UK: Merger Control Comparative Guide

UK:  Merger Control Comparative Guide


1 Legal and enforcement framework

1.1 Which legislative and regulatory provisions govern merger control in your jurisdiction?

Merger control in the United Kingdom is governed by Part 3 of the Enterprise Act 2002, as amended by the Enterprise and Regulatory Reform Act 2013.

The United Kingdom is also currently subject to the EU merger control regime, as set out in the EU Merger Regulation (139/2004). The EU Merger Regulation will cease to apply on Brexit occurring.


1.2 Do any special regimes apply in specific sectors (eg, national security, essential public services)?

Certain mergers of water or sewage undertakings are subject to a mandatory reference to a Phase 2 investigation. Generally, a merger of two or more ‘water enterprises' (meaning an enterprise carried on by an undertaking appointed under Section 6 of the Water Industry Act 1991) will be subject to a mandatory reference unless the turnover of one or both of them falls below a threshold of £10 million.

In addition, across a number of industries, the Competition and Markets Authority (CMA) will seek the views of the relevant regulator:

•Energy: OFGEM will report its views on gas or electricity mergers and may recommend licence amendments.

•Rail: The Office of Rail Regulation will provide its views to the CMA on any rail merger (including the grant of a franchise where the relevant thresholds are met).

•Airports and aviation: The CAA will report its views on a merger to the CMA.

•Financial services: The provisions of the Financial Services and Markets Act 2000 may require a merger to be approved by the Financial Conduct Authority or the Prudential Regulation Authority

•Healthcare: Certain mergers involving the National Health Service (NHS) will require NHS Improvement to give its views to the CMA.


Finally, special rules exist for public interest mergers (see question 1.3) and for mergers involving listed companies.


1.3 Which body is responsible for enforcing the merger control regime? What powers does it have?

Following the Enterprise and Regulatory Reform Act 2013, all merger control investigations (both Phase 1 and Phase 2) are carried out by the CMA.

Under the Enterprise Act 2002, the CMA has wide-ranging powers. Broadly speaking, the CMA is entitled to:

•restrict or prohibit an enterprise from taking an action;

•impose obligations as to the carrying on of particular activities or for the safeguarding of particular assets;

•appoint a person to conduct or supervise the carrying out of particular activities;

•unwind steps already taken which it considers to be, or to potentially be, anti-competitive; and

•accept undertakings from the relevant parties to take such actions as it considers appropriate in lieu of taking other steps against those parties.

The secretary of state for business, innovation and skills has ultimate responsibility for merger control law and policy. In addition, in certain circumstances the secretary of state has the power to issue a public interest intervention notice and assume responsibility for referring a merger to a Phase 2 investigation if he or she considers that there are relevant public interest considerations at play. In these circumstances the secretary of state will have the final decision on whether the merger is against the public interest and, if so, on any remedies to address these concerns.

Under Section 42 of the Enterprise Act 2002, the secretary of state is entitled to issue a public interest intervention notice in relation to mergers affecting national security, the media and the stability of the UK financial system.


2 Definitions and scope of application

2.1 What types of transactions are subject to the merger control regime?

Under Section 23 of the Enterprise Act 2002, the UK merger control regime will apply to any transaction which has, or will have, the effect of two or more distinct ‘enterprises' ceasing to be distinct and in which either:

•the relevant turnover threshold is exceeded; or

•the ‘share of supply test' is met.

These thresholds and tests are set out in question 2.6.

Under Section 129 of the Enterprise Act 2002, an ‘enterprise' is defined as the activities, or part of the activities, of a business. It therefore need not be a separate legal entity. Under Section 26 of the Enterprise Act, two enterprises will be considered to ‘cease to be distinct' if they are brought under common ownership or control. Two enterprises will be treated as being under ‘common control' if they are:

•enterprises of interconnected bodies corporate;

•enterprises carried on by two or more bodies corporate of which one and the same person or group of persons has control; or

•an enterprise carried on by a body corporate and an enterprise carried on by a person or group of persons having control of that body corporate.


