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Competition and Markets Authority

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Economics

Established to protect consumers by ensuring decent competition in the marketplace, the Competition and Markets Authority (CMA) plays an important role in the UK economy. What role does the CMA play and how has Brexit affected it? Read on to find out.

What is the Competition and Markets Authority?

The Competition and Markets Authority (CMA) looks out for the interest of customers, businesses, and the economy by keeping businesses in check.

The Competition and Markets Authority (CMA) is an independent non-ministerial body that works to promote healthy market competition in and outside the United Kingdom, providing benefits to the customers.

The CMA also monitors organisations' mergers, and, if necessary, it stops organisations from gaining monopoly power in a particular market or economic sector through mergers.1

Roles of the Competition and Markets Authority

With an aim to make sure organisations operate fairly and within the competition law, and help consumers get a fair price on goods and services, the CMA has the following tasks in regulating market practices:

  • To monitor and investigate mergers between organisations to stop one organisation from having monopoly power in a market or reducing competition.

  • To investigate the market when there is a case of customer or competition problem.

  • To protect consumers from unfair market practices.

  • To fight against market cartels and practices that don't promote competition in the marketplace.

  • To give recommendations to the government and regulators on providing competition for the customers' benefits.

Competition and Markets Authority Mergers investigated graph StudySmarterFigure 1. Total mergers investigated by the CMA in the last 10 years. Created with data from the UK Government, www.gov.uk - StudySmarter.

As you can see in figure 1, the CMA investigates many mergers annually. Let's take a look at a few cases that the CMA has investigated and their outcomes.

After investigating the proposed merger, a concern about the presence of little real competition for the company in the UK came up.

In order to clear the concern and receive the competition and markets authority approval, both companies agreed to sell their UK classified business Shpock and Gumtree UK to other organisations in a move to keep a healthy competition in the online marketplace.

In a bid to protect consumers of the service, the CMA made this move after investigations revealed that customers were paying an estimated extra cost for funeral homes services. The CMA also stopped funeral homes from giving referral payments to hospitals, care homes, and hospices.

The Competition and Markets Authority opened an investigation into Amazon and Google's handling of fake reviews on their platforms. This was done to protect consumers' interests and to avoid misleading reviews or recommendations on certain products or services.

In 2019, the Competition and Markets Authority made an audit recommendation to the UK government after the loss of one of the big four audit companies and the little competition available.

After auditing, the Competition and Markets Authority's recommendation was to separate auditing from the organisations’ consulting services and to make joint audits mandatory to develop the capacity of firms. That way, the task of auditing wouldn’t fall on the same four big organisations.

The CMA audit recommendation also included the introduction of regulators to improve organisations' audit teams' accountability.

After investigations into the retail banking systems, the CMA initiated open banking in 2017 in a move to increase competition in the retail banking sector.

Open banking allows consumers and SMEs to make payments for goods and services directly from their bank accounts without using cards. It also allows the sharing of data from bank and credit card activities to trusted third parties, who in turn provide services and applications options to save consumers' resources.

The Competition and Markets Authority’s open banking initiative has been a major success in improving competition in the retail banking market, and also in benefiting consumers and small and medium enterprises (SMEs).

The role of the Competition and Markets Authority post-Brexit

Upon the UK exit from the European Union, the Competition and Markets Authority became independent of the European Commission for merger control and competition law enforcement.

This means that the CMA can now review mergers that can impact the UK’s economy without confirming if the case is already under review by the European Commission. The CMA is no longer subject to the European Commission regulation 1/2003 which gives competency between the Commission and national competition authorities.

Competition and Markets Authority - Key takeaways

  • The Competition and Markets Authority is an independent non-ministerial body that works to promote healthy market competition within and outside the United Kingdom, providing benefits to the customers.
  • The Competition and Markets Authority looks out for the interests of customers, businesses, and the economy by keeping businesses in check.
  • The Competition and Markets Authority also monitors organisations' mergers, and if necessary, stops them from gaining monopoly power.
  • The roles of the competition and markets authority are:1. To monitor and investigate mergers between organisations to stop an organization from having monopoly power in a market or from reducing competition.2. To investigate the market when there is a case of customer or competition problem.3. To shield consumers from unfair market practices. 4. To fight against market cartels and practices that don't promote competition in the marketplace. 5. To provide recommendations to the government and regulators.
  • After Brexit, the Competition and Markets Authority became independent of the European Commission for merger control and competition law enforcement.

