ALEX BRUMMER: Enforcer shows its bite with Compare the Market and Brexit will bring more action from the competition watchdog
A classic mistake for British companies is to underestimate regulator, the Competition and Markets Authority (CMA).
Compare the Market, part of the BGL Group, discovered this with the regulator’s decision to come down hard on the comparison website, which required insurers to offer the cheapest prices exclusively on their website.
The practice on a smaller scale bears comparison with the US anti-trust case against Google, accused of layering its search choices on the basis of who pays the highest price rather than fairness.
The Competition and Markets Authority (CMA) came down hard on Compare the Market, which required insurers to offer the cheapest prices exclusively on their website
Now that the UK is leaving the European Union we can expect to see and hear much more of the CMA in mergers and acquisition. At present most cross-border deals, such as the London Stock Exchange’s acquisition of the Refinitiv financial information platform, end up in Brussels.
If anyone doubts the determination of the CMA to foster as much competition as possible, they should think back to the proposed Sainsbury’s-Asda merger of 2018, which was effectively blocked despite confident predictions by City lawyers that it would be allowed with modest store disposals.
The telecom operators O2 and Virgin Media will be less than happy that the proposed debt-financed £31 billion merger, engineered by Virgin-owner Liberty Global, is to be scrutinised in London rather than Brussels.
This might have been thought a good thing a few years ago when BT’s £12.5 billion takeover of EE was approved by the CMA while a proposed merger between Telefonica-owned O2 and Hutchison’s Three network was blocked by the EU.
A brief tenure by former MP Andrew Tyrie as chairman of the CMA saw the regulator become more aggressive. More important currently is the Boris Johnson mantra of ‘taking back control’.
If anyone doubts the validity, they should think back to last week when new national security rules were put in place covering 17 specific sectors of the economy – everything from artificial intelligence to satellites.
The telecom operators O2 and Virgin Media will be less than happy that the proposed debt-financed £31 billion merger, engineered by Virgin-owner Liberty Global, is to be scrutinised in London rather than Brussels
There is no reason to think that O2-Virgin won’t make it over this fence even though communications is designated a sensitive sector. What will be of more interest to the CMA is what such a deal means for choice and prices.
Telecoms require heavy investment in putting in new infrastructure and buying spectrum licences. But reducing the number of players in any market rarely means lower prices, and the CMA, as a consumer champion, is unlikely to be lenient on that.
Among Britain’s industrial players, there are few FTSE firms taking a bigger bet on going green than Johnson Matthey (JM). Its main money spinner at present is metals for the catalytic converter, essential for cleaner driving.
But with the Government wanting to phase out petrol and diesel vehicles by the end of this decade, the work it is doing on next-generation technologies is ever more important. Chief executive Robert MacLeod points out this does not mean a cliff edge for JM, since there will be a hybrid transition and parts of the world will set less challenging targets.
JM is riding both the hydrogen and electric revolutions. It believes that hydrogen will become the fuel of choice for trucks and the heaviest of vehicles, and is already engaged in cracking and carbon capture at their Hynet operation in the North West and its Acorn plant in Scotland.
It is also taking full advantage of R&D tax breaks and the patent box to power ahead with fuel cell technology for electric cars. It is still in the foothills, and alternative technologies only accounted for 10 per cent of the income that came from catalytic converters in the Covid-affected first half when underlying profits fell £151 million.
JM also benefited from higher prices for platinum and palladium production. Main prize for investors and the climate change agenda is the longer term switch to hydrogen and fuel cells. Shareholders may need patience but JM is worth watching.
Brilliant that the Prime Minister recognises the value of Britain’s aerospace ambition with a £16.5 billion spend on defence, including a whizz-bang Space Command.
Does that mean that the UK is ready to take back control of aerospace pioneer Cobham and satellite champion Inmarsat, both sold to overseas buyers in the last year or so with no one at Westminster screaming foul? This happened in spite of a national security review of the Cobham sale which left no doubt it was a bad idea. Only asking.