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THE NEW UK COMPETITION REGULATOR – THE COMPETITION AND MARKETS AUTHORITY

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THE NEW UK COMPETITION REGULATOR - THE COMPETITION AND MARKETS AUTHORITY 1

By Paul Stone, Head of Competition and Regulation at Charles Russell LLP

The UK government decided to review the UK competition regime in 2011.  It was concerned that there was unnecessary duplication between the existing competition regulators (the Office of Fair Trading (OFT) and the Competition Commission) and that competition cases were taking too long to be completed.

This article discusses the changes to the UK competition regime that have resulted from the government’s review, including the establishment of the new UK competition regulator, the Competition and Markets Authority (CMA).  The changes came into effect on 1 April 2014.

Overview of the CMA

Paul Stone

Paul Stone

The centrepiece of the reforms is the abolition of the OFT and the Competition Commission and the transfer of their functions to a new regulator, the CMA.

One of the government’s concerns about the old regime was that the skills and expertise of the two competition regulators were not always being fully utilised.  The government hopes, therefore, that the CMA will have more resources to pursue a larger number of cases and conclude them more quickly.

For mergers and market investigations, the CMA retains the two phase approach from the previous regime, with Phase I decisions the responsibility of the CMA Board and Phase II decisions taken by independent panels of experts (equivalent to former Competition Commission members).

Although the CMA has a new senior leadership team, the vast majority of its staff have transferred from the OFT and the Competition Commission.  It will be interesting to see the extent to which the CMA is able to establish itself as a new regulator in its own right, rather than simply an amalgamation of its predecessors.

Competition Act enforcement – how will this work in practice?

The CMA has taken over the OFT’s function of enforcing the prohibitions on anti-competitive agreements and abuse of a dominant position set out in the Competition Act 1998.

The government considered making changes to the model for enforcing these prohibitions.  In the end it adopted the model used by the OFT, although incorporating a number of recent improvements put in place by the OFT, such as having separate decision makers at the provisional decision (statement of objections) and final decision stages.

One significant new power for the CMA is that it can require individuals to answer questions.  It is expected that compulsory interviews will therefore become a common feature of the CMA’s Competition Act investigations.

Sectoral regulators

One of the government’s key concerns was that the sectoral regulators (ie those responsible for regulated sectors such as Ofgem and Ofwat) were not making use of their concurrent powers to apply the Competition Act.

Sectoral regulators are therefore now required to consider using their Competition Act powers before using sector-specific powers.  There is also a duty on the CMA and sectoral regulators to cooperate and they have formed a new UK Competition Network as a forum to facilitate this.

As a result of these changes, we can expect more competition cases in the regulated sectors.

Cartel offence

One of the most significant changes is the removal of the dishonesty element from the criminal cartel offence.  The need to show that individuals had acted dishonestly was regarded by the government as a major impediment to the successful prosecution of the cartel offence.

A number of concerns were expressed about this change, and so the government has introduced a number of new exclusions and exceptions to the offence, including where details of the arrangement are notified to customers or published before implementation.

It seems inevitable that this change will result in more prosecutions under the cartel offence.

Market investigations

The CMA has a new power to investigate practices across markets and the Secretary of State has broader powers to intervene in cases on public interest grounds.  There are also new statutory deadlines for market investigations.

Mergers

There are new statutory time limits for merger reviews: these include a 40 working day time limit for Phase I decisions and a time limited process for parties to offer undertakings post the Phase I decision.

The CMA also has strengthened powers to adopt interim measures during the course of its investigations, which can prevent further integration and unwind integration that has already occurred.

How can companies ensure they are prepared?

The expectations of the CMA are clear – more enforcement and quicker throughput of cases.  That means companies should ensure they are ready – and take the opportunity to review the effectiveness of their competition law compliance programmes.

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Sunak to raise business tax to pay for COVID-19 support – The Sunday Times

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Sunak to raise business tax to pay for COVID-19 support - The Sunday Times 2

(Reuters) – British finance minister Rishi Sunak is set to increase a tax on business to pay for an extension to COVID-19 support schemes in the budget next month, The Sunday Times reported https://bit.ly/3ujaBcU.

Sunak, in his speech on March 3, will announce he is increasing corporation tax from 19 pence in the pound and will outline a pathway where it rises to 23 pence in the pound by the time of the next general election, the report said. The move will raise an expected 12 billion pounds ($16.8 billion) a year, the report added.

According to the report, at least 1 pence is set to be added to the bill for business from this autumn, at a cost to business of 3 billion pounds, with further rises in subsequent years.

Allies of Sunak clarified he would not increase corporation tax higher than 23%.

These measures will be helpful in paying for an extension to the furlough scheme, VAT cuts and business support loans until at least August.

Unlike the 2010 Conservative-led government, which pursued spending cuts to rebalance the economy after the global financial crisis, Sunak is expected to defer most of the toughest decisions about how to pay for that support in his budget speech.

