Anticipated or completed mergers qualify for review under the UK rules if they meet a test relating to the turnover of the target or, alternatively, a ‘share of supply’ test. Where the UK turnover of the target exceeds £70 million, the turnover test will be satisfied. The share of supply test will be satisfied where the merger creates an enlarged business supplying 25 per cent or more of goods or services of any reasonable description or enhances a pre-existing share of supply of 25 per cent or more.
The Competition and Markets Authority (CMA) has the power to carry out an initial Phase I investigation, and has a duty to refer any qualifying transaction for a detailed Phase II investigation where it believes that the merger could give rise to a substantial lessening of competition. Phase I decision-making is undertaken by the Senior Director of Mergers or another senior CMA official, while Phase II decision-making is undertaken by an independent panel of experts drawn from a pool of senior experts in a variety of fields.
Remedial undertakings in lieu of a Phase II reference may be accepted by the CMA. The CMA’s in-depth Phase II investigation may lead to a prohibition decision, a decision that the transaction should be allowed to proceed subject to undertakings, or an unconditional clearance.
Notification under the UK system of merger control is ‘voluntary’ in the sense that there is no obligation under the Enterprise Act 2002 to apply for CMA clearance before completing a transaction. The CMA may, however, become aware of the transaction through its market intelligence functions (including through the receipt of complaints) and impose interim orders preventing integration of the two enterprises pending its review. There is a risk that it may then refer the transaction for a Phase II investigation, which could ultimately result in an order for divestment.
In certain limited circumstances (where the merger raises a defined public interest consideration), the UK system allows the Secretary of State for Business, Innovation and Skills (Secretary of State) to intervene in relation to mergers. Currently, public interest considerations are limited to national security, quality and plurality in the media, accurate presentation of news and free expression in newspaper mergers, and the maintenance of stability in the UK financial system.
The CMA has published detailed non-binding guidelines on jurisdictional issues and its procedures for the review of mergers.2 It has also adopted other guidance documents published by its predecessor organisations, the Office of Fair Trading (OFT) and the Competition Commission (CC).3
The Competition Appeal Tribunal (CAT) may review decisions made by the CMA or the Secretary of State in connection with a reference, or possible reference, of a merger. An appeal lies, on a point of law only, from a decision of the CAT to the Court of Appeal and requires the leave of either the CAT or the Court of Appeal.
II YEAR IN REVIEW
The number of Phase I merger decisions made by the CMA in the 2015–2016 financial year (62) was down from the 82 decisions taken in the preceding financial year, and significantly down from the peak of 210 merger decisions made by the OFT in the 2005–2006 financial year.4 Since 1 April 2004, 62 is the lowest annual figure for Phase I decisions, with the average number being 105 decisions per year.
Of the 62 cases decided during the year, 40 were cleared unconditionally, representing around 65 per cent of cases, down from 77 per cent in the preceding year (including cases cleared under the de minimis exception – see Section III.vii, infra). Eleven cases were referred for Phase II review, which is around 18 per cent of cases, up from 7 per cent in the preceding year. Undertakings in lieu of a reference were accepted in nine cases, up from three in the preceding year. Only two cases were found not to qualify, down from 10 cases in the preceding year.
At the time of writing, four of the 11 transactions referred to Phase II have been cleared unconditionally, two have provisionally been found to give rise to a substantial lessening of competition, two are still under review, and three have been abandoned.
A total of nine Phase II decisions were published by the CMA in the 2015–2016 financial year, up from three published by the CMA in the previous year. Eight were unconditional clearances and one permitted the transaction to proceed subject to behavioural remedies. As was the case in the preceding year, the CMA did not prohibit any mergers during the 2015–2016 financial year.
