UK: When Is A Merger Not A Merger? Recent Jurisdictional Developments In UK Merger Control

Summary and implications

In December 2013 the UK Competition Appeal Tribunal (CAT) released its ruling on the applications by Groupe Eurotunnel S.A. (Eurotunnel) and Société Coopérative de Production SeaFrance S.A. (SCOP) for review of the UK Competition Commission's (CC) report on the acquisition by Eurotunnel of certain assets from the collapsed SeaFrance S.A. business.

This case provides some welcome clarity on the line between a transaction that comprises a merger, and a transaction that comprises simply the acquisition of assets. This briefing considers the case, together with other recent cases that shed light on exactly when UK merger control applies to a transaction – both in terms of whether a business is being transferred and in terms of whether sufficient control is being acquired over it.

Early consideration of these issues is advisable as this will contribute to the decision whether or not to notify, especially given newly-enhanced regulatory powers to suspend or unwind deal implementation steps.

a) The legal tests for UK merger control jurisdiction

The Office of Fair Trading (OFT) has jurisdiction to review a transaction under the Enterprise Act 2002 (the Act) where:

a) "two or more enterprises have ceased to be distinct"; and

b) the applicable market share or turnover thresholds are met.

This briefing is concerned exclusively with the first of these tests. In turn this breaks down into two issues – first, whether what has been transferred is indeed an "enterprise" as opposed to a collection of assets; and second, whether a sufficient level of control has been acquired, or increased, to count as "ceasing to be distinct".

The enterprise issue is considered under section (b) below and the control issue is considered under section (c) below. Both topics have been the subject of recent case law.

b) An enterprise

The first consideration under the UK's merger control jurisdiction test is whether there is the transfer of an "enterprise". The Eurotunnel case provides one of the most comprehensive judicial analyses of the concept to date.

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