2024 is shaping up to be a pivotal year for the senior leadership of law firms across the world.
Political change is crucial to decision-making at the highest level and this year is set to be one of the most politically active in decades with many major economies (the UK, US and the EU/Commission to name a few) going to the polls. Law firm mergers and lateral partner hiring is intrinsically tied to the wider economy and all eyes will be on incoming premiers to see the strategy for their term in office.
Competition and antitrust is no exception to this rule. Arguably, it is one of the most beholden to political shifts, such as the 2016 Brexit referendum, irrevocably changing the UK regulatory landscape.
In this case, 2024 looks to be one of the most significant years in the competition market in quite some time. Taking the UK & Irish markets, this article will delve into the monumental regulatory shifts coming into effect in 2024, leading to one clear conclusion: dither on investment in competition now and the ship may have sailed by 2025.
This year kicked off with important news from the Court of Appeal. The UK’s Competition and Markets Authority (CMA) has won an appeal with the court agreeing that companies outside the UK must provide information it requests, quashing legal challenges from BMW and VW.
Reflecting on the decision the CMA’s chief executive Sarah Cardell said, “Today’s unanimous judgment strengthens the CMA’s ability to investigate, enforce against and deter any anti-competitive conduct that harms consumers, businesses and markets in the UK”.
This significant development in the scope of the CMA’s powers comes hot on the heels of the Digital Markets, Competition and Consumers Bill which is currently at Committee stage in the House of Lords. This new Bill could give the CMA greatly enhanced capabilities in dealing with key players in their respective industries – a move most see as an attempt to catch up with Big Tech.
In summary, the DMCC would entail:
Designation of a small handful of firms with Strategic Market Status i.e. a substantial, entrenched market power (non-transitory); in at least one digital activity,
Conduct Requirements and Pro-Competition Interventions (“PCI”) i.e. removing barriers to entry and addressing the root cause of overwhelming market power. This is not a new concept as the regulator Ofcom is held up as a near parallel for enforcing PCIs
SMS firms will also have to report to the CMA, prior to completion, any acquisitions with a value of £25 million or more and a UK connection.
With such a significant force entering the market it will inevitably take a great deal of investment and manpower. The CMA has announced that, in advance of the new regime coming into force, it plans to increase the 60 heads in the Digital Markets Unit to 200 by October. The CMA is signalling its intentions clearly and UK partners would do well to listen:
“[the Bill] not only provides clarity for UK parliamentarians, but also for tech firms and wider stakeholders about the approach the CMA intends to take. Once Parliament passes the Digital Markets, Competition and Consumers Bill, we will release more detailed draft guidance for consultation. This will mean that everyone is clear about how we intend to operate the regime and has the opportunity to provide their views.”
The public mood has certainly turned against the largest multinational technology companies; however, the policymakers will also be conscious of the need to encourage foreign businesses to invest in the UK.
The post-Brexit landscape has resulted in a shortfall in inward UK investment and the CMA, whilst beefing up in its battle against tech giants, will be conscious of the wider numbers. According to parliamentary research on FDI statistics, 2021 marked the fifth successive year inward FDI flows into the UK fell: inward FDI flows reached a high of £192.0 billion in 2016, before falling in each subsequent year.
In strengthening their hand, they must avoid the trap the CJEU fell into in 2020 having increased its own scope of regulation in relation to FDI. The Commission’s Third Annual Report stated that, despite a ‘significant increase’ in formally reviewed cases, less than 3% of cases resulted in a Commission opinion. Increasing the powers with which a competition regulator can act can be a double-edged sword and it is one the UK would be wise to heed.
And so, to Dublin, one of Europe’s fastest growing legal markets with several international firms establishing multi-practice offerings in Ireland through lateral partner hires, partnerships and mergers. Dublin’s English-speaking legal system, full EU membership, proximity to the UK and encouragement of foreign investment (particularly from the US) has led to it becoming a key competition battleground.
The market is, however, close-knit and so has looked further afield for its growth over the past 12 months. The top Irish firms have fairly stable teams sitting at 8-10 lawyers across the board and so recent hires have largely come from overseas and in-house/regulators. In the domestic market, there has been only one lateral partner move in the last year. The only lateral associate move was a reinforcement at Ropes & Gray to support their office opening having hired a Counsel from the Competitive and Consumer Protection Commission (CCPC).
Firms need to think outside of the box to get a foothold in what is an increasingly lucrative market with a crucial year ahead.
In line with international developments in the UK & Europe, Ireland have also been reviewing the capabilities of their regulator, the CCPC. The Screening of Third Country Transactions Act 2023 was signed into law on 31 October 2023. It gives the Irish government wide-ranging powers to review investments which meet specified criteria and, ultimately, to block investments that create national security and/or risks to public order.
The Act is expected to come into force in Spring 2024 and one of the specified criteria applies to all third country parties taking significant ownership of a business. This will apply to all UK and US-based investors.
The CCPC will also have a new power to impose civil fines which, if the strengthened DPC (Data Protection Commission) is any example to follow, will be enforced with aplomb. Fines will total up to €10 million or 10% of total worldwide turnover (whichever is greater).
The Act also extends the surveillance powers contained in the Criminal Justice (Surveillance) Act 2009 to CCPC’s investigations into anti-competitive agreements. The 2009 Act allows subject to certain safeguards, the “(a) monitoring, observing, listening to or making a recording of a particular person or group of persons or their movements, activities and communications, or (b) monitoring or making a recording of places or things, by or with the assistance of surveillance devices.”
Foreign business, particularly from its traditional Anglophone partners, will continue to invest in Ireland and they will need local expertise. Whether that local expertise comes in the form of a strategic alliance, a merger, or new office openings is yet to be seen. One thing for certain is that international firms in the UK and US have a watchful eye on Dublin.