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The Competition and Markets Authority (CMA) has been conducting a market study into housebuilding in England, Scotland and Wales since February. It has now reached an interim stage and set out its provisional view that it may escalate the market study into a market investigation. The CMA is particularly concerned about:
- the land banks held by the largest housebuilders; and
- the private management of public amenities.
Housebuilding market study
The CMA has the power to conduct market studies to investigate the causes of why markets may not be working well, taking into account an overview of regulatory and other economic drivers and patterns of consumer and business behaviour. The CMA has relatively limited powers at the conclusion of a market study. For example, it may make recommendations to government or it may initiate a market investigation if it wishes to take matters further.
In addition to the two areas above, the CMA is also looking at: the planning regime, the way competition works in the market and barriers to entry and expansion.
Potential housebuilding market investigation
However, should the CMA initiate a ‘market investigation’ this will involve a more detailed examination into whether there is an ‘Adverse Effect on Competition’ due to any feature of the market(s) preventing or restricting competition and, if so, what remedial action is appropriate. Following a market investigation, the CMA has wide powers to remedy market features having an adverse effect on competition up to and including divestment.
For example, following on from the 2008 market investigation into the supply of groceries, the Competition Commission (a predecessor body to the CMA) made the Groceries Market Investigation (Controlled Land) Order 2010 which is designed to limit the ability of large grocery retailers to prevent land being used by their competitors for grocery retailing in the future. There seem to be echoes of the concerns expressed in 2008 in relation to groceries in the CMA’s current concerns about large housebuilders’ land banks.
Next steps
The next steps in the market study will involve the CMA continuing to gather and analyse further evidence and it will publish working papers in the autumn setting out in more detail its thinking and analysis on key areas of concern, and its emerging thinking on the most effective solutions to tackle those concerns. The statutory deadline for the conclusion of the market study is 27 February 2024, and we would expect that it’s unlikely to conclude much before that date.
How we can help
The CMA tends to seek to apply legal and economic theory to real world markets in its approach to analysis. This can lead to issues with its interpretation of market features, raising concerns which conflict with practicalities. We have extensive experience advising companies in making effective submissions in relation to market studies across a whole range of different industries and making real world business practices comprehensible to the CMA. This can help avoid unnecessary negative outcomes.
If it would be helpful to discuss any of the issues raised in this article, please do not hesitate to contact Noel Beale or your usual Michelmores LLP contact.
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