I’ve written before about the UK’s Competition and Markets Authority, its main antitrust regulator. It has already blocked one US company from taking over another US company and is opening more investigations into the actions of others. It is now at the stage where US authorities need to assess whether the CMA’s interventions are harming US interests.
What is particularly worrying about the CMA is its almost total lack of due process. For various reasons it has become fashionable in British politics to “depoliticize” issues by appointing independent regulators to take charge of them. Unfortunately, this means that those regulators are generally unaccountable to the people’s elected representatives and, indeed, to the courts.
The way the CMA works is to open an investigation to assess whether or not a merger or acquisition (for example) would lead to a “substantial lessening of competition” (SLC) in a UK market. Market definition is key here – if the CMA defines a market too narrowly it will almost inevitably find such a SLC in the case in point. This is an example of what my colleague Ryan Young calls the “Relevant Market Fallacy” in action.
Yet when the CMA finds such a SLC, there is very little an affected party can do. The route of appeal is not to a Court that can apply the rule of reason, but to the Competition Appeals Tribunal, which is only empowered to reverse the CMA’s decision if it (the CMA) has made an error of law or procedure. Even when it finds such an error, the CMA has the power to go ahead with its decision, as it did in the case of Meta’s attempted acquisition of Giphy. Indeed, the CMA claims it is compelled by statute to act in such a manner. The UK’s ministers have no power to overturn any of its decisions.
Such an approach would be unconstitutional in the United States, where due process is a right. The lack of accountability and oversight would also be a problem in a country where power derives from the people, not the Crown.
Of course, the UK’s political system is its own affair, and if it has chosen to go down the route of empowering bureaucrats the way it has, it is for the UK to reap the angry wind of what it has sown. However, the CMA appears to have decided that it will be the global regulator of antitrust, as shown by its increased interest in US acquisitions. This raises the CMA’s actions from an internal matter to one of international trade and diplomacy.
Given the importance of the issue, Representative Jeff Duncan (SC-03) and Representative Michael Guest (MS-03) are leading the way by sending a letter to the US Commerce Secretary Gina Raimondo and US Trade Representative (USTR) Ambassador Tai asking that they investigate the effects of the CMA and other foreign competition authorities. Rep. Duncan and Rep. Guest in particular noted that “The CMA’s conduct against mergers among U.S. companies has demonstrated a striking lack of good faith, due process, or economic principle.”
Duncan and Guest request that the USTR use all available tools to “deter foreign governments from pursuing policies or actions that target, on spurious grounds, U.S. businesses in industries where the United States is a global leader.” This is the right approach. They does not go so far as to advocate tariffs or other such heavy-handed means that would likely result in retaliatory action. This is an area where soft power, backed up by the evidence from a full investigation, is appropriate in suggesting to otherwise friendly governments that their uncontrollable bureaucrats might need to wind their necks in, to use a British phrase.
Part of the reason we are in this state, however, is because the international institutions we developed to deal with such problems are in a parlous state. If the World Trade Organization had a functioning appellate body, this might make a good case for a US complaint (the US won 85% of its cases when the body was functional.) As we look to the future of a possible trade deal with the UK under the next administration, then competition governance will need to be an important chapter – I would suggest a combination of mutual recognition and deference, such that if the US competition authorities allow an acquisition, the UK authorities should recognize and defer to that, and vice versa.
In the meantime, Rep. Duncan and Rep. Guest should be congratulated for their leadership on this issue.
See more here.