I am asking Members to adopt the Draft Competition (Jersey) Amendment Law. This draft law
proposes a number of important changes to our competition regime as set out in the Competition
(Jersey) Law 2005. Before we discuss the principles of this draft law, I would like to thank the
Members and officers of the Economic and International Affairs Scrutiny Panel for their work in
reviewing this draft legislation and for their comments, which are available online for Members to
read. If we look at the draft law, it is, first of all, worth setting out the purposes of promoting
competition in Jersey’s economy. Why do we do this? Well, put very simply, with competition
businesses must work hard to win and keep customers. As a result, competition bears down on prices
and drives up quality and choice. As I am sure Members will agree, it is key that Jersey has a
competition regime that is tailored to the size of our jurisdiction and takes account of the unique
characteristics of the Island’s economy. To use the words of the prominent Oxford economist, Sir
John Vickers, in small island economies such as Jersey, it is just as important that markets work well
as it is in larger economies. However, in smaller economies, competition policy faces particular
challenges. First of all, some of our local markets are not as exposed to international competition, or
not exposed to international competition, which means that there is not as much scope as in larger
economies for there to be effective competition. Secondly, there are economies of scale in
competition policy itself. So, its cost per resident in Jersey is greater than that in larger economies.
Thirdly, given Jersey’s size and geographic location, high barriers to entry often characterise our
markets. All these aspects underline the importance of ensuring that our competition policy is
tailored to the needs of our Island. This Assembly demonstrated the importance it places on well-
functioning local markets by establishing the Jersey Competition and Regulatory Authority in 2001,
initially as an independent regulator for the telecommunications and postal services sectors, and in
2005 as a generic competition authority. In recent years, my department has conducted what is, in
essence, the first wholesale review of Jersey’s competition rules since their inception 20 years ago.
This work has culminated in the draft law which is before Members today. This review and the draft
law are timely and important as they are intended to help ensure that residents and businesses in
Jersey can get the best out of their economy from competition working as well as it practically can.
As Members will know, if a market is perfectly competitive, no single business would have the ability
to set prices. Rather, each seller would have to accept the price decided by the market as charging a
higher price would result in loss of market share to its competitors. In the opposite situation,
however, with a monopoly, there is only one seller who therefore has significant power to set prices
at the level that is most beneficial to them. In the absence of any form of regulation in a monopoly,
prices could potentially be much higher than the price that would be set in a competitive market.
This, again, underlines the importance of a well-designed and effectively-enforced competition law.
Looking at it more practically, in between the extremes of perfect competition and monopoly, any
move to more competition on our Island will, all else being equal, force businesses to keep prices
low and ensure that consumers benefit from the best deals, cheapest prices and most efficient service.
However, as I have already outlined in my opening remarks, as a small island economy we face
particular challenges in ensuring sufficient competition. There is a trade-off in that a small domestic
market means there is a limit to the number of market competitors that can operate, which raises
questions about the choice of market monitoring regime. In particular, when should we rely on
economic regulation instead of competition law to address specific market issues? While this is a
question which is outside of the scope of today’s debate, I am acutely aware of this challenge and
will ensure that the mechanisms for market oversight are kept under constant review. Furthermore,
the Oxera review that I referenced earlier also emphasised the need for culture of competition in
Jersey to enable competition law to work effectively. This places particular importance on activities
designed to promote a competitive environment and raise awareness of competition policy and its
benefits among local businesses, consumers and public institutions. In addition, as Members know,
the Government has taken various steps in recent years to minimise the impact of the cost-of-living
challenges which impact us all, but particularly those Islanders who are already struggling the most.
While the high levels of inflation seen in recent years have, to an extent, been caused by external
factors, effects of competition overseen by an independent regulator ensures that prices do not rise
beyond what can be reasonably expected. In turn, this helps to ensure that consumers and businesses
are not faced by what could essentially be described as a double whammy of price increases. I believe
that there is an important role to play for the J.C.R.A. (Jersey Competition Regulatory Authority) as
fair competition and well-functioning local markets are key to minimising the impacts of these
challenges. This is why I am proposing the introduction of a formal market studies framework with
enhanced powers for the J.C.R.A. As Members know, a market study is an in-depth and independent
study into the factors affecting competition for particular goods or services in a specific market, to
find out how well competition is working and whether it could be improved. Unlike the J.C.R.A.’s
existing competition enforcement tools and merger investigations, market studies look at the
structure, conditions and performance of the market itself, rather than asking whether there could be
a breach of the law by one or many other businesses. By gathering and analysing information, the
J.C.R.A. can then identify whether there are features that prevent a market from working well, and it
can consider how any competition issues can best be addressed using proportionate means. As such,
market studies are a flexible tool for the J.C.R.A. to seek to improve market outcomes and offer
targeted pro-business, pro-consumer solutions to foster and establish an environment in which
businesses can flourish and achieve their full potential. It is furthermore key that the J.C.R.A. is well
equipped to gather the information it needs to review a specific market in Jersey. That is why the
draft law includes appropriate information gathering powers for the J.C.R.A. to collect the
information it needs to properly assess local markets. Today, the J.C.R.A. does not have such powers
and therefore has to rely on the voluntary co-operation of businesses when conducting its market
studies. However, the J.C.R.A. would normally only consider using the proposed new powers if
informal approaches, and information requests are impractical or have been unsuccessful. Moreover,
in any event, businesses can claim confidentiality for business secrets and other confidential
information that should not appear in the public report. Looking at other jurisdictions, most
competition authorities have some type of power to conduct market studies, including information
gathering powers, and usually these powers are explicitly set out in the legislative framework. In
addition, given the importance of competition to innovation and improving productivity, it is key that
Jersey focuses on maintaining and enhancing the competitive landscape, and the aims of this draft
law are wholly aligned with the ambitions of the Future Economy Programme to ensure that the right
conditions are set for sustainable economic growth for the whole economy. It is worth setting out
here as well that competition and open markets tend to drive forward productivity and innovation,
while market powers and closed markets tend towards the reverse, something I always fear for this
Island. This too is a particularly critical factor for Jersey because raising productivity is key to
maintaining living standards and prosperity in a supply-constrained economy. That is why I want to
ensure that our mergers and acquisitions regime is supportive, light touch and reduces red tape
wherever possible, but also robust where it needs to be. As Members may know, merger control is
one of the most powerful tools available to the J.C.R.A. to regulate market power. It acts as a
safeguard against the strengthening of the creation of market structures that may lead to the exercise
of such power and are not justified by social gains. Merger control is especially important for small
economies, such as Jersey, because in such economies, market power, once created, is very difficult
to erode. Having said that, at the same time, merger control carries high costs for businesses and the
J.C.R.A. as well, some of which are increased because of Jersey’s small size. As Members may
know, Jersey’s merger control regime currently requires mandatory notification to the J.C.R.A. of all
transactions that trigger certain thresholds.
