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Results: 4 Answers
Merger Control
4.
Review process
4.1
What is the review process and what is the timetable for that process?
 
UK
The Competition and Markets Authority (CMA) has a two-stage review process, divided into Phase 1 and Phase 2 investigations.

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

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

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

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

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

For more information about this answer please contact: Neil Baylis from Mishcon de Reya
4.2
Are there any formal or informal ways of accelerating the timetable for review? Can the authority suspend the timetable for review?
 
UK
There are no formal ways of accelerating the timetable for review. However, the timetable set out by the CMA establishes the maximum time periods that each phase may take; the CMA is entitled to take less than the maximum amount of time allowed for any given stage.

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

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

For more information about this answer please contact: Neil Baylis from Mishcon de Reya
4.3
Is there a simplified review process? If so, in what circumstances will it apply?
 
UK
There is no simplified review process. Where a transaction genuinely raises no issues, the parties may legitimately decide not to notify the CMA in the knowledge that there is no meaningful risk that the CMA will seek to unwind the merger at a later date.

For more information about this answer please contact: Neil Baylis from Mishcon de Reya
4.4
To what extent will the authority cooperate with its counterparts in other jurisdictions during the review process?
 
UK
The CMA seeks to cooperate with competition authorities in other jurisdictions wherever it is appropriate and possible for it to so.

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

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

For more information about this answer please contact: Neil Baylis from Mishcon de Reya
4.5
What information-gathering powers does the authority have during the review process?
 
UK
Where a merger notice has been accepted by the CMA, the CMA is nevertheless entitled to request further data, information or documents from the parties in order to reach a conclusion in its Phase 1 investigations. Given the short timeframe within which a Phase 1 investigation is to be completed, responses to these requests are often required within a very short timeframe.

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

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

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

  • questionnaires;
  • data requests;
  • Section 109 notices;
  • requests for submissions;
  • third-party hearings;
  • open and/or joint hearings;
  • surveys;
  • consultants; and
  • site visits.
For more information about this answer please contact: Neil Baylis from Mishcon de Reya
4.6
Is there an opportunity for third parties to participate in the review process?
 
UK
Third parties are entitled to lodge complaints in relation to non-notified mergers with the CMA either prior to or after completion of the merger. The CMA is not, however, obliged to act on these complaints and will consider them in the context of all available information before deciding whether and how to respond to them.

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

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

For more information about this answer please contact: Neil Baylis from Mishcon de Reya
4.7
In cross-border transactions, is a local carve-out possible to avoid delaying closing while the review is ongoing?
 
UK
In principle, this is possible, so long as the terms of any hold separate order are not infringed.

For more information about this answer please contact: Neil Baylis from Mishcon de Reya
4.8
What substantive test will the authority apply in reviewing the transaction? Does this test vary depending on sector?
 
UK
Under both Section 22(1) of the Enterprise Act 2002 (in respect of completed mergers) and Section 33(1) of the Enterprise Act 2002 (in respect of anticipated mergers), the test that the CMA will apply is whether:

  • a relevant merger situation has or will be created; and
  • if so, whether that has resulted or may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
For more information about this answer please contact: Neil Baylis from Mishcon de Reya
4.9
Does a different substantive test apply to joint ventures?
 
UK
No.

For more information about this answer please contact: Neil Baylis from Mishcon de Reya
4.10
What theories of harm will the authority consider when reviewing the transaction? Will the authority consider any non-competition related issues (eg, labour or social issues)?
 
UK
The CMA will formulate theories of harm in relation to any merger which is referred to a Phase 2 investigation. In doing so, the CMA is entitled to consider multiple theories of harm in relation to the same merger if it considers this appropriate.

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

  • Loss of existing competition – the purchase of a current participant in a market by one of its current competitors may result in a reduction in competition in that market;
  • Loss of potential competition – the purchase of a potential participant in a market by a current participant in that market may result in increased competition in that market being prevented;
  • Increased buyer power – this will be anti-competitive in relatively limited circumstances, such as where it allows the merged entity to force its suppliers to reduce prices due to its dominance as a buyer in a particular market;
  • Increased coordination – for example, increased likelihood of price fixing, agreements not to compete in the market for certain goods/customers and/or agreements not to compete in certain geographical markets;
  • Vertical mergers – that is, the purchase of an upstream supplier by a downstream customer (or vice versa), enabling:
    • the increase of input costs for competitors of the downstream customer;
    • input foreclosure (ie, preventing access to the upstream input producer by competitors); and/or
    • customer foreclosure (ie, the downstream customer increasing prices when selling products produced by the upstream supplier's rivals, or even refusing to sell them at all);
  • Conglomerate mergers – that is, mergers which enable a group that produces multiple products to price those products so as to drive clients to purchase packages of products rather than individual products;
  • Diagonal mergers – that is, mergers between an upstream supplier and a downstream competitor of the purchasers of that supplier’s goods; and
  • Access to commercially sensitive information, allowing the purchaser to obtain a competitive advantage.

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

For more information about this answer please contact: Neil Baylis from Mishcon de Reya