LANCASTER UNIVERSITY, 29TH NOVEMBER 2000

ESMEE FAIRBAIRN LECTURE BY DR DEREK MORRIS, CHAIRMAN, COMPETITION COMMISSION

COMPETITION POLICY AND REGULATION IN THE UK: A NEW ERA

Introduction

The UK has had a competition policy regime since as far back as 1948, but this area of policy has not, for most of this period, been seen as the most gripping or most challenging part of either microeconomic analysis or economic policy-making. Yet there has been an evolution, some would say a revolution, in both, which arguably has brought the area where they intersect-competition policy and economic regulation-to a prominence unprecedented in the UK.

This audience, or indeed any audience not totally absorbed in this somewhat arcane subject, could be forgiven for not having noticed this phenomenon. As recently as the beginning of this year it was quite credible to argue that, despite a general toughening in application, the competition regime of the UK had remained fundamentally unchanged for over 25 years, since the Fair Trading Act of 1973. But this first year of the new millennium is, as I will seek briefly to demonstrate, a major turning point, in a number of dimensions, which will in due course be seen to have created a sea-change in the regime, and established a new climate, a new culture even within which industry operates in the UK. In short, a new era is upon us, one which reflects a number of economic and social trends, within which quite powerful economic ideas or even ideologies are moving, and which many (though not necessarily all) regard as manifestly beneficial to the well-being of society.

The 1998 Competition Act

First and foremost among the changes has been the new Competition Act. This was passed in 1998, triggered the 1999 change in name of the Monopolies and Mergers Commission to the Competition Commission (the significance of which I will return to shortly) and came into force on 1st March this year. This contains two new prohibitions, the so-called Chapter I prohibition on anti-competitive agreements by firms-primarily, but by no means only, secret cartel activities-and a Chapter II prohibition on abuse of a dominant position in a market, covering such matters as exploitation of purchasers through excessive prices, predatory pricing, undue discrimination etc. These two prohibitions are closely and explicitly modelled on what were Articles 85 and 86 of the Treaty of Rome, now confusingly re-numbered 81 and 82. There is therefore a significant history of their implementation in the European Union and, indeed, the new UK Act will be directly subject to European jurisprudence in this field.

Since the coming into force of the 1998 Act, the European Commission has announced that it intends to 'de-centralise' the application of Articles 81 and 82 by allowing National Competition Authorities and National Courts to implement the Articles directly. This new regime is planned for 2003. In the interim it will be necessary to determine the extent to which this will require some reformulation of the 1998 Act to ensure consistency both in terms of substantive legal issues and institutional and other procedural matters.

Under the new Act, the Director General of Fair Trading may investigate alleged breaches and, if he finds either of the prohibitions have been breached, has powers to fine the company or companies concerned up to 10 per cent of their annual revenue for up to three years if the breach has been running that long. That could easily eliminate some companies' profits for several years, which in turn could have serious consequences for their share price, and could even make them vulnerable to takeover. In short, these powers are very considerable and more severe even than those under the Treaty of Rome, which limits fines to 10 per cent of revenue. (The powers are not as strong as the original European powers-in AD 79 the Romans introduced a law which punished price fixing by death or banishment to Britain. Could such miscreants be the origin of the web of restrictive agreements with which UK industry is said to be rife?)

There are, however, two very important safeguards. The first is that companies can notify the Office of Fair Trading of agreements and the like, and seek an exemption, for example because an agreement is designed to promote technical improvements, innovation etc from which all the participants can gain. In addition a large number of vertical agreements, ie between suppliers and their customers, are outside the Act, though predictably this does not extend to price fixing agreements.

The second safeguard is that companies can appeal-against decisions that a prohibition has been breached, against the imposition or size of fines, against decisions to grant or not to grant exemptions, and against interim order decisions (designed to prevent continuation of a practice while it is being investigated). Such appeals are made to specifically created Appeal Tribunals which are a new function of the Competition Commission in addition to its previous Monopolies and Mergers Commission activities, and is the reason for its change of name. This section of the Commission is headed by a President, currently Sir Christopher Bellamy, a former judge at the Court of First Instance in Europe.