Overall, the CMA intervened (i.e., prohibited or accepted remedies) in around 14 per cent of cases in the 2015–2016 financial year, which is around twice the rate of intervention from the European Commission over the same period. The higher intervention rate may be explained by the voluntary nature of the UK merger control regime, which means that parties may elect not to notify transactions that do not give rise to significant competition issues.
ii Initial enforcement orders
The CMA has powers to impose interim measures to freeze or unwind integration and prevent pre-emptive action, including in relation to anticipated mergers at Phase I (see Section III.vi, infra). This ensures that, while notification is voluntary in the UK, the CMA is able to prevent action being taken that would result in irreversible damage to competition. The CMA imposed initial enforcement orders in 32 per cent of Phase I cases decided in the 2015–2016 financial year. This represents a slight decrease from the 38 per cent of Phase I cases decided in the 2014–2015 financial year in which initial undertakings and enforcement orders were imposed, which may be attributed to the fact that fewer completed mergers were reviewed in the 2015–2016 financial year. Interim undertakings were given in two Phase II cases decided in the 2015–2016 financial year, which is around 22 per cent of cases. This represents a significant decrease from the 67 per cent of Phase II cases decided in the 2014–2015 financial year in which initial undertakings were given. At the time of writing, the CMA has not yet used its powers to reverse integration steps taken before issuing an order. Some commentators have raised concerns that the initial enforcement orders place undue restrictions on the parties’ businesses, even in cases where no competition concerns arise, and that the process of negotiating derogations from the standard form can sometimes be unduly onerous.
iii Information requirements and timetables
The CMA merger notice requires a large amount of information. The CMA therefore strongly encourages parties to make contact in advance of notification to seek advice on their submission, not only to ensure that the notification is complete, but also to lessen the risk of burdensome information requests post-notification.
One of the key features of the UK regime is the existence of a statutory 40-working day timetable at Phase I. The CMA recognises that this presents its own challenges, in particular balancing the need to obtain as much information as possible upfront (before the clock starts running) against the burden such information requests may place on businesses. The CMA has also acknowledged the need to take care that pre-notification discussions do not extend for longer than is appropriate. In its Annual Plan 2015/16, the CMA stated its aim to start the statutory clock within 20 working days (on average across all cases) of a submission of a substantially complete draft merger notice. The CMA appears to be meeting its target: during the 2015–2016 financial year, pre-notification took on average 10 working days, compared to 25 working days in the preceding year.5 Some cases, however, still require long pre-notification periods. The CMA has emphasised that pre-notification will be quicker the more complete the draft notification is, including draft annexes containing internal documents, contact details, etc.6
While the CMA has indicated its willingness to adopt a reasonable approach to assessing what type of information will be required for a complete notification, it also retains the power to ‘stop the clock’ where the parties have failed to comply with the requirements of a post-notification formal information request (see Section III.iv, infra). The CMA formally paused the statutory timetable in 12 per cent of Phase I cases during the 2015–2016 financial year.7
During the 2015–2016 financial year, the CMA completed 100 per cent of cases within the Phase I statutory deadline.8 The average length of Phase I was 34 working days, compared to 37 working days in the preceding year. The CMA claims that 74 per cent of less complex mergers were cleared in 35 working days or less (and some significantly less), compared to 23 per cent in the preceding year.9 This is in line with the CMA’s commitment in its Annual Plan 2016/17 to clear at least 70 per cent of less complex cases within 35 working days.
iv Local market analysis
When examining retail mergers, the CMA tends to assess the impact on competition both at a national level and at a narrower local level. This approach often results in the merging parties offering to divest a number of businesses in local areas in order to secure clearance for the overall transaction. This trend has continued during the last year with the CMA accepting local divestments in a number of cases, including Greene King/Spirit Pub Company (16 local areas); Regus Group/Avanta Serviced Office Group (five local areas); and The Original Bowling Company/Bowlplex (six local areas). The CMA is willing in some cases to consider the divestment of a substantial number of businesses in order to clear a transaction. For example, at the time of writing, the CMA is consulting on possible remedies in respect of the proposed Ladbrokes/Coral merger, which include the possible divestment of around 350 to 400 betting shops.