2.2 How is ‘control' defined in the applicable laws and regulations?

Under Section 26(3) of the Enterprise Act 2002, ‘control' is defined as including:

•material influence;

•de facto control; and

•legal control (ie, a controlling interest in an entity).

It is also specified that this control may be exerted directly or indirectly.

This is a very broad definition, which encompasses both legal ownership and control and effective ownership or control. Accordingly, a wide range of ownership structures may fall within the scope of the merger control regime under the Enterprise Act 2002.


2.3 Is the acquisition of minority interests covered by the merger control regime, and if so, in what circumstances?


Under Section 26(3) of the Enterprise Act 2002, the acquisition of a minority interest in an enterprise may fall under the UK merger control regime if, as a result of that acquisition, "a person or group of persons is able, directly or indirectly, to control or materially to influence the policy of a body corporate".

In particular, the acquisition of a minority shareholding will be covered by the merger control regime if it can be said to allow the acquirer to "materially influence" the actions of the company. The larger the minority interest, the more likely this is to be the case. For example, an acquisition of over 25% of a company's shares would enable the purchaser to block any special resolutions, thus giving the purchaser significantly more power to influence the company than a purchaser of exactly (or less than) 25% of the company's shares. Accordingly, there is a presumption that a purchaser of over 25% of a company's shares will be able to "materially influence" that company.

There is no such presumption in relation to shareholdings of less than 25%. However, the CMA's guidance states that it "may examine any shareholding of 15% or more", and that "exceptionally, a shareholding of less than 15% might attract scrutiny where other factors indicating the ability to exercise material influence over policy are present". This is likely to be the case, for example, where the acquirer is also obtaining additional voting rights or the right to appoint members of the board, or can be said to have ‘de facto' control over the company in question.


2.4 Are joint ventures covered by the merger control regime, and if so, in what circumstances?


The broad definition of ‘enterprise' and ‘control' adopted in the Enterprise Act means that joint ventures may (and indeed are likely to) fall within the scope of the UK merger control regime. The Competition and Markets Authority (CMA) guidance on mergers states that "the CMA will have regard to the substance of the arrangement under consideration, rather than merely its legal form".


2.5 Are foreign-to-foreign transactions covered by the merger control regime, and if so, in what circumstances?

Yes, provided that the jurisdictional thresholds set out in question 2.6 are met. (If neither party carries on business in the United Kingdom, these thresholds will not be met.)


2.6 What are the jurisdictional thresholds that trigger the obligation to notify? How are these thresholds calculated?


There is no obligation to notify. However, a merger will be considered by the CMA to be subject to the merger regime where:

• the value of the annual UK turnover of the enterprise being taken over exceeds:

◦in the case of a ‘relevant enterprise', as defined in Section 23A of the Enterprise Act, £1 million; or

◦in all other cases, £70 million; or


•as a result of the enterprises ceasing to be distinct enterprises, at least 25% of all goods and/or services of a particular description which are supplied in the United Kingdom are supplied by or to the same person, or by or to the persons by which the enterprises in question are carried on.

For the purposes of this test, a ‘relevant enterprise' is defined as an enterprise whose activities consist of or include:

•developing or producing restricted goods (ie, goods, software or information that is controlled under export control legislation);

•holding information that is capable of use in connection with the development or production of restricted goods and is responsible for achieving or exceeding the performance levels, characteristics or functions of the restricted goods that are specified in the relevant export control legislation;

•owning, creating or supplying intellectual property relating to the functional capability of computer processing units, the instruction set architecture for such units or computer code that provides low-level control for such units;

•designing, maintaining or providing support for the secure provisioning or management of roots of trust of computer processing units or computer code that provides low-level control for such units; and

•various activities relating to quantum computing or simulation, quantum imaging, sensing, timing or navigation, quantum communications or quantum resistant cryptography.


