Interview with Andrea Coscelli

Editor’s Note:

Dr. Andrea Coscelli is the Chief Executive of the UK Competition and Markets Authority (CMA), a role he has held since 2016. As CEO, he is responsible for providing visible and dynamic leadership to the CMA, driving performance to ensure the CMA meets its strategic priorities and delivers value for money, and working with the CMA Chairperson to represent the CMA to its partners, stakeholders, ministers, Parliament, and the public. Prior to joining the CMA, he was the Director of Economic Analysis at Ofcom and a Partner at Charles River Associates. He holds a Ph.D. in Economics from Stanford University and in 2020 was awarded a CBE for services to Competitive Markets.

This interview was conducted for Antitrust on January 19, 2021, by Associate Editor Anna Lyle-Smythe, Partner, Slaughter and May.

Antitrust: As we are talking in January 2021, I think we have to start with Brexit. The CMA recruited heavily in anticipation of a possible effective Brexit in March 2019. Now that the transition period has come to an end and the CMA has parallel enforcement powers with the EC, what should we expect in terms of the CMA’s caseload as between covering the same ground as before, while also covering the parallel cases with the European Commission?

Andrea Coscelli: 2021 is going to be the year when we transition from a primarily domestic portfolio to a portfolio with many international cases as well. It will take some time, as the way the Withdrawal Agreement operates is that there is a slow transition—­particularly on the enforcement side—of cases from the European Commission to the CMA. For instance, cases including the UK market which have already reached the “statement of objections” point will remain with the EC until the end of the matter. Consequently, the EC will still do plenty of work for UK consumers on all these cases.

This applies similarly to mergers. As you know, cases filed in Brussels before the end of the 2020 calendar year have remained in Brussels, despite the fact that these merger reviews can last many months. This regime has been in place for a long time, and we are confident that it will continue to deliver for UK consumers.

At the same time, we are already working on a number of international mergers that were not notified to the EC before the end of 2020. In some cases, we have been speaking to the parties since the autumn once it became clear they would not formally notify the EC before the end of the year. These will be among the first cases examined in parallel with the EC and we will be announcing the reviews over the coming weeks and months.

Antitrust: You mentioned that currently the case mix is more domestic with a few international ones, and that you anticipate a transition to a greater number of international cases. Will this lead to a shift in priorities at the CMA, and can you tell us about this prioritization by reference to any current cases?

Andrea Coscelli: Priorities will indeed evolve. Our approach to cases will be based on the consideration: “Were the CMA not to open an investigation, what would the consequences be for UK consumers?” Competition authorities in Japan, Australia, and Brazil operate under a similar principle, and the CMA has spoken to these authorities in recent years to understand this in practice. It will be a shift, but we are confident that we will be able to deal with this new case mix as the ability to work on complex international cases is already there.

Antitrust: In the past, the CMA has commented that it anticipated up to 50 extra merger cases per year. Is this still a reasonable estimate, or has this changed?

Andrea Coscelli: We have previously estimated an extra 30 to 50 Phase I cases per year. Of course, this is subject to the M&A cycle, evidently currently affected by COVID-19. Despite that, the estimate is probably still about right. The main question is whether the CMA decides to play a significant role in a few very big and complex cases, which may in turn force us to be slightly more selective in more discretionary areas of our portfolio such as enforcement and the markets regime.

Antitrust: On global merger transactions and antitrust enforcement cases, the CMA will now have a role independent to that of the EC. How do you see the CMA’s role in those matters in terms of cooperation with other competition agencies?

Andrea Coscelli: My experience thus far is that the CMA can play a major role. Historically, we have already done so within a number of organizations––for example, in the ICN, the OECD, and with our Multilateral Mutual Assistance and Cooperation Framework (MMAC) partners (Australia, New Zealand, Canada, and the U.S.). We worked on six or seven sizeable global transactions in the last couple of years with the U.S. Department of Justice and Federal Trade Commission, and played an important role, with discussions at all levels on strategy and timing. We expect the same with the EC, and this has already started to happen with the aforementioned cases. We are confident that we can fulfill this role, and still fulfill our goal of providing positive outcomes for UK consumers in smaller cases. In recent years there have been several cases where the CMA intervened in smaller, domestic markets where only a small number of consumers may be affected, but there are very obvious anticompetitive concerns. Previously we have tended to investigate these, and hope to continue to do so, though we may need to be more selective going forward.