“The corporation tax hike will be higher than expected and the extension of the support schemes will be longer than most people expect,” the newspaper quoted a source as saying.

Insiders indicated the stamp duty holiday on property purchases would also be extended in line with the other coronavirus support measures, the report said.

Britain’s economy had its biggest slump in 300 years in 2020, when it contracted by 10%, and will shrink by 4% in the first three months of 2021, the Bank of England predicts.

($1 = 0.7136 pounds)

 

(Reporting by Vishal Vivek in Bengaluru; Editing by Lincoln Feast.)

 

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Foxconn chairman says expects “limited impact” from chip shortage on clients

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Foxconn chairman says expects "limited impact" from chip shortage on clients 3

TAIPEI (Reuters) – The chairman of Apple Inc supplier Foxconn said on Saturday he expects his company and its clients will face only “limited impact” from a chip shortage that has rattled the global automotive and semiconductor industries.

“Since most of the customers we serve are large customers, they all have proper precautionary planning,” said Liu Young-way, chairman of the manufacturing conglomerate formally known as Hon Hai Precision Industry Co Ltd

“Therefore, the impact on these large customers is there, but limited,” he told reporters.

Liu said he expected the company to do well in the first half of 2021, “especially as the pandemic is easing and demand is still being sustained.”

The global spread of COVID-19 has increased demand for laptops, gaming consoles, and other electronics. This caused chip manufacturers to reallocate capacity away from the automotive sector, which was expecting a steep downturn.

Now, car manufacturers such as Volkswagen AG, General Motors Co and Ford Motor Co have cut output as chip capacity has shrunk.

Counterpoint Research says the shortage has extended to the smartphone sector, with application processors, display driver chips, and power management chips all facing a crunch.

However, the research firm predicts Apple will face a minimal impact, due to its large size and its suppliers’ tendency to prioritise it. Apple is Foxconn’s largest customer.

Foxconn is looking at other areas for growth, including in electric vehicles (EVs), and Liu said their EV development platform MIH now had 736 partner companies participating.

He expected it would have two or three models to show by the fourth quarter, though did not expect EVs to make an obvious contribution to company earnings until 2023.

Liu also said the company was still looking for semiconductor fab purchase opportunities in Southeast Asia after not winning a bid to take over a stake in Malaysia-based 8-inch foundry house Silterra.

(Reporting by Ben Blanchard and Jeanny Kao; Writing by Josh Horwitz; Editing by William Mallard and Ana Nicolaci da Costa)

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EU seeks alliance with U.S. on climate change, tech rules

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EU seeks alliance with U.S. on climate change, tech rules 4

By Sabine Siebold and Kate Abnett

BERLIN (Reuters) – Europe and the United States should join forces in the fight against climate change and agree on a new framework for the digital market, limiting the power of big tech companies, European Union chief executive Ursula von der Leyen said.

“I am sure: A shared transatlantic commitment to a net-zero emissions pathway by 2050 would make climate neutrality a new global benchmark,” the president of the European Commission said in a speech at the virtual Munich Security Conference on Friday.

“Together, we could create a digital economy rulebook that is valid worldwide: a set of rules based on our values, human rights and pluralism, inclusion and the protection of privacy.”

The EU has pledged to cut its net greenhouse gas emissions to zero by 2050, while President Joe Biden has committed the United States to become a “net zero economy” by 2050.

Scientists say the world must reach net zero emissions by 2050 to limit global temperature increases to 1.5 degrees above pre-industrial times and avert the most catastrophic impacts of climate change.

The hope is that a transatlantic alliance could help persuade large emitters who have yet to commit to this timeline – including China, which is aiming for carbon neutrality by 2060, and India.

“The United States is our natural partner for global leadership on climate change,” von der Leyen said.

She called the Jan. 6 storming of the U.S. Capitol a turning point for the discussion on the impact social media has on democracies.

“Of course, imposing democratic limits on the uncontrolled power of big tech companies alone will not stop political violence,” von der Leyen said. “But it is an important step.”

She was referring to a draft set of rules unveiled in December which aims to rein in tech companies that control troves of data and online platforms relied on by thousands of companies and millions of Europeans for work and social interactions.

They show the European Commission’s frustration with its antitrust cases against the tech giants, notably Alphabet Inc’s Google, which critics say have not addressed the problem.

But they also risk inflaming tensions with Washington, already irked by Brussels’ attempts to tax U.S. tech firms more.

Von der Leyen said Facebook’s decision on a news blackout on Thursday in response to a forthcoming Australian law requiring it and Google to share revenue from news underscored the importance of a global approach to dealing with tech giants.

(Additional reporting by Foo Yun Chee; editing by Robin Emmott and Nick Macfie; editing by Jonathan Oatis)

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