The CMA has damaged business with its trigger-happy approach to blocking mergers and acquisitions. The appointment of Doug Gurr is a good start, but will a new chairman be enough to turn around an organisation set in its ways? Asks Matthew Lesh
In recent years Britain’s competition regulator has enjoyed a surge in taxpayer funding and staff, a considerable expansion of its powers and many political platitudes. Senior executives have even made self-congratulatory speeches about the CMA’s ‘leadership’ in the digital space.
This all came crashing down with a thud in recent weeks. In an unexpected move, the government forced out chair Marcus Bokkerink due to the CMA’s lack of focus on economic growth. The organisation is also facing austerity measures after a major “budgeting error”. The Treasury’s refusal to bail out the CMA is resulting in around 100 staff facing the chopping block.
It’s worth unpacking how we got into this situation.
Over the last five years, the CMA has significantly increased its enforcement activities, including investigations and blocking acquisitions, particularly in the digital space. They wanted to set a global standard for competition regulation, focusing on curbing the alleged dominance of tech giants and fostering fair competition.
Over the last five years, the CMA has significantly increased its enforcement activities, including investigations and blocking acquisitions, particularly in the digital space
However, their interventionist approach that focuses on ‘big is bad’ has attracted high-profile criticism and led to unease among major investors.
In 2023, the CMA blocked Adobe from acquiring Figma and Meta from purchasing Giphy. Both decisions were largely based on theoretical future harms rather than the facts today, raising many eyebrows. For example, the CMA asserted that Giphy, a gif images library with no revenue in the UK, could pose a potential threat to Facebook’s gigantic advertising business.
In the same year, the CMA also tried to block Microsoft’s acquisition of gaming company Activision. In a blistering response, Microsoft President Brad Smith replied that Britain was “bad for business”. The CMA eventually reversed its stance and approved the deal with modifications.
This isn’t the CMA’s only high-profile critic. Trump-aligned Silicon Valley venture capitalist David Sacks warned last year that the CMA’s holding up deals for ‘novel reasons’ would reduce the likelihood of start-ups setting up European headquarters in the UK. Another leading venture capitalist, Marc Andreessen recently described the UK’s competition rules as “extremely draconian, anti-tech, anti-business, anti-American policies”.
A loss of exit opportunities for start-ups
With Trump now threatening a global trade war, holding the pen over tariffs against the UK, the CMA’s actions against US tech companies may just come up the agenda. While protecting US companies per se is a less than ideal policy approach, there are good reasons to think the CMA is doing damage to the UK with its more interventionist approach.
As a result of becoming trigger-happy in blocking mergers and acquisitions, there is a loss of ‘exit’ opportunities for start-ups. Very few companies make it to floating on the stock market — most ‘exit’ by being acquired by a larger firm. The prospect of being purchased drives the underlying venture capital investment, consequential innovation and job creation. When the CMA takes away this option, by threatening long investigations and blocking acquisitions, that investment and innovation does not happen in the first place.
In recent weeks, the government has been applying pressure on regulators to promote growth: 17 watchdogs have been asked to produce plans to boost growth. In this context, the government’s decision to appoint Doug Gurr, a former head of Amazon UK, as acting chair of the CMA could not be more symbolic. The official statement said Gurr would serve as interim chair “in a bid to boost growth and support the economy”. Government sources have said the firing was designed to be a warning for other regulators.
Gurr led Amazon in its tussle with the CMA over an investment into Deliveroo in 2020, which was ultimately approved. Deliveroo boss Will Shu said the investigation took up most of his time and led to withholding money and the sacking of 30 per cent of staff. He accused the CMA of “trying to kill companies”.
The trouble, of course, is that the appointment of a new chairman does not necessarily change an organisation set in its ways. The announcement of sackings at the CMA came with a commitment to protect the merger and digital competition units. These are the precise elements of the organisation that most threaten investment into the UK.
The CMA’s new digital competition unit, empowered in the dying days of the Sunak government, will be able to undertake pre-emptive interventions with limited accountability. Under this regime, the CMA announced an investigation into Google search last month. Ironically, this move comes just as new AI services like ChatGPT give Google a run for its money by providing high-quality search and summary engines.
Replacing the chair of the CMA is a crucial initial step towards addressing the organisation’s overreach and ensuring it aligns more closely with its intended purpose. One idea – proposed by the Labour Growth Group – is for the CMA to undertake an immediate review of all ongoing CMA work with a pro-growth lens. In the longer run, however, it could be necessary to unpick the CMA’s new powers.
For now, the steer from the government is clear. The era of regulatory overreach hurting Britain’s prospects must end.
Matthew Lesh is a Public Policy Fellow at the Institute of Economic Affairs, Country Manager at Freshwater Strategy, and co-author of the IEA publication, Digital Overload: How the Digital Markets, Competition and Consumers Bill’s sweeping new powers threaten Britain’s economy.