Antitrust: What are your thoughts on the timing for a cooperation agreement between the CMA and DG COMP?

Andrea Coscelli: Reaching an agreement on this topic is a priority for the UK Government. There is a specific reference to it in the Trade and Cooperation Agreement reached with the EC just before Christmas 2020. Personally, I am cautiously optimistic that an agreement can be reached within the next year or so, but this is very much a matter for the UK Government, though the CMA will do everything in our power to support them in this. I think that the main hold-up will be available bandwidth to progress the discussions with so much else going on at the moment rather than conflicting considerations or priorities. It is in our and the EC’s mutual interests to reach an agreement on this.

Antitrust: The CMA’s remit is broad: mergers, antitrust, market studies, consumer protection, and now also digital markets and possibly also state aid/subsidies. What are the challenges and benefits of bringing all of these functions under one roof?

Andrea Coscelli: One of my key roles is to look at these issues in the round, along with the CMA board. It makes sense for competition authorities to have wide powers in both the consumer protection and competition areas. There are many complementarities and synergies between them, and it aids an agency’s legitimacy to have both. The CMA receives complaints from a variety of sources––parliamentarians, companies, individual consumers––and it is appropriate that the CMA is able to react quickly with a broad range of legal tools.

In some cases there are quick fixes, particularly in consumer protection, that can be easily recognized; for example, during the COVID-19 crisis there were consumer protection concerns relating to the lack of timely refunds, particularly in sectors like package travel and weddings, among others. The CMA acted quickly to secure refunds for consumers, which was a highly visible and pragmatic resolution.

On the other hand, by way of example, the CMA recently referred for an in-depth review an international transaction involving Tronox and TiZir Titanium that was later abandoned. This was a vertical acquisition in an upstream market. In this case, the market and the impact of the transaction would not be broadly understood outside a select group of observers. In a competition context, the CMA’s intervention was both important and necessary even though it was essentially invisible to most consumers. It is crucial to maintain this balance of having some activities that are simpler to understand to ensure funding and support from the public and the government, so that we can continue to demonstrate our value as a public sector agency.

Antitrust: On the digital front, alongside reviews in multiple jurisdictions, companies will need to look across several different types of laws––competition, data protection, privacy, consumer, and now also the digital-specific regulations. How do you see the way forward in terms of streamlining enforcement to avoid overlaps or inconsistent results while also ensuring the best outcome for consumers?

Andrea Coscelli: It is helpful to bear in mind why we are in this current situation. If you consider industries like pharmaceuticals or financial services, they are heavily regulated with all sorts of regulations all over the world. Companies in these sectors have spent considerable amounts on their compliance functions in each national market over the years. Consequently, when we have merger cases or enforcement activities relating to these industries, nobody questions the principle of CMA’s involvement in those sectors. Both sectors understand the importance of the relevant regulatory frameworks. Personally, I think the digital sector will catch up to this perspective. Their current aggressive approach in countering regulation, particularly in the U.S., is not sustainable. I don’t view the risks of inconsistent regulation as a long-term problem.

In terms of how we avoid conflicts, one example is how closely we work with the Information Commissioner’s Office (ICO). An example is the antitrust case we announced last week investigating Google. That announcement was very clear in highlighting the ICO’s and the CMA’s respective roles. Both agencies will only take action where it makes sense to, and the same applies for OFCOM in the context of the Digital Cooperation Forum, with which we have also worked closely. For example, the CMA, the ICO, and OFCOM jointly advised the Government on their digital markets proposals shortly before Christmas 2020. We anticipate plenty of activity in regulation in the coming years––everyone has an incentive to work together, and there is no reason to treat parts of the digital economy differently from other regulated sectors.

Antitrust: A related question: How do you see the standalone mergers regime for digital companies with strategic market status working from a procedural and substantive analysis perspective? In practice, can we expect Phase 2 to look the same as now, even if the resulting standard of proof is the current Phase 1 standard?

