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This article has been written by Saurab Verma of 2nd year pursuing BA LLB course from Dr Ram Manohar Lohiya National Law University, Lucknow. This article will critically analyse the procedure and the rules governing the situations of the Mergers in the United Kingdom. Also, in this article, the main emphasis will be on the working of the Competition and Market Authority which is responsible during the merger situation.

Table of Contents


Mergers in the UK are governed by the Enterprise Act 2002 (amended by way of the Enterprise and Regulatory Reform Act, 2013). Mergers in which first-class for assessment will be issued to an investigation by way of the Competition and Markets Authority (CMA). They are the problem to evaluate if their annual UK turnover of the commercial enterprise agency which is being taken over exceeds £70 million, or the place the merger creates a 25% share in a market for objects and services in the UK or a large section of it.

Under the Enterprise Act, there is no statutory requirement to notify the applicable authorities when a merger takes place. Voluntary notification can, however, be given and is considered preferable. 

The CMA is accountable for the investigation of mergers which qualifies for reviewThe investigation is deemed essential in some instances due to the fact if the two or more groups merging into the equal entity serves to reduce opposition in the marketplace, the best of products or services may additionally diminish, the rate may additionally be stored excessive and technical development can also gradual down. If this has been to be the case, the hazard is a big lessening of competition. 

Though there will be a voluntary notification by the merger, the CMA will open an investigation on its personal initiative following, for instance, market intelligence or the place where there has been a complaint. Pending the planned exit of the UK from the European Union and any transitional preparations which might also be put in place, the UK is additionally problem to the EU Merger Regulation (EUMR), which applies the place the turnovers of the groups concerned in a transaction exceed positive thresholds, generally to the exclusion of the UK’s home merger control regime (and those of all other EU Member States).

If the EUMR thresholds are met then a notification to the European Commission (the Commission) is mandatory, and the UK merger rules will now not normally apply. Conversely, if the EUMR thresholds are not met, the EU guidelines will no longer typically apply. However, the initial jurisdictional analysis, it ought to be mentioned that there are provisions underneath the EUMR which enable cross-border mergers to be transferred between the Commission and the countrywide authorities to make sure that they are reviewed in the most terrific forum.

Overview of UK Merger Control

Mergers in the UK are ruled with the aid of the Competition and Market Authority(CMA) installed under Section 25 of the Enterprise and Regulatory Reforms Act, 2014. The CMA was once formed by combining and superseding the powers of Office of Fair Trading which was once made under Enterprise Act, 2002 and Competition Commission in the United Kingdom. CMA is a non-ministerial government department governed by an impartial board that involves both executives and non-executives. 

It also contains a panel of independent contributors who are selected on their ride level in areas of business, economics, regulation or opposition policy. CMA is a regulating authority accountable for each Phase1 examination of mergers and Phase 2 investigation and closing determination. Also, the CMA selections can be appealed to the Competition Commission which was installed under Section 12 of the Enterprise Act, 2002. The CMA normally makes meantime orders stopping any potentially prejudicial action, such as integrating the merging business. This may also encompass initial enforcement orders on businesses to monitor, forestall or reverse preemptive motion during a merger investigation.

It will typically do so when it opens an investigation into a done merger. Such an order stays in place till the transaction is cleared or the required remedial motion is implemented. A completed merger can be required by the CMA to be unwound if the regulator has life-like grounds to consider the events are integrating their businesses. This is Phase 1 of the investigation by means of the CMA, and it has to be commenced interior 40 days of either notification of the merger, or when the CMA receives ample records about the merger to begin its investigation. In Phase 2, the CMA can order that the carried out transaction is terminated.

This may, for instance, be via disposal of the received companies or assets – in all likelihood at decrease than market value or otherwise unfavourable terms. The CMA can also order that the customer acquires no similarly shares in the goal enterprise without the CMA’s consent. And if an executed merger is referred to the CMA, the merged entity must attain the CMA’s consent earlier than similarly integrating the businesses. It can even prohibit the completion of the merger. Where it deems quintessential the CMA can receive undertakings from the parties to take the vital action to prevent or unwind pre-emptive action.

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Part 3 of the Enterprise Act 2002

Part 3 of the Enterprise Act, 2002 states about the rules and procedures followed by the Office of Fair Trading(OFT), related to the duties to make references in the case of anticipated mergers as well as for completed mergers. This part basically describes the principle stages for the procedure followed in both Phase 1 and Phase 2 investigations. 

Brief description of the system of merger control in the UK

UK merger control is governed by way of the Enterprise Act 2002, as amended with the aid of the Enterprise and Regulatory Reform Act 2013 (ERRA). There is an authority called Competition and Market Authority(CMA) which was established under ERRA13 as the UK’s economy-wide opposition authority accountable for making sure that competition and markets work properly for consumers. 

On 1 April 2014, the purpose of the Competition Commission (CC) and many of the basis of the Office of Fair Trading (OFT), which includes the CC’s and OFT’s merger manipulate functions, have been transferred to the CMA and these our bodies abolished. The CMA’s most important duty is to promote competition, both inside and outside the UK, for the advantage of consumers.

Guidelines, rules of procedure and other relevant publications

This instruction forms the phase of the recommendation and data published with the aid of the Competition and Markets Authority (CMA) below Section 106 of the Enterprise Act 2002, as amended (the Act). It is aimed to supply widespread data and advice to agencies and their advisers on the methods used with the aid of the CMA in running the merger control authority is specified in the Act.

It also includes the coaching on when the CMA will have jurisdiction to overview mergers underneath the Act. These documents are in particular concerned with those mergers involving corporations energetic in the United Kingdom (UK) that are governed by the provisions of the Act. However, it also temporarily addresses these mergers that fall to the European Commission (the Commission) beneath the European Union Merger Regulation (the EU Merger Regulation), and the relationship between domestic and European merger manipulate systems. It explains the roles of the CMA, the Secretary of State, and relevant sectoral regulators.

CMA publications

These are the following publications by the CMA-

  1. Mergers – the CMA’s jurisdiction and procedure: CMA2
  2. Merger assessment guidelines: CC2/OFT1254
  3. The quick guide to UK merger assessment: CMA18
  4. Water and sewerage mergers: CMA49
  5. Disclosure of information in CMA work: CC7
  6. Merger remedies
  7. Variation and termination of undertakings and orders: CMA11
  8. Mergers exceptions to the duty to refer and undertakings in lieu
  9. Mergers customer survey design and presentation
  10. Retail mergers commentary: CMA62
  11. CMA’s mergers intelligence function: CMA56
  12. Review of NHS mergers: CMA29
  13. Economic analysis submissions best practice: CC2com3
  14. Government in markets: OFT1113

Adoption by the Competition and Markets Authority (CMA) of OFT/Competition Commission publications

The ERRA13 made the CMA as the UK’s economy-wide competition authority responsible for making sure that competition and markets work properly for consumers. On 1 April 2014, the features of the Competition Commission (CC) and many of the features of the Office of Fair Trading (OFT), which include the CC’s and OFT’s merger manage functions, were transferred to the CMA and these bodies were abolished. The CMA’s predominant duty is to promote the competition, each inside and outdoors the UK, for the gain of consumers. 

Under the Act, the CMA has a feature to achieve and review facts relating to merger situations, and an obligation to refer for an in-depth ‘Phase 2’ investigation any applicable merger scenario the place it believes that it is or can also be the case that the merger has resulted or may additionally be expected to result in a good-sized lessening of opposition in a UK market. Following a reference for a Phase 2 investigation, the CMA conducts a more distinctive evaluation to decide whether: 

(i) there is an applicable merger situation falling inside the UK merger manipulate regime, 

(ii) that applicable merger situation has resulted or may be predicted to result, in a huge lessening of competition, and

(iii) it takes action to treatment any giant lessening of competition identified. At Phase 2, those selections are taken by an Inquiry Group of at least three people, chosen for every case from the unbiased professionals appointed with the aid of the Secretary of State to the CMA’s panel.

Delegated legislation adopted by the Secretary of State

The Secretary of State has a role in certain public hobby cases. The Secretary of State is in a position to modify certain provisions of the Act through secondary legislation, for example, these provisions referring to jurisdictional thresholds, and to make secondary regulation related to things such as the stage of merger fees. 

