When setting up and operating a joint venture (JV) in the UK, companies should consider if the UK's merger control rules apply.
In this article we set out the criteria for when theUK's merger control rules apply, as well as considering some other regimes (such as the EU) that could also apply.
UK Merger Control
The UK operates a voluntary system of merger control, although the Competition and Markets Authority (CMA) has jurisdiction to review a merger if one or more of the threshold tests apply.
Creating a JV in the UK may trigger UK merger control rules if certain criteria are met. These criteria are as follows:
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there must be two or more enterprises that cease to be distinct or there are arrangements in place which, if executed, would lead to two or more enterprises ceasing to be distinct; and
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either the turnover test or the share of supply test must be met.
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The turnover test is satisfied where the enterprise being acquired generates a UK turnover that exceeds £100 million, with the introduction of the Digital Markets, Competition and Consumers Act 2024 (the DMCC).
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The share of supply test can be satisfied when the enterprises supply or acquire goods or services and the JV creates an enlarged business supplying or purchasing 25% or more of those goods in the UK. The CMA has considerable discretion on defining 'the market' for determining this test.
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How the tests are applied depends on the nature of the JV being considered. For instance, 'greenfield' joint ventures, where no existing business activity is being contributed, do not come within scope of the tests because there is no turnover or existing share of supply. On the other hand, where two parent companies each contribute existing business activities into a new JV arrangement, the turnover (and shares of supply) of both business units being contributed must be considered.
A new safe harbour for 'small mergers' has been introduced by the DMCC. Where each party's turnover is less than £10 million, they will be exempt from review by the CMA.
The DMCC introduces a 'no increment' test, which means that the CMA will be able to review transactions where one of the parties has (a) at least a 33% share of supplies/goods in the UK and (b) a total UK turnover of £350 million, and one of the other parties has a connection to the UK (i.e. is a UK company or carries out business in the UK).
Furthermore, the DMCC creates a mandatory reporting requirement for firms with Strategic Market Status (SMS) where they enter into a JV with a UK connected body corporate and where it will take control of 15% of shares or voting rights, considered to be qualifying status, and the value of the total consideration to the JV is at least £25 million.
To be designated by the CMA as having SMS, the CMA must undertake a formal investigation. For the CMA to open an investigation into the SMS status of an organisation, the organisation must have:
- UK turnover of more than £1 billion or global turnover of more than £25 billion;
- substantial and entrenched market power in relation to the digital activity; and
- a position of strategic significance.
The new thresholds and test introduced by the DMCC were phased in on 1 January 2025, with the unfair commercial practices regime and key consumer law enforcement provisions taking effect on 6 April 2025. Further provisions introduced by the Act are expected in early 2026.
Other merger control regimes
Even if a JV is being formed in the UK, it is still important to remember that other merger control regime jurisdiction tests could apply (including regimes where filing is mandatory) – particularly where the jurisdictional tests take account of parent company turnover of both the target and the acquirer.
For instance, EU merger control clearance could still be required where two or more businesses with significant EU turnover establish a 'full function' JV. Further, a need to file in the EU could occur where a previously non-full function JV later becomes full function.
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.
