The Government has Undermined the UK's Principal Competition Authority

I was surprised, bordering on appalled, to hear that the government had sacked Marcus Bokkerink, the Chair of the Competition and Markets Authority (the CMA). He has been replaced by Doug Gurr who previously worked for Amazon.

There are three reasons to be concerned.

The first is that this decision hugely undermines the independence of this key regulator, and by implication threatens the independence of others.

Not all regulators claim great independence, of course. You cannot expect ministers to take no interest in the regulation of schools and hospitals. The public expect accountability in these areas to rest with politicians. But decades of experience have shown that competition and price control regulation are best left to independent bodies. Politicians are far too likely to take decisions that play well in the short term (Lower prices! Yay! Lots of votes!) but lead to less investment and poor customer service. Or they refuse to take tough decisions which are unwelcome to their mates in company boardrooms.

Ministers have for these reasons accepted (until now) that the CMA and its predecessor, the Competition Commission[1], were highly independent, not least because that particular regulator faces a constant bombardment of submissions and lobbying from the world's largest companies and their very highly paid lawyers and economists. The intensity of this pressure has increased dramatically since we left the EU whose DG(Competition) used to deal with the largest cases collectively, so to speak. The government's removal of the CMA's Chair thus represents a severe blow to the credibility and effectiveness of the CMA.

My second concern is that ministers were mistaken in suggesting, in effect, that the CMA's pro-competition stance was anti-growth. Apart perhaps from in the very short term, growth comes from innovation and greater efficiency, both of which are strongly encouraged by effective competition.

Politicians might have been misled by the observation that innovation and size are positively correlated - but they get the causality the wrong way round. Innovative companies grow rapidly. They then stop innovating and focus on maintaining their market power by squeezing or buying up their competitors. That's why they hate competition authorities such as the CMA.

There is also the point, made recently by Diane Coyle, that enforcing competition to make markets work in the interests of customers means there is less need for regulation of other kinds.

My third concern and major disappointment is that is that I had hoped that Labour ministers would not behave like their predecessors when making public appointments. Here is an extract from a blog entitled Public Sector Appointments - Labour Must Behave Better that I published just after last year's election:

It is vital that arm's length bodies take high quality decisions bearing in mind their statutory duties and the facts and arguments that are brought to their attention. They cannot do this if their Chairs and Chief Executives are concerned about how their decisions might be received by politicians and the media, and/or if they arrive in post with strong biases, prejudices or predispositions.

It is therefore hugely disappointing that ministers have not only sacked the perfectly decent Chair of a competition authority but replaced him with someone who used to work at a very senior level in one of the USA's largest companies. They will have intended this to send a clear message - but it is a very worrying message which will surely lead to a less competitive UK economy and hence lower growth.

I am far from the only commentator to express these concerns:-

The FT reported one antitrust lawyer as believing that the move would have "a chilling an intimidating effect" and that " although in the short term it seems reassuring for business if competition policy is at the mercy of political fashion, it becomes less stable and predictable, which undermines business confidence ... It is an extraordinary move by the government to interfere so much in a competition authority".

Writing in the Guardian, Nils Pratley said that 'it is too simplistic to think that strong regulation impede impedes growth. In most cases, firm and predictable regulation coupled with the rule of law is good for attracting investment. In general, investors prefer high regulatory standards over a free-for-all that invites fraud or worse.'

Ministers responses to questions have been underwhelming at best. Business minister Justin Madders was asked whether the CMA would "hold powerful tech companies accountable". His answer was that "We do need to protect consumers but we also need to drive growth".

You might also like to check out what is, I think, fairly standard advice to senior officials about how to design an effective regulatory system.

Finally, I attach Mr Bokkerink's resignation statement which is surprisingly polite - but includes, towards the end, the very good question whether his successor and the government will in practice be able to develop a strategy that is more effective than the CMA's past pro-consumer and pro-competition stance.

Martin Stanley

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Mr Bokkerink’s Statement

As the government announced in this afternoon's press release about governance changes at the CMA, it is attempting to find new ways of boosting growth from the UK's competition and consumer protection authority, that are different to its current approach.

The CMA's future strategy for boosting growth and supporting the economy will become apparent in the weeks and months ahead under its new Board leadership. In the meantime, let me take this opportunity to reflect on the approach that I had the privilege to lead as chair to drive the kind of growth that is broad-based, lasting, and tangible felt by the people and businesses of the UK - an approach that, in essence, has been about consumers making choices, businesses competing on merit, and the benefits of the resulting innovation and productivity spreading across the economy.

The CMA has a statutory duty to promote competition for the benefit of consumers. On becoming Chair, I refocused the CMA on delivering three all-important outcomes that this duty is intended to achieve for the country: consumers and business consumers having a choice, free from manipulation - instead of being forced to accept higher prices and worse service because they have no other option; businesses large and small being free to compete, innovate, and have a fair shot at succeeding based on merit - instead of being excluded or having their hands tied behind their back; and a level playing field in markets, so that the economy as a whole can benefit from the productive, sustainable growth that comes from that combination of empowered consumers and effective competition - instead of being held back by a few powerful incumbents setting the rules for everyone else.

During the past two years, that's what the CMA has been delivering it, in practice. We have worked to safeguard choice and a fair deal for consumers in markets that matter to people's daily lives and the economy - from buying or renting a home, to groceries, road fuel, and veterinary services, to shopping online and medicines that the NHS buys on people's behalf. Similarly, we have acted to open up markets, unlock innovation and create a level playing-field for businesses seeking to compete, invest and grow - from open banking and online marketplaces to construction, electric vehicle charging, gaming, cloud and mobile services. In parallel, I've made transparency and openness the hallmarks of the CMA - advocating more frequent reviews with Parliamentary Select Committees, engaging more directly and frequently with consumer groups, businesses and investors, using their feedback to improve how we work, strengthening the Board to include more business, entrepreneurial and investor experience alongside competition law and economics expertise.

My experience across decades working with businesses and investors, as well as more recently at the CMA, reinforces what empirical evidence around the world also shows. That these fundamentals - genuine choice, effective competition, a level playing field, safeguarded by an independent, impartial and transparent competition and consumer protection authority working for the benefit of people and businesses across the UK - are essential to achieving the kind of growth that fosters opportunity and prosperity for all. With competition, with empowered consumers, you get innovation, investment and productivity. In short, they work. In the same way that reduced choice, constraints unfair competition, monopolisation of markets, consumer and competition authorities vulnerable to short term expediency or vested interests, don't work - at least not for growing the economy overall and over the long term. These are choices. Parliament knew what they were choosing in strengthening the UK's competition and consumer protection laws.

The draft plan which the CMA Board published for consultation last week sets out the actions the CMA was planning to take, over the next 12 months and the next three years, to drive that opportunity, prosperity and productive, sustainable growth for people and businesses in the UK further and faster. Throughout, by bringing or restoring, genuine choice, effective competition, and a level playing field in markets, including the digital markets on which UK consumers and businesses depend; and continuing to reform the way the CMA works.

With new Board leadership appointed and a new government strategic steer in the pipeline, this approach will no doubt change. I wish Doug and the government best of luck in finding a different path that works more effectively. From my own perspective it has been a privilege to be able to champion the pro-consumer, pro-competition, pro-innovation, pro-UK approach of the past two years. Above all, it's been a privilege to be able to work with the committed, dedicated, talented, unique set of people who make up the CMA, who have made all that possible. I thank you all.

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[1] I was its Chief Exec from 2004-8.