III THE MERGER CONTROL REGIME
i Threshold issues
Under the UK system, a ‘relevant merger situation’ (i.e., a transaction potentially qualifying for review) occurs when two or more enterprises have ceased to be distinct. This can occur either through common ownership or common control. Common ownership involves the acquisition of an enterprise so that two previously distinct enterprises become one. Common control involves the acquisition of at least one of the following: de jure or legal control (a controlling interest); de facto control (control of commercial policy); or material influence (the ability to make or influence commercial policy).
The concept of material influence has been drawn widely by the UK competition authorities.10 It formed the jurisdictional basis for the investigations by the OFT and the CC in relation to the 29.82 per cent shareholding acquired by Ryanair in Aer Lingus in the context of a takeover bid. The CC ultimately found that the existence of Ryanair’s minority shareholding led or may have been expected to lead to a substantial lessening of competition in the markets concerned and decided that the most effective and proportionate remedy was to compel the airline to reduce its stake in Aer Lingus to 5 per cent. This case illustrates how a would-be acquirer who builds a minority stake in advance of a full takeover bid remains exposed to a CMA investigation and ultimately risks being ordered to divest the stake, even if the takeover bid fails (for further information, see Section III.ix, infra).
A merger situation will qualify for review if it meets the turnover test or the share of supply test (see Section I, supra). If the CMA believes that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition in a UK market, then it will refer the merger for a Phase II investigation.
In general, a completed merger will no longer qualify for a Phase II reference four months after the date of implementation of the merger. Time will not begin to run, however, until the ‘material facts’ of the merger (i.e., the names of the parties, nature of the transaction and completion date) have been made public or are given to the CMA (if neither occurs prior to completion). Time will not run where undertakings in lieu of reference are under negotiation, where the parties are yet to comply with an information request from the CMA, or where a request has been made by the UK for review of the transaction by the European Commission in accordance with Article 22(3) of the EU Merger Regulation (EUMR) (see the European Union chapter for details of this procedure). The four-month period may also be extended by agreement between the CMA and the merging enterprises, but for no more than 20 days.
ii Substantive test
In its assessment of mergers, the CMA considers whether the transaction may be expected to give rise to a substantial lessening of competition. At Phase I, a reference must be made if it is or may be the case that a merger may give rise to a substantial lessening of competition (known as the ‘realistic prospect’ threshold), while at Phase II a ‘balance of probabilities’ threshold applies.11 As a result, it is relatively common for mergers to be referred to Phase II and subsequently cleared unconditionally.
The CMA has adopted substantive assessment guidelines12 that illustrate, in particular, the shift away from traditional merger control analysis, which proceeds from the definition of the relevant product and geographical markets to measure post-merger levels of concentration, towards a more direct assessment of competitive effects taking into account factors such as differentiated products, closeness of competition and price sensitivity of customers. For example, the CMA will often use margin and switching data (commonly based on customer surveys) to estimate the upward pricing pressure arising from a merger. For these purposes, the CMA has adopted guidance on the design and presentation of consumer survey evidence in merger inquiries.13 The CMA has also adopted commentary on the assessment of retail mergers,14 which details the type of local market analysis that is often employed to assess mergers between bricks and mortar businesses.
The CMA applies different approaches at Phase I and Phase II to assessing the merger counterfactual. At Phase I, the transaction is generally measured against the prevailing conditions of competition (unless it is unrealistic to do so or there is a realistic counterfactual that is more competitive than the pre-merger conditions of competition). At Phase II, the CMA will measure the transaction against the ‘most likely scenario’.
