UK: UK Office Of Fair Trading Finalises New ´Jurisdictional And Procedural Guidance´ For Mergers

On 30 June 2009, the UK antitrust authority, the Office of Fair Trading (OFT), published its 'Jurisdictional and procedural guidance' for mergers (Guidance). This consolidates, updates, and expands on previous OFT guidance and practice and is therefore essential reading for those involved in a transaction affecting the UK.

Consolidation and update

The Guidance consolidates, updates and supersedes these prior statements: Procedural guidance (May 2003); Jurisdictional guidance (previously in chapter 2 of the OFT's 'Substantive assessment guidance of May 2003); Guidance note on the calculation of turnover (July 2003); and Guidance on interim arrangements for informal advice and pre-notification contacts (April 2006 and October 2007).

Issues of interest

The Guidance is helpful in various respects, including the following (as further detailed below):

  • Material influence: The Guidance reflects recent case law, which confirms that the acquisition of a shareholding of less than 25% may give rise to material influence and therefore OFT jurisdiction to review a merger.
  • Informal advice: The Guidance formally reintroduces the possibility for parties to seek confidential and non-binding informal advice on the likelihood that the OFT will refer a merger for in-depth review to the UK's higher competition authority, the Competition Commission (CC).
  • Initial undertakings: The Guidance confirms that the OFT need only satisfy a low threshold when deciding whether to seek initial undertakings, which is consistent with its increasing reliance upon such undertakings to prevent further integration in completed merger situations.
  • Remedies and 'near-miss' offers: Merging parties typically only have one opportunity to offer undertakings in lieu of reference to the Competition Commission (and therefore to avoid an in-depth review), and cannot enter into negotiations with the OFT. However, the Guidance states that in exceptional 'near-miss' circumstances the OFT will allow the parties an opportunity to revise their initial offer.
  • Fast-track references to the Competition Commission: The Guidance introduces a 10 working day fast-track Competition Commission reference procedure for mergers that clearly give rise to competition concerns and for which remedies are not suitable.

The Guidance

(i) Material influence. In the UK, three levels of control may give rise to OFT jurisdiction to review a merger: 'controlling interest', 'de facto control', and 'material influence'. Material influence, or "the ability materially to influence the [commercial] policy of the target", is the lowest level of control. A 25% shareholding will give rise to a presumption of material influence, since 25% will usually suffice to block a special resolution. This assessment will be made on a case-by-case basis, and the Guidance confirms that the acquisition of a shareholding of less than 25% may also trigger material influence, as in BSkyB's failed attempt to acquire a 17.9% stake in ITV.

The Guidance does not change the law on material influence, but rather gives a more detailed explanation of the relevant factors to consider when making this assessment, including the level of shareholding, voting patterns, board representation and financial controls. It is important to bear in mind that even the acquisition a small minority shareholding may enable the OFT to carry out a merger inquiry.

(ii) Informal advice. Informal advice, by which the OFT indicates the likelihood of referring a merger to the CC for in-depth review, was a legacy of the pre-2003 merger regime. However, with the OFT's enhanced role under the new Enterprise Act regime, providing informal advice in the traditional manner was no longer considered appropriate. In particular, merging parties had a propensity to seek informal advice even for unproblematic mergers, and the OFT had difficulty in providing greater insight at the informal advice stage than could be provided by legal advisers with full knowledge of the facts. Therefore, in 2005 the OFT suspended the provision of informal advice except in exceptional circumstances.

The OFT nevertheless acknowledged the benefits of informal advice, and in 2006 and 2007 it issued interim guidance on when it may be appropriate. The Guidance formalises these principles, namely that merging parties may seek confidential and non-binding informal advice on the likelihood that the OFT will refer a merger to the CC when: there is a good faith intention to proceed with the merger; and the merger raises genuine competition concerns (which may include the question of whether the failing firm defence would apply).

The OFT may also address the question of jurisdiction through informal advice, but only where the merger also raises genuine competition concerns, and it may indicate the suitability of remedies. The informal advice process, which should take no longer than 10 working days, is therefore valuable where there are potential competition concerns, and where an insight into the OFT's likely reaction will inform the parties' notification strategy.