The SOS has the strength to take over the position of decision-maker from the CMA in relation to mergers which have a doable have an effect on the UK public activity (“public activity mergers”). The sectors to which these powers apply are constrained by using legislation, and presently cowl countrywide security, the media quarter (including newspapers, tv, and radio), and the need to maintain the steadiness of the UK monetary system. The SOS has the power to prolong these classes (for example, the financial stability criterion was once delivered throughout the world monetary disaster of autumn 2008).

The CMA’s Duty to Make References: Phase 1 Investigations

Duty to make references: completed mergers

The OFT shall make a reference to the Commission if the OFT believes that it is or may additionally be the case that an applicable merger scenario has been created; and the introduction of that state of affairs has resulted, or may be anticipated to result, in a giant lessening of competition within any market or markets in the United Kingdom for goods or services. 

The OFT might also decide no longer to make a reference under this part if it believes that the market involved is not, or the markets worried are now not of adequate significance to justify the making of a reference to the Commission; or any relevant customer advantages in relation to the introduction of the applicable merger situation concerned outweigh the full-size lessening of competition involved and any destructive outcomes of the widespread lessening of opposition involved as integrated beneath Section 22 of the Enterprise Act, 2002.

Discretion not to refer

If the Competition and Markets Authority (CMA) believes that it may additionally be the case that a relevant merger situation may additionally lead to a widespread lessening of opposition (SLC), then it is below accountability to refer the merger for in-depth (phase 2) investigation. However, in positive instances, the CMA has a discretion now not to make a reference however the fact that there is a sensible prospect that the merger will lead to an SLC in a market or markets in the United Kingdom. 

These are when the markets worried are no longer of  full-size to justify a reference in the case of predicted mergers, when the preparations concerned are insufficiently some distance advanced, or insufficiently perchance to proceed, to justify a reference; or when any applicable consumer advantages bobbing up from the merger outweigh the SLC worried and any unfavourable penalties of the SLC concerned. 

Markets of insufficient importance

Under Sections 22(2)(a) and 33(2)(a) of the Act the CMA may also parent out now not to refer a merger for an in-depth ‘phase 2’ investigation if it believes that the market(s) to which the duty to refer applies is/are no longer of ample significance to justify a reference. This exception is designed to keep away from references being made where the expenses concerned would be disproportionate to the significance of the market(s) concerned.

The CMA considers that the market(s) concerned will typically be of ample value to justify a reference (such that the exception will now not be applied) where the annual price in the UK, in aggregate, of the market(s) worried, is extra than £15 million. By contrast, the place the annual charge in the UK of the market(s) worried is, in aggregate, plenty much less than £5 million, the CMA will often now not assume about a reference justified until a straight forward task in lieu of reference is in principle available.

Where the annual price in the UK, in aggregate, of the market(s) concerned is between £5 million and £15 million, the CMA will reflect on consideration on whether or not or no longer the expected consumer injury ensuing from the merger is materially large than the frequent public fee of a section 2 reference.

The CMA will base its evaluation of envisioned patron damage on the dimension of the market concerned; its view of the probability that an SLC will occur; its evaluation of the magnitude of any competition that would be lost; and its expectation of the duration of that SLC. 

The CMA will additionally take account of the wider implications of its selections in this area, and will be less in all likelihood to exercise its discretion, and consequently more maybe to refer, the area the merger is one of a possibly large quantity of comparable mergers that ought to be replicated across the region in question.

Customer benefits

While mergers can damage competition, they can also give an upward push to efficiencies which enhance rivalry and/or produce applicable purchaser benefits. If the efficiencies springing up from the merger enhance contention inside a market where an SLC finding would possibly probably arise, the CMA can take this into account in its evaluation of the merger’s have an effect on competition. 

For example, a merger of two of the smaller corporations in a market resulting in effectivity positive aspects might permit the merged entity to compete more efficiently with the larger firms. Rivalry-enhancing efficiencies may lead the CMA to conclude (at Phase 1) that the merger does not provide upward shove to a realistic prospect of an SLC in a specific market, or may additionally mitigate the severity of any SLC prompted by means of the merger.

Relevant patron benefits are defined with the aid of Section 30(1) of the Enterprise Act 2002 (the Act) to be advantages to relevant customers in the shape of lower prices, higher satisfactory or increased choice of items or offerings in any market in the United Kingdom, or higher innovation in relation to such items or services.

Sections 30(2) and (3) of the Act grant that advantage is only an applicable patron benefit if it has accrued or is anticipated to accrue to relevant customers inside the UK within a lifelike period from the merger and would be unlikely to accrue without the merger or a similar lessening of competition.

Relevant clients are clients at any factor in the chain of manufacturing and distribution and are consequently no longer constrained to final customers section 30(4) of the Act. It is not possible for the CMA each 

(i) to observe relevant purchaser benefits as an exception to the obligation to refer, eg in relation to certain affected markets, and 

(ii) to accept a venture in lieu in recognize different affected markets.

The CMA is exercising its discretion in identifying whether to apply an exception to the responsibility to refer the merger in question for a Phase 2 investigation. In exercising this discretion, the CMA has regard to the benefits of a Phase 2 investigation, along with the possibility of redress being got at Phase 2 that should stop an SLC while additionally taking pictures any relevant patron benefits.

Circumstances in which a reference cannot be made

Section 22(3) of the Enterprise Act, 2002 states that no references shall be made if the making of the reference is avoided with the aid of area 74(1) or 96(3) or paragraph four of Schedule 7 or if the OFT is thinking about whether to accept undertakings beneath section 73 rather of making such a reference or the applicable merger scenario worried is being, or has been, dealt with in connection with a reference made under section 33 or a notice under section 42(2) is in pressure in relation to rely or the be counted to which such a word relates has been finally decided under Chapter 2 otherwise than in circumstances in which a word is then given to the OFT under section 56(1) or the European Commission is considering a request made, in relation to the remember concerned, by the United Kingdom (whether by myself or with others) under article 22(1) of the EC Merger Regulation, is proceeding with the count in pursuance of such a request or has dealt with the be counted in pursuance of such a request.

Duty to make references: anticipated mergers

The OFT shall make a reference to the Commission if the OFT believes that it is or can also be the case that arrangements are in growth or in contemplation which, if carried into effect, will result in the creation of a relevant merger scenario and the introduction of that situation can also be predicted to result in a good-sized lessening of opposition within any market or markets in the United Kingdom for items or provider as integrated beneath Section 33(1) of The Enterprise Act, 2002.

Relevant merger situations

A merger needs to meet all three of the following criteria to constitute a relevant merger state of affairs for the functions of the Act:

  1. Two or extra businesses should give up to be distinct, or there should be preparations in growth or in contemplation which, if carried into effect, will lead to businesses ceasing to be distinct.
  2. Either the price of UK turnover of the business enterprise which is being acquired exceeds £70 million or the organizations which end to be wonderful grant or accumulate items or services of any description and after the merger collectively grant or collect at least 25 per cent of all those unique items or offerings furnished in the UK or in a considerable section of it. The merger has to result in an increment to the share of furnish or consumption. In practice, therefore, the share of furnish checks can only be met the place the agencies concerned supply or gather goods or services of a similar kind (known as ‘the share of providing test’).
  3. Either the merger (subject to certain exceptions) the merger has to have taken vicinity not greater than 4 months earlier than the reference is made.

Enterprises ceasing to be distinct 

Two enterprises will ‘cease to be distinct’ if they are brought under common ownership or control.


The time length ‘enterprise’ is defined in part 129 as the activities, or part of the activities, of a business. The commercial enterprise business enterprise in query wants not, therefore, to be a separate felony entity. The definition states that the things to do in the query need to be carried out for ‘gain or reward’. 

However, there is no requirement that the transferred things to do ought to be profitable or generate a dividend for shareholders, and the definition can also consist of transfer things to do performed on a not-for-profit basis. In making a judgment as to whether or not or now not the matters to do of a commercial enterprise or part of a business, symbolize an employer under the Act, the authorities will have regard to the substance of the association beneath consideration, as a replacement than essentially its crook form. 