The most notable situation where the CMA may use a counterfactual different to the prevailing conditions of competition is in a failing firm scenario. However, in practice, it is often difficult to argue for its application, especially at Phase I. The CMA considered the failing firm test in respect of six Phase I cases in the 2015–2016 financial year. Of these:
- a one provided sufficient evidence for the counterfactual to be satisfied;
- b one failed to provide sufficient evidence of a probability of market exit by the failing firm;
- c one adopted a specific counterfactual in which the transaction was measured against a downsized target business; and
- d in the three remaining cases, it was considered unnecessary to reach a definitive conclusion.
The CMA was also asked to apply the failing firm scenario in four Phase II cases, but concluded in each case that the acquiring firm had failed to provide sufficient evidence of a probability of market exit by the firm due to financial failure.
iv The notification procedure
An application for clearance is made using a formal merger notice. The initial period within which the CMA must make a decision whether to make a reference is 40 working days from the first working day after the CMA confirms to the parties that the merger notice is complete. This initial period may be extended where the parties have failed to comply with the requirements of a formal information request under Section 109 of the EA, where the Secretary of State has served a public interest intervention notice, or where the European Commission is considering whether to accept a request from the UK for the merger to be referred to Brussels under Article 22(3) of the EUMR.
As noted in Section II.iii, supra, the CMA encourages parties to enter into pre-notification discussions at an early stage both to ensure that the notification is complete and to avoid as far as possible the need for extensions to the statutory timetable. Pre-notification discussions will also help the CMA to determine any jurisdictional issues (e.g., whether the CMA is best placed to review the case or whether a reference to the European Commission should be sought under the EUMR – see Section IV.ii, infra) and whether a case is likely to give rise to any substantive issues that might trigger its duty to refer.
It is possible for the parties to request that the CMA ‘fast-tracks’ a merger reference where there is evidence that an in-depth review is likely to be required. The OFT used this procedure on only two occasions: Thomas Cook/Co-operative Group Limited/Midlands Co-operative Society and Global Radio/GMG Radio,15 while the CMA has granted two ‘fast-track’ requests so far: BT/EE and Ladbrokes/Coral. This option may be attractive to parties in cases where a reference appears inevitable, as it allows for Phase I of the review process to be truncated.
The CMA levies substantial filing fees in respect of the mergers it reviews, with fees of between £40,000 and £160,000 depending on the turnover of the target business.
v Informal advice
Where there is evidence of a good-faith intention to proceed and there is a genuine competition issue, prior to submitting a merger notice or initiating pre-notification discussions, it may be possible to obtain informal advice from the CMA as to whether it is likely to refer the merger for a Phase II investigation. There is no standard timetable for the provision of informal advice, but where it is intended that the advice will be given following the conclusion of a meeting, the CMA will endeavour to schedule that meeting within 10 working days of receipt of the original application. The resulting advice is confidential and does not bind the CMA.
vi Interim measures
As outlined above, the CMA has powers to impose interim measures to freeze or unwind integration and prevent pre-emptive action. Financial penalties may be imposed for breaches of such measures (capped at 5 per cent of the aggregate group worldwide turnover). In certain circumstances, the CMA also has the power to require a monitoring trustee to be appointed in order to ensure compliance with the interim orders.
The CMA will normally make an interim order where it has reasonable grounds to suspect that two or more enterprises have ceased to be distinct (i.e., in respect of completed mergers) and will normally do so almost immediately. Given that the risk of pre-emptive action is generally much lower in relation to anticipated mergers, the CMA has noted that it would typically engage with parties before making an order in those circumstances.
The CMA has stated that it would generally not expect to impose an order limiting the parties’ ability to complete an anticipated merger unless it had strong reasons to believe that completion will occur prior to the end of Phase I and the act of completion itself might amount to pre-emptive action that would be difficult or costly to reverse (e.g., where the act of completion would automatically lead to the loss of key staff or management capability for the acquired business). Therefore, absent exceptional circumstances, it is expected that parties will still be able to complete transactions prior to CMA clearance.