2.7 Are any types of transactions exempt from the merger control regime?


Where a merger falls under the scope of the EU Merger Regulation, it is almost always excluded from review under the UK regime by virtue of the European Union's ‘one-stop shop' principle. A merger will fall under the EU regime where it has an ‘EU dimension'.

This will be the case where:

• either:

◦the combined aggregate worldwide turnover of the undertakings is more than €5 billion; and

◦the aggregate EU wide turnover of each of at least two of those undertakings is greater than €250 million;

• or:

◦the combined aggregate turnover of all the undertakings involved is more than €2.5 billion;

◦in each of at least three member states, the combined aggregate turnover of all those undertakings is more than €100 million;

◦in each of at least three of the member states included for the purposes above, the aggregate turnover of each of at least two of the undertakings concerned is more than €25 million; and

◦the aggregate EU wide turnover of at least two of the undertakings concerned is more than €100 million.

However, in either of the above situations, this will not be the case if each of the undertakings concerned achieves more than two-thirds of its aggregate EU-wide turnover within the same member state.



3 Notification

3.1 Is notification voluntary or mandatory? If mandatory, are there any exceptions where notification is not required?

Notification is voluntary.

However, the Competition and Markets Authority (CMA) has its own market intelligence functions, which may lead to mergers coming to its attention even if they are not notified to it. The CMA has the power to require the parties to a merger to provide sufficient information to allow it to review the merger itself if it chooses to investigate on its own initiative.


3.2 Is there an opportunity or requirement to discuss a planned transaction with the authority, informally and in confidence, in advance of formal notification?

There are no obligations on parties to discuss their mergers with the CMA either before making a notification or at all, unless the CMA issues an enquiry letter of its own initiative.

However, the CMA offers two possible routes by which parties can discuss a planned merger with the CMA:

•seeking informal advice; and

•pre-notification discussions.

The first of these, informal advice, is intended to allow the parties to a potential transaction that they believe may fall under the merger control regime to discuss the transaction with the CMA informally and in confidence in advance of a formal notification.

The CMA guidance on when informal advice will be given states that it is appropriate for ‘good-faith confidential transactions', which are described as transactions that are neither purely hypothetical nor public domain. The evidence required to support a request for informal advice is likely to include proof of adequate financing, heads of agreement and/or board-level consideration of the transaction. The CMA will also require the parties to demonstrate that there is a genuine potential competition issue to be considered.

Pre-notification discussions, on the other hand, are intended to allow parties to a merger that have decided to notify the CMA to engage with the CMA in advance of doing so, typically on the contents of a draft notification. The CMA will not make these discussions, or the fact that they are taking place, public.

3.3 Who is responsible for filing the notification?

As there is no obligation to file a notice, no party is responsible for doing so.

However, any merger notice must be submitted by an ‘authorised person', which is defined as "any person carrying on an enterprise to which the notified arrangements relate", or a representative of an authorised person (eg, a solicitor).

Any party to a transaction that it believes may fall under the merger control regime may submit a merger notice to the CMA in relation to that transaction. Alternatively, parties to such a transaction may opt to submit a joint merger notice.

As a general rule, the buyer of a business or company will usually wish to control the notification process.


3.4 Are there any filing fees, and if so, what are they?

Merger fees are levied by the CMA and are payable in relation to all qualifying mergers regardless of whether the merger was notified and regardless of the outcome of the CMA's investigation.

Fees vary from £40 to £160,000, depending on the turnover of the business being acquired. The fee is payable by the person submitting the merger notice, or by the person acquiring control if no merger notice was submitted.

3.5 What information must be provided in the notification? What supporting documents must be provided?

Under Section 96 of the Enterprise Act, merger notices must be "in the prescribed form" and "contain the prescribed information".