To date there have been no fines or appeals. This is unsurprising given that only breaches since 1st March this year can be prosecuted. But the OFT are on record as pursuing a number of cases arising out of the 3000 or so complaints they are currently receiving, and have carried out the first 'dawn raids' (which don't normally occur at dawn in fact) to seize documents, computer material etc. It is therefore far too early to assess the effect of the new Act. Nor is it entirely clear how one would do it. Maximum effectiveness would see all companies implementing comprehensive compliance programmes such that no-one breached the Act, no complaints arose and no fines were justified. Nonetheless most commentators will inevitably judge the new Act by the scale and number of breaches it generates and the fines levied in consequence, as has to some extent been the case in the US. And it is extraordinary to see the scale of some of the cartels rooted out in the US, given not only the fines but the potential for prison sentences which perpetrators face there. Will we, in due course, see similar revelations in the UK?

One important factor contributing to this will be the OFT's immunity programme, based on that in the US, whereby, for example, the first member of a cartel through the OFT's doors to blow the whistle will, provide they co-operate fully, get complete immunity. Subsequent arrivals will not be so fortunate.

Merger reform and its implications

This, then, is a major innovation in competition policy in the UK this year. It is very far from being the only one. Potentially of equally far-reaching importance was the announcement by the Secretary of State for Trade and Industry, Stephen Byers, on 27 October, of reform of merger control. Currently, under the 1973 Fair Trading Act, any merger, whether notified to the OFT or not, whether intended or consummated, can be referred by the Secretary of State (SoS) to the Competition Commission for investigation, provided it is above a threshold size. This however is in the light of the DGFT's advice on the matter and in virtually all cases that advice is acted upon. The Commission reports on whether the merger is against the public interest or not. If not it is cleared, but if it is judged to be against the public interest then the Commission recommends remedies, typically prohibition of the merger, partial divestment or restrictions on the merged entity's activities. The SoS decides and the OFT enforces but, here again it is very rare for the SoS to adopt significantly different remedies to those recommended by the Commission.

The reforms announced have three key elements. The most prominent, and conceptually most important, paradoxically may not in practice have huge effect-at least not immediately-namely the passing of responsibility for merger decisions in almost all circumstances (see below) to the independent competition authorities. Under the new regime the DGFT will decide which mergers to refer, and the Commission's findings will be determinative.

This move to explicit independence is clearly based on the move in 1997 to establish an independent monetary policy under the Bank of England's Monetary Policy Committee, which has generally be regarded as successful. As I hinted earlier the immediate effect may not be great, because only rarely has the OFT's advice on reference, or the Commission's proposed remedies been significantly varied by the SoS, though the reform will make the process less uncertain for companies and probably shorter, which is particularly important in relation to mergers.

But the extension of the concept of independence in the implementation of economic policy is nonetheless very significant. At the most fundamental level it reflects a change in political theory, one traceable in the academic literature back to the 50s and 60s in the US, away from the notion that government, or its public sector agencies, could be assumed to act to mediate private interests and private interest conflicts to promote the wider interests of society-a notion that much political, and it has to be said, economic theory utilised-to one in which government is seen in effect as just another forum within which private interests, be they short term, sectoral or whatever, exert themselves. So, in order for example that the short term losers from a tough anti-inflation policy cannot, via lobbying government or parliament, undermine its wider-spread and longer term benefits, management of interest rates is passed to an independent body. Clearly, and rightly, the objectives of policy, in that case inflation, remain the government's responsibility, as manifest in the inflation target set, but achieving it is left to an independent body. In the same way it is now intended, when legislative timetables permit, that the competition regime, in particular the criteria for determining mergers will be set by government, but implementation will be through an independent OFT and independent Competition Commission.

