Competition | UK Regulatory Outlook February 2024

Competition beyond borders

In a recent speech, Sarah Cardell, chief executive of the UK's Competition and Markets Authority (CMA), highlighted the importance of international cooperation and communication in the field of competition law. She emphasised that, while competition authorities remain independent and sovereign in their decisions, maintaining positive relationships and sharing knowledge with fellow enforcement agencies is crucial.

This is an important reminder for businesses both of the extent of information sharing between competition authorities and the possibility of divergent decisions. These factors mean that it is often necessary to take a multijurisdictional approach to competition law advice, expanding the compliance burden.

For example, the CMA, European Commission,  US and other national competition authorities have all been involved in reviewing several recent high-profile mergers, including Adobe/Figma, Amazon/iRobot and Illumina/Grail. Ms Cardell highlighted the potential for divergence between the decisions of competition authorities in these types of cases, where one authority may permit a merger that another blocks or requires substantial remedies before it is permitted. While noting the efficiencies in coordination between authorities, Ms Cardell emphasised that instances of divergence are inevitable and "entirely proper" given that each authority reviews the merger under a different set of regulations and with a view to assessing the anti-competitive effects in its own jurisdiction.

International cooperation extends beyond merger control. The CMA recently has collaborated with other authorities in investigating anti-competitive conduct – such as its investigation into the fragrances sector (including anti-competitive employment agreements). This investigation led to the CMA cooperating with the US Department of Justice and the Swiss Competition Commission. Ms Cardell noted that such cooperation is particularly important in digital markets as competition issues may arise across multiple jurisdictions and be addressed differently in each. The Digital Markets Act in the EU and the anticipated UK Digital Markets, Competition and Consumers Bill (DMCCB ) in the UK are prime examples of this.

The DMCCB will grant the CMA significant powers to address extraterritorial agreements that have an anti-competitive effect on the UK market as well as compel relevant information to be provided by overseas companies.

Businesses need to be aware of the extent of information-sharing between competition authorities as well as the possibility of divergent decisions being reached. It follows that, for companies engaging in international M&A activity or facing investigations in more than one jurisdiction, it will be necessary to seek competition law advice in all directly-impacted jurisdictions.

Revised Market Definition Notice

On 8 February 2024, the European Commission adopted a Revised Market Definition Notice. The notice provides helpful guidance on how the European Commission defines markets, which will influence whether and how the Commission intervenes in investigations and mergers.

This is the first revision of the Market Definition Notice since its adoption in 1997. It reflects the significant developments in competition law enforcement as well as in market innovation over the intervening years, in particular the increased digitalisation and the new ways of offering goods and services, as well as the interconnected nature of trading platforms and commercial exchanges.

The revised notice now provides guidance on market definition in multi-sided platforms, an area where market definition is particularly difficult. Multisided platforms are where demand from one group of users has an influence on demand from another group of users (the notice suggests examples such as payment card systems and advertising sponsored platforms, although this could also include price comparison websites for insurance, flights or hotels).  It introduces the concept of defining a multi-sided platform as being part of one market encompassing all its user groups or separate interrelated markets for products offered on each side of the platform depending on how it is used, which the Commission hopes will simplify cases.

Another area addressed by the notice is market definition in the presence of after-markets, bundles and digital ecosystems. These typically occur where the consumption of one product leads to the consumption of another connected product, especially where technological links (such as interoperability) exist between the two products.

The notice also permits markets to be defined in a more forward-facing manner. For example, it allows market definition to take account of expected transitions in the market structure. This suggests a more dynamic evaluation of a market, rather than focusing solely on market structure at the time of the assessment. Market definition may take into account short-term and medium-term changes in market structure. This includes situations where there is a reasonable probability of new product types emerging or changes in the definition of the relevant geographic market. These changes could be driven by upcoming technological advancements or regulatory changes.

Market definition plays a key role in the enforcement of competition law.  It is the primary tool for determining and assessing market power, market concentration and dominance, and remains central to the assessment of merger activity and the analysis of competitive interaction generally. However, digitalisation and more complex markets and technologies are increasingly challenging a rigid approach to market definition and we are seeing regulators seek a more flexible methodology.

The principal changes and additions in the Revised Notice codify existing Commission and judicial practice and consequently do not represent a fundamental shift in approach. Nevertheless, the additional clarity in how the Commission intends to approach novel markets is welcome given the importance of market definition in competition law. 

Although the CMA is not bound to follow the notice (or any post-Brexit judgments of the European courts), it is also likely to prove informative for market definition in the UK – particularly as there is no current indication that the CMA is working on its own update.