A corporation can additionally encompass any huge variety of components, most generally together with the property and records wished to raise on the business, at the same time with the benefit of existing contracts and/or goodwill. In some cases, the switch of physical assets on my very own can also be ample to represent an enterprise, for occasion where the facilities or website on-line transferred allow a unique commercial enterprise activity to be continued.

Intangible property such as intellectual property rights is unlikely, on their own, to represent a business enterprise except it is plausible to pick out turnover at once related to the transferred intangible assets that will additionally switch to the buyer. 

The business acquired may additionally no longer be trading then again this does now no longer in itself forestall the company from being a corporation for the functions of the Act. 


‘Control’ is not restricted to the acquisition of outright voting control however consists of conditions falling quick of outright control. Section 26 distinguishes three tiers of hobby referred to as control. Section 26(3) presents the Authorities with a discretion to treat cloth have an effect on and de facto control as equal to criminal control. The Act additionally consists of provisions to deal with situations in which an organization acquires manage through levels or the place ‘associated persons’ may act collectively to achieve control.

The turnover test

The ‘turnover test’ is relaxed the place the annual price of the UK turnover of the company being received exceeds £70 million. In most situations, the turnover test is utilized to the turnover of the received company that used to be generated through the sale of goods or offerings to clients within the UK in the commercial enterprise 12 months preceding the date of completion of the merger or, if the merger has not yet taken place, the date of the reference to the CC.

The share of supply test

Under section 23, the ‘share of providing test’ is blissful if the merger enterprises, firstly, provide or accumulate goods or offerings of a specific description; and will after the merger at the same time supply or acquire 25 per cent or more of these items or services, in the UK as an entire or in a tremendous part of it, furnished that the merger outcomes in an increment to that share. amplify in the share of furnish must result from the corporations ceasing to be distinct. In the case of an acquisition, the share of the furnish is based absolutely on the activities of the acquirer and the goal company.

In joint venture situations, the share of the furnish is calculated through reference to the things to do of the joint venture, even though it will consist of shares of the joint task parents the place they proceed to undertake the equal things to do as the joint venture. The Act expressly allows the Authorities a broad discretion in describing the applicable goods or services, requiring entirely that, in relation to that description, the parties’ share of furnish or acquisition is 25 per cent or more. 

The share of furnish is one of a type from a market share, and objects and offerings to which the share of imparting take a seem at is utilized favour now not quantity to the market described for the financial analysis. In addition, the authorities may also additionally have regard to any practical description of a set of goods or services to decide whether or not or now not the share of providing check is met—the value, cost, price, quantity, capacity, range of people employed or any other criterion might also additionally be used to determine whether or no longer the 25 per cent threshold is reached. 

Time limits and prior notice to meet the standards for an applicable merger situation, the merger must either now not yet have taken place or have taken vicinity not more than 4 months before the reference is made. However, in instances the place the OFT has not been knowledgeable without delay of cloth data about the merger, the four-month period is deemed to have commenced when fabric facts are ‘made public’, ie when they are ‘so publicized as to be usually known or without difficulty ascertainable’. 

The OFT also has the strength to ‘stop the clock’ in positive circumstances, for instance, the place it is waiting for requested statistics from the merging parties. Section 27(5) and 27(6) permit the Authorities to deal with successive occasions inside a duration of two years involving the equal parties (or in the outcome of the same arrangements or transaction) as happening simultaneously on the date of the present-day event. The Authorities have discretion on whether or not to apply this section.

CMA procedure in Phase 1

Notify Mergers to the CMA

In the United Kingdom, Merger notification is voluntary. Meaning thereby, it depends on the businesses to whether or not to notify to CMA of a merger or not, even if the merger is being qualified to be reviewed below CMA. However, there is no prohibition on the corporations finishing transactions besides clearance from the CMA, which may on the other hand supply upward jab to some risks. So if the companies choose to notify the CMA, they can do it by using filling the shape ‘ Merger Case Team Allocation Request Form’ via which CMA will choose the gorgeous case team and start the process of discussing with the merger events about what facts is required before formal notification is made.

 After this, the groups merging will notify the CMA using the ‘ Notice Merger Template’ in which the details and instruction on the statistics necessary to allow the CMA to check an expected or done merger are provided.

CMA’s market intelligence function

The fact that it is the discretion of the businesses to whether or not to notify CMA or now does not imply that CMA will no longer evaluate it. The UK merger regime contemplates the opportunity of merger assessment initiated through the CMA itself where it believes it may also have jurisdiction. Under Section 5 of the Act, the CMA is responsible for obtaining, compiling and preserving under evaluate information about things related to the carrying out of its functions under the Act.

In order to raise out these functions, the CMA proactively evaluations a range of information sources, together with countrywide and consultant change press, to achieve statistics about predicted and achieved mergers. The CMA also continues an active speak with Governmental departments and different regulatory bodies to gain Genius about merger activity. Also, there are alternative ways in which by ask the CMA to think about the merger.

Informal advice

In planning mergers and acquisitions, it is for events and their advisers to affirm whether or not transactions might grant upward push to opposition concerns. However, in order to aid the planning and consideration through organizations and their advisers of future mergers, the MU is prepared to furnish advice on a casual foundation on opposition problems IA is reachable fully for transactions that are neither hypothetical (‘too quickly for IA’) nor in the public domain (‘too late for IA’). 

In assessing whether or not a non-public transaction is suitable for the IA process, the CMA will normally anticipate being cosy that there is a great have faith intention to proceed as evidenced through capacity of a possible viable to do so, having regard to 

(i) adequate financing; and

(ii) heads of settlement or similar for agreed transactions; or two 

(iii) proof of board-level consideration through the acquirer the place occasions required IA prior to notifying the target. 

These factors are non-exhaustive and the CMA will be open to persuasion that a precise appropriate trust idea is fantastic for IA consideration, for instance when a changing customer is honestly considering making a bid in the context of a public sale situation. – The CMA believes it can materially help business, and justify the use of its personal sources for IA, solely when its duty to refer is a real issue.

It sees no cost to the commercial enterprise or the taxpayer in accepting invitations to recommend the propositions of advisers that a transaction raises no such issue. Parties, with the exception of seasoned Bono cases, are well-placed to be counted on proper exterior advice in such cases; as the UK regime is voluntary, they are of the route beneath no duty to notify their transaction to the CMA. 

Pre-notification discussions

Pre-notification discussions take location when the events to a merger have decided to notify the CMA and wish to interact with it, generally on the contents of a draft notification, prior to formal submission. The use of the prenotification phase to discuss a supposed notification with the case team on a confidential groundwork is an essential section of the entire merger evaluation process. 

For agencies planning to notify a merger, the CMA consequently strongly encourages events to contact it to engage in prenotification discussions at least two weeks before the supposed date for notification.

Pre-notification contacts advantage the parties, and often the CMA, with the aid of serving, for example, to two instruct the case team where markets are complex and/or unfamiliar or two frames the transaction, along with its intent and efficiencies, in a practical context early on and clarify the statistics and evidence the CMA will:

a) required for the functions of the Merger Notice in the case at hand, so as to be able to formally start its investigation on the forty working day statutory timetable, and/or

b) will request early in the review procedure.

Notification using a merger notice

Once a merger is announced, and thereby turns into public knowledge, the companies involved may formally notify their merger to the CMA. Where the parties have not signed a share buy settlement or equivalent, the CMA will normally expect to be at ease that there is a suitable trust intention to proceed, as evidenced by, for example, ample financing, heads of agreements or similar, or proof of board-level consideration. 

In the case of a public bid, the CMA will count on at least a public announcement of an association intends to make an offer or the announcement of a possible offer in order to open a Phase 1 investigation.

As referred to above, events are inspired in all cases to have interaction in fantastic pre-notification discussions with the MU prior to making their remaining notification. Parties need to apprehend that must they pick (even if for probably comprehensible commercial reasons) to restrict pre-notification discussions, they will minimize the scope to agree with the CMA a more focused method to the statistics required in the case at hand for the purposes of a whole Merger Notice.

Where parties submit a notification, the MU will, on receiving it, think about whether it meets the requirements of the Act. Once the MU is blissful that it does, it will verify this to the parties. The forty working day period within which the CMA must determine whether the test for reference is met begins on the working day after that confirmation is given.

