The Court of Appeal has upheld an appeal brought by SCOP against the decision of the Competition and Market Authority (CMA) on jurisdiction in the Eurotunnel/SeaFrance merger. SCOP, a body of mainly former SeaFrance employees, challenged the CMA's finding that it had jurisdiction to review the acquisition of certain assets of SeaFrance by Eurotunnel. The CMA's review of the acquisition, founded on its decision on jurisdiction, had led to a prohibition decision.
The Enterprise Act 2002 provides that the CMA only has jurisdiction to review a relevant merger situation, if one business acquires, 'the activities, or part of the activities, of [another] business' (constituting an enterprise). The CMA had concluded that Eurotunnel had acquired the activities of Sea France with particular importance given to the fact that former SeaFrance employees had been transferred. This decision was upheld on appeal to the Competition Appeal Tribunal (CAT).
However, the majority of the Court of Appeal found this decision and the reasoning of the CMA (and CAT) to be materially flawed and irrational. The CMA had failed to give proper consideration to the fact that employees were not transferred from SeaFrance to Eurotunnel but had in fact been re-employed by the SCOP after their employment with SeaFrance had been terminated. The fact that the business had also been in 'hiatus' for seven months was another factor which pointed against Eurotunnel having taken over SeaFrance's activities.
Appeals in merger cases are carried out to 'judicial review' standards. Some margin of discretion - particularly around the analysis of detailed facts - is normally awarded to specialist bodies such as the CMA (and CAT). However, this case demonstrates that the Court of Appeal was willing to get into the factual details to reach its decision. The case also represents yet another defeat for the CMA in the courts.
This saga is still not at an end as the CMA is seeking to appeal the Court of Appeal's decision to the Supreme Court.