This leads directly to the second significant change. Against such a background it becomes increasingly untenable that mergers should be assessed against a broad 'public interest' criterion such as is specified in the 1973 Fair Trading Act. To be sure the Act indicates matters that should be taken into account; and, apart from a now rather anachronistic-looking reference to the need for a "balanced distribution of employment", these very much refer to competition and consumer interests. And in practice these have determined almost every merger decision in the last ten years if not longer. But the Act also says that the Commission may take into account anything it deems relevant, and on occasion this can generate both a substantial number of submissions, extensive debate and considerable uncertainty. So, for both conceptual and practical reasons, the reform envisages a new criterion-whether the merger will bring about a substantial lessening of competition. If it does then the Commission will determine the appropriate remedy. At this stage, any offsetting benefits of the merger to consumers can be weighed in the balance and might be reflected in the remedies, though it is envisaged that such offsetting benefits would have to be reasonably clear, significant and fairly imminent.

The logic behind this is in my view very sound. (I can say this because the Commission, being a body for implementing the competition regime has, other than commenting on practical implications, no role in policy). But it inevitably raises a question. What if a merger simply does have wider ramifications, for good or bad, that do not relate to competition or potentially offsetting consumer benefits? For example a merger of two defence contractors might clearly reduce competition but be in the nation's defence interests; or acquisition by a foreign contractor might not reduce competition but jeopardise defence interests. Some mergers may have environmental consequences, beneficial or harmful, which are not an issue of competition, nor even of the interests of consumers of the products involved.

To meet this objection the reform will retain a 'gateway' power for the SoS to intervene, but only in very specific circumstances. Initially this will include only cases where national defence interests are involved. If other areas emerge, for example environmental, then the SoS will need Parliamentary approval for this. Despite what we all read about the increasing subservience of Parliament to Government, this remains, rightly, a serious hurdle. But, more important, in a world of independent agencies implementing government policy, it locates these wider public interest issues where they should be located, which is with Parliament and Government.

These are potentially far-reaching changes, and quite heavy going. There is a third important consequence of slightly lighter shade The shift from a public interest test to a competition one raises interesting questions about the type of people who become members of the Competition Commission, charged with implementing merger control or, indeed, charged with hearing appeals in relation to the 1998 Act. Currently the members, 31 on the so-called reporting side, plus 22 specialist panel members for various utility and newspaper cases, (essentially the functions previously carried out by the MMC, and so including mergers) and a further 21 on the new appeals side are all part-time except for myself as Chairman and the President, (though there is a full-time staff of approaching 100) and come from a range of relevant backgrounds, experience and expertise. These embrace economics, law, accountancy, industry, finance and consumer, public sector or trade unionist backgrounds. This has evolved over a number of years and, in the light of the broad public interest criteria specified in the 1973 FTA has not until recently been seriously questioned.

As an historical light diversion I should say that it was not always thus. When the precursor of the Competition Commission, the Monopolies and Restrictive Practices Commission was first established in 1948, with what one senses was no great enthusiasm but more as a result of US pressure for open markets in return for Marshall aid, there was the self same question-what sort of people? Of economists, one charged with recruitment wrote:

"The Commission should only employ an economic adviser on a part-time rather than a full-time basis. It is probably better to have the economist as an adviser and not as a member of the Commission itself since monopoly is a subject on which economists are apt to hold fanatical views, which might even lead to minority reports."

I am grateful to Professor Stephen Wilks from whose recent book 'In the Public Interest'-a splendid history of the Commission-this and later quotes are taken.

Industrialists fared no better:

"We have narrowed this wide field by looking for some evidence of intellectual penetration as well as impressive personality. We have excluded export salesmen and other purely executive types. In fact industrialists are ruled out pretty well as a class because they are all connected directly or indirectly with monopoly or some kind of restrictive practice.

What then of lawyers? Alas, no since "we want to keep the Commission free from even the suspicion of employing the apparatus of the law". Trade unionists and employees generally were ruled out as being far too familiar with restrictive practices anyway, and as for accountants, people from the financial world, consumerists, their exclusion was sufficiently obvious to warrant no mention whatever.