Own-initiative investigations

Even where the parties have no longer voluntary notified a merger by way of an entire Merger Notice, the CMA may also decide that the data it has bearing on to the parties and the merger and/or any facts it has obtained from the parties in response to its inquiry letter is sufficient for it to commence its investigation and start the forty working days statutory timetable for its Phase 1 investigation. 

Where the CMA sends an inquiry letter to the events on its very own initiative, the records it requests, probably by using way of extra information requests, will eventually be comparable to that which the parties would have furnished had they chosen to notify the transaction by means of way of Merger Notice.

For this reason, if the CMA receives from the parties in such conditions response to its inquiry letter containing ample records for the CMA to commence its investigation, the CMA will affirm this to the parties, and the forty working days statutory timetable commences on the working day after such affirmation is given.

Fast-track reference cases

For a case to be speedy tracked to reference, the CMA has to have evidence in its possession at an early stage in an investigation that it believes objectively justifies a trust that the take a look at for reference is met and the notifying events ought to have requested and given consent for use of the procedure. 

Candidate cases for speedy tune reference for a Phase 2 investigation are consequently probably to be instances where, to the extent that the CMA does find a concern with the merger, that problem would impact on the entire or substantially all of the transaction, and not simply one part. 

It is open to merger events to inform the CMA that they reflect on consideration on their case meets the standards for quick tune reference for a Phase 2 investigation during pre-notification, at the time of notification or at any factor all through the route of the CMA’s investigation. In addition to thinking about whether or not the case meets those criteria, the CMA will in identifying whether to utilize the quick tune manner have regard to its administrative assets and the efficient habits of the case.

Undertakings in lieu of a reference

If the CMA finds that its obligation to refer the merger for a Phase 2 investigation applies, the parties may have a possibility to keep away from that result via supplying binding undertakings in lieu of reference (UILs) for the CMA (or the Secretary of State in public pastime cases)to accept. UILs may additionally be established by the CMA only the place it has concluded that the merger must be referred for a Phase 2 investigation. 

Any UILs universal with the aid of the CMA should be for the reason of remedying, mitigating or preventing the enormous lessening of competition involved or any unfavourable outcomes identified. In order to take delivery of UILs beneath area 73 of the Act, the CMA must be assured that the opposition issues recognized will be resolved with the aid of ability of the UILs provided except the need for similarly investigation.

UILs are consequently fabulous solely where the opposition concerns raised by the merger and the remedies proposed to tackle them are clear cut, and these treatments are fine and capable of ready implementation. Experience has indicated that UILs are well-known most often in cases where, first, the troublesome overlaps symbolize a small percentage of the transaction and, second, these overlaps contain asset applications – such as stand-alone agencies in separate local markets – that are severable from the remainder of the transaction besides materially affecting the usual commercial purpose for the merger. 

These instances have nearly invariably led to ‘structural’ UILs to divest applicable property to an appropriate third-celebration purchaser authorized via the CMA. The CMA is tremendously unlikely to receive behavioural redress at phase 1. The CMA will therefore commonly anticipate UILs supplied by way of parties to be structural, as a substitute than behavioural, in nature.


All mergers that qualify for reference for a section 2 investigation are difficulty to a fee, irrespective of whether or not a reference for a section 2 investigation is made. The price is gathered by using the Competition and Markets Authority (CMA) on behalf of HM Treasury. For mergers which contain the acquisition of a controlling interest, the fee becomes payable on the announcement of the CMA’s selection (or the Secretary of State’s selection in public pastime cases) whether or not or not to refer the merger for a segment 2 investigation.

The CMA’s exercise is to ship and the bill to the merger events after the decision on reference has been announced. Payment has to be made within 30 days of the date of the invoice. A merger charge is not payable if the merger involves the acquisition of a hobby that is less than a controlling hobby and the CMA investigated the acquisition on its own initiative. This exception does not follow if the merger parties notified such an acquisition by using submitting a merger notice.

Determination of Reference by the CMA: Phase 2 Investigations

Subject to complying with the Rules of manner for CMA Groups, and to any coaching issued through the CMA Board, Phase 2 Inquiry Groups are free to determine how they habit a Phase 2 inquiry. In exercise Phase 2 inquiries generally observe a fairly fashionable pattern, which is described in the following chapters, however, Inquiry Groups have the flexibility to range the way they function in order to lift out their felony duties successfully and inside the strict statutory deadlines. The responsibilities and powers of Inquiry Groups conducting  Phase 2 inquiry are set out in the Act.

The Phase 2 Inquiry Group and case team

All the CMA’s features in Phase 2 merger inquiries are carried out with the aid of way of Inquiry Groups. An Inquiry Group is appointed for each inquiry, supported through a case group of CMA staff. Under the ERRA13, the Chair of the CMA is responsible for figuring out and appointing the Inquiry Group that will habits a particular inquiry and for deciding on one of them to act as chair of the Inquiry Group (the Inquiry Group Chair). In practice, the Chair of the CMA will delegate these duties to the CMA Panel Chair. 

The CMA’s panel members come from a range of backgrounds, which include economics, law, accountancy and/or business; the membership of an Inquiry Group normally reflects a combination of know-how and ride (including industry experience).

For a Phase 2 inquiry, an Inquiry Group will comprise at least three (and usually no extra than five) members, including the Inquiry Group Chair. Before appointing members to an Inquiry Group, the CMA will fulfil itself of members’ availability and consider whether their outside hobbies could affect the impartiality, or appreciation of the independence of the Inquiry Group.

At operational (case team) level, in order to keep away from pointless duplication and facilitate an environment-friendly end-to-end merger review process, the CMA would normally anticipate to have a diploma of case crew continuity via maintaining at least some of the Phase 1 case group to work alongside newly assigned group of workers on the in-depth Phase 2 investigation when a rely is referred.

Investigations and reports

The Act imposes an obligation on the CMA to refer finished and expected mergers for an in-depth Phase 2 investigation if it believes that it is or may be the case that: two a relevant merger situation has been created or arrangements are in progress or in contemplation which, if carried into effect, will result in the advent of an applicable merger situation, and two the advent of that state of affairs has resulted, or can also be expected to result, in a huge lessening of competition inside any market or markets for goods or services in the UK.

The CMA may, however, determine no longer to make a reference for a Phase 2 investigation if it believes that: the market worried is not, or the markets worried are not, of ample importance to justify the making of a reference two any applicable patron benefits in relation to the advent of the applicable merger situation outweigh the tremendous lessening of competition worried and any detrimental outcomes of that good-sized lessening of competition, or two in the case of an anticipated merger, the preparations worried are now not sufficiently far advanced or are now not sufficiently possibly to proceed, to justify the making of a reference. 

Where the CMA finds that it is underneath a responsibility to refer a merger for a Phase 2 investigation, it can also underneath section 73 of the Act accept UILs to remedy, mitigate or stop the substantial lessening of opposition concerned or any unfavourable effect of it.

Under Section 22(3) of the Act, the CMA cannot refer a merger if two the Secretary of State has issued a public pastime intervention note regarding the merger and that note remains in force the Commission is thinking about a request for the merger to be referred to the Commission for review, or in the case of performed mergers, the applicable merger situation worried is being, or has been, dealt with in connection with a reference made of the anticipated merger.

Duty to treatment the anti-competitive results of mergers

Following a reference for a Phase 2 investigation, the Inquiry Group ought to decide,  whether or not an applicable merger situation has been or will be created, and two if so, whether or not the introduction of that state of affairs has resulted, or can also be expected to result, in a significant lessening of opposition within any market or markets in the UK for goods or services (where both limbs are satisfied, this is referred to as an ‘anti-competitive outcome’). 

If the Inquiry Group finds that there is an anti-competitive result it ought to decide,  whether or not motion be taken through it, or with the aid of others, to remedy, mitigate or prevent the sizeable lessening of competition involved or any damaging effect that has resulted from, or may additionally be anticipated to result from, that large lessening of competition, and two if action is to be taken, what motion ought to be taken and what is to be remedied, mitigated or prevented.

While most mergers that take location in the UK will not increase competition issues, the merger manage procedure is designed to permit the CMA to pick out these where such troubles may also arise so that they can also be excellent investigated and, where necessary, resolved thru excellent remedies.

