The Competition and Markets Authority (CMA) Plans for More Regulatory Action post-Brexit, But Will It Happen?

Today’s short post responds to comments made in today’s business press from the Chief Executive of the Competition and Markets Authority (CMA) in the UK, Andrea Coscelli. The sentiment behind Dr Coscelli’s vision of the post-Brexit world for the regulator is that it will be free to pursue certain regulatory actions that it was not entirely free to pursue before, and that now it fully intends on doing so. This may be fair enough, but are there more forces potentially affecting the regulatory scope of British regulators that he is potentially underestimating?

Dr Coscelli’s comments in today’s edition of The Financial Times relates to the CMA’s potential regulatory stance towards the big US tech giants once the UK formally moves away from European regulations at the end of the year (once the transitionary period has concluded). Coscelli stated that ‘the upside [of the UK leaving the EU] is that you take back control – genuinely – of the decisions’. This sentiment has been connected to the declared position of the CMA in that it wants to take a more active role in scrutinising the actions of the large US-based tech players, like Google and Apple. This apparent will to get more involved in the regulation of these societally-central companies comes after scandals such as the Facebook-Cambridge Analytica scandal and it is not just British regulators that will apparently be getting more involved – European regulators have vowed to take a tougher stance on the tech giants too. Yet, in responding to criticism from business that more regulation may stifle innovation in a given commercial sector, Coscelli confirmed that the regulator will still have a ‘reasonably pro-business approach’. However, this apparent pro-business but inquisitive and critical approach that Coscelli wants to take, irrespective of that sentiment perhaps being slightly paradoxical, potentially ignores the new post-Brexit world that is about to engulf the UK.

Despite the sentiment being displayed by British ministers already regarding diverging from European rules – deregulation is a massive worry since the UK formally left the EU, across a range of sectors – it is the concept of an American trade deal which brings forth one of the biggest issues for British regulation. It is being coming clearer by the day that there are a number of challenges facing the UK and US if they are to successfully negotiate a trade deal, with one onlooker suggesting that the US is quickly learning ‘just how European the UK really is’. British ministers have long hailed the potential impact of the deal as a ‘big prize’, but whilst the US may be learning that the UK is still very close to their European counterparts, the UK is likely about to learn that the ‘prize’ of the trade deal does not come without strings. The US has been noted as declaring that a number of elements must be in place if the deal is to go through, including the NHS paying more for its drugs from American pharmaceutical companies, and the UK accepting chlorinated Chicken into its marketplace from American farmers. But, whilst these stories are headline-grabbing, for Coscelli it is probably worth monitoring President Trump’s approach to France’s latest move. Towards the end of last year, President Macron instituted a levy on the tech giants that irked Trump and lead to threats of a $2.4 billion tariff on French goods as a result of the levy, including tariffs on champagne. Yet, despite the threat, Prime Minister Boris Johnson has supported the idea that Macron has instituted and suggested a similar ‘digital services’ tax in the UK, to take action on the amount of money earned by the tech giants in the UK, compared the amount of tax they pay on those earnings. Trump has declared that he believes such practices to be disproportionately unfair against the US-based tech giants and has vowed to protect their interest in the global marketplace. Trump has a history of carrying through such threats, and there are more in the pipeline – tariffs on Argentina and Brazil will be reimposed shortly to punish the countries for the currency policies, whilst tariffs against European nations involved with Airbus (after subsidies given to the firm were ruled illegal by the WTO) may go as high as $7.5 billion. With all this in mind, can Coscelli really go after the tech giants in the post-Brexit world?

The answer, very likely, is no. The post-Brexit world does indeed free the hands of British regulators, but in name only. In fact, it is more than likely the case that their hands, in certain sectors, become even more tied than before. Why? Because politics will trump the regulatory agendas of entities like the CMA. Coscelli’s apparent will to regulate and punish the tech giants more will not outweigh the importance of the US-UK trade deal to the UK, despite what Mr Johnson declares, and President Trump will be well aware of this; the trade deal will be on the US’ terms, not the UK’s. With that in mind, expect to see some ‘low-hanging’ regulatory fruit being picked and masqueraded as a ‘new day’ in terms of competition regulation, but with the large US companies demanding a seat at the negotiating table (as well as British businesses), the tech giants will not be affected by this new regulatory outlook.

Keywords – CMA, Competition, tech giants, trade deal, politics, @finregmatters