Andrea Coscelli: At this point, this is only a proposal by the CMA to the Government, which asked for our advice on how to evolve some of the current enforcement tools and ensure they are fit for the digital economy. Our view is that for the limited number of platforms in the digital sector with those special characteristics––substantial market power, an entrenched position, projecting an important role across an ecosystem––there should be a special merger control regime. The rationale is that while the current regime works in general, we are concerned that many of our previous decisions and the existing case law are outdated when applied to this area of the economy. Decisions have often been made in the context of stable markets, where it has been possible to assess the forward-looking position with confidence based on market data and documents from the preceding few years. In the digital sector, by contrast, we know very well that things can move tremendously quickly. The mergers framework in general is not well designed to keep up with this fast pace of change. Consequently, to account for the intrinsic uncertainty in this small subset of transactions, we would like to combine deep case-specific assessments of mergers (in Phase 2), with a slightly more cautious approach in terms of the level of certainty of competitive harm currently used in Phase 1. Parliament may decide to adopt some, all, or none of the CMA proposals, but it should be clear that our advice in this area is not the finished product and there will be a full consultation process.

Antitrust: How did you land on the concept of “strategic market position” that will determine whether the new regime applies or not?

Andrea Coscelli: The main element for us is market conduct rather than mergers. We want to establish a set of rules to constrain behavior going forward in a similar way to financial regulation. We don’t expect many platforms to be caught by the legislation, and there will be full rights of appeal of the designation. Once designated, those companies will be aware that if they acquire any of their rivals, they will be subject to the special merger regime, and will simply have to factor this in. We don’t know how many of these transactions will be blocked; however, there will be a material change from the current and historic position, where prohibitions have been very rare.

Antitrust: At the CMA, will there be specialized teams looking at digital markets? If so, how will the CMA operate to ensure standards are applied equally throughout all sectors?

Andrea Coscelli: We believe that the same combination of people who currently look at transactions––data scientists, merger experts, lawyers, and economists––are very capable of handling such cases. They may have to look at it through a different legal lens, but otherwise the same principles broadly apply. This means that we will try to integrate the Digital Markets Unit very significantly with the rest of the CMA.

Antitrust: The “strategic market position” threshold for digital companies (and the conduct to which the regime applies) falls short of traditional notions of dominance (and abuse). Does that indicate a change in the balance between ex ante and ex post enforcement? Or how did you conclude on that threshold?

Andrea Coscelli: I am an economist by background, and I think we should challenge ourselves to generate the right outcomes in these markets. Antitrust enforcement has evolved in the UK (and similarly in the U.S. and Europe) in that, because the scale of the potential liability and damages in some cases is now very significant, the protection of rights of defense has led to very considerable friction in the system. But in digital markets, which move very quickly, such friction is particularly detrimental. Currently, it pays off as a strategy for large firms to delay matters, appeal at great length etc., as even if they lose, commercially the damage can be quite limited. We are conscious that the EC has secured some big wins in this sector, with some positive outcomes for consumers in recent cases, but sometimes poor commercial outcomes for businesses at the receiving end of the commercial practices.

We would seek to learn similar lessons as we did following the 2008 financial crisis, which led to extensive ex post regulation. Now, we want to complement the existing ex post regime with an ex ante regime that delivers for all market participants in a reasonable timeframe, and with a reasonable balance between rights of defense and administrability for the regulator. There is widespread support for this view, and nearly every advanced economy is currently having this conversation. The German Parliament approved a piece of legislation a few days ago with similar ex ante powers for the Federal Cartel Office. Many authorities globally are on the same page intellectually if not yet in practice, as is particularly apparent with the EC’s proposed Digital Markets Act.

Antitrust: More generally, in your ideal world, how do you see the balance between ex ante and ex post enforcement?

Andrea Coscelli: The balance will develop over time. I would note two key points: first, today the CMA does not have ex ante powers. The Government will consult, and this process will take time. As a result, we will only have ex post powers at our disposal in the near future. Secondly, the economy is bending more and more toward digital platforms and ecommerce. COVID-19 has only accelerated this. Despite this, our proposals are only applicable to a handful of platforms; for the majority of digital actors, only ex post powers will be relevant. In summary, the balance should and will shift somewhat, but not for some time, and not for the majority of platforms––ex post powers remain the CMA’s primary tool, though we will of course assess this on an ongoing basis.

Antitrust: Many of our readers in the U.S. may have the sense that the CMA has been increasingly interventionist in recent years, particularly against U.S. companies. Has there been a policy shift in that direction, or why do you think that perception might be so prevalent?