Derogations from interim orders are available and, whereas previously interim orders were released only at the time of the final clearance decision, the CMA may now release such orders following a state of play meeting if it is decided that the case will be cleared.
vii Exceptions to the duty to refer
As explained above, the CMA has a statutory duty to refer a relevant merger situation for a Phase II investigation where it believes that it is or may be the case that a merger has resulted or may be expected to result in a substantial lessening of competition in a UK market. The CMA has adopted guidance on the statutory exceptions that apply to the duty to refer potentially problematic mergers to a Phase II investigation.16
The guidance sets out the criteria for accepting undertakings that may be offered by the merging parties in lieu of a reference. To discharge the CMA’s duty to refer, any undertakings offered by the parties should restore competitiveness to pre-merger levels and must be proportionate. It is most common for undertakings to relate to the sale of a part of the merged assets; the CMA is generally reluctant to accept behavioural remedies, although it has recently accepted a number of ‘quasi-structural’ remedies with behavioural features.17 It is becoming increasingly common for the CMA to require an ‘upfront buyer’, in other words, for a buyer of the divestment assets to be identified and approved by the CMA before clearance is granted.
The merging parties have five working days from the issuance of a substantial lessening of competition decision (SLC decision) to offer undertakings to the CMA, although they may offer them in advance should they wish to do so. The CMA then has until the 10th working day after the SLC decision to decide whether the offered undertakings might, in principle, be acceptable as a suitable remedy to the substantial lessening of competition. If the CMA decides the offer might, in principle, be acceptable, a period of negotiation and third-party consultation follows. The CMA is required to decide formally whether to accept the offered undertakings, or a modified form of them, within 50 working days of providing the parties with the SLC decision, subject to an extension of up to 40 working days if there are special reasons for doing so.
The CMA’s duty to refer may also be discharged in other circumstances, namely in respect of small markets (de minimis mergers), mergers where there are sufficient efficiencies to offset any competition concerns and merger arrangements that are insufficiently advanced. In relation to de minimis mergers, the guidance states that, for markets with an aggregate turnover exceeding £10 million, the benefits of an in-depth Phase II investigation may be expected to outweigh the costs. However, for markets with an aggregate turnover of less than £3 million, the CMA will generally not consider a reference to be cost-effective or justified provided that there is, in principle, no clear-cut undertaking in lieu of reference available. For markets with an aggregate turnover of between £3 million and £10 million, the CMA will consider whether the expected customer harm resulting from the merger is materially greater than the average public cost of a Phase II reference. The CMA applied the de minimis exception in four cases during the 2015–2016 financial year.
viii Phase II investigations
Upon the making of a Phase II reference, there are a number of consequences for the transaction – some arising automatically, some relevant only if invoked by the CMA. When a reference is made in relation to a merger that has not yet been completed, the EA automatically prohibits the parties from acquiring interests in each other’s shares until such time as the Phase II inquiry is finally determined. This restriction can be lifted only with the CMA’s consent.
In relation to completed mergers, from the point of reference, the EA prohibits any further integration of the businesses or any transfer of ownership or control of businesses to which the reference relates (although in practice, the CMA is likely to have imposed an interim order at Phase I in any event).
Unless the CMA releases or replaces an interim order made during Phase I, it will continue in force for the duration of the Phase II inquiry. If an interim order was not made at Phase I or if it is necessary to supplement the measures previously put in place at Phase I, the CMA may impose a new order or accept interim undertakings from the parties.
The CMA is obliged to publish a report, setting out its reasoned decisions, within a statutory maximum of 24 weeks (extendible in special cases for a period of up to eight weeks). The CMA has a statutory period of 12 weeks (which may be extended by up to six weeks) following the Phase II review within which to implement any remedies offered by the parties.
