UK Government’s Flagship Competition Bill Plans Wider UK Merger Scrutiny

It is surprising that the Government has not used the Bill to propose a wholesale reform of the UK merger regime following Brexit. However, the Bill does introduce new key provisions which substantially increase the CMA’s jurisdiction to review mergers.

Under the Bill the key merger control reform is an extension of the CMA’s jurisdiction to catch vertical mergers, including what are termed ‘“killer acquisitions”. Killer acquisitions are those mergers where large companies acquire much smaller or nascent competitors with market changing potential to remove the competitive threat and, in so doing reinforce the acquirers’ leading market position or allow them to leverage their market power in one market into another neighbouring market. This has been a particular trend with “Big Tech” companies in recent years.

The introduction of a vertical merger threshold in the Bill will mean that any acquisition by an acquirer over certain turnover and share of supply thresholds could be subject to CMA scrutiny whether or not they or the target have any overlapping goods or services and regardless of the turnover of the target.

The Bill proposes the following specific reforms to the UK merger control regime: –

–Turnover Threshold Raised: -Under the current Enterprise Act mergers qualifying for investigation by the CMA are those where the target has a UK turnover of £70 million or more (the “turnover test”) or where the merger creates or enhances the supply or acquisition of at least 25% of a particular good or service in the UK (the “share of supply test”). The Bill proposes to increase the turnover test in line with inflation from £70 million to £100 million in order to focus more on the mergers felt to be most likely to cause harm and to ensure the regime remains proportionate. The share of supply test remains unchanged.

–New Vertical Mergers Jurisdictional Thresholds: -The proposals create an additional set of thresholds to allow the CMA to scrutinise so-called ‘“killer acquisitions” and other mergers which do not involve direct competitors (“vertical mergers”). Jurisdiction would be established where at least one of the merging businesses has: (a) an existing share of supply of goods or services of 33% in the UK or a substantial part of the UK and (b) a UK turnover of £350m or more.

–Small Merger Safe Harbour: -The Bill introduces a small merger safe harbour, exempting mergers from CMA review where each party’s UK turnover is less than £10 million, to reduce the burden on small and micro enterprises.

–More Effective Procedures: -Schedule 5 of the Bill introduces a procedure whereby parties can request during the Phase I investigation (or before it has begun) to fast track a merger proposal (which the parties agree does present potential competition issues) to a Phase II investigation, thereby enhancing and streamlining the merger process. Powers are also going to be introduced to ensure parties may give commitments to the CMA at any time during the Phase II investigation process.

If you would like more information on these developments or other matters covered by the Bill, please contact Robert Bell, Nick Alfillé, Edward Baker or your usual Memery Crystal contact.