Andrea Coscelli: At the outset, I would like to stress that if you look at deals abandoned or blocked on account of our activities in the last few years, the significant majority are domestic. Large law firms do not work on many of the smaller transactions, and so these are not reflected as much in the commentary.

Further, we have also been in the process over the last few years of evaluating merger practices and outcomes by commissioning external reports. A recent KPMG report into third-party market entry and expansion revealed us to be overly accepting of such arguments from parties, so we know we should tighten that up. We also conducted an ex post study on digital mergers, which allowed us to understand better some of the concerns ultimately feeding into the considerations we have been discussing. We also constantly evaluate the remedies we accept. A very useful report recently showed that behavioral remedies seem not to operate well, and tend to require significant enforcement efforts and costs. As this shifts the risk on to consumers and customers rather than on the merging parties, we have subsequently significantly reduced our willingness to accept behavioral remedies.

These assessments shape how we deal with incoming deals, whether domestic or U.S. The U.S. perspective is quite unique, as it’s based on a different institutional system that has its own significant challenges––for instance, the political appointments of judges, which has possibly led to some questionable merger and antitrust decisions recently, or agencies with political appointees heading them, both different approaches from the UK. The agencies’ behavior swings with the elected administration to a much greater extent than in Europe. We have worked well on a number of cases with the outgoing administration, but we expect the incoming administration to be more aligned with us on their concerns about possible under-enforcement.

Antitrust: U.S. readers may also perceive the courts as having a relatively limited role in UK antitrust and merger enforcement, at least as compared to their regime. How does the role of the courts influence the CMA’s policy and practices?

Andrea Coscelli: We think courts here play a very important role in what the CMA does. Indeed, we have a specialist competition tribunal in the UK that has always scrutinized in great detail the work of the CMA when asked by companies. There is a distinction between their review on the enforcement side and on the merger side. There is a full merits review on the enforcement side. In some cases this leads to lengthy trials, 6–8 full weeks in court, with factual witnesses, expert witnesses including sometimes the same top academics testifying in high profile U.S. cases, which resembles to an extent the U.S. system.

In contrast, for mergers, we have two levels of checks and balances which are more distant from that system. First, throughout the investigation in Phase 2, I and the board cannot interfere in decisions; instead a panel made up of independent members, with backgrounds as lawyers, economists, and business people makes a decision with advice from CMA staff. Secondly, if a party is still unhappy, they can appeal to the specialist tribunal, which is very fast. Hearings will take place in a matter of months and will then usually last 2–4 days. The review is nonetheless still very extensive. For instance, in a recent case (Tobii/Smartbox), an appellant raised 22 grounds of appeal in hundreds of pages of submissions. The tribunal reviewed in depth every single one, and the CMA won 21 out of 22, with the only one we lost irrelevant to the overall outcome, so the prohibition stood.

Antitrust: You are an economist by background. How do you see the level of alignment currently between competition enforcement and economic principles? How does that compare over time?

Andrea Coscelli: I’ve been on a personal journey on this subject since I started in the mid- to late 90s. Initially, I felt that economists added great value to merger control and enforcement; but the number of cases and their scale was very different at that time. Now, I believe their role may have overshot. At the end of the day, we are dealing with legal processes. The vast majority of the important decisions made by the CMA end up in court being reviewed by judges. Economists have increasingly become advocates for the parties, and have often made it difficult to unpick what a majority view among economists is behind their sometimes overly-complex analyses, which unsurprisingly presents challenges for agencies and legal professionals. We are one of the agencies most open to academia and economists generally, and we keep up to date on the latest perspectives. Nonetheless, it is always difficult to push complex economics through a legal process, and there is always scope for abuse of the economics by the parties through various procedural challenges.

For me, this is one of the issues that leaders in the field need to spend more time thinking about. It cannot be right that reaching a decision in an antitrust case should take several years and require the review of millions of documents, and then every time someone raises a minor difference of opinion in front of an agency or on appeal, the case is to an extent argued again and more months are spent on it. Economists too should consider how to improve the situation. It is certainly not ideal from the perspective of a public agency.

Antitrust: In light of that, are we perhaps approaching a more qualitative rather than quantitative approach?