Any party aggrieved by a decision of the CMA (including a decision not to refer a merger for a Phase II investigation) or the Secretary of State may apply to the CAT for a review of that decision. Appeals against merger decisions must be lodged within four weeks of the date the applicant was notified of the disputed decision or the date of publication, if earlier. Lodging an appeal does not have a suspensory effect on the decision to which the appeal relates. In determining an application for review, the CAT is statutorily bound to apply the same principles as would be applied by the High Court on an application for judicial review.
Appeals against merger decisions have been relatively rare since the establishment of the CAT. In the previous year, two merger cases were subject to judgments from the courts.
In September 2013, Ryanair appealed the CC’s decision that its acquisition of a 29.82 per cent shareholding in Aer Lingus had led or may be expected to lead to a substantial lessening of competition. Ryanair argued, inter alia, that the CC’s decision to require a divestiture was contrary to the EU duty of sincere cooperation in circumstances where an appeal to the European Courts was still outstanding in respect of the European Commission’s 2013 decision to prohibit a merger between the two Irish carriers. The CAT dismissed Ryanair’s appeal on all grounds on 7 March 2014,18 and Ryanair’s subsequent appeal to the Court of Appeal was also dismissed on 12 February 2015.19 On 14 July 2015, the Supreme Court refused Ryanair’s application for permission to appeal the Court of Appeal’s judgment. Ryanair has, therefore, exhausted its appeal against the CC’s decision.
In December 2013, Groupe Eurotunnel and Société Coopérative de Production Sea France (SCOP) appealed the CC’s decision in respect of the former’s acquisition of three ferries and related assets from the liquidated Sea France business. The parties argued, inter alia, that the CC had erred in its consideration of whether, in purchasing the Sea France assets, Eurotunnel had acquired an ‘enterprise’ for the purposes of the EA. The CAT agreed with the parties20 and remitted the case back to the CC and the CMA for reconsideration. In June 2014, after concluding that there had been no material change of circumstances, the CMA issued a revised decision confirming its view that the Sea France assets did indeed constitute an enterprise and confirming the original prohibition findings of the CC. On further appeal by the parties, this decision was subsequently upheld by the CAT21 but overturned by the Court of Appeal in May 2015.22 The CMA appealed the Court of Appeal’s judgment to the Supreme Court. On 16 December 2015, the Supreme Court allowed the CMA’s appeal holding that Eurotunnel had acquired an enterprise and that the CMA had jurisdiction to review the transaction.23
IV OTHER STRATEGIC CONSIDERATIONS
i Whether to notify
Given that notification under the UK system is voluntary, the question of whether clearance should be sought from the CMA in a particular case is one for the parties – and, in particular, the purchaser – to consider. This is essentially a question of what level of commercial risk is acceptable.
Where the parties elect not to notify a transaction, the CMA may still become aware of it as a result of its own market intelligence functions, including through the receipt of complaints. The CMA has a dedicated Mergers Intelligence Committee responsible for monitoring non-notified merger activity and liaising with other competition authorities, and is increasingly focusing on this. In March 2016, the CMA noted that the Merger Intelligence Committee had reviewed over 550 transactions in the past year, and that 10 Phase I decisions during that period (out of a total of 54 Phase I decisions at the time) were reached as a result of the Committee’s work, which amounts to 19 per cent of cases.24 Of these 10 cases, three resulted in the consideration of undertakings in lieu of a reference and one in clearance under the de minimis exception.25
When deciding whether to call in a non-notified merger, the CMA has powers to request information from the parties and will also accept submissions from the parties on jurisdictional, de minimis and substantive issues. The CMA is willing to give an informal indication that it does not at that point in time intend to call in a merger – so far, the CMA has not called in a merger having given such an indication.26
As noted above, the fact that a merger has been completed does not prevent the CMA from investigating and referring it for a Phase II investigation or accepting undertakings in lieu of a reference. While the substantive assessment of anticipated and completed mergers ought to be identical, the CMA can be expected to impose interim orders while it considers a completed merger. In addition to ordering the parties to stop any integration that might constitute pre-emptive action, the CMA may also require the parties to unwind any integration steps that have already taken place.