The CMA provides a template merger notice which the CMA guidance states comprises the ‘prescribed form' for the purposes of the act. The CMA guidance further states that if a party provides all the information relevant to the merger in question that is responsive to the questions in the template merger notice, then this will satisfy the ‘prescribed information' requirement.

However, as the CMA guidance indicates, the precise nature and extent of the information required will vary from case to case. Accordingly, the notifying party or parties are given a degree of latitude in determining what information needs to be included in a merger notice.

Where evidence is cited in support of statements contained in a merger notice, CMA guidance indicates that that evidence (including any relevant contemporaneous documents) should be provided along with the merger notice "where reasonably practicable". As a minimum, the supporting documents will include:

•the transactional documentation;

•the latest report and accounts of the parties;

•any business plans entered into at the time of the transaction; and

•any third-party market reports relevant to the market in which the parties compete.

3.6 Is there a deadline for filing the notification?

As filing is voluntary, there are no deadlines by which a notification must be filed. However, since the CMA will not start its investigation until it has all the relevant information, it is in the parties' interests to file the transaction as soon as possible after signing.


3.7 Can a transaction be notified prior to signing a definitive agreement?

Parties can notify the CMA prior to final agreement and are encouraged to do so (although the merger must have been publicly announced before they can submit a merger notice). They are also encouraged to engage with the CMA prior to filing a formal merger notice.

However, the CMA can reject a notice if it suspects that the parties do not in fact intend to carry the notified arrangements into effect.

The agreement should be in sufficiently final form to represent the transaction that will be the subject of the notification.


3.8 Are the parties required to delay closing of the transaction until clearance is granted?

As there is no obligation to file a merger notice, there is no requirement to obtain clearance before proceeding with a transaction.

However, parties are advised to consider carefully whether a merger notice is appropriate, as the CMA has the power to investigate and take action in relation to a merger on its own initiative and may do so even after the merger has completed, provided that it does so within four months of completion.

In many cases the transaction will be conditional on CMA clearance, so early closing is not an option (unless the parties waive the condition). In mergers that have already closed, the CMA may choose to impose a ‘hold separate' order which will prevent the parties taking any action which could prejudice the CMA's ability to impose a remedy. Fines of up to 5% of global turnover can be imposed on parties infringing such an order.


3.9 Will the notification be publicly announced by the authority? If so, how will commercially sensitive information be protected?

Under Section 96(2)(b) of the Enterprise Act, any merger notice must confirm that the merger proposal has been made public. This is because the CMA will issue a public invitation to comment at the start of its investigation into a merger.

The parties should make clear in their merger notice any information which is of a commercially sensitive nature. The CMA will generally excise such information from its published materials about the merger.


4 Review process

4.1 What is the review process and what is the timetable for that process?

The Competition and Markets Authority (CMA) has a two-stage review process, divided into Phase 1 and Phase 2 investigations.

Upon receiving a merger notice containing the requisite information, or upon receiving sufficient information from the parties in response to a letter of enquiry, the CMA will notify the parties that it is commencing a Phase 1 investigation to determine whether it has a duty to refer the merger to a Phase 2 investigation. The CMA has up to 40 working days from this notification to decide whether it is obliged to refer the merger to a Phase 2 investigation.

If the CMA concludes that it is obliged to refer the merger to a Phase 2 investigation, it must notify the parties of that decision. The parties will then have a five-working-day period in which to propose any undertakings that they are willing to give in lieu of a reference (UILs). If no UILs are proposed, the matter will proceed to a Phase 2 investigation. If UILs are proposed, the CMA will have a further five-working-day period in which to decide whether the UILs are acceptable in principle.

If any UILs proposed are not acceptable, the merger will be referred to a Phase 2 investigation. If, on the other hand, they are acceptable in principle, the parties and the CMA may take a further 40-working-day period (extendable by a further 40 working days if required) to consider and consult on those proposals. If accepted by the CMA, no Phase 2 investigation is required. Otherwise, the matter will be referred to a Phase 2 investigation.

