The UK competition authorities, and the Competition and Markets Authority in particular, have broad powers to investigate markets as a whole and impose remedies without any finding of unlawful conduct. The use of these powers has fluctuated over time but is again increasing. Over the last year, the CMA has opened three market studies, investigating the markets for Music Streaming, Children’s Social Care, and Mobile Ecosystems. This compares with just one market study opened in 2020 (Electric Vehicles) and one in 2019 (Online Platforms Digital Advertising). Over this same period, the CMA has also begun two market investigations (Mobile Radio Network Services and Funerals). This article provides an overview of these market studies and investigations and the themes emerging from them. It also provides thoughts on the future of the UK markets regime.
The CMA’s market study and investigation powers
The CMA is one of only a small number of competition agencies worldwide that has powers to review markets and impose remedies in the absence of antitrust violations. It has two main tools at its disposal: (1) market studies and (2) market investigations. These tools allow the CMA (and, in the case of market studies, sectoral regulators) to investigate markets as whole and introduce measures to address structural or behavioural concerns without any finding of unlawful conduct.
Market studies are shorter inquiries, generally lasting no more than one year. They can result in a range of different outcomes, including recommendations to industry participants or government, opening separate enforcement proceedings, and referring a market for a more in-depth market investigation. The CMA cannot impose legally binding remedies as part of a market study, but can accept binding undertakings in lieu of a market investigation reference.
Market investigations are longer, more detailed investigations carried out by an Inquiry Group of CMA Panel Members. A market investigation typically lasts 18 months and can take up to two years. A market can be referred for a market investigation by the CMA, the concurrent sectoral regulators or the Secretary of State where there are reasonable grounds to suspect that a feature, or combination of features, of a market prevents, restricts or distorts competition. Market investigations often follow a market study, but a market study is not a pre-requisite, provided the decision to open a market investigation has been subject to consultation. The CMA has broad powers to impose remedies at the end of a market investigation to address features of the market having an adverse effect on competition.
The CMA’s recent market studies and investigations
The CMA has launched three market studies and opened one market investigation this year:
- Children’s Social Care. In March, the CMA launched a study into the availability and cost of children’s social care, responding to concerns about private-sector providers making high profit margins. The CMA issued its interim report in October, which found that there was a shortage of appropriate places for local authorities seeking to place children, resulting in higher As a result, large private sector providers of children’s homes and foster services in England and Wales appeared to be making higher profits than the CMA would expect in a well-functioning market. The CMA will now test these initial findings, look more closely at profits in the market, and explore possible solutions before publishing its final report in March 2022.
- Mobile Ecosystems. In June, the CMA launched a market study to examine whether features or practices associated with Apple and Google’s mobile ecosystems (comprising operating systems, app stores and web browsers) harm consumers or other businesses, such as app The CMA intends to use the results of the market study to: (a) inform the design and implementation of the new Digital Markets Unit (“DMU”); (b) inform the decision on which firms should be designated as having strategic market status (“SMS”); (c) support the DMU’s development of codes of conduct for firms with SMS; and (d) identify specific areas where the CMA could make “procompetitive interventions” under these powers. Such actions could in practice involve interventions that limit a platform’s ability to exercise market power; (ii) interventions that promote interoperability and common standards; (iii) consumer-choice remedies; and (iv) separation remedies. The CMA is also considering other possible outcomes, including making a market investigation reference.
- Mobile Radio Network Services. In October, the CMA launched a market investigation into Motorola’s Airwave network, which is the mobile radio network used by British emergency services to communicate securely while working in the field. The investigation follows concerns expressed by Government and other stakeholders, in particular the National Audit Office and the Public Accounts Committee, regarding Motorola’s market The CMA has concerns that Motorola is “cashing in” on its position and earning excess profits, leaving taxpayers to foot the bill. Motorola has a dual role as the owner of the current network and as a supplier in the roll-out of the new and cheaper Emergency Services Network (“ESN”). The CMA is therefore investigating whether Motorola “has an incentive to delay or shape the roll-out of the ESN to its advantage, given the significant profits it currently receives from operating the Airwave network.”
- Music Streaming. In October, the CMA announced its intention to launch a market study into music streaming. The announcement follows requests from two different Government departments (the Department for Business, Energy and Industrial Strategy (“BEIS”) and the Department for Digital, Culture, Media and Sport (“DCMS”)) and in the DCMS Select Committee’s Report on the Economics of Music Streaming. The CMA has not yet determined the scope of the market study but, given the topics covered in the DCMS Select Committee’s Report, the CMA is likely to examine (at least) the market position of the major record labels and the role of innovation in the sector.