The first Chairman was Sir Archibald Carter, perhaps inevitably, a civil servant-Eton, Cambridge, a no doubt distinguished career in Whitehall ending up as Permanent Secretary to the India Office.

Whether running India was good preparation for rooting out monopolies and restrictive practices in the UK I really do not know, but it is a measure of the adaptability of the Commission's approach that it came to comprise every single one of the categories initially excluded.

But the merger reform, the planned independence, inevitably raises the question again and, indeed the SoS has announced that he would like to hear views on this in the context of the proposed regime changes.

During the last year I have heard it argued, quite strongly in many cases:

a) that competition policy is essentially about market structure, types of company behaviour and levels of performance, which are central to a now well-established corpus of industrial economic expertise. Market definition, behaviour of monopolists and oligopolists, barriers to entry, discrimination, predation, vertical restraints etc are the key components of that expertise, and are precisely the key elements in assessing competition. Therefore the present breadth of membership should be replaced predominantly by economists, preferably industrial economists who have the requisite expertise, rather as the MPC now predominantly comprises macro/monetary economists.

b) that there is a clear legal framework and corpus of competition law and precedent such that, as in other countries in relation to competition law, and as in other areas of policy regulated by law, UK competition law decisions should be made by senior members of the legal profession. Other expertise is supplied by expert witnesses but they do not actually decide matters. The present breadth of membership should therefore be replaced predominantly by lawyers, preferably competition lawyers who have the requisite expertise, rather as in the civil courts generally.

c) that competition is about real companies in real markets taking a myriad complex decisions in complex circumstances. Professional economists, which typically means academic economists, rarely have much, if any, experience of this, lawyers still less, and if regulatory bodies are to be effective in promoting rather than stifling competition it is essential that implementation is fully informed by those with experience in this field. The present breadth of membership should therefore be replaced predominantly by people from industry, accounting and finance who have the requisite expertise, rather as senior figures from these fields have been brought in to all manner of public policy areas in recent years to improve policy implementation.

d) competition is a means not an end. The end is to enhance consumers' interests, through lower prices, better quality, more choice etc. Unless its implementation quintessentially reflects that perspective, one which unfortunately has much less prominence than in the US, then it will struggle to be effective. The present breadth of membership should therefore be replaced predominantly by those with a consumer perspective and preferably consumer organisation experience, of which there are now a growing number.

And so on, and so on.

All of these arguments seem to have merit. If we accept them all then we must conclude, first, that the present breadth of membership must be replaced, for all agree on that; and second, if all these views are to be reflected, that we should have a spectrum, of economists, lawyers, industrialists, accountants, finance people etc etc.

You will understand why I am grateful that appointments to membership are made not by me but by the Secretary of State who having solicited views, will in due course have to decide the matter. For my part, it is my responsibility to ensure that whoever are appointed work effectively together to provide robust decisions efficiently, and I shall be happy to do that with the experience and expertise available.

But this merely raises yet another question. How independent can the Commission be if its Chairman, President and Members are appointed, and re-appointed to further terms of office by the Secretary of State? The significance of this question is enhanced by the recent change which, from October 2nd allows the European Convention on Human rights to be implemented by UK courts. Article 6 states that those whose rights may be affected have a right to an independent hearing of their case, and this certainly applies to those companies who appear before the Commission. Fortunately this is one area that, subject always of course to its testing in the courts, appears to be resolved. All such initial appointments are subject to what has loosely become known as Nolan rules, which involves an independent assessor in the process of appointment, to ensure that all aspects of the process exhibit fair and non-discriminatory treatment, absence of bias or political expediency etc. As regards re-appointment, since a recent case before the Scottish Court of Sessions (the Scottish Appeal Court), in which it was judged that some recently appointed Scottish Sheriffs were not independent because they were beholden to the government for re-appointment after one year, all members, initially appointed for four years, are automatically re-appointed for one (and only one) further four year term. (The only exception is the President, who by analogy with High Court Judge, is automatically re-appointed to further four year terms until retirement at 70.) Thus, whatever the long term composition of the Commission its independence should be assured.

