Response to the Competition and Markets Authority Draft Guidance for the Office for the Internal Market

The RSE has submitted a response to a consultation by the Competition and Markets Authority (CMA) on their Draft Guidance for the new Office for the Internal Market (OIM). The response provides general comments on the guidance before providing specific comments on each section of the guidance.

The RSE presents several considerations and recommendations, with three of the main recommendations being that:

  1. The CMA should conduct an initial investigation to explore the nature of the UK’s internal market by researching and analysing existing research. This will assist it in understanding what the market looks like to ensure the OIM has a well-defined remit and is adequately resourced from an informational perspective.
  2. The guidance should note that policy divergence is a likely outcome within a multi-level governance system and that this should not automatically be viewed unfavourably. There is little evidence that divergence and lack of central regulation lead to trade barriers.
  3. The guidance should recognise that other public policy areas will impact regulation and trade and present how the CMA/OIM will interact with these via the national authorities. Although the OIM is an advisory and not a regulatory body, it must cover devolved aspects and market aspects. This may require the OIM to broaden its scope or, if not, require another body, such as an Independent Secretariat, to be established. This is a change that the RSE has consistently recommended would be beneficial.

Paper summary

The opportunity to comment on the Competition and Markets Authority (CMA) Draft Guidance on the Office for the Internal Market (OIM) is welcomed by the Royal Society of Edinburgh (RSE). The RSE has previously responded to the UK Government White Paper on the UK Internal Market. The response noted the current divergence and the limits that should be placed on the scope of the legislation. While recommending that subsidiarity and proportionality principles should be added to the internal market concept, exceptions to the principles of mutual recognition and non-discrimination to protect certain areas of public policy and institutions should be introduced. Moreover, an independent secretariat for intergovernmental arrangements should be established to improve the institutional framework for intergovernmental relations.

Notwithstanding the UK Internal Market Act, there remains a lack of data around the internal market and how it operates. Therefore, the RSE believes that the CMA should conduct or commission research to understand the different levels of the market, with a specific focus on regional economies, and examine, in more detail, the nature of trade across the UK and within the different nations and regions. There remains a lack of clarity as to what the OIM objective to reduce divergence will mean for the devolved administrations. The OIM should respect the legislative and consumer choices within each nation of the UK.

There is a lack of clarity around governance arrangements of the OIM and CMA more generally. The governance of the OIM will be important in addressing highly political issues; therefore, it is crucial that the OIM be independent and that its activities be transparent. Further clarity is needed on how the CMA/OIM will work with other regulatory bodies, judge what an internal market looks like, and ensure transparency around its decisions.

Within the legal framework, it is unclear how the CMA envisions that the even-handedness obligation contained in s31(4) of the Internal Market Act will be reflected across all the OIM’s functions to pursue its objectives. Additionally, we recommend that the scope for discretionary reports be widened and not limited to areas of the Act where the twin principles of market access and non-discrimination apply if an impact on the UK’s internal market can be seen.

The principles included within the analytical framework are narrow and limit the oversight of the OIM when conducting its analytical work in important ways. The RSE would recommend that the OIM should explore how widely it can use Section 33 of the Internal Market Act at its discretion.

While the prioritisation principles are welcomed, these should reflect that policy divergence is a legitimate outcome as part of a union state; and this should be reflected in the even-handedness principle. The welfare of consumers and products should be considered when judging the effectiveness of the market, and this should be reflected within the principles.