I thank noble Lords for their suggested amendments and I appreciate the sentiments expressed by the noble Lord, Lord Whitty, regarding this part of the Bill.
Beginning with the amendments in the names of the noble Baroness, Lady Hayter, and the noble Lord, Lord Whitty, Amendments 24ZA and 24ZC seek to add specific references to some of the CMA’s competition functions and duties into its overarching duty, which is,
“to promote competition, both within and outside the United Kingdom, for the benefit of consumers”.
These include, for example, references to the CMA’s role in tackling mergers and abuse of dominant positions, and in reducing cartels and monopolies.
The CMA’s duty to promote competition reflects its unique position as the UK’s principal competition body, its leadership role in tackling anti-competitive behaviour as part of ensuring markets work well for consumers, and its domestic and international advocacy role. It does not seek to set out all the CMA’s functions. In addition to this overarching duty, the CMA will inherit the full range of the competition functions of the OFT and the Competition Commission, as well as additional consumer enforcement powers.
These functions and powers include: strengthened Competition Act enforcement powers to enable the CMA to tackle anti-competitive monopolies, monopsonies and cartels; strengthened merger controls to enable the new authority to address more effectively anti-competitive mergers that can lead to high prices and poor quality for consumers; a wide range of investigative and remedy-making powers to ensure that markets work well for consumers; and finally, the use of consumer enforcement powers to address business practices that distort competition or impact on consumer choice, even where markets are competitive. We are also providing more speed and rigour in market studies and investigations, and anti-trust cases, to give consumers faster and more robust decisions.
Given that the CMA will have a range of powers to ensure that competition and markets work well, it would not be appropriate to legislate for the CMA’s overarching duty to focus on one of these important competition and consumer tools over another. It is also important to preserve the independence of the CMA to choose the right tool to promote competition and tackle anti-competitive practices. We therefore do not consider that it is necessary or right to specify the particular kinds of anti-competitive features set out in these amendments.
There is also a particular concern over the way in which Amendment 24ZC seeks to gloss the meaning of a dominant position by specifying that it is normally to mean control over a quarter or more of a market. This would contradict European Union jurisprudence on dominance and therefore introduce, by way of a provision in the CMA’s overarching duty, a conflict with the CMA’s actual powers and responsibilities and with the European Union law which underlies them.
Determining whether an undertaking is dominant requires an economic analysis of the state of competition in a market as it is best defined. Market shares can be important indicators but may not be decisive—for example, where there is significant buyer power or low
barriers to entry such that the undertaking’s exercise of its power is constrained by the threat of new entry. By introducing this more mechanistic approach to dominance, the amendment would conflict with the way dominance is assessed under European competition law. So it would be wrong for us to introduce this scope for inconsistency and uncertainty by way of an amendment to the CMA’s overarching duty. I hope that noble Lords will accept my explanation, which has taken a little time, for why the overarching duty is just that and why I do not believe that more specific additions are appropriate.
Amendment 24ZCA, tabled by my noble friend Lord Lucas, and bearing in mind his reference to and comments about Amazon and its great buying power, seeks to empower the CMA to investigate any company or arrangement to establish whether a cartel, monopoly or monopsony exists or is being abused without receiving prior complaint. The CMA will, as the OFT can now do, be able to make inquiries whether or not it has received a complaint and will be able to take action on its own initiative in markets where it observes a problem. Indeed, it will inherit the function of obtaining, compiling and keeping under review information about matters relating to the carrying out of its functions under Section 5 of the Enterprise Act 2002.
However, for the authority to use its far-reaching powers of investigation under the Competition Act 1998—such as powers to require the production of specified documentation or information and powers to enter business premises with or without a warrant—Section 25 of the Competition Act 1998 requires it to have reasonable grounds for suspecting that an anti-trust prohibition has been infringed. This strikes the right balance between giving competition authorities effective powers and protecting businesses from overzealous enforcement. If the amendment is intended to undermine this threshold, it would represent a significant weakening of a protection for businesses. As such, as the noble Lord, Lord Borrie, mentioned, I do not consider that the amendment is required. I understand the noble Lord’s concern that allegations of anti-competitive behaviour should be properly investigated and the facts established. Decisions on individual cases and priorities will be for the CMA, which will of course be independent of government.
At the end of the day, it will be for the management of the CMA to ensure that it is a highly effective competition authority, vigorous in the pursuit of anti-competitive behaviour, and the provisions of the Bill, including the creation of the CMA, will assist in this. They are designed to deliver greater coherence in competition policy and practice and a more streamlined approach to decision-making through stronger oversight of the end-to-end case management process, more flexibility in resource utilisation and better incentives and powers to apply the anti-trust and markets tools to deal efficiently with competition problems. In addition, this clause will give the CMA a duty to promote competition, something which neither the OFT nor the Competition Commission have. I hope that my noble friend Lord Lucas will accept that these changes should go a long way to securing that the CMA will be the active champion of competition that we all wish to see.
In the light of my explanation, I ask the noble Lord, Lord Whitty, to withdraw his amendment.