If referred to a Phase 2 investigation, the inquiry group formed to carry out the investigation will have a 24-week period (extendable by up to eight weeks) to determine whether there would be a substantial lessening of competition if the merger were to proceed, and if so, what remedies are necessary to prevent this outcome. The CMA may also suspend the commencement of this period by up to three weeks if the parties indicate that they may abandon the transaction.

If no substantial lessening of competition is found, the merger will be cleared. If, on the other hand, it is concluded that there would be a substantial lessening of competition and that remedies are required, the CMA will have a further 12-week period (extendable by up to six weeks) to implement those remedies.


4.2 Are there any formal or informal ways of accelerating the timetable for review? Can the authority suspend the timetable for review?

There are no formal ways of accelerating the timetable for review. However, the timetable set out by the CMA establishes the maximum time periods that each phase may take; the CMA is entitled to take less than the maximum amount of time allowed for any given stage.

Further, engaging with the CMA pre-notification may enable the parties and the CMA to undertake much of the required work before a merger notification is given, thus shortening the time required for the formal process.

With regard to suspension of the timetable for review, the CMA is empowered to issue requests for information under Section 109 of the Enterprise Act 2002. If it does not receive an adequate response to such a request, the CMA is entitled to suspend the timetable pending receipt of such a response.


4.3 Is there a simplified review process? If so, in what circumstances will it apply?

There is no simplified review process. Where a transaction genuinely raises no issues, the parties may legitimately decide not to notify the CMA in the knowledge that there is no meaningful risk that the CMA will seek to unwind the merger at a later date.


4.4 To what extent will the authority cooperate with its counterparts in other jurisdictions during the review process?

The CMA seeks to cooperate with competition authorities in other jurisdictions wherever it is appropriate and possible for it to so.

The CMA is a member of the European Competition Network, a network of the 28 competition authorities in the European Union and the European Free Trade Area which seeks to facilitate cooperation between competition authorities. It also currently follows the Best Practices on Cooperation between EU National Competition Authorities in Merger Review, which set out non-binding principles of cooperation in relation to mergers subject to review in more than one EU member state. The CMA will also work with other non-European competition authorities where it is possible to do so.

Where national legislation prevents the exchange of confidential information that would potentially be relevant to a merger control analysis being conducted by another competition authority, the CMA will share such information only with the permission of the parties.


4.5 What information-gathering powers does the authority have during the review process?

Where a merger notice has been accepted by the CMA, the CMA is nevertheless entitled to request further data, information or documents from the parties in order to reach a conclusion in its Phase 1 investigations. Given the short timeframe within which a Phase 1 investigation is to be completed, responses to these requests are often required within a very short timeframe.

These requests may be made informally. However, if necessary, the CMA is empowered under Section 109 of the Enterprise Act 2002 to issue a Section 109 notice seeking such information. If the recipient fails to comply with a Section 109 notice, the CMA is entitled to extend the timetable for the investigation for so long as the information is outstanding. Continuing failure to comply with a Section 109 notice may also result in more serious consequences, such as fines. The CMA's Section 109 notice powers may also be applied to third parties if the CMA considers it necessary – for example, in order to seek evidence supporting assertions of anti-competitive effects made in response to an invitation for comment.

Where the CMA becomes aware of a merger in relation to which no merger notice has been issued, the CMA may send a letter of enquiry to the acquiring party seeking further information. If the merger has already been completed, this request may take the form of a Section 109 notice, entitling the CMA to suspend the time limits for referring the merger to investigation pending a satisfactory response.

If a merger is referred for a Phase 2 investigation, the CMA will begin this process by writing to the parties. This letter will include a number of matters, including any requests for further information or data that the CMA considers that it requires to carry out the investigation. Thereafter, the CMA may use some or all of a number of methods for gathering information, including:


•data requests;

•Section 109 notices;

•requests for submissions;

•third-party hearings;

•open and/or joint hearings;


•consultants; and

•site visits.