Scale and complex monopolies

Both the 98 Act and Merger Reform, directly or indirectly, represent major changes in the nature and substance of competition policy in the UK. Lest it be forgotten, this leaves almost untouched the aspect of the Commission's work of which members of the general public are most aware, namely so-called scale or complex monopoly investigations. Major inquiries in recent years, eg into the pricing of domestic electrical goods, cars, supermarkets and currently some banking services, all come under the heading of complex monopoly which essentially concerns situations where two or more companies which together have more than 25% of a market act in separate but parallel fashion, so as to restrict, distort or prevent competition, though it is a separate question whether, in that event, this is against the public interest.

Some have wondered whether these provisions of the 1973 Act are still necessary given the 1998 Act. The Government concluded that they are and there can be little doubt that this is right. It is not just that there may well be circumstances where, for example, consumers are put at a disadvantage even though it is not possible to say that companies have acted illegally under the 1998 Act. If companies do not have contact about their policies, still less co-ordinate them then Chapter I is of no relevance, and if no company is 'dominant', by convention (though not binding in law) established in Europe has having at least 40% of a relevant market) then neither is Chapter II. Consistent with this, remedies for detriments arising from complex monopoly do not involve fines, but they can involve divestment, the splitting up of companies, as well as more behavioural regulation. Understandably it has been said privately by some European competition authorities that these are powers to die for.

Little by little the European authorities have sought to encompass such provisions. 'Dominance' under Article 82 can it seems include so-called 'collective dominance', a concept which has emerged recently (albeit in the context of a merger); and it is now reported that the European Commission is seeking, or in other versions already has, structural powers to split up or divest companies rather than just fine them. These powers, and the concept of collective dominance, albeit by another name, are very well established aspects of the UK system and it would have been ironic, not to say perverse if they had been tampered with just as Europe is beginning to see their value. More generally one can perceive a process-a rather productive one-in which, via the 1998 Act, the UK has learnt from the best of the European regime, and Europe is likewise harnessing distinctive successful features of the UK regime.

It would take another lecture to go into all the elements of the characterisation of the UK regime as successful but a quick post-script is relevant. A Sunday newspaper recently focussed on the extent to which in a number of areas, consumer prices have been falling, not just in real terms but nominal terms and in some cases quite rapidly. The article focussed on three key areas, which together are responsible for significant expenditure by consumers-electrical goods, cars and groceries. I am confident that it is not merely coincidence that these have all been the subject of major complex monopoly inquiries by the Commission, albeit that in one, namely supermarkets, it became evident that the competitive forces driving down prices substantially pre-dated the Commission's work.

Will the complex monopoly regime become subject to the changes emerging elsewhere? That is to say, should there be independence in this area as in mergers; and should the public interest test be narrowed as for mergers? These are matters for another day. There are no plans to pursue such changes and, in truth, the considerations can be so much wider in a complex monopoly inquiry and the remedies potentially so much more intrusive-in a merger at the end of the day the very worst that can happen is the status quo ante, which is far from true in complex monopoly inquiries-that the ideals of the merger reform do not obviously read across to monopoly cases. In any event it makes good sense to see how both the new merger regime, and indeed the 1998 Act bed down over the next few years before contemplating still further reform of this sort. Against this there may be scope to reform the monopoly provisions to make the regime more pro-active than the legislation currently permits, but this will need careful thought and proper consultation.

Utility Regulation

The new Act and the new merger regime on top of the continuing core monopoly provisions of the FTA might be thought a suitably busy agenda for the moment. But even this is by no means the whole story. Another relatively new but now very substantial area of work of the Competition Commission is in relation to the regulatory regimes operating in the privatised utilities. These regimes work primarily through a licensing system, which controls what the regulated companies in water, energy and telecommunications can or cannot do, in particular the maximum prices they can charge. If amendments to the licences, in particular quinquennial amendments to establish new, typically lower, levels of prices in the future, are disputed by the company involved then the matter is referred to the Commission, and much of our work since 1993-the date of the first major licence dispute-has been in this area.