An additional risk to bear in mind is that the initial period for a Phase I investigation may be reduced to less than 40 working days if the parties elect not to notify a completed merger. The CMA must comply with the four-month statutory deadline for a reference under the EA, which will start to run when the ‘material facts’ of the merger have been made public or are given to the CMA. If the CMA’s timetable is compressed in this manner, it may mean that it has insufficient time to obtain evidence that would support a Phase I clearance, without the need for a Phase II investigation.
ii UK or EU?
If a merger has an ‘EU dimension’, as defined in the EUMR, it falls under the exclusive jurisdiction of the European Commission and cannot be completed until it has been notified and cleared. Conversely, the CMA is in principle competent to investigate mergers that do not have an EU dimension but qualify for review under the UK rules. This simple allocation of jurisdiction is, however, subject to the EUMR processes relating to the reallocation of jurisdiction (see the European Union chapter for details of these procedures).
The decision whether to make a pre-notification referral request is a strategic issue for the parties, and will depend on where the competition issues lie and the degree of risk that the Member States may request a post-notification referral. The European Commission granted Article 4(4) requests by parties to transactions with an EU dimension for the case to be referred to the CMA on three occasions in the 2015–2016 financial year. In the same period, the European Commission accepted an Article 4(5) request to refer a case from the CMA on just one occasion.
As regards post-notification referrals, in the 2015–2016 financial year, the CMA made two Article 9 requests for cases to be referred from the European Commission (in the first instance the referral was refused and in the second the case was partially referred, with the CMA reviewing the UK aspects of the transaction). In the previous financial year, the CMA made a single Article 22 reference to the European Commission (the referral was accepted by the European Commission).
The CMA’s mergers guidance recommends that, in all cases in which a referral back might be considered appropriate, parties contact the CMA prior to notification to the European Commission to discuss any UK issues raised by the transaction.
iii Cross-border cooperation
Parties should be aware that the CMA is part of the European Competition Network, and as such is informed of mergers notified to the competition authorities of the other 27 EU Member States and the European Commission. It also participates in the International Competition Network, an informal network that seeks to develop best practice among competition agencies around the world.
V OUTLOOK and CONCLUSIONS
In its Annual Plan 2016/17, the CMA stated its aim to further increase the pace, scale and impact of its interventions. In particular, it announced two new targets for its assessment of mergers: to implement Phase II merger remedies without the need for an extension to the statutory deadline in at least 70 per cent of cases and to clear at least 70 per cent of merger cases that are less complex within 35 working days (a target that was met in the last financial year). The CMA also announced that during 2016–2017 it will review its policy and procedure in relation to accepting undertakings in lieu and may consult on revised guidance on its application of any of the exceptions to the duty to refer. The CMA will also launch an internal project to consider the use of formal information-gathering powers at both phases across its mergers portfolio, and will publish guidance on how to interact with the CMA on non-notified mergers (including the operation of its mergers intelligence work).
On 25 May 2016, the Department for Business, Innovation and Skills launched a consultation on refinement options for various elements of the UK competition law regime, including merger control. The consultation notes the CMA’s intention to improve the merger control process but also refers to concerns raised by some stakeholders in relation to information requirements; inefficiencies between Phase I and Phase II investigations; and the intrusiveness of hold-separate undertakings. The consultation therefore sets out a number of proposals and options for reform, including the following:
- a Developing guidance on the type and frequency of information requested by the CMA. The consultation proposes two legislative options for supporting this guidance:
- • a restriction on the frequency and type of information requests the CMA could make in advance of, and during, a Phase I assessment; or
- • a new obligation for all CMA information requests to be proportionate, considering the impact on business.
- b Publishing guidance on the CMA’s approach to initial enforcement orders and derogations in order to provide more certainty to businesses.