4.6 Is there an opportunity for third parties to participate in the review process?

Third parties are entitled to lodge complaints in relation to non-notified mergers with the CMA either prior to or after completion of the merger. The CMA is not, however, obliged to act on these complaints and will consider them in the context of all available information before deciding whether and how to respond to them.

Where the CMA determines that a Phase 1 investigation should be carried out, the CMA will issue an invitation to comment on the merger, inviting views from interested third parties on the transaction under review.

Further, the CMA may directly contact particular third parties to seek their views on the transaction.


4.7 In cross-border transactions, is a local carve-out possible to avoid delaying closing while the review is ongoing?

In principle, this is possible, so long as the terms of any hold separate order are not infringed.


4.8 What substantive test will the authority apply in reviewing the transaction? Does this test vary depending on sector?

Under both Section 22(1) of the Enterprise Act 2002 (in respect of completed mergers) and Section 33(1) of the Enterprise Act 2002 (in respect of anticipated mergers), the test that the CMA will apply is whether:

•a relevant merger situation has or will be created; and

•if so, whether that has resulted or may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.


4.9 Does a different substantive test apply to joint ventures?



4.10 What theories of harm will the authority consider when reviewing the transaction? Will the authority consider any non-competition related issues (eg, labour or social issues)?

The CMA will formulate theories of harm in relation to any merger which is referred to a Phase 2 investigation. In doing so, the CMA is entitled to consider multiple theories of harm in relation to the same merger if it considers this appropriate.

In September 2010 the Competition Commission and Office of Fair Trading (the CMA's predecessors) published Merger Assessment Guidelines, which set out some of the theories of harm that might be relevant when reviewing a merger, as follows:

•Loss of existing competition – the purchase of a current participant in a market by one of its current competitors may result in a reduction in competition in that market;

•Loss of potential competition – the purchase of a potential participant in a market by a current participant in that market may result in increased competition in that market being prevented;

•Increased buyer power – this will be anti-competitive in relatively limited circumstances, such as where it allows the merged entity to force its suppliers to reduce prices due to its dominance as a buyer in a particular market;

•Increased coordination – for example, increased likelihood of price fixing, agreements not to compete in the market for certain goods/customers and/or agreements not to compete in certain geographical markets;

• Vertical mergers – that is, the purchase of an upstream supplier by a downstream customer (or vice versa), enabling:

◦the increase of input costs for competitors of the downstream customer;

◦input foreclosure (ie, preventing access to the upstream input producer by competitors); and/or

◦customer foreclosure (ie, the downstream customer increasing prices when selling products produced by the upstream supplier's rivals, or even refusing to sell them at all);

•Conglomerate mergers – that is, mergers which enable a group that produces multiple products to price those products so as to drive clients to purchase packages of products rather than individual products;

•Diagonal mergers – that is, mergers between an upstream supplier and a downstream competitor of the purchasers of that supplier's goods; and

•Access to commercially sensitive information, allowing the purchaser to obtain a competitive advantage.

The CMA has adopted the Merger Assessment Guidelines as part of its own procedures and guidance.


5 Remedies

5.1 Can the parties negotiate remedies to address any competition concerns identified? If so, what types of remedies may be accepted?

Parties can negotiate remedies to address any competition concerns identified.

If the Competition and Markets Authority (CMA) concludes at the end of a Phase 1 investigation that the merger should be referred to a Phase 2 investigation, the parties can offer to give undertakings in lieu of a reference (UILs) in order to avoid such a referral. Under Section 73 of the Enterprise Act 2002, the CMA will accept the proposed UILs if it is confident that they will resolve the competition concerns that it has identified without any further investigation. Once UILs are accepted by the CMA, it is precluded from referring the merger to a Phase 2 investigation.

Broadly speaking, there are two types of UILs:

•behavioural undertakings, where the parties give undertakings as to how they will conduct themselves post-merger; and

•structural undertakings, where the parties offer either to exclude part of the relevant undertaking(s) from the merger or to divest part(s) of the merged business.