 At Phase 1, the CMA’s test for reference (its ‘duty to refer’) will be met if the CMA has a practical belief, objectively justified by using applicable facts, that there is a sensible prospect that the merger will reduce opposition substantially. The statutory context of the Act means that in these Phase 1 instances the place there is proper uncertainty as to whether the obligation to refer arises, this question is one for resolution via the Inquiry Group on the foundation of a particular Phase 2 investigation. At Phase 2, the Inquiry Group is then required to base its selections on the stability of probabilities.

Duty to remedy the anticompetitive effects of mergers

Following a reference for a Phase 2 investigation, the Inquiry Group ought to decide: to whether or not an applicable merger situation has been or will be created, and two if so, whether or not the introduction of that state of affairs has resulted, or can also be expected to result, in a significant lessening of opposition within any market or markets in the UK for goods or services (where both limbs are satisfied, this is referred to as an ‘anti-competitive outcome’). 

If the Inquiry Group finds that there is an anti-competitive result it ought to decide: to whether or not motion be taken through it, or with the aid of others, to remedy, mitigate or prevent the sizeable lessening of competition involved or any damaging effect that has resulted from, or may additionally be anticipated to result from, that large lessening of competition, and two if action is to be taken, what motion ought to be taken and what is to be remedied, mitigated or prevented.  

While most mergers that take location in the UK will not increase competition issues, the merger manage procedure is designed to permit the CMA to pick out these where such troubles may also arise so that they can also be excellent investigated and, where necessary, resolved through excellent remedies. At Phase 1, the CMA’s test for reference (its ‘duty to refer’) will be met if the CMA has a practical belief, objectively justified by using applicable facts, that there is a sensible prospect that the merger will reduce opposition substantially. 

The statutory context of the Act means that in these Phase 1 instances the place there is proper uncertainty as to whether the obligation to refer arises, this question is one for resolution via the Inquiry Group on the foundation of a particular Phase 2 investigation. At Phase 2, the Inquiry Group is then required to base its selections on the stability of probabilities.

Time limits for the implementation of remedies

The CMA is difficulty to a statutory cut-off date of 12 weeks following its ultimate report, extendable once with the aid of up to six weeks if the CMA considers there are unique reasons for doing so, to implement its Phase 2 remedies. The CMA will draw up a timetable for the drafting and implementation of undertakings or order, and share key milestones with the major parties to help them plan their entry to the process.

CMA procedure in Phase 2.

The technique of agreeing on undertakings or making an order will involve informal consultation between the CMA (with meetings commonly being held at the case team level) and the essential parties. Third parties may additionally be consulted with the place relevant. Parties will be asked to comment on each substance of the draft undertakings or order, and on any clause which they consider to be exclusive and which they would choose to be excised from the posted model by way of reference to section 244 of the Act.

When a version of the undertakings has been provisionally agreed on which the CMA is willing to seek advice from publicly, the CMA will then post a notice of intention to receive ultimate undertakings’ or a ‘notice of intention to make an order’ to which the draft undertakings or order are annexed. A minimal session period (15 days for undertakings and 30 days for order) is allowed for involved parties to remark on the notice.

The CMA will discern out whether or not any changes want to be made to the draft undertakings or order in light of responses to the consultation. If any cloth modifications are required, a in a similar fashion minimal seven-day session period is required. Minor changes do no longer require in addition consultation. 

The CMA then publishes a notice of acceptance of undertakings’ or a ‘notice of making an order’. At this point, the inquiry is ultimately determined. Responsibility inner the CMA for any similar implementation of redress (for example, overseeing any divestiture process) will either pass over to the Remedies, Undertakings and Commitments Committee or to an Inquiry Group appointed to oversee this phase of the machine (possibly the actual Inquiry Group). 

Where treatment implementation is expected to be difficult or includes specific concerns it is in all possibility that either the unique Inquiry Group will be reappointed to oversee that process, or that a new Inquiry Group will be appointed rather than the matter being dealt with with the aid of way of the Remedies, Undertakings and Commitments Committee.

The ‘Substantial Lessening of Competition’ Test

A substantial lessening of competition

The term ‘substantial lessening of competition’ is no longer defined in the Act. Competition is seen via the authorities as a process of competition between firms in search of to win customers’ enterprise over time with the aid of supplying them a better deal. Rivalry creates incentives for companies to reduce price, make bigger output, enhance quality, beautify efficiency, or introduce new and better merchandise due to the fact it offers the chance for successful firms to take business away from competitors, and poses the danger that companies will lose business to others if they do not compete successfully.

A merger offers an upward jab to an SLC when it has a huge impact on competition over time, and therefore on the competitive pressure on companies to enhance their offer to customers or come to be more environment-friendly or innovative. A merger that offers an upward push to an SLC will be anticipated to lead to an unfavourable effect for customers. Evidence on probably damaging outcomes will consequently play a key role in assessing mergers.

Theories of harm

Theories of damage are drawn up by way of the Authorities to provide a framework for assessing the results of a merger and whether or not or not it should lead to an SLC. They describe possible changes springing up from the merger, and have an impact on contention and anticipated harm to clients as compared with the situation probably to occur barring the merger.

The Authorities may additionally revise the theories of damage as their assessment progresses. In formulating theories of harm, the authorities will reflect on consideration of how contention may be affected.

 They may set out those aspects of the merger firms’ competitive offers to customers over which corporations compete and which should worsen as an end result of the merger, whether in phrases of charge or non-price elements such as the volume sold, provider quality, product range, product first-class, and innovation. The ability of firms to adjust these aspects, and additionally the time inside which they can do so, will rely upon the market concerned.

The counterfactual

The application of the SLC test entails an assessment of the prospects for the opposition with the merger against the competitive state of affairs besides the merger. The latter is called the ‘counterfactual’. The counterfactual is an analytical device used in answering the query of whether or not the merger gives upward thrust to an SLC. 

While primarily based on evidence received by means of the Authorities in their investigations, it is typically now not comparable in element to their evaluation of the competitive consequences of the merger. A counterfactual can’t be built that includes violations of opposition law. Since the counterfactual may additionally be both greater or much less competitive than the prevailing prerequisites of competition, the choice of the terrific counterfactual might also extend or decrease the potentialities of an SLC finding by means of the applicable Authority

The approach to the counterfactual

In reviewing mergers at Phase 1, the OFT is required to assess whether or not the merger creates a sensible prospect of an SLC. The ‘is or may also be the case’ fashionable in the OFT’s SLC test additionally has implications for its approach to the counterfactual. The OFT considers the impact of the merger in contrast with the most competitive counterfactual offering constantly that it considers the situation to be a practical prospect. 

As a Phase 2 body, the CC takes an exclusive strategy considering that it has to make a general judgement on whether or no longer an SLC has befallen or is likely to occur. To assist make this judgment on the in all likelihood future scenario in the absence of the merger, the CC may have a look at countless possible scenarios, one of which may be the continuation of the pre-merger situation; however ultimately solely the most probable state of affairs will be selected as the counterfactual.

The exiting company scenario

The exiting company state of affairs is most normally considered when one of the corporations is said to be failing financially. It can also be especially vital in the context of an exiting firm situation for the Authorities to apprehend the rationale for the transaction below the review. 

For the OFT to be given an exiting company argument, it would need two to consider that it was inevitable that the company would exit the market and be confident that there used to be no considerably much less anti-competitive purchaser for the association or its assets. The OFT would then consider whether, having regard additionally into consideration, the result of the exit of the firm and its property would be a substantially much less anti-competitive consequence than the merger.

Market definition

The cause of market definition is to supply a framework for the authorities’ evaluation of the competitive results of the merger. The Authorities will pick out the market within which the merger can also give upward jab to an SLC (the relevant market). 

The applicable market includes the most sizeable competitive options on hand to the customers of the merger companies and includes the sources of opposition to the merger corporations that are the on the spot determinants of the effects of the merger (ie the Authorities’ intention when figuring out the relevant market is to encompass the most relevant constraints on the behaviour of the merger firms). 

The Authorities will ensure that the relevant market they identify satisfies the hypothetical monopolist test. Market definition is a useful tool, however not a quit in itself, and identifying the relevant market includes a thing of judgment.

