Competition Policy & Other Regulatory News
There was a flurry of regulatory news over the weekend. Here are brief details, mainly drawn from the Financial Times of Friday 2 or Saturday 3 May.
Claer Barrett drew attention to the forthcoming Pensions Bill will require pensions providers to set up ‘defaults’ for those in defined contribution schemes (not civil servants!) who reach pension age but do not actively decide how to use their pension pots.
Those who make an active choice might buy an annuity - so ensuring that they have a known income for the rest of their lives - and/or draw down some of the capital so they can front-load their spending - though this risks those with limited assets not having enough to live on if/when they later need expensive care.
Pension providers might therefore mimic this by imposing different defaults according to the personal circumstances of those pensioners who do not make an active choice. The default could vary according to (if known) their health, marital status, financial status and so on. It could get very complicated, especially when the default turns out to be entirely inappropriate for a particular pensioner.
Cory Doctorow argued that non-US countries should respond to Trump’s tariffs by repealing their anticircumvention legislation which prohibits the sale of jailbreaking tools. We could then, for instance, use non-branded printer inks, unlock software subscriptions, and repair our own vehicles without paying large royalties to American companies. Such legislation was originally enacted following strong pressure from the US Government.
Most large institutions have significant investments in private equity but the distributions from these investments have, over the last three years, been only half of their historic averages. The world-wide shortfall is now $400-500 billion. The large institutions such as pension schemes need to replace this income in order to reward their own investors, pay pensions etc. How are they doing this? - by borrowing against the value of those very same private equity holdings that have reduced their distributions.
Sounds very dodgy to me.
And the above report follows a longer (full page) FT report on 25 April in which the authors expressed great concern about ‘highly leveraged hedge fund strategies’. Hedge funds (by definition) borrow large amounts of money to make large numbers of trades, each of which will on average produce a small profit. But those who lend to the hedge funds get nervous when markets become turbulent. Things then go badly wrong when the hedge funds are unable to find the cash required by their lenders - as Long Term Capital Management (LTCM) found it in a spectacular crash in 1998.
And markets are certainly turbulent once again.
In the USA:
Three brief stories:
Competition and prosecution authorities often impose ‘monitors’ to scrutinise the future behaviour of companies found guilty of past bad behaviour or otherwise likely to misbehave in future. The FT reported that the Trump administration is thinking of significantly reducing the use of such enforcement mechanisms.
Paramount/CBS is reportedly willing to pay Donald Trump $10s of billions to settle a ‘baseless’ law suit. This is of course entirely unconnected with the administration’s current investigation of a merger between Paramount and Skydance which would trigger a billion dollar payout to Paramount’s shareholders.
In better news, a federal judge has referred Apple to a criminal prosecutor for failing to comply with an injunction intended to allow software developers to steer customers away from Apple’s App Store.
Competition Policy
This is perhaps a convenient opportunity to introduce you to a further part of my How to Succeed in the Senior Civil Service. Part 8 begins in this way:
“8.1 You are more than likely to need to understand the basics of competition policy at some time in your career.
Competition is a key driver of innovation, productivity and the efficient functioning of the modern economy. All recent governments, all over the world, have encouraged competition - not just between businesses, but also between schools, between hospitals, and so on. The result is that competition policy plays an important role in most government departments:
The Business and Innovation departments? - Big Tech seems to be in perpetual warfare with competition authorities in the US and EU as well as the UK.
Health? - competition between providers has played an important role in recent policy making whilst hospital mergers need to be approved by the UK's Competition and Markets Authority (the CMA).
Sport? - Manchester City successfully used UK competition law in its 2024 challenge to the Premier League's Associated Party Transaction Rules.
Energy? - Energy prices are constantly in the headlines and Ofgem is these days around the same size as its parent department.
I could go on ...
Here are the main issues considered in this part of 'How to Succeed ...'.
First, competition in some sectors favours those 'with sharp elbows' - and this group seldom includes the poor and the vulnerable. And some businesses may need temporary protection from damaging competition.
Mark Carney put it very well when on his recent accession to Canada's Premiership:
Markets are the most powerful tool we have ever invented. They can help find solutions to our greatest problems. When markets are governed well, they deliver great jobs and strong growth better than anything.
But markets are also indifferent to human suffering and are blind to our greatest needs. So, when they’re governed badly - or not at all - they’ll deliver enormous wealth for a lucky few and hard times for the rest.
So there needs to be a balance. These important policy choices are discussed in Chapter 8.2 below
Next, there is a rich ecosystem of regulators charged with countering the damage done when businesses have too much market power. (Americans refer to this as antitrust.) You may need to have a basic understanding of how they operate, especially as they may stop you implementing what might otherwise seem sensible policies.
Chapter 8.3 discusses the meaning of market power.
Chapter 8.4 discusses how merger control prohibits mergers which may create companies with excessive market power.
Chapter 8.5 describes the weapons available to regulators who are tackling companies that are engaged in anti-competitive behaviour.
Chapter 8.6 describes how individuals and individual companies can take private actions to seek compensation from businesses that have engaged in anticompetitive behaviour.
Chapter 8.7 briefly summarises a number of current debates in this area, and ...
Chapter 8.8 lists some other competition policy areas, such as intellectual property law, which are not discussed in detail.”
[You can read the rest of this part here.]
Martin Stanley