Typically, the CMA will be more willing to accept structural undertakings, though in some cases the CMA may want to receive both behavioural undertakings and structural undertakings. In some cases, UILs in relation to the assignment or licensing of patents, brands, data or other IP rights which could be considered to be either structural or behavioural may also be appropriate.


5.2 What are the procedural steps for negotiating and submitting remedies? Can remedies be proposed at any time throughout the review process?

UILs are the only form of negotiated remedy available in the UK merger control regime and must be agreed prior to the commencement of a Phase 2 investigation. Any offer of UILs must be made in writing using the CMA's Remedies Form for Offers of Undertakings in Lieu of Reference.

The parties may wait until the CMA issues its decision as to whether it considers that the merger would result in a substantial lessening of competition, and therefore has a duty to refer the merger to a Phase 2 investigation, before proposing any UILs. If they do so then, under Section 73A(1) of the Enterprise Act 2002, they will have five working days from the date on which they receive the CMA's reasons for that decision to formally propose any UILs. The CMA cannot consider any offers made after this period has expired, even where they are revised versions of offers made within that period.

The CMA will have until the end of the 10th working day following the parties' receipt of its decision (ie, five further working days from the deadline for the parties' submission of UILs) to decide whether it would be willing to accept the offer either as made or in a modified form. If a modified form is proposed, the parties will be allowed a further brief period to consider whether they would be willing in principle to agree to the modified UILs.

Once the CMA has determined that the proposed UILs are acceptable or the parties have agreed the modified UILs in principle, the CMA will begin a detailed analysis of the UILs. The CMA is allowed 50 working days, with the option under Section 73A(4) of the Enterprise Act 2002 to extend by a further 50 working days if there are ‘special reasons' for doing so, to reach a final decision.


5.3 To what extent have remedies been imposed in foreign-to-foreign transactions?

As noted above, no legal distinction is made between UK-to-UK transactions and foreign-to-foreign transactions. Remedies, including divestment remedies, can be ordered in relation to all mergers qualifying for investigation that raise competition concerns.


6 Appeal

6.1 Can the parties appeal the authority's decision? If so, which decisions of the authority can be appealed (eg, all decisions or just the final decision) and what sort of appeal will the reviewing court or tribunal conduct (eg, will it be limited to errors of law or will it conduct a full review of all facts and evidence)?

Under Section 120 of the Enterprise Act 2002, Competition and Markets Authority (CMA) decisions in relation to merger control can be appealed to the Competition Appeal Tribunal (CAT). This right is not limited to final decisions.

The CAT will hear appeals of CMA decisions in the first instance, and will consider findings both of fact and of law made by the CMA. In doing so, the CAT is specifically obliged to apply judicial review principles when reaching its decisions (see Section 120(4) of the Enterprise Act 2002). The precise nature of this obligation was considered in detail by the Court of Appeal in British Sky Broadcasting Group plc v Competition Commission [2010] EWCA Civ 2.

The parties may appeal decisions of the CAT to the Court of Appeal and ultimately the Supreme Court, but such appeals are limited to findings of law (see Section 120(6) of the Enterprise Act 2002).


6.2 Can third parties appeal the authority's decision, and if so, in what circumstances?

Yes. Under Section 120(1) of the Enterprise Act 2002, "Any person aggrieved by a decision of the CMA" can apply to the CAT for a review of that decision.



7 Penalties and sanctions

7.1 If notification is mandatory, what sanctions may be imposed for failure to notify? In practice, does the relevant authority frequently impose sanctions for failure to notify?

Notification is voluntary, so there are no sanctions for failing to notify.

However, the Competition and Markets Authority (CMA) retains the power to retrospectively review mergers post-completion, and the effect of a finding that the merger would result in a substantial lessening of competition at this stage is potentially more damaging given that a company could be required to divest a business it has already paid for.