Sources

1. Official website of the CMA: https://www.gov.uk/government/organisations/competition-and-markets-authority/about

Competition and Markets Authority

The roles of the competition and markets authority are:

  • To monitor and investigate mergers between organizations to stop an organization from having monopoly power in a market or from reducing competition. 

  • To investigate the market when there is a case of customer or competition problem

  • To shield consumers from unfair market practices 

  • To fight against market cartels and practices that don't promote competition in the marketplace. 

  • To provide recommendations to the government and regulators. 

The CMA protects consumers by enforcing the competition law and regulating business practices. 

The Competition and Markets Authority monitors organisations' mergers and enforces the competition law.

Making funeral homes give a definite price list.

 

In a bid to protect consumers of the service, the CMA made this move after investigations revealed that customers were paying an estimated extra cost for funeral homes services. The CMA also stopped funeral homes from giving referral payments to hospitals, care homes, and hospices. 

The Competition and Markets Authority is an independent, non-ministerial body that works to promote healthy market competition within and outside the United Kingdom. 


The Competition and Markets Authority looks out for the interests of customers, businesses, and the economy by keeping businesses in check. 

Final Competition and Markets Authority Quiz

Question

What is the Competition and Markets Authority?

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Answer

The Competition and Markets Authority is an independent, non-ministerial body that works to promote healthy market competition within and outside the United Kingdom, providing benefits to the customers. The competition and markets authority looks out for the interests of customers, businesses, and the economy by keeping businesses in check. 

Show question

Question

The CMA monitors organisations’ mergers.


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Answer

True

Show question

Question

The CMA can stop a merger between organisations. 



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Answer

True

Show question

Question

Select the correct statement(s).



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Answer

None of the above.

Show question

Question

What are the roles of the Competition and Markets Authority?


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Answer

  • To monitor and investigate mergers between organisations to stop them from having monopoly power in a market or from reducing competition. 

  • To investigate the market when there is a case of customer or competition problem.

  • To shield consumers from unfair market practices. 

  • To fight against market cartels and practises that don't promote competition in the marketplace. 

  • To give recommendations to the government and regulators.

Show question

Question

Complete the statement: 

‘The competition and markets authority aims to promote __________ in the UK and global markets’.

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Answer

healthy competition 

Show question

Question

Explain the role played by the Competition and Markets Authority in the merger of eBay and Adevinta.


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Answer

After investigating the proposed merger, a concern about the presence of little real competition for the company in the UK came up. In order to clear the concern and receive the competition and markets authority approval, both companies agreed to sell their UK classified business Shpock and Gumtree UK to other organizations in a move to keep a healthy competition in the online marketplace. 

Show question

Question

Why did the Competition and Markets Authority initiate open banking?


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Answer

To improve competition in retail banking. 

Show question

Question

Name a market where open banking has proven to be a success. 


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Answer

The Competition and Markets Authority’s open banking initiative has been a major success in improving the competition in the retail banking market, and also in benefiting consumers and SMEs

Show question

Question

What recommendation did the CMA give the legislators on auditing?


Show answer

Answer

The Competition and Markets Authority’s audit recommendation was to separate auditing from organisations consulting services and to make joint audits mandatory. The Competition and Markets Authority’s audit recommendation also included the introduction of regulators to improve organisations' audit teams' accountability. 

Show question

Question

Give an example of the Competition and Markets Authority protecting customers from unfair market practices.


Show answer

Answer

The CMA opened an investigation into Amazon and Google's handling of fake reviews on their platforms. This was done to protect consumers' interests, and avoid misleading reviews or recommendations on certain products or services. 

Show question

Question

Brexit had no effect on the Competition and Markets Authority. 


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Answer

True

Show question

Question

After Brexit, the CMA was empowered to investigate mergers that affect the UK economy, even though they are under the European Commission review.


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Answer

True

Show question

Question

State the effects of Brexit on the CMA’s operations. 


Show answer

Answer

After the UK’s exit from the European Union, the Competition and Markets Authority became independent of the European Commission for merger control and competition law enforcement. They also are no longer subject to the European Commission regulation 1/2003 which gives competency between the commission and national competition authorities.

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