Context: The UK Competition & Markets Authority (CMA) told newspaper The Guardian last month that her agency does not always “need to have a seat at the table” when there’s a global competition case. While she does not see tension between the government’s pro-growth agenda and her agency’s competition enforcement, she acknowledged that “where [they] do need to go further is to make sure that perceptions of the regime haven’t created a chilling effect, haven’t had a detrimental impact on business and investor confidence” (February 18, 2025 The Guardian article). It is difficult to reconcile the foregoing with some of the agency’s current investigate priorities such as the cloud services market (February 28, 2025 ai fray article) and various AI “merger” inquiries (September 7, 2024 ai fray article).
What’s new: The UK government recently published its draft strategic steer to the CMA and invites the general public to send its views by completing a survey or emailing a response. The deadline is on Thursday (March 6, 2025) morning.
Direct impact: The draft steer is phrased very generally, but at a high level promotes laudable objectives (proportionality, growth, investment etc.). Stakeholders still have the chance to make constructive suggestions, such as for clearer and more specific directions.
Wider ramifications: The UK is competing with other economies, on the other side of the English Channel but also in far-away places, for investment and talent. Policy makers around the globe increasingly realize that reasonable regulation can serve as an important differentiator, not least in connection with AI.
The current UK government’s (draft) strategic steer is not a fundamentally new initiative. It is done every election cycle. And a focus on investment and growth was also the wish of the previous UK government under then-Prime Minister Rishi Sunak in 2023.
The UK government recently replaced the CMA’s chairman, which suggests that the ministers will not content themselves with merely providing some basic direction in the form of a high-level document that will always leave plenty of room for interpretation. For example, a call to prioritize “pro-growth and pro-investment interventions” (as stated in section of 2.1 of the draft steer) does not discourage overregulation if the agency says that more enforcement means more competition and more competition spurs growth and attracts investment. But that would be circular logic.
In recent years there has been quite some criticism of the CMA intervening too aggressively in technology markets. For example, the (London) Times reported in January 2024 on what Silicon Valley billionaire David Sacks (former chief operating officer of PayPal and founder of a tech venture fund) said on his popular All-In podcast:
“The UK, they’re like the chihuahua who’s leading the pack. They’re the smallest market but they’re the most aggressive on antitrust enforcement.
“If you’re a start-up and you’re trying to consider where to put your Europe office, I would not choose the UK any more. I used to think that the UK was No 1 because it was so easy, but you don’t want to create that nexus if you can help it. It might subject you to a competition authority you don’t want to deal with later when you get acquired.
“If acquirers and targets can’t have confidence that the deal will be approved, and in fact they’re going to be left in limbo for over a year waiting for speculative approval, they’re going to be less likely to do deals in the first place and I’m sure Adobe’s not happy about the fact they’ve got to pay a billion-dollar break-up fee.”
Mr. Sacks also explained that there are only two exit avenues for startups: going public in an initial public offering (IPO) or being acquired. There is no third way (other than eventually going out of business). By closing the M&A door, “you’re absolutely making it tougher for venture capitalists and founders to get a good return. It’s that simple. And that is going to have a depressing effect on the investing of risk capital in Silicon Valley.”
Earlier this year, another British newspaper reported on the new CMA chair’s Big Tech (Amazon) background (January 21, 2025 The Telegraph article) and recalled past criticism of the CMA’s overenforcement. One of the world’s leading venture capitalists, Marc Andreessen of Andreessen Horowitz (a16z), said there were “enormous challenges” in the UK with competition rules that appeared “extremely draconian, anti-tech, anti-business, anti-American policies.”
Members of the legal community have also expressed concerns over the CMA’s heavy-handedness. Today, Steptoe antitrust partner Ronan Scanlan published a LinkedIn article that “warmly welcome[s]” the draft strategic steer’s emphasis on growth, proportionality, comity (meaning that jurisdictions respect, and don’t unnecessarily interfere with, each other) and legal certainty.
According to Mr. Scanlan, “[f]or too long the decisions that the CMA has taken; in particular, in relation to merger control, have been without due regard to the costs to the businesses affected.” He describes that attitude as a “so what” mode that disregards the impact on companies.
The article says “the CMA became more activist in its approach to mergers” and raises different issues, such as that the CMA may clear a merger in a four-company market one day while blocking one in a 12-company market on the next occasion. Mr. Scanlan also says that “[m]ore generally, every lawyer, economist and business that has gone through a merger process with the CMA has a horror story.”
There has been too much criticism from too many sides for the CMA to be able to argue that it has just been misunderstood, or that everyone else, other than self-serving complainants, failed to see the wisdom of its regulatory decisions. Where there is so much smoke, there must be, or must have been, some fire.
As a result of the Draghi Report and other recent initiatives, the EU may now approach regulation, particularly in innovative industries, more carefully. What is at stake is where a given startup will be founded. Will the founders stay in the UK? Will they cross the Channel because it’s the gradually less heavily regulated economy? Or will they go to a place like Dubai? The more negative headlines the CMA’s overenforcement makes, the more founders and investors will seek greener pastures abroad, and the harder it will be for the UK government to achieve its economic policy goals.