7.2 If there is a suspensory obligation, what sanctions may be imposed if the transaction closes while the review is ongoing?

There is no requirement that the parties suspend completion of an intended merger during the period in which it is being reviewed by the CMA.

However, under Section 72 (during a Phase 1 investigation) and Section 81 (during a Phase 2 investigation) of the Enterprise Act, the CMA is entitled to impose interim orders in relation to a merger prior to completion of the CMA's review if it considers it appropriate to do so. These are commonly referred to as ‘hold separate' orders. The CMA may make orders that:

•prohibit or restrict the doing of things which the CMA considers would constitute pre-emptive action;

•impose on any person concerned obligations as to the carrying on of any activities or the safeguarding of any assets;

•provide for the carrying on of any activities or the safeguarding of any assets either by the appointment of a person to conduct or supervise the conduct of any activities (on such terms and with such powers as may be specified or described in the order) or in any other manner; and

•do anything which may be done by virtue of Schedule 8, paragraph 19 (which relates to the provision of information).

The CMA will usually require the chief executive officer (or another appropriate person) to provide a statement of compliance with any interim order(s) on a regular (typically fortnightly) basis. The CMA may also require that further information or statements of compliance be provided on an ad hoc or periodic basis.

Under Section 117 of the Enterprise Act 2002, it is a criminal offence for a person to provide false or misleading information to the CMA either knowingly or recklessly.


7.3 How is compliance with conditions of approval and sanctions monitored? What sanctions may be imposed for failure to comply?

The implementation of and/or compliance with any undertakings accepted or orders made by the CMA following the conclusion of an investigation will be handled by either the Remedies, Undertakings and Commitments Committee or an inquiry group appointed to oversee this part of the process.

In some cases the CMA may appoint a monitoring trustee or hold separate manager. A monitoring trustee is appointed to monitor and report on compliance with any interim measures and/or implementation of remedies. A hold separate manager, on the other hand, is an individual granted executive powers to operate the acquired business separately from the acquirer and in line with the relevant interim measures or remedies. He or she will play a day-to-day operational role in the business.

If a party fails to comply with any undertakings or orders, the CMA may enforce compliance by way of civil proceedings (including applications seeking injunctive relief) before the relevant courts in the United Kingdom.

In addition, under Section 94 of the Enterprise Act 2002, any person affected by the breach of undertaking or order that has sustained loss or damage as a result of it may bring an action against the party subject to those undertaking(s) and/or order(s).


8 Trends and predictions

8.1 How would you describe the current merger control landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

Discussions continue as to whether the United Kingdom should move to a mandatory filing regime in line with the rest of Europe and most other jurisdictions globally.

The other major issue is Brexit – which, if it occurs, will almost certainly result in a larger volume of mergers being caught by the UK regime. The Competition and Markets Authority (CMA) is hiring staff in expectation of this increase.

There are no immediate legislative reforms – the recent changes to the filing thresholds for ‘relevant enterprises' have yet to be fully assessed. The trend for more challenges to CMA decisions looks set to continue in the area of merger control as well as other areas of competition law.


9 Tips and traps

9.1 What are your top tips for smooth merger clearance and what potential sticking points would you highlight?

The most important tip is to be prepared. Do the analysis early as to where filings may be required and start preparing any notifications well in advance of the transaction being entered into.

Mergers raising serious issues will almost always require input from economists to assist with market definition and analysis and development of the arguments. The CMA employs its own economists to assess mergers and will expect the parties to have their own advisers on these issues.

Parties should also be aware that dealing with a Phase 2 merger inquiry is highly onerous, and that one or more members of management may have to work on the case full time to deal with the CMA's requests for information.

Where filings are being made in multiple jurisdictions, ensure consistency of approach. The authorities do talk to one another and any disparities between arguments made in different jurisdictions could undermine the parties' case.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.


13 November 2019 , by Neil Baylis

Mishcon de Reya