The Competition Commission (CC) is an independent public body which helps to ensure healthy competition between companies in the UK for the ultimate benefit of consumers and the economy. It conducts in-depth investigations into mergers and markets and also has certain functions with regard to the major regulated industries.
The CC does not initiate inquiries independently. All its activities are undertaken following a reference to it by another authority
Mergers are referred for investigation by the Office of Fair Trading (OFT) or, sometimes, the Secretary of State.
Market investigations may be referred by the OFT, sector regulators (for markets falling within their sectoral jurisdictions) or the Secretary of State.
Reviews of merger/market investigation remedies may be referred by the OFT.
Regulatory references and appeals can be made by the sector regulators in gas, electricity, energy, water and sewerage, railways, airports and postal services.
Under the Enterprise Act 2002 (the Enterprise Act), the OFT can investigate whether there is a realistic prospect that a merger will lead to a substantial lessening of competition (SLC) in a UK market. If it finds that there is such a prospect it will refer the merger to the CC, unless it obtains undertakings from the merging parties to address its concerns, the market is of insufficient importance or it considers that one of a number of other limited exceptions applies. In exceptional cases where a merger raises certain public interest issues, the Secretary of State may also refer mergers to the CC.
Where a merger is referred to the CC, the CC carries out an investigation and decides whether it has or may be expected to result in an SLC. If so, the CC has wide-ranging powers to remedy any competition concerns resulting from the merger, including preventing a merger from going ahead. It can also require a company to sell off part of its business or take other steps to improve competition.
The Enterprise Act enables the OFT (and the sector regulators) to investigate markets and, if they are concerned that there may be competition problems, to refer those markets to the CC for in-depth investigation.
The CC is required by the Enterprise Act to decide whether any feature or combination of features in a market prevents, restricts or distorts competition, thus constituting an adverse effect on competition (AEC). Market investigations enable the CC to undertake a broad, in-depth assessment of the complexities of a market and focus on the functioning of a market as a whole rather than on a single aspect of it or on the conduct of an individual firm within it.
If the CC finds that features of a market are harming competition, it must seek to remedy the harm either by introducing remedies itself or recommending action by others.
Undertakings or orders are the primary means by which remedies are given effect under the Enterprise Act, and its predecessor, the Fair Trading Act 1973. The OFT has a statutory duty to keep these undertakings or orders under review. If the OFT considers that, due to a change of circumstances, a set of undertakings or an order should be varied or terminated, the OFT refers the matter for consideration by the CC. Responsibility for deciding on variation or termination of undertakings lies with the CC.
The CC also has various functions under legislation which regulates the supply of gas, electricity, water, sewerage, rail, air traffic services, airport services, postal services, electronic communications and public health care. The CC’s task is generally to determine disputes concerning proposed changes to the price controls, terms of licences or other regulatory arrangements under which undertakings in these sectors operate. It also has some functions under the legislation regulating the provision of financial services and legal services, and the Competition Act 1980.
The CC is not a regulator. It deals only with regulatory matters which are referred to it by other authorities, or the Secretary of State, or on appeal by a person affected by a regulator’s decision.
In 2012 the Government announced its plans for reform of UK's competition regime. These include creating a new single Competition and Markets Authority (CMA), which will take on the functions of the CC mentioned above, and the OFT's competition functions and consumer enforcement powers. The Enterprise and Regulatory Reform Bill, which gives the effect to these reforms, received Royal Assent on 25 April 2013 and the Government aims to have the CMA fully operational by Spring 2014.
History of the CC
The CC replaced the Monopolies and Mergers Commission in 1999, following the commencement of the Competition Act 1998. The Enterprise Act introduced a new regime for the assessment of mergers and markets in the UK. The CC’s role in such cases is now clearly focused on identifying and remedying competition issues, replacing a wider public interest test in the previous regime. It also continues to act as an appellate body in relation to regulatory—particularly price control—decisions taken by economic regulators.