The CMA also concluded its Electric Vehicle Charging market study and Funerals market investigation this year. These were launched in 2020 and 2019, respectively:
- Electric Vehicle Charging. In December 2020, the CMA launched a study into the electric vehicle charging market in an effort to “get ahead” of any competition concerns in this nascent but fast-growing market. The CMA considered the different ways that competition could develop and the issues that might In July, it recommended a significant package of remedies intended to address challenges facing the sector. In particular, the CMA raised concerns that the rollout of charging points had been slow and disjointed, and warned that more needed to be done in the sector ahead of the Government’s planned ban on sales of new petrol and diesel cars by 2030. These include measures to (i) kick-start investment and boost roll-out of charge points along motorways, in remote locations, and on-street; speed up electricity grid connections and lower connection costs; (iii) set open data and software standards for home charge points, so that drivers can benefit from smart charging and flexible energy systems; and (iv) establish a public body to monitor the electric vehicle sector to ensure charging is as simple as filling up at a petrol station.
As a result of the information it received during the market study, the CMA also opened a Competition Act investigation into exclusivity agreements between Electric Highway (which operates around 80% of the electric vehicle charging points on UK motorways) and service station operators Roadchef, Extra and MOTO, citing concerns that these long-term exclusivity arrangements prevented rivals from setting up charging points.
- The CMA’s probe into the funerals sector began as a market study that was launched in mid-2018. The market study found that the average price charged by funeral directors had increased almost 70% over the previous decade and that cremation prices had risen by almost 85%. The CMA also found that funeral directors and crematorium operators often did not provide sufficient or clear information on pricing to consumers. Following its market study, the CMA opened an in-depth market investigation in 2019.
In June 2021, following the conclusion of its market investigation, the CMA ordered a package of “sunlight remedies” requiring funeral directors and crematorium operators to clarify their prices upfront and display them prominently on their websites and premises, to allow customers to compare prices and choose the right services. The CMA also recommended that the Government establish an inspection and registration regime to monitor funeral director services.
Themes emerging from recent market studies and investigations
The following themes are emerging from the CMA’s recent practice.
- Quicker investigations. The Government and CMA have both called for market interventions to happen more quickly, particularly where they focus fast-moving digital and technology The trade-off for the CMA is that it does not have the power to impose legally binding remedies unless it carries out a full market investigation. The CMA has therefore become increasingly creative in finding ways to introduce remedies after a market study. In Mobile Ecosystems and Online Advertising, for example, the CMA envisages that remedial steps would be formally introduced by the DMU, based on the CMA’s recommendations.
- Digital Unsurprisingly, the CMA is increasingly using its market powers to investigate digital markets, such as Music Streaming and Mobile Ecosystems. This reflects not only shifts in the wider economy but also the challenges that competition agencies have had in applying more traditional antitrust tools in fast-moving digital markets. The focus on gathering information and understanding digital markets in detail is likely to continue as the CMA prepares for the DMU to acquire formal legal powers and as it drafts codes of conduct that will apply to firms designated to have strategic market status.
- Focus on new and nascent The CMA has shown a willingness to investigate new and nascent technologies. This represents a shift away from the CMA’s traditional use of its market probing powers, which it tended to use to investigate mature markets with established incumbents. The Electric Vehicle Charging market study provides a good example of the way that the CMA can use its powers in emerging markets which are growing at pace. This study was initiated by the CMA as a proactive step to investigate the market in its infancy and identify areas of potential concern before they became entrenched. The CMA’s investigation into Music Streaming arguably falls into the same category, with the CMA considering whether action is needed to support changes in market dynamics in response to new technologies.
- The Electric Vehicle Charging study also shows the CMA using its markets powers explicitly to support the UK’s transition to a sustainable This is consistent with the CMA’s stated policy objective set out in its draft 2022/23 Annual Plan to make greater use its powers and support the UK’s Net Zero and sustainability goals.
- More generally, recent market studies and investigations have been carefully focused and scoped. The CMA has concentrated on addressing specific market features or segments, particular technologies, specific companies and targeted theories of harm. For example, the Electric Vehicle Charging and Mobile Radio Network Services market studies are focused on one particular technology, and the Mobile Ecosystems study is targeted at Apple and Google’s products In these cases, the CMA appeared to have a clear view of the broad outcomes it wanted to achieve from the beginning of the study.