The present position is that, the Commission having reported on the matter, the regulator must accept the public interest finding, and must remedy any detriment found by the Commission. The regulator is not obliged to implement the specific remedy proposed by the Commission but, as the result of judicial review activity, it has been established that the regulator's discretion is quite small. The recent Utilities Act has now formalised this with a provision that, if the regulator wishes to vary the remedy, it will require Commission approval that the regulator's proposals nonetheless do remedy (and no more than that) the detriments found. Failing that approval the Commission will determine the licence amendment.

At one level this is no more than an explicit tidying up of an area where the courts have already reasonably well established the position. Yet it has a wider significance, and not only in that it is envisaged in due course that the same will apply to water and telecommunications (which were originally included in the current Bill). There is much debate at present over the extent to which the regulators are, and should be, independent. They were clearly set up to be so, but issues to do with their appointment or re-appointment, proposals now in hand to replace them with boards which they chair (thus constraining their power to act as individuals by broader interests) and legislative changes which some argue dilute their independence of action have all emerged. I have no observations on this, but it is important to remember that in the critical area of price setting, the appeal mechanism to the reporting side of the Competition Commission entails the same degree of independence of process as is being embraced in relation to mergers.

Such a regime is effectively now a template for extensions of the regulatory regime. Similar powers are being written into the new Transport Act, covering rail access charges and air traffic control. (The Commission already reviews airport charges at Heathrow, Gatwick, Stansted and Manchester every five years.) The new Postal Services Act also include them. Equally if not more important, the new Financial Services and Markets Act provide for the OFT to monitor the rules and guidance of the Financial Services Agency for their competition implications. If it believes that the prudential rules unacceptably interfere with competition in financial markets then the DGFT can refer the matter to the Commission, which delivers its verdict to the Treasury. As a matter of law the Treasury can override that verdict, but it has said that it would do so only in the most exceptional circumstances, the example given being cases where remedies would be inconsistent with international treaties relating to the financial system.

While this summarises the immediate changes occurring in relation to the privatised utilities, there are more substantial, longer term charges also afoot. When the 98 Act came in, the industrial sector regulators were given so-called 'concurrent powers' with the DGFT to enforce the new Act in their own industries, eg the Director General at OFWAT has powers to fine water companies for breaches of Chapter I or II, though the concept of concurrency includes co-ordination amongst the regulators, including the DGFT to ensure consistency of treatment. Had there been no history-of privatisation, establishment of regulators and licensing regimes, then there would have been little reason for such a structure. Such powers could have lain with the DGFT to implement in such industries to no greater or lesser extent than in the rest of the economy. Given the history, and in particular the licensing regime, it was adjudged better to locate the new powers with the regulators, on the grounds that, as these industries progressively become competitive so the licensing regime would wither away, competition rules could take their place, and managing this interface would be easier if the same bodies were responsible for them. In time therefore we might expect that this transition will occur with, from the Commission's point of view, fewer disputed licence cases coming to the reporting side but perhaps more appeals, against regulators' decisions and fines under the Competition Act coming to the appeals side.

Two aspects of this have come to the fore. First if the switch to a competitive structure is successful in these industries then it is generally supposed that the regulatory regime will wither away, the need for industrial regulators will likewise disappear, and the concurrent powers would logically switch to the DGFT. This would be some years away, but some straws in the wind may be seen soon in the forthcoming Communications white paper, which will consider the appropriate regulatory regime for broadcasting and communications, currently split between four different authorities.

