandatory information requests to support studies. Over time, however, many studies evolved into lengthy and detailed inquiries that, in substance, resembled market investigations but without equivalent procedural safeguards.
Replacing the two-stage process with a more flexible single phase is therefore attractive, even if the proposed framework is somewhat more complex on paper. That said, switching to a single-phase process may also carry risks of confirmation bias, especially when accompanied by the abolition of the panel system. How the CMA balances speed against robustness in practice will therefore be critical.
The consultation also proposes, almost in passing, a change to the substantive test in market cases. Rather than asking whether particular features of a market give rise to an adverse effect on competition (the current test for phase 2 cases), the CMA would be asked to consider whether there is an adverse effect on consumers. While there is overlap between the two concepts – and market studies already focus heavily on consumer outcomes – they are not co-extensive. It is thus perfectly possible to envisage consumer detriment being found in the absence of any meaningful impact on competition.
If adopted, this change would represent a significant expansion of the CMA’s markets jurisdiction, allowing intervention in a wider range of circumstances. The consultation offers little justification for such a significant shift, which has the potential to blur the boundary between competition enforcement and broader consumer protection or industrial policy objectives.
CMA guidance
Alongside a range of more minor proposals, the consultation document proposes that all CMA guidance should in future be subject to approval by Government. This is presented as a technical alignment exercise, bringing competition guidance into line with the digital markets regime.
With the best will in the world, however, ministers and officials lack the CMA’s deep technical expertise in areas such as market definition, theories of harm or remedy design. CMA guidance is primarily intended to explain how the authority will apply the law in complex and technical contexts, not to articulate policy preferences. It is therefore unclear what meaningful value Government approval would add.
At best, the proposal risks adding delay and rigidity to the process of updating guidance. At worst, it risks politicising guidance and ultimately reducing its utility. The contrast with the post-Brexit revision of the UK verticals regime is instructive: leaving the drafting of guidance to the CMA helped ensure a technically credible outcome that remained closely aligned with guidance from the European Commission and was free from the more overt political tone evident in the press release that announced the UK’s new block exemption.
Seen together with the proposed changes to decision-making structures, the guidance proposal reinforces the impression of a broader rebalancing away from regulatory independence and towards greater political control over the CMA.
Next steps
The consultation is open until the end of March. It remains to be seen whether, and to what extent, the Government will be prepared to adjust its proposals in response to feedback. Any legislative changes will in any event depend on the availability of Parliamentary time. The timing of implementation therefore remains uncertain.
For businesses, the consultation raises issues that go well beyond procedural tidying-up. In particular, those with exposure to UK merger control or market investigations may wish to consider whether, and how, to engage with the process – either individually or through trade associations – to ensure that concerns around independence, predictability and legal certainty are clearly articulated.
