2017 Merger Control Survey: UK
IFLR is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX
Copyright © Legal Benchmarking Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

2017 Merger Control Survey: UK

Sponsored by


André Pretorius and Suzy Campbell, Herbert Smith Freehills


1.1 What is the applicable legislation and who enforces it?

The Enterprise Act 2002 (in particular Part 3), as amended by the Enterprise and Regulatory Reform Act 2013, is the primary legislation governing merger control in the UK. The Competition and Markets Authority (CMA) enforces the law on merger control.


2.1 What types of mergers and joint ventures (JVs) are caught?


Any transaction in which two or more enterprises are brought under common ownership or control and therefore cease to be distinct will be caught by the UK merger control regime provided that the relevant thresholds are met (see 2.2 below). Mergers, acquisitions of shares or assets (in whole or in part) and joint ventures may all be caught. The regime applies both to mergers that have already taken place (subject to time limits) and to mergers that are proposed or in contemplation.

In respect of common control, the level of control required may be material influence, de facto control or legal control. Material influence is presumed where a party acquires a share of voting rights in a target company of over 25%, but can arise at shareholdings below this level. Board representation or other agreements that influence policy are also relevant factors. The merger control regime also catches transactions where an entity increases its level of control in an enterprise (for example from material influence to de facto control).

2.2 What are the thresholds for notification, how clear are they, and are there circumstances in which the authorities may investigate a merger falling outside such thresholds?


There are two alternative thresholds. The UK merger control regime will apply either: where the annual UK turnover of the target company exceeded £70 million in its