- c Improving the constitution of Phase II panels through various possible options, including: reducing the size of panel members from 32 to 12 members; including senior CMA staff on panels; requiring panel members to make themselves available for a minimum amount of time each year; and ensuring that the panel contains a broad range of skills and experience. The consultation also proposes a number of options for clarifying the role and accountability of the panel members in order to speed up Phase II investigations.
The government intends to publish its response to the consultation by autumn 2016, setting out which, if any, of the options it intends to take forward.
1 Jordan Ellison is a partner and Paul Walter is a special adviser at Slaughter and May. The authors would also like to thank Isabel Nicholson, professional support lawyer at Slaughter and May, for her help in preparing this chapter.
2 Mergers: Guidance on the CMA’s jurisdiction and procedure (January 2014) CMA2.
3 On 1 April 2014, the CMA assumed the competition powers and responsibilities of the OFT and the CC as part of a series of reforms intended to strengthen the UK merger control regime.
4 For the CMA case directory, see www.gov.uk/cma-cases.
5 Speech by Alex Chisholm on the CMA’s achievements over the last two years, 11 May 2016.
6 Mergers: A year in review, Law Society Competition Section seminar, 8 March 2016.
7 Speech by Alex Chisholm on the CMA’s achievements over the last two years, 11 May 2016.
9 Speech by Alex Chisholm on the CMA’s achievements over the last two years, 11 May 2016 and Mergers: A year in review, Law Society Competition Section seminar, 8 March 2016. For example, Nikkei/FT was cleared in 10 working days, Heineken/Diageo in 20, NSMP/Total in 21, Aviator/Swissport in 22 and Netto/Co-op in 23.
10 The breadth of the concept can be seen in JCDecaux/Concourse where the OFT found that, even in the absence of an equity stake, material influence had been acquired by virtue of an option to appoint two out of three board members and the ability to restrict the target’s capability for expansion.
11 See OFT v. IBA Health Ltd  EWCA Civ 142.
12 Merger Assessment Guidelines (September 2010) OFT 1254, CC 2.
13 Good practice in the design and presentation of consumer survey evidence in merger inquiries (March 2011) OFT 1230, CC2 com 1.
14 Commentary on Retail Mergers (March 2011) OFT 1305, CC 2 com 2.
15 In Global Radio/GMG Radio, the issuance by the Secretary of State of a public interest intervention notice meant that the fast track procedure was delayed for several months. It was only once the Secretary of State had concluded that there were no media plurality issues that the decision to refer to the CC could be made by the OFT.
16 Exceptions to the Duty to Refer and Undertakings in Lieu of Reference Guidance (December 2010) OFT 1122.
17 For example, in Müller UK & Ireland /Dairy Crest, the CMA accepted a toll-processing agreement to address the substantial lessening of competition identified. The CMA took comfort from the fact that such toll-processing agreements were relatively common in the dairy industry, and the fact that it would have the ability to approve the counterparty to the agreement. In Reckitt Benckiser/K-Y brand, the CMA concluded that licensing the relevant UK rights to the K-Y brand to a third party would address the substantial lessening of competition identified and accepted this as a final undertaking at Phase II. The CMA was concerned that there would be significant practical difficulties associated with a divestment of the K-Y brand and that a prohibition would not be effective due to the high risk that the seller would close the business.
18 Ryanair v. Competition Commission  CAT 3.
19 Ryanair v. Competition Commission  EWCA Civ 83.
20 The Société Coopérative de Production Sea France v. Competition Commission and Groupe Eurotunnel SA v. Competition Commission  CAT 30.
21 Groupe Eurotunnel SA and SCOP v. Competition and Markets Authority  CAT 1.
22 Société Coopérative De Production Seafrance SA v. Competition and Markets Authority  EWCA Civ 487.
23 Société Cooperative De Production Seafrance SA v. The Competition and Markets Authority and another  UKSC 75.
24 Mergers: A year in review, Law Society Competition Section seminar, 8 March 2016.