Second, there has been comment that the resources involved in the various regulatory regimes have been growing rather than declining, and this has culminated in a Treasury initiated inquiry into the regulatory offices. The Commission has no role or locus standi in this but I am on record from nearly two years ago as positing that the ready assumption that increasing competition means less regulation is not obviously right. Water, gas, electricity, telecommunications and the like are not like most goods and services, where competition and consumer choice are usually sufficient. A parallel, and perhaps better indicator of the future may be not the generality of products produced and sold under competition conditions but such services as insurance, mortgages, pensions and other financial services, which many would argue are highly competitive but which nonetheless, they would say, need detailed regulation to ensure that consumers are not baffled or misled, and are reasonably protected against the consequences which may follow either. Others believe that, once consumers have sufficient choice it is a case of caveat emptor. If you choose the wrong pension arrangement or mortgage when the right one is available, you shouldn't complain, and the same should be true for gas, electricity or phone calls. Whether this debate bears any relation to the alleged increase in regulatory resources remains to be seen, but on both grounds, those awaiting the demise of this regime would do best not to hold their breath.

Transparency

All of these changes-the coming into effect of the Competition Act, the merger reform announcement and related issues, the ECHR and related reforms, the FSM Act and the plethora of utility-related Bills will all have occurred within barely a 12-month period centred on the calendar year 2000. That might be thought enough reforming zeal for one if not several years, however desirable it all might be, but it omits to mention yet another major reform-a reform of process which requires not legislative change, but which is no less important for that-namely an opening up of the processes of the Commission to much greater scrutiny by both those involved in the process and the public generally. This push towards greater transparency was given considerable impetus by the sector regulators, but its origins in the Competition Commission lay in a detailed survey of all those who are involved in our inquiries or need to read our reports. This revealed many good things of which the Commission members and staff can rightly be proud-the thoroughness of our inquiries, our neutrality and independence of mind, the robustness of our reports and the overall integrity of our processes. (This might surprise those of you whose only knowledge of our work is through the more lurid elements of the press.) But there was considerable criticism that our processes, broadly conceived, were often opaque even to those involved and that, more generally, few amongst the general public know anything of who we are, what we do, how we do it, and whether we are doing it well.

It is easy, and perhaps human to get defensive about this. Are we not obliged by law to publish a report not only of our findings but of our reasoning such that the basis of those findings is clear, and is that not far more transparency than in many other competition regimes, and many other parts of the legal process? How many of the journalists who have actually complained of lack of information had taken the trouble to look at our website (answer, none)? Does the press not show much more interest at any hint of alleged scandal, embarrassment, incompetence however much manufactured, rather than what is actually going on, and so on.

All valid, but none of it adequate to rebut the charge that the processes of a body with substantial power to affect companies and consumers should be much better understood than they were. We therefore initiated a major programme of reform, including publication of key documents, or summaries of them, primarily those which detail the main issues we will be pursuing, and the remedies we might propose; joint hearings where appropriate which allow various sides to see from where others are coming and most significant, open meetings which the public and press can attend and at which the main issues can be raised, albeit not the commercially sensitive material that often underlies those issues.

During the course of this year, open meetings have become a regular feature of our procedures. Anyone who is interested then has access, they have an opportunity to observe, to hear the arguments. Transparent reality is frequently much more prosaic than speculation as to the content of secret sessions but if this permits more accuracy of coverage, and indeed places much more onus on reporters to be balanced in their coverage then this is all to the good.

The Broader Themes

All these initiatives have different origins: they have emerged from different bodies for different reasons and in respect of different concerns. Yet there are some themes, some broader tides in the affairs of man (which threaten perhaps to flood us?) which will undoubtedly change the climate and culture within which business is done in the UK, and which underpin these diverse initiatives.

What are these themes? Clearly a belief in the paramount importance of competition-though that of course covers a multitude of not always compatible virtues-to an extent unparalleled in the UK this century. But beyond this three others.

First, the tenor of the times asserts our primacy as consumers over all other hats we might wear-producer, supplier, manager, citizen, etc. Reform of utility regulation envisages a new primary statutory duty of regulators to promote the interests of consumers. The new criterion rehearsed in the merger reform relates to competition and efficiency gains which accrue to consumers. In the theme of rip-off Britain that has played so well in the UK press, who is it who is alleged to be ripped off?