The boundaries of the market do now not decide the result of the Authorities’ analysis of the competitive effects of the merger in any mechanistic way. In assessing whether a merger may supply upward thrust to an SLC the Authorities can also take into account constraints outside the applicable market, segmentation within the applicable market, or different ways in which some constraints are extra essential than others.

Measures of concentration

As part of their assessment of the results of a merger on competition, the Authorities may additionally use market shares and measures of concentration, assessed on the relevant market or some other market. Where such measures are regarded for the purpose of applying thresholds, the narrowest market described by using the hypothetical monopolist test must be employed. Concentration can be measured the use of such data as sales revenue, production volume, potential or reserves. 

The measure the Authorities will use will rely on the statistics of the case and the availability of information. For example, when products range in fantastic it might also be appropriate to use sales revenue as the basis. If exceptional suppliers make the same, or similar, products capability may be a substantial determinant of a firm’s aggressive energy and maybe a greater splendid foundation of assessment.

There are countless ways from which concentration can be measured, like for instance, market shares of firms in the market, each in absolute terms and relative to every other, can provide an indication of the plausible extent of a firm’s market power. The blended market shares of the merger firms, when compared with their respective pre-merger market shares, can supply an indication of the change in market electricity ensuing from a merger or ‘number of firms’. 

A straightforward rely of the companies in a market is a primary measure of concentration. The Authorities might also attach greater weight to the number of companies when considering coordinated effects. When assessing unilateral effects from local markets of mergers involving retailers, a matter of the wide variety of different fascias in a local location additionally conveys some records about concentration. 

Also, every other way is HHI. Herfindahl-Hirschman Index (HHI) is a measure of market awareness that takes account of the variations in the sizes of market participants, as well as their number. The HHI is calculated by using adding collectively the squared values of the proportion market shares of all corporations in the market.

The change Merger Assessment Guidelines, Part 5 Page 40 Competition Commission & Office of Fair Trading in the HHI (known as the ‘delta’) can be calculated with the aid of subtracting the market’s pre-merger HHI from its predicted post-merger HHI.64 The absolute stage of the HHI post-merger and the delta springing up from the merger can furnish an indication of the change in market shape ensuing from the merger.

Horizontal mergers

Unilateral effects can occur in a horizontal merger when one company merges with a competitor that until now furnished a competitive constraint, permitting the merged company profitably to raise expenditures on its own and barring wanting to coordinate with its rivals. Unilateral consequences can be horizontal or vertical.

Unilateral effects

Where products are undifferentiated, unilateral outcomes are extra probable where: the market is concentrated; there are few companies in the affected market post-merger; the merger outcomes in a company with a giant market share and there is no strong aggressive fringe of firms. Unilateral outcomes ensuing from the merger are extra probable where the merger eliminates a big aggressive pressure in the market. 

Where merchandise is differentiated, for instance via branding or quality, unilateral outcomes are more in all likelihood the place the merger firms’ products compete closely. To determine whether the merger effects in unilateral effects, the Authorities might also analyze the alternate in the pricing incentives of the merger firms created with the aid of bringing their differentiated merchandise underneath common ownership or control.

Coordinated effects

A merger can also supply upward shove to an SLC through coordinated effects. Coordinated results may additionally occur when corporations running in the equal market realize that they are together interdependent and that they can reach an extra worthwhile result if they coordinate to limit their rivalry. 

Coordination may additionally take distinctive forms. In many instances, it will contain firms retaining expenses higher than they would in any other case have been in an extra competitive market. However, coordination can in precept affect any component of the competition, for example by way of limiting manufacturing or innovation. 

Firms may also coordinate with the aid of dividing up the market between them, for example by geographic area or client characteristics, or by allocating contracts amongst themselves in bidding competitions. However, coordination want no longer involves all components over which firms compete. Coordination can be specific or tacit. Explicit coordination is performed through verbal exchange and agreement between the parties involved. Tacit coordination is carried out via implicit understanding between the parties, however barring any formal arrangement. Both can be germane to an evaluation of the results of a merger.

Non-Horizontal mergers

Non-horizontal mergers convey products collectively that do not themselves compete however may be related. They consist of vertical mergers (including diagonal mergers) and conglomerate mergers. Non-horizontal mergers do no longer involve a direct loss of opposition between corporations in the same market, and it is a well-established principle that most are benign and do no longer elevate competition concerns. Nevertheless, some can weaken competition and can also end result in an SLC. 

Examples of situations in which products are associated so that the authorities may additionally verify whether or not a merger gives rise to an SLC on the basis of non-horizontal outcomes include the place there is a vertical merger between an upstream provider and a downstream patron which purchases the supplier’s goods, either as an enter into its own manufacturing or for resale or diagonal merger between an upstream dealer and a downstream competitor of the clients that buy the supplier’s goods; and Merger Assessment Guidelines, Part 5 Page 50 Competition Commission & Office of Fair Trading or conglomerate merger of two suppliers of goods which do no longer lie inside the identical market, but which are nonetheless associated in some way; for example due to the fact they are enhances (so that a fall in the fee of one true increases the customer’s demand for another); or due to the fact, there are economies of scale in purchasing them (so that clients buy them together). 

Any given merger can have aspects of greater than one of the above. For example, a merger may additionally be characterized as phase vertical and part diagonal in phrases of its consequences on the competition. Non-horizontal mergers can lead to efficiencies, and this may result in the merged company having expanded incentives to compete to take business from rivals. This increased incentive to compete can end result in an amplify in the rivalry.


While mergers can harm competition, they can also supply upward thrust to efficiencies. Efficiencies springing up from the merger may additionally enhance rivalry, with the result that the merger does not supply upward jab to an SLC. For example, a merger of two of the smaller corporations in a market ensuing in effectivity beneficial properties might permit the merged entity to compete extra successfully with the larger firms. The Act also allows efficiencies to be taken into account in the form of applicable consumer benefits. 

These advantages are described in Section 30(1), and are now not limited to efficiencies affecting rivalry. In addition, the statutory definition allows the Authorities to take into account benefits to clients bobbing up in markets other than where the SLC is found, and advantages to future customers. It is not unusual for merger firms to make effectiveness claims. 

To shape a view that the claimed efficiencies will decorate rivalry so that the merger does not end result in an SLC, the OFT must be satisfied, on the groundwork of compelling evidence, and the CC ought to expect, that the following criteria will be met: 

(a) the efficiencies need to be timely, probably and adequate to stop an SLC from arising (having regard to the effect on rivalry that would in any other case end result from the merger), and 

(b) the efficiencies need to be merger specific, ie a direct final result of the merger, judged relative to what would manifest barring it. Efficiency claims can be challenging for the Authorities to confirm due to the fact most of the data regarding efficiencies is held by the merger firms. The Authorities, therefore, encourage the merger corporations to grant evidence to assist any effectivity claims whether as part of the SLC analysis or the consideration of applicable patron benefits.

Barriers to entry and expansion

Any evaluation of a viable SLC consists of consideration of the responses of others (eg rivals, manageable opponents and customers) to the merger. In the longer time period opposition in the market may also be affected as new corporations enter, or the merged firm’s competitors take actions improving their capability to compete against the merged firm. 

Examples include, investment in new capacity, or conversion of current capacity to a new use, entry using new science enabling new manufacturing methods, investments in advertising and product diagram to reposition existing brands so that they compete more with these of the merged firm, sponsorship via clients of a new entrant with guarantees of business; and investment inability with the aid of customers to make their personal input so that they no longer need to purchase from the merged firm. 

All of these movements can mitigate the preliminary impact of the merger on competition, and in some instances can also suggest that there is no SLC. Potential (or actual) competitors may encounter barriers which adversely have an effect on the timeliness, likelihood and sufficiency of their capability to enter (or increase in) the market. 

Barriers to entry are therefore unique points of the market that provide incumbent firms advantages over achievable competitors. Where entry barriers are low, the merged company is greater probably to be constrained via entry; conversely, this is less probable where obstacles are high. The electricity of any given set of limitations to entry or growth will to some extent depend on conditions in the market, such as a growing degree of demand.

Countervailing buyer power

In some circumstances, a character client can also be in a position to use its negotiating strength to limit the ability of a merged association to raise prices. The Merger Assessment Guidelines, Part 5 Page 63 Authorities refer to this as countervailing client power. The existence of countervailing buyer strength will be an element in making an SLC finding less likely, where client electricity may make contributions to an SLC finding. 

