New competition authority will have budget to match its tough new powers, says expert

Guy Lougher of Pinsent Masons, the law firm behind Out-Law.com, said that the extra £16 million in real terms to be allocated to the new Competition and Markets Authority (CMA) signalled the creation of a competition regime that "protects consumers and businesses".

"The proposed increase in investigations is a sign that the CMA should now have the resources to deliver effective enforcement," he said, ahead of Pinsent Masons' annual competition law conference on 20 November.

"In recent years the OFT has been criticised over its track record of competition enforcement, but that has been in the context of a spending review which reduced its operating budget by 25% over the four years to 2014-15. With an additional £16 million, the CMA will have better capacity to track down and pursue businesses that have broken the law," he said.

The CMA was legally established on 1 October 2013, and will become fully operational on 1 April 2014. It will combine the work of the existing Competition Commission (CC) with the competition and certain consumer functions of the Office of Fair Trading (OFT) to form a single regulator, responsible for promoting competition across the economy for the benefit of consumers. It will have tougher powers to investigate cartels and mergers, undertake market studies and enforce antitrust laws.

The Treasury has told Pinsent Masons that the additional funding that has been allocated to the new regulator would enable it to open between five and 10 additional major investigations each year. This means that the CMA could fund up to 21 new antitrust or criminal cartel investigations each year from 2015/16; up from the 11 new cases opened by the OFT in 2012/13 and six opened in 2011/12.

As well as receiving additional funding from the Government, the CMA will also make several changes to the OFT's internal systems and procedures, Lougher said. These changes are intended to make the CMA's decision-making more robust and less easily challenged than those of its predecessor, he said. The OFT's first attempt to prosecute a criminal cartel in front of a jury collapsed in 2010 after new evidence emerged, despite a four-year investigation before the case went to court. This was followed by a number of high-profile cases where the Competition Appeal Tribunal overturned fines imposed by the OFT for unlawful pricing practices due to a lack of evidence.

"The CMA will have a much better chance of successfully pursuing businesses that have engaged in anti-competitive behaviour because it will have the capacity to launch more investigations," Lougher said. "But, crucially, the changes are designed to ensure that it will also have the capacity to take more robust decisions by being more selective about which cases it pursues and by adopting a more rigorous approach to decision-making."

"All cases that come into the CMA will now be subject to internal challenge and review, making it more likely that it will pursue only those cases where it has a good chance of successfully defending any infringement decisions which it adopts," he said.