(iii) Initial undertakings. The UK merger regime is voluntary, and therefore merging parties are not obliged to notify a merger to the OFT nor suspend completion pending receipt of an OFT clearance decision. Although merging parties may complete a transaction, the OFT has the power and duty to refer a merger to the Competition Commission that may substantially lessen competition, even if completion has already taken place. And the Commission has the ability to prohibit and unwind a merger, even after completion.

To safeguard against prejudicing a reference to the Commission and any potential remedial action by it, the OFT has the power to prevent post-completion integration of merging businesses. The OFT exercises this power by requesting initial undertakings from the merging parties to suspend integration, otherwise known as 'hold-separate undertakings', or by issuing an order to that effect, if the parties are unwilling to give an undertaking.

Recently, the OFT has shown a far greater tendency to request hold-separate undertakings in respect of completed mergers, and will do so almost as soon as it becomes aware of the merger. According to the Guidance, the OFT may request hold-separate undertakings where: it suspects that a completed merger may raise competition concerns; and undertakings are appropriate to prevent integration.

Significantly, the Guidance states that the threshold for satisfying these conditions is low, since the OFT is ill-placed to judge the severity of competition concerns at such an early stage of its investigation, and lengthy consideration would prevent a speedy resolution of the case. Therefore, if merging parties decide to complete a merger – before or without notifying the OFT – that may give rise to competition concerns, hold-separate undertakings are a distinct likelihood in any subsequent OFT inquiry.

(iv) Remedies and 'near-miss' offers. If the OFT concludes that a merger may substantially lessen competition, it is under a duty to refer the merger to the Competition Commission for in-depth review. Unlike the Commission, the OFT does not have the power to impose remedies on merging parties, however, it may accept binding undertakings as an alternative to making a Commission reference (so called 'undertakings in lieu'), if those undertakings are sufficient to remedy its competition concerns.

If the merging parties intend to offer undertakings in lieu, they must do so before the OFT's internal 'Case Review Meeting', and ideally at or immediately after the preceding 'Issues Meeting'. The parties only get one chance to offer appropriate and sufficient undertakings to avoid a Commission reference, since although the OFT will identify the areas of concern, for procedural reasons it will not enter into remedy negotiations.

However, in recognising the cost and efficiency benefits of the undertakings in lieu process, the OFT will be slow to reject undertakings in lieu that fall just short of remedying the OFT's concerns. According to the Guidance, in such 'near-miss' cases, it will exceptionally afford the merging parties a narrow "second window of opportunity" (normally one working day) to consider revising their initial offer of undertakings, although only if the parties' initial offer was clearly in "good faith and credible". Behavioural remedies are unlikely to be suitable candidates, and the OFT is unlikely to give merging parties a second chance if it previously identified the competition concern and the parties simply declined to offer a suitable undertaking. Therefore, it is in the interests of merging parties to submit their best offer at or immediately after the Issues Meeting, because they may not get a second chance to avoid a reference decision.

(v) Fast-track references to the Competition Commission. Upon receipt of a merger notification, the OFT typically has 40 working days to decide on whether to refer the merger to the Commission for in-depth review. In response to popular demand, the Guidance introduced a fast-track reference procedure whereby mergers that clearly satisfy the Commission reference test may be referred within 10 working days of notification.

This procedure will only be available to so-called 'binary cases', in which the potential competition concerns impact on the whole, or substantially all of the merger. Such cases are unsuited to undertakings in lieu, since any remedy considered sufficient by the OFT would likely eliminate the entire rationale for the merger. Therefore, in such cases the offer of undertakings in lieu is extremely unlikely. Similarly, the OFT can dispense with the Issues Meeting and the Case Review Meeting, since the parties will agree that the reference test is met. This enables the OFT to significantly reduce the amount of time required to reach a decision. Nevertheless, suitable pre-notification discussions and consultation by the OFT with third parties will still be required.


The above summary of parts of the Guidance illustrates its importance for parties and counsel involved in any merger transaction that may fall within the OFT's jurisdiction. Not only does the Guidance consolidate and update previous OFT positions, it also provides more detailed and practical insight to how the OFT will handle matters: essential reading for internal and external counsel.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.