Indeed, why do we want competition? Economists are trained to respond that it typically improves productive and allocative efficiency, thereby increases the capacity of the economy to generate economic well being and is, therefore, a good thing, irrespective of to whom the benefits accrue. Whether it is consumers, employees or shareholders, and whether the shareholders are managers, individual shareholders or pension funds is regarded as a quite separate matter, to be addressed by distributional policies of various kinds. But in sharp contrast, in the policy arena, there is a shift away from a public interest criterion, which could permit any broader efficiency gains to be recognised, towards a consumer interest one which requires that consumers be the recipient of such gains, and this reflects a clear distributional priority in favour of consumers in competition policy.

The second tide running through much of the above clearly is the shift towards independent implementation of competition policy. It is worth just noting how far this has gone. The new Competition Act will be operated by the OFT with appeals to the Competition Commission. The mergers reform will very largely exclude ministers from this area. The independence of the sectoral regulators is seen as being under threat but disputed licence modifications will continue to be referred to an independent Competition Commission. The numerous new functions for the Commission detailed in various new Acts, mentioned above, will operate in the same way. Appointments and re-appointments will be safeguarded from political bias; and as in most areas of public policy there is always scope for judicial review by the courts. By 2001 the only significant area of competition policy which will still be subject to ministerial discretion will be the implementation of remedies in relation to scale and complex monopolies, and the first of these is likely over time to decline in favour of the exercise of Chapter II of the Competition Act, which operates independently of Government.

The third new theme is informational; that in general far more information should be available than has been the case to date. This is partly an issue of substance, partly of process. On the former neither competition nor the consumer's interest can easily be furthered if people and organisations do not know or understand the options they face or the likely consequences of their decisions. There is a very basic theorem in economics, but it is also very evident in practice, that lack of information can, and generally will inhibit competitive processes and leave many consumers unprotected.

Equally, processes to implement competition law and regulation are increasingly thought unlikely to be fair and effective without much greater transparency of process. This type of proposition has, of course, been highlighted by the Freedom of Information Bill, and recent cases in a number of fields, most notably the BSE inquiry; and the competition regime is hardly the high water work in this respect. But the same focus, on transparency, on disclosure are sweeping through the area and demand a response.

This, then, is the new world we face-a much greater emphasis on creating pervasive conditions of intense competition throughout the economy; an abiding belief that the consumer is sovereign; an emerging consensus that Government should set the framework, the criteria, the terms of policy but largely or entirely remove itself from the operational decisions through which policy is actually implemented; all in conditions of the maximum information which are consistent with individual privacy and legitimate commercial confidence.

Much of this has been in the ether for some while. But virtually all the key changes which will drive this agenda forward have occurred in the last nine months, and together are generating a new era unrecognisable to those involved until recently. The new regime is now potentially amongst the most powerful in the world, combining as it does various powers of both the European and US systems; is now very largely independent in operation and increasingly transparent. Nor is it only in design that it may lay some claims to global best-practice. In execution it has, I believe, established itself as fair, thorough, independent and cost-effective. Where circumstances dictate, the Commission has not shrunk from radical intervention - to break up companies such as British Gas and Milk Marque; to legally restrict companies' scope for action, such as in ice cream distribution, or in supply of groceries to supermarkets, where this is the only means to ensure a competitive outcome; to bring about substantial price reductions as with cars and calls to mobile phones; and to block mergers both large and small if they prejudice competition and consumer interests. At the same time it has been fully prepared to find in favour of companies where the evidence warrants this, most recently and most obviously in relation to the general level of prices and profitability of groceries in supermarkets. And most of this in timescales typically much faster than elsewhere, dramatically so in comparison to the US system, which many see as unduly litigious and unnecessarily burdensome as a result.

The world does not, of course, stand still. Decentralised implementation of the EU regime will need to be integrated with the UK's domestic regime. New challenges, for example the growth of global mergers, the rapid growth of internet trading, new issues of intellectual property rights to name but three, will tax the system and will no doubt require further evolution of the regime, in ways which there is not time to explore today. But the increasing priority given to competition policy, initially by the last Government and even more by the present one has set a new framework which should prove an important component in the continuing drive to improve industrial performance and consumer well-being in the UK.