Should competition law be suspended to help deal with the COVID-19 crisis?

March 27, 2020

(By Peter Ormosi and Andreas Stephan) When the escalation in Covid-19 sparked panic buying and shortages of key products, UK supermarkets asked the government to consider suspending competition law, to allow them to co-ordinate supplies and reduce shortages. On 25 March 2020, the UK’s Competition and Markets Authority (CMA) published a document stating that,

Throughout the UK, business are… providing essential goods and services to consumers, to ensure key workers can carry out their important tasks and in getting the country through this crisis. The CMA understands that this may involve coordination between competing businesses. It wants to provide reassurance that, provided that any such coordination is undertaken solely to address concerns arising from the current crisis and does not go further or last longer than is necessary, the CMA will not take action against it. (paras 1.4 and 1.5)

This blog piece examines the consequences of providing this reassurance and asks whether it is a good idea. Read the rest of this entry »

Is Furman right to propose ex ante platform regulation as the best way to address competition concerns in the digital economy?

April 24, 2019

(by Elias Deutscher) Last month, the Digital Competition Expert Panel, chaired by Professor Jason Furman, published its report ‘Unlocking digital competition’ (the ‘Furman report’). The report had been jointly commissioned by the Chancellor of the Exchequer and Business Secretary due to concerns about prevailing high levels in industry concentration, the accumulation of data in the hands of a handful of players and the rise of a few vertically integrated super-platforms. The same concerns have fuelled a European-wide policy debate about the challenges of competition law enforcement in the digital economy (e.g. by the German Federal Ministry for Economic Affairs and Energy and the European Commission).

The Furman report singles out the strategic importance of data and the gatekeeper function of intermediary platforms as central features of digital competition and the most important challenges for competition policy. These features make digital markets more prone to tipping in favour of a few powerful incumbents. Amongst other recommendations, the report proposes to address these concerns through the creation of a specific ex ante regulatory regime for digital platforms. While it outlines some of the basic features of the proposed new regulation, the report omits to clearly set out the underlying rationale and implications of such a regime. It also gives little guidance on its exact scope and implementation. Most importantly, it remains unclear whether the proposed framework will apply only to large, dominant firms, or also to smaller, non-dominant platforms. Read the rest of this entry »

Why the CMA is wrong in its proposals for reform and what should be done instead

March 7, 2019

(by Bruce Lyons) The Chairman of the CMA, Lord Tyrie, has written a 44-page letter (including annex) to the Secretary of State for Business, Greg Clark, setting out a long list of legislative proposals.[1] Two motivations are given: “First, the growth of new and rapidly-emerging forms of consumer detriment, caused in part by the increasing digitalisation of the economy, requires more rapid intervention, and probably new types of intervention… Second, there are increasing signs that the public doubt whether markets work for their benefit.” I agree with the spirit of these points and that they require action. However, I disagree with some of the CMA’s key proposals. Lord Tyrie appears particularly frustrated with the lengthy appeals system which limits his ability to act firmly and swiftly. Unfortunately, the overall package of proposals would reverse hard-won progress in competition policy over the last 20 years and lead to a paternalistic, arbitrary and unrestrained Consumer Interest Authority. In this blog, I briefly explain some of my concerns. I then set out two alternative proposals that would more directly and appropriately address public concerns over unfair pricing and result in better decisions without prolonged appeals. Read the rest of this entry »

The deterrent effect of competition authorities’ work

September 15, 2017

(by Mike Walker^) In his post last month, Steve Davies bemoaned the lack of evidence on the magnitude of harm deterred by the activities of the Competition Agencies. He presented some estimates from research in CCP on cartel deterrence, concluding most strikingly: “On the most conservative of our estimates, more than half of all potential cartel harm never occurs, because it is deterred. This is very much a lower bound, and the proportion could be as high as 90%.” Read the rest of this entry »

Can care homes survive with privately funded residents cross-subsidising those who are state funded?

February 2, 2017

(by Morten Hviid) Care homes often take a mix of privately funded and state funded residents. Recent research by a leading provider of market information about the care home sector, LaingBuisson, assesses that the average fee per resident with a local authority (LA) assisted place fell short of what it costs care homes to provide the care by £104 p.w.. They also argue that the shortfall is picked up by private fee payers who are thereby providing a cross-subsidy. They refer to this as a hidden “care tax”.  The existence of this cross-subsidy is nothing new. The predecessor of the Competition and Markets Authority, the OFT, found the same in a report from 2005.  However, the size of the cross-subsidy is notable.  Even without assessing the strength of the new research, which is not publicly available, several aspects of this news story are worth pondering further.  Should LAs use any buyer power they might have when negotiating prices?  What are the consequences for the care market from the cross-subsidy?  Why are care homes willing to accept below cost prices?  These questions have added current importance because the CMA is undertaking a Market Study into the care home market. Read the rest of this entry »