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While I am not proposing to change the mandatory notification element today, I am already working
on a review to ensure that it does not unnecessarily capture transactions that do not materially impact
competition in local markets, and my department will be consulting on legislative proposals next
year. This is a key piece of follow-up work, as we must ensure that interactions across Government
and related entities are simple and efficient for businesses to enable them to grow and flourish in our
Island. However, if fewer transactions are notifiable under a mandatory threshold, this enhances the
risk that, incidentally, a merger that may be harmful to local competition slips through the net. In
Jersey, this is a particular challenge as there are large, often financial, institutions with high turnover
but whose customer base is not local, in contrast to smaller businesses with relatively low turnover
but potentially significant local market shares. Therefore, to counterbalance any changes to the
merger notifications threshold to ease the cost of doing business in Jersey, the draft law includes the
ability for Ministers to introduce a call-in power to allow the J.C.R.A. to review certain small mergers
below the threshold within a short period of time. A similar call-in has been adopted by many other
countries in Europe. Any uncertainty for businesses can be taken away by offering the opportunity
to get certainty in advance. For example, by voluntarily notifying the J.C.R.A. of the merger. With
regard to the problem of dissecting already merged companies, this can be minimised as I intend to
set quite a short deadline before which the J.C.R.A. must indicate whether or not it wishes to review
a transaction. After all, in most cases, it takes some time before businesses have been merged, so
businesses can take this deadline into account. The J.C.R.A. will then have to decide before that
deadline whether or not it wishes to call in that small merger. In that way, an equal balance is struck
between the public interest of preventing market power and the business interest of legal certainty
and lower regulatory costs. I would also like to bring Members’ attention to the proposed provisions
included in the draft law to expand the range of instruments that the J.C.R.A. can use to address any
competition concerns it may have identified. In particular, the draft law proposes the introduction of
a so-called commitments procedure, which is intended to benefit the J.C.R.A., the parties involved
and the public. The purpose of the proposed commitments procedure is to allow the J.C.R.A. to
accept legally binding commitments from a business relating to its future conduct, where the J.C.R.A.
is satisfied that these commitments address the competition concerns. Case resolution by way of
commitment decisions has a number of benefits for the J.C.R.A., the parties and the public, which
have led to the success of commitments decisions in various other jurisdictions. The absence of fines
and the finding of an infringement are attractive features for businesses subject to the investigation.
For the J.C.R.A., commitment procedures enable the Authority to save resources and lead to a swifter
resolution of cases. Commitment decisions also allow the Authority to obtain the finality of its
decisions faster than infringement decisions, which are more prone to appeals by the parties. In a
negotiated procedure, the J.C.R.A. may also be able to achieve commitments going beyond what the
authority could otherwise obtain in an infringement procedure, including various kinds of proactive
and tailormade remedies. Market testing of the proposed commitments ensures that remedies are
aligned to the reality of markets and acceptable to the business community. There are a number of
other provisions which I would happily discuss, should Members wish to do so or have any questions.
However, for now, I would like to conclude by emphasising again that the proposed legislative
changes collectively aim to ensure that Jersey’s competition framework supports business innovation
and growth, exerts a downward pressure on prices and looks after the interests of consumers. As cost
of living is such a high profile subject at the moment, these powers will be important. The proposals
have been extensively consulted on and have received wide support. As I have explained, this draft
law also fully aligns with the work undertaken in the Future Economy Programme and our
commitment to reduce red tape, enhance opportunities for businesses, and strengthen Jersey’s
international reputation, as outlined in the Common Strategic Policy. In particular, competitive and
well-functioning markets help create the right conditions for entrepreneurial activity and dynamic
businesses to grow, which in turn improves productivity in the economy. With a more vibrant
economy, this makes our Island a more attractive place to live and work. I therefore hope that
Members will support this proposition. I move the principles of this amendment to the law.