Competition lawyers are gearing up for the biggest shake-up in the UK's antitrust regime for years following confirmation today (14 October) that the Office of Fair Trading (OFT) and the Competition Commission (CC) are set to merge.

The Department for Business, Innovation and Skills (BIS) announced the move as part of the new coalition Government's move to streamline the work of public bodies – a policy dubbed 'the bonfire of the quangos'.

The proposed restructuring of the two competition bodies comes after debate over whether the UK's two-tier regime was too burdensome. Businesses had expressed concerns that the CC effectively starts its investigations from scratch after a referral from the OFT.

The UK also already has a separate appeals body for antitrust matters in the form of the Competition Appeal Tribunal.

The BIS said that the new body would be responsible for merger regulation, market investigations, cartel and antitrust cases, as well as a number of functions with respect to regulated utilities, arguing this would "streamline" competition procedures.

There have been fears among some lawyers that the move could impact on the UK's reputation for maintaining a robust antitrust regime (see market reaction, below).

The OFT has already seen its spending cut by nearly 10% over the past three years. A final decision on merging the two bodies will follow a public consultation in the New Year.

The move came amid mounting speculation among competition advisers that the coalition Government was to merge the two bodies after the OFT and CC issued joint merger assessment guidelines last month.

Business Secretary Vince Cable commented: "Consumers are represented by a bewildering array of public, private and voluntary bodies, which often duplicate efforts to inform, educate and advise consumers of their rights. Our aim is to create a simpler structure with a single competition authority and a stronger role for front-line consumer services."

As part of the shake up of non-governmental public bodies, the BIS also announced plans to merge the postal regulator Postcomm with media watchdog Ofcom, and that the Financial Reporting Council will retain its independent status but no longer receive public funding.

Reaction from competition partners

Norton Rose head of antitrust Martin Coleman (pictured above): "The merger of the two bodies gives the opportunity for significant efficiencies with regards to the review process. Businesses will welcome the fact that there is a smooth flow between the initial review, traditionally executed by the OFT, and the more in-depth investigation."

"There is a risk that the merger will lead to a situation where there is less objectivity in the second phase investigation process, but if there are proper safeguards in place to make sure that this doesn't happen, it should not present a problem."

Hogan Lovells competition partner Lesley Ainsworth: "At a time when public authorities are under pressure to make savings, a marriage between the OFT and CC would appear to be sound. Although given that their combined budget is below £100m, the scope for major cost savings is unlikely to be great."

Linklaters competition partner Alec Burnside: "The argument for a merger has some force, although there is a danger here of the baby being thrown out with the bath water. The two-tier system has commanded respect internationally and there is weight in the argument for a 'fresh pair of eyes'.

"However, there may be other ways of ensuring the right checks and balances, and lessons can be learnt from the structures used in other countries."

CMS Cameron McKenna competition partner David Marks: "There has always been an element of duplication between the two bodies, and anything which shortens the procedure is to be welcomed."

"But there are detriments: the CC had the great virtue of bringing a fresh pair of eyes, detachment and reliability to the investigatory process.

"The OFT is making the first review to compressed timetables, whereas the CC has the capacity to make an in-depth review of the most complex cases. Squeezing them together may mean replacing a Rolls Royce service with a Mondeo."