If all clients of the merged firm possess countervailing buyer strength post-merger, then an SLC is unlikely to arise. However, often only some—not all—customers of the merged firm possess countervailing customer power. In such cases, the Authorities assess the extent to which the countervailing client electricity of these clients might also be relied upon to defend all customers. Buyer power can be generated by means of special factors. 

An individual customer’s negotiating position will be more suitable if it can without problems swap its demand away from the supplier, or where it can otherwise constrain the behaviour of the supplier. Typically the capability to switch away from a dealer will be improved if there are countless choice suppliers to which the purchaser can credibly switch, or the consumer has the capacity to sponsor new entry or enter the supplier’s market itself by means of vertical integration. 

Where customers have no choice but to take a supplier’s products, they may nevertheless be able to constrain costs through imposing expenses on the supplier. For example, customers may be able to refuse to purchase other products produced by using the supplier, or, in the case of a retailer, the role the supplier’s merchandise in less eye-catching parts of the store.

Even the place the market is characterized by way of clients who are larger than the suppliers, it does now not always comply with that there will be countervailing client power. The Authorities will determine whether or not and to what extent the merger is in all likelihood to decrease the customer’s potential and incentive to pursue credibly any of the strategies set out above.

It is possible, for example, that a merger might also decrease a customer’s ability to switch or even to sponsor new entry and, if this discount adversely impacts the negotiating role of a patron significantly, that customer’s client electricity will now not be enough to be countervailing.


As there is no requirement to notify mergers in the UK to the CMA, there is in a similar fashion no prohibition on companies finishing transactions barring clearance from the CMA. However, the CMA may, before it has reached its decision whether to make a reference, make an order underneath part seventy-two of the Act if splendid to forestall or unwind ‘pre-emptive action’ (a period in-between order). 

Pre-emptive motion is defined in the Act as which means any motion that would possibly prejudice the reference and/or obstruct the taking of any remedial motion that may additionally be required section 72(8) of the Act. In essence, period in-between orders are designed to end the merger events from beginning integration (or stop further integration) whilst the CMA’s investigation and possible remedy implementation is ongoing. 

As properly as searching for to prevent integration, the CMA may also, in extraordinary circumstances, require that existing integration is unwound. All such meantime orders (including consents thereunder) are posted on Interim orders can also be imposed at any time all through the CMA’s review. The CMA’s use of meantime orders is distinctive in expected mergers and accomplished mergers due to the fact the danger of pre-emptive motion in an anticipated merger is usually a lot decrease than in a performed merger.

The CMA’s approach to making preliminary orders

Under section 72 of the Act, an IEO can be made as soon as the CMA has lifelike grounds for suspecting that it is, or may additionally be the case that two or more organizations have ceased to be distinct, or that preparations are in development or in contemplation which, if carried into effect, will result in two or greater corporations ceasing to be distinct. 

There are penalties for failing to comply with an IEO. Where the CMA considers that, except reasonable excuse, an IEO has no longer been complied with, it can also impose a penalty of a fixed quantity it considers appropriate, which shall no longer exceed 5% of the international turnover of the addressee of the IEO.

Remedies: Phase 2 Investigation

Phase 2 treatments are negotiated with, established by, and monitored by using the CMA. two If suitable undertakings can’t be agreed with the parties, the CMA will make an order to treatment the unfavourable findings. All such undertakings and orders are published. 

Broadly speaking, the sorts of remedies which the CMA might reflect on consideration on include the treatments structured to restore or keep all or phase of the pre-merger fame quo such as prohibiting all or phase of an expected merger or reversing a achieved one (in both case, this generally entails divesting one or extra of the merging parties’ organizations to a suitable purchaser, to get rid of the anti-competitive overlaps between the customer and goal and permit the remainder of the merger to proceed, or to unwind an executed anti-competitive merger), treatments intended to expand competition following the merger either from existing or new rivals (such as requiring the merged entity to give get admission to fundamental services or to license intellectual property); and remedies designed to exclude or limit the ability of the merged firm to take advantage of expanded market power bobbing up out of the merger (such as imposing a rate cap or different rate constraint, requiring improved transparency of expenses or obliging the merged enterprise to refrain from habits aimed at inhibiting entry) – these sorts of “behavioural” remedies are not favoured by way of the CMA and are used pretty rarely. 

The CMA has a length of 12 weeks following its Phase 2 selection within which to negotiate and finalize redress with the parties. This may additionally be extended with the aid of up to six weeks if there are “special reasons” for doing so (this is now not a specifically high threshold). The integral framework and goals of the redress will have been protected in the CMA’s final Phase 2 decision, so this later segment deals with the targeted negotiations and drafting of the undertakings which the parties will commit to in order to put in force the remedies. Third birthday celebration consultation will also take vicinity within the identical time frame.

‘Public Interest Cases’, ‘Other Special Cases’ and Mergers in the Water Industry

Public interest cases

The Act presents that (as the default position) the CMA decides whether or not to refer the merger for a Phase 2 investigation, and that the Phase 2 Inquiry Group makes the remaining choice as to whether or not any competition problems occur and whether or not any remedies are required, based basically on whether the merger has precipitated or may additionally reason a vast lessening of opposition (SLC).

However, the Act additionally approves for the Secretary of State to assume responsibility for figuring out whether or not or no longer to refer a merger when described public pastime considerations are probably applicable with the aid of issuing a public activity intervention word (PIIN).

 If the Secretary of State has referred a merger on such public pastime grounds, he or she also takes the remaining selection on whether the merger operates or may be expected to function against the public interest, and on any treatments for recognized public hobby concerns.

Section 42 of the Act, therefore, affords that the Secretary of State can also problem a PIIN in the case of mergers that meet the Act’s jurisdictional thresholds, that have public pastime implications and that the CMA has no longer referred for a Phase 2 investigation. Public hobby issues are presently limited to countrywide protection (including public security) plurality and other concerns relating to newspapers and different media and the balance of the UK financial system.

To facilitate this, the CMA has an obligation below section fifty-seven of the Act to inform the Secretary of State the place it is investigating a merger (at Phase 1) that it believes raises fabric public hobby considerations. However, even where a public pastime consideration is present, if such a PIIN is no longer issued, the CMA will treat the case and make its selection on competition grounds as if it had been any different merger case (and submissions on the public pastime concerns would therefore not be relevant in these circumstances).

Public Interest considerations

Section 58 of the Act details the public hobby concerns on which the Secretary of State can also intervene in a merger case. These are national security, including public security two the want for accurate presentation of news and free expression of opinion in newspapers the need for, to the extent that it is real looking and practicable, an adequate plurality of views in newspapers in every market for newspapers in the UK or a part of the UK the need, in relation to each and every one-of-a-kind target market in the UK or in a precise region or locality of the UK, for there to be an adequate plurality of persons with control of the media businesses serving that target market two the want for the availability at some point of the UK of a vast range of broadcasting which (taken as a whole) is both of excessive best and calculated to enchantment to a huge range of tastes and pastimes the want for persons carrying on media enterprises, and for these with control of such enterprises, to have a proper dedication to the attainment in relation to broadcasting of the objectives of the requirements set out in area 319 of the Communications Act 2003, and two the pastime of retaining the balance of the UK monetary system.

In addition to these distinctive concerns mentioned above, section 42(3) of the Act also allows the Secretary of State to intervene on the foundation of a consideration which is not designated but which the Secretary of State believes ought to be specified. To the extent that the Secretary of State intervenes on the groundwork of a consideration that he or she believes ought to be specified, he or she is required by section 42 of the Act to are seeking to have that consideration consequently inserted into Section 58 via skill of an order authorized with the aid of both Houses of Parliament.

Procedure in public interest cases: Phase 1

If a PIIN is issued, the case is dealt with in the following way: The CMA will put up an invitation to comment searching for 0.33 birthday celebration views on both competition and public activity issues. As properly as normally issuing an invitation for comment, the CMA will actively contact other governmental departments, sectoral regulators, industry associations and purchaser our bodies for their views on public activity problems the place appropriate. 

