Competition law experts Giles Warrington and Angelique Bret of Pinsent Masons said the proposal, which is still subject to CMA ratification, aligns with the UK government’s housebuilding target – of delivering 1.5 million new homes by the end of the current parliament – and the wider pro-growth remit it has given to regulators.
The £100m affordable housing pledge is part of a “commitments package” that seven housing developers – Barratt Redrow, Bellway, Berkeley Group, Bloor Homes, Persimmon, Taylor Wimpey and Vistry – have agreed with the CMA, to bring a competition investigation the CMA was running to an end. In this regard, the CMA is proposing to accept a series of legally binding commitments from the developers. The proposals are open to public consultation until 24 July.
The CMA had been investigating allegations that the developers had engaged in sharing competitively sensitive information. The acceptance of commitments means that there is no finding of infringement.
As well as the £100 million fund for the government to support affordable homes development, the draft commitments include pledges from the companies not to share certain categories of information directly or indirectly in future, subject to exceptions; to contribute towards the development of new industry-wide UK competition law guidance; to deliver regular training; and to appoint a commitments compliance officer, who will be responsible for undertaking a periodic sampling review of correspondence, with CMA having input into the scope of these bi-annual reviews.
Giles Warrington said: “Increasing housebuilding and making housing affordable for working people are UK government priorities, and on this basis the CMA may have considered itself justified in investigating any alleged anticompetitive agreements between housebuilders which could have led to higher prices. However, in this case the CMA ultimately considered that it did not need to reach a view on infringement, and the housebuilders’ proposed commitments achieve the twin objectives of ensuring effective competition law compliance going forward – by implementing various risk mitigation, compliance training, and guidance measures in their own organisations and for the wider industry – and by providing a record-setting fund to help address the country’s affordable housing shortage with clear benefits for the UK public.”
“If accepted by the CMA, the proposed commitments will likely be viewed as an example of the CMA’s new pragmatic and pro-growth approach – and help avert possible accusations that could have otherwise been made about enforcers focusing on penalising housebuilders rather than encouraging housebuilding,” he said.
Warrington said the alternative approach to disposing of cases offered in the draft commitments is not without precedent. The CMA previously secured commitments that included payments, from pharmaceutical companies Vifor Pharma and Aspen. In the merger control context, the CMA also accepted a pro-investment solution in last year’s Vodafone/Three deal that involved a multi-billion commitment to invest in a 5G network. More recently, the CMA considered – but didn’t ultimately accept – a proposed “sponsorship remedy” in the GXO/Wincanton logistics merger, which aimed to establish an investment fund to create a new competitor to the merged entity.
Warrington said the case is an example of the “nuanced approach” the CMA is open to taking in “appropriate cases” in its role as an enforcement agency.
He said: “Taking the commitments route has advantages for both the CMA and the parties involved. For the CMA, resolving a competition investigation with commitments relieves it of the procedural burden of proving its case, going through all the procedural steps involved in a final decision and potentially defending an appeal. For the housebuilders, this removes the potential risk of being found to have infringed competition law.”
Angelique Bret added: “This antitrust investigation was launched after the CMA examined information gathered during its housebuilding market study. It highlights the need for companies responding to the CMA’s requests for information (RFIs) during a market study, such as the new civil engineering market study, or in other contexts where the CMA uses its information gathering powers, to carefully check whether their RFIs responses could disclose to the CMA possible competition law non-compliance and, if so, how to best manage such risk.”
“Given that the CMA normally stipulates strict deadlines for responding to formal RFIs, and the substantial monetary fines – recently increased by the DMCC Act – that can be imposed on companies and individuals for non-compliance, it is important that businesses act quicky to obtain appropriate competition law advice to guide them in their interactions with the CMA, or UK sector regulators with concurrent competition powers, during such information gathering procedures,” she said.
