A National Audit Office review of the regime for overseeing markets and enforcing competition law in the UK has found that it is generally effective and well regarded by comparison with international equivalents. However, the NAO has found that the competition system as a whole must still address a number of challenges to function as intended.

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Responsibility for the competition regime rests with a number of bodies, but the principal competition bodies in the UK are the Office of Fair Trading and the Competition Commission. Sector regulators such as Ofgem and Ofwat also have competition powers. The direct cost of the competition regime is calculated to be about £27 million each year.

While the performance of the separate bodies is well regarded, the NAO has identified four key issues which ought to be addressed as the system develops.

First, the competition system relies on case law and precedent. However, to date, most sector regulators have used their powers sparingly. The NAO recommends the Government consider if the incentives for regulators to use their competition powers are appropriate given the need to establish the body of case law which is required in an effective competition system.

Secondly, the process of enforcing competition law itself is often lengthy and most decisions are appealed against. There is a risk that the length, and uncertainty of outcome of the enforcement and appeals processes may reduce the appetite of the authorities for using their competition enforcement powers. The NAO recommends the Government should review whether progress in the development of the body of case law has been adversely impacted by these factors.

Thirdly, the bodies have not referred markets to the Competition Commission as much as expected. In future the NAO considers the Government should adopt a presumption that all Regulators should actively consider using their powers to make market investigation references on a regular basis.

Finally, the competition system comprises several bodies and work flows unevenly between them. The NAO has called on the Government to consider if arrangements could be made to allow resources to flow around the system and between organisations more easily.

"The UK competition arrangements are highly regarded around the world. There is, however, evidence that industry regulators have not generated the level of competition cases necessary to develop the body of case law and experience that is the hallmark of a modern competition regime, and that potential benefits for consumers are not being fully realised."

Amyas Morse, head of the National Audit Office


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