UK Merger Control to be ‘rebalanced’

The UK Government has recently introduced plans to reform (or ‘rebalance’) the UK’s merger control system. 

Some transactions that are currently caught will fall outside the new regime:

• the turnover threshold will be increased from £70m to £100m UK turnover; and
• there will be a ‘safe harbour’ for small mergers where each party’s UK turnover is less than £10m.

But there will be an additional ‘killer acquisitions’ focused basis for establishing jurisdiction where at least one of the parties has:

• an existing share of supply of goods or services of 33% in the UK or a substantial part of the UK; and
• UK turnover of £350m.

As ever, there has been continuing debate about the ‘share of supply’ test, under which transactions are caught by UK merger control where they lead to the creation or enhancement of a share of supply of 25% or more (where they fall outside the safe harbour for small mergers).  The concern with this test has always been that it is not economic market related, but instead it can relate to any description of goods or services that the CMA may identify.  This makes its application in practice unpredictable for merging parties and gives the CMA a wide discretion.  However, there was also a lack of consistency of views amongst the respondents to the Government’s consultation on this.  So, for the moment, the share of supply test remains, but subject to future review.

Other changes to the details of ‘fast track’ processes (which skip Phase I and go direct to Phase II), and when the CMA may accept commitments are proposed.

In addition, the CMA’s powers of investigation are to be enhanced with greater fines on companies and also individuals for any failures to comply with information requests or providing false or misleading information. 

Rules on information sharing will be updated to permit more effective and flexible information sharing by the CMA with overseas authorities, and the CMA will be able to use compulsory information gathering powers to obtain information on their behalf.

When all of the above may happen though is uncertain as it will require Parliamentary time.  The recent Queen’s Speech, where Government sets out its legislative plans for the year only talked about only a Draft Digital Markets, Competition and Consumer Bill, so it may be that these reforms have to wait for 2023 or beyond to actually be implemented.

If you would like to discuss any of these matters, please do not hesitate to get in touch.

"Now that we have left the EU, we have an opportunity to implement regulations that work better for the UK. We are moving in a more agile way than the EU, whilst maintaining high standards. We can forge our own path to deliver growth, innovation, and competition while minimising burdens on business."

https://www.gov.uk/government/speeches/queens-speech-2022