This contrasts with the way market studies and investigations were scoped and conducted just a few years ago. For example, the CMA’s investigations into Retail Banking and Energy markets were broad in scope and tried to consider a wide range of potential concerns across those markets. The same is true of earlier market investigations, such as Aggregates Cement and Ready-Mix Concrete, and Private Healthcare, in which the CMA was asked to consider the markets as a whole. While a broad study or investigation allows the CMA greater flexibility to gather evidence and target its interventions as it gathers a better understanding of the market, they are difficult to manage, consume considerable resources and take longer to complete. The CMA now routinely carries out a careful scoping exercise before launching any new market study.
- Some market studies have been overtly politically motivated, starting out as concerns expressed by Government to the CMA over particular markets or By way of example, the Music Streaming study was the outcome of a letter from DCMS to the CMA noting that “[t]he Government’s view is that transparency and fairness in the global streaming environment are key… However, this is a complex area, so it is vitally important that any action by the Government be led by robust evidence.” The investigation into Mobile Radio Network Services was also inspired by concerns expressed by Government, as were the CMA’s market studies into Online Advertising (2020) and the “Big Four” Statutory Audit firms (2019).
- Finally, consumer protection continues to be as much a priority for the CMA as competition law, as evidenced by the Funerals market investigation and Children’s Social Care market study undertaken this year.
The future of the CMA’s markets regime
The UK Government recently consulted on proposed reforms to competition and consumer policy, which include reforms to bolster the CMA’s market study and investigation powers. There are two broad options currently under consideration:
- Maintaining separate market studies and market investigations, while allowing the CMA to impose legally binding remedies in both; and
- Abolishing both the market study and market investigation procedures altogether and replacing them with a new single-stage market inquiry tool. The new market inquiry would carry a statutory timeframe of two years by default, but the CMA would be expected to conclude investigations more quickly where it could.
Regardless of the option pursued, BEIS has also proposed granting the CMA extended and more flexible remedial powers. Under these proposals, the CMA would acquire: (i) powers to impose interim measures in market investigations, in the same way that it can in Competition Act investigations; (ii) powers to require businesses to participate in implementation trials to test how best to implement remedies; and (c) power to review and, if necessary, vary the remedies it imposes.
BEIS considers that these reforms are needed to improve the speed and effectiveness of the CMA’s markets regime, and that they would be particularly beneficial when examining fast-paced, developing markets such as those related to environmental sustainability, where competition and consumer issues are likely to continue to evolve after the CMA’s work has concluded.
The CMA has largely welcomed the proposals, though in its Response noted that it sees merit in retaining the current two-stage market inquiry regime:
“The CMA supports the government’s aim to increase the pace of markets work. However, it is concerned that each of the proposals for structural reforms could put at risk some of the advantages … of the current market study and market investigation tools. In particular, the single-stage market inquiry option could risk losing the pace and flexibility advantages of the market study process. As a consequence, it could risk increasing the average duration of markets cases, contrary to its intended aim of speed and efficiency. The decision makers will by definition need to familiarise themselves with the detail of the case and reach a view on the adverse effects that have been identified, something that will inevitably take some time if they only become involved part way through the process. In practice, this may well mean that all cases default to a more onerous market investigation framework, meaning that the flexibility of the current market study process risks being lost.”
The Government is considering this and other feedback and will then announce how it intends to proceed, possibly in the form of draft legislation.
By their nature, market studies and investigations allow the CMA considerable scope to gather information and intervene in a wide range of issues and markets. They allow the CMA to tackle perceived market failings where there is no evidence of unlawful conduct. The CMA’s recent practice suggests that it is becoming more willing to turn to these market tools and apply them in creative ways to achieve quicker outcomes and address issues before they become entrenched. This is particularly true of fast moving digital markets and other new technologies.
Proposed reforms to the regime are consistent with this trend and suggest the CMA will become even more willing to turn to these market tools in future. The CMA is likely to be given even more powers to intervene in markets, greater powers to impose remedies, and the ability to impose interim measures. Even though the CMA cannot impose punitive measures under the markets regime, its power to intervene in markets can have significant implications for companies in circumstances where those companies have very few rights of defence and no right to appeal on the merits. Under the latest Government proposals, these powers only look set to increase.