The CMA will lift out its review of the jurisdictional and competition troubles in the identical way as it would for any different case, with the caveat that its timetable will be adapted in order to allow it to supply its record to the Secretary of State by way of the closing date detailed in the PIIN. Following its very own interior review, the CMA then provides a recommendation to the Secretary of State on jurisdictional and competition issues, which have to be ordinary (section forty-six of the Act). The CMA is also required (other than in media public activity cases) to bypass to the Secretary of State a summary of any representations it has obtained that relate to these public pastime matters. 

The Act approves the CMA to furnish recommendation and recommendations on the public pastime consideration to the Secretary of State; however, given the CMA’s role as an opposition agency, it would not typically be predicted that the CMA would furnish its personal recommendation on public pastime problems at Phase 1.

The CMA will also inform the Secretary of State about the applicability of any of the exceptions to the obligation to refer and as to whether or not it would be excellent to deal with opposition worries by means of way of UILs. The content of such recommendation will without a doubt depend on whether the events have indicated to the CMA that they would be willing to provide UILs. 

The Secretary of State then makes a judgment on the outcome of the case in the mild of the CMA’s advice. Alternatively, the Secretary of State can also decide underneath Section 45(6) of the Act now not to make a reference on the groundwork that an anti-competitive effect in the shape of a CMA discovering of a practical prospect of an SLC is justified with the aid of one or greater public interest considerations. Where the Secretary of State is minded to refer, he or she will also reflect on consideration on whether or not UILs are justified.

If the Secretary of State concludes, after receipt of the CMA’s report, that there are no public activity troubles that are applicable to the PIIN, the CMA will be recommended below section 56 of the Act to deal with the merger as an everyday merger case. In any event, any choice in the case based totally on opposition concerns ought to follow from the CMA’s recommendation on whether or not it is or may also be the case that the merger has resulted or may additionally be anticipated to result in an SLC.

Procedure in public interest cases: Phase 2

If a reference is made on public pastime grounds (with or without competition grounds) the CMA conducts a Phase 2 inquiry and reviews to the Secretary of State. If the CMA considers that the merger operates or may additionally be predicted to function against the public interest, it makes guidelines as to the action the Secretary of State or others should take to remedy any unfavourable effects. 

The Secretary of State will make the final decision on the public interest test and take remedial steps it considers integral to tackle the opposition and public interest issues. The CMA’s Phase 2 procedures for public activity inquiries are similar to those for normal merger references.

The foremost variations are that the CMA affords its report to the Secretary of State and the ultimate choice on public hobby things lies with the Secretary of State. The CMA has to prepare a document and provide it to the Secretary of State inside 24 weeks (subject to a viable eight-week extension) from the date of the reference.

The Act does no longer require the CMA to consult the Secretary of State in the event that it proposes to extend the inquiry. When the Secretary of State has made a selection as to whether or not or now not to refer the case for a Phase 2 investigation, the Secretary of State is required beneath area 107 of the Act to post the CMA’s Phase 1 record (although the CMA will additionally want to make the file handy via

The events will be contacted prior to guide to discuss whether or not the document incorporates personal data that ought to be excised prior to publication. The Secretary of State must additionally put up a non-confidential version of the CMA’s ultimate record in public activity instances no later than the book of his or her decision on the case (that is, within 30 days). The remaining decision on the fabric to be excised from the posted report is made via the Secretary of State. Shortly after the Secretary of State has published the CMA’s final report, it is additionally posted on

‘Special public interest  cases’

Section 59 of the Act additionally permits the Secretary of State to intervene in a very limited wide variety of instances that no longer qualify beneath the Act’s standard merger regime but the place a particular consideration is applicable to the merger. These special merger situations might also occur in defence industry mergers if at least one of the agencies concerned is carried on in the UK by, or beneath the manipulate of, a physique company integrated in the UK and where one or more of the corporations worried is an applicable government contractor. 

In addition, following the Communications Act 2003, a one-of-a-kind merger scenario can also occur where the merger involves a dealer or suppliers of at least 25% of any description of newspapers or broadcasting in the UK. Unlike the trendy jurisdictional test, no increment to this share of supply is required. There will be no competition assessment in such cases.

In instances the place the Secretary of State has issued a different public activity intervention observe (SPIIN), the CMA will put together a report underneath Section 61 of the Act for the Secretary of State advising on whether a unique merger scenario has been created.

 The SPIIN will set out the time period inside which the CMA ought to furnish this file to the Secretary of State. The CMA will also summarise representations that it has obtained referring to to the considerations in the SPIIN. Given that the CMA is not expert in the considerations that would be predicted to be targeted in the SPIIN, it is likely to confine itself at Phase 1 to summarising and commenting on the representations received by means of applicable third birthday celebration experts, such as the Ministry of Defence.

Following a reference on specific public pastime grounds, the CMA would follow comparable strategies to these outlined for everyday mergers challenge to the procedural variations relating to public hobby mergers, even though its evaluation would be restrained to the public activity issues unique in the intervention notice. No merger price is payable in specific public interest cases.

European mergers

Under the EU Merger Regulation, the Commission has jurisdiction over ‘concentrations with an EU dimension’ (as described in Articles 1 and 3 of the EU Merger Regulation). National opposition authorities (NCAs) might also now not observe their personal competition legal guidelines to these mergers, without positive limited circumstances. The starting factor for the allocation of jurisdiction between the Commission and the CMA is that mergers that fall within the jurisdictional provisions of Article 1 of the EU Merger Regulation are no longer challenge to assessment under the Act.

This is because mergers reviewed by the Commission under the EU Merger Regulation benefit from the ‘one-stop-shop’ precept such that countrywide competition filings are now not required in the EU. However, as described further below, the EU Merger Regulation approves for the switch of instances between NCAs and the Commission in a number of ways.

Parties must also be aware that, even in instances where the Commission has and retains jurisdiction, the Commission continually consults the NCAs about mergers, and the EU Merger Regulation affords for NCAs to endorse the Commission in positive circumstances. The equipped UK authorities for the motive of the EU Merger Regulation are the Secretary of State and the CMA. The CMA has charge of the UK in a position of authority function in appreciate of the majority of mergers falling beneath the EU Merger Regulation.

This capacity that it is the CMA that liaises with the Commission on the assessment and dedication of cases over which the Commission has jurisdiction. 

Significantly, it additionally means that the CMA’s functions consist of finding out whether to request the referral of an EU Merger Regulation case from the Commission to the UK in total or in section below Article 9 of the EU Merger Regulation and whether to are seeking to refer a UK merger to the Commission in accordance with Article 22 of the EU Merger Regulation.

Alternatively, the CMA may additionally have to decide whether to consent to any request by means of the events for the referral of an EU Merger Regulation case from the Commission to the UK in total or in phase underneath Article 4(4) of the EU Merger Regulation or to a request that a case falling beneath the Act be transferred to the Commission in accordance with Article 4(5) of the EU Merger Regulation.

Mergers in the water industry

In some circumstances, mergers of water or sewerage undertakings in England and Wales are a concern to mandatory reference for a Phase 2 investigation. At the time of writing, beneath the Water Industry Act 1991 (as amended by area 70 of the Act) the CMA should refer any merger involving two or more ‘water enterprises unless the turnover of one or both of them falls under positive thresholds. two the CMA does no longer reflect on consideration on its Phase 1 IA manner to be suitable for advising on whether or not or now not a structure or transaction triggers the obligatory reference provisions.

However, by way of guidance, in reporting on the outcomes of any merger referred underneath the Water Industry Act 1991, the Phase 2 Inquiry Group should have regard to the variety of water corporations under independent control. This is to prevent prejudice to the capability to make comparisons between specific businesses in carrying out its regulatory functions.

In finding out on remedies, the Phase 2 Inquiry Group will be capable to have regard to their effect on client benefits, but solely were taking account of these benefits would not forestall an answer to the prejudice worried or where the advantages are predicted to be appreciably more necessary than the prejudice.


If the employer which you own or are concerned with has a UK, EU or global turnover which corresponds to the above amounts, you ought to be very aware of the law. You ought to especially be conscious that although notification in the UK is voluntary, it is risky (particularly if the merger potentially raises opposition issues) no longer to notify as the CMA ought to in some cases be extra likely to open an investigation into the merger.

To know more about Mergers & Acquisitions in India, Please Click Here.

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