Andrea Coscelli: Yes, indeed some American economists in top institutions are going back to a focus on presumptions, and seeking to establish categories of cases where say 95 to 98 percent of the time, it is a safe assumption there is––or is not––an issue. But competition authorities nowadays spend many months on such cases. Many of these U.S. economists are saying “enough is enough” and are advocating a move back towards these presumptions. We should also be up-front with companies and their advisers in communicating that such transactions are very likely to be prohibited, and in the future hopefully such plans will not go beyond the boardroom.

Antitrust: On a very different note, the chorus for positive action on climate change has been growing. What role do you see competition authorities having on that issue?

Andrea Coscelli: I think there’s a number of strands here.

First, discussion in relation to cooperation among firms. The CMA must encourage good behavior and cooperation while not permitting cartel-like behaviour. Equally, the CMA should, and does, provide guidance on how to cooperate safely, so that companies do not feel at risk from competition law when trying to work together toward sustainable outcomes.

Second, the CMA should use the markets regime to work with the Government as a partner. A great example is the market study on electric vehicle charging, which is aimed to help the Government set up a private sector market with government subsidies, which works in the medium term for all of us as consumers.

Third, consumer protection. The CMA launched an initiative on “greenwashing”––in other words, making false or exaggerated claims about a product’s “green” credentials––which will help businesses actually doing good work and possibly see us enforce against bad actors who are not doing much for the planet, but are trying to argue that they are for commercial gain. This can be difficult to distinguish, so it is important that someone trustworthy looks into this.

We would have hoped to make more progress on this front, and will do in the coming year, but COVID-19 curtailed some of the plans we had.

Antitrust: Based on that first strand, is it time for a more positive recognition under competition law to be able to offset benefits for one set of consumers against harm suffered by another? This could also be temporal––current consumers could “pay” for consumers of the future?

Andrea Coscelli: This is a very complex question, but one that is equally important. We are actively looking at it and will continue to do so over time.

Antitrust: Another “hot topic” of 2020: the UK Government published draft legislation in November to introduce mandatory reviews of transactions that raise potential national security concerns. This follows a growing focus on such issues across many jurisdictions. How do you see these filings impacting on the role of competition authorities, both in the UK and globally?

Andrea Coscelli: We think about this in a similar way to the U.S. or Canada––it is for Parliament to decide the trade-off between foreign direct investment and national security. Both regimes need to be clear and complementary to one another. The CMA is effectively an adviser on this legislation, and will provide guidance and advice in following it and the touch points with the traditional competition regime. These interactions will certainly add another complex role to the CMA’s responsibilities, but, ultimately, we live in a complex world where all of these various policy objectives are important.

Antitrust: It sounds like the CMA is very used to wearing many hats for its different roles, and so is well-placed to advise. One last question: 2020 was a year to remember! The CMA––like all organizations––had to adapt its working practices in response. How did this affect the organization?

Andrea Coscelli: We have worked quite well this past year. We had made substantial investment in technology the year before, so everything was already on the cloud, everyone had laptops and smartphones, so we were fairly well prepared and able to move to remote working quickly in March 2020. I was amazed that the 2020 work programme ended up being probably around 95 percent of what we predicted in February/March 2020.

One issue emerging now from lockdown is that while many of us have substantial reserves of social capital built up over years of working together, many of our more junior staff, or the 50 to 60 new members of staff who have joined during the pandemic, do not have this to fall back on. Many have never met the people they work with face to face. Some activities are also very difficult to do remotely, such as inspections for cartels, or some data reviews that require specialized software we only have on computers in the office.

In reaction to how COVID-19 and lockdown affected consumers, we set up an online form quickly, and received roughly 100,000 complaints which helped us identify the key issues to prioritize, relating to price gouging, failures to give refunds for cancellations, and similar issues. We were nimble and responsive to emerging consumer needs, which is a good example for any public agency. Though we responded well, we cannot underestimate the costs on individuals and relationships involved in working from home for so long. I believe we need a period of healing where we work in a similar way to pre-COVID 19, and gradually move to a hybrid model of meetings with people both in the office and on-screen. We moved into new offices a few months before the pandemic, and so much of the technology for us to do that is in place already. Once the technology works, we need to continue to work on culture and relationships. I’m optimistic on our final landing place post-COVID-19, but that will take time and some work is needed before we can confidently embrace the new world.

Antitrust: Andrea, thank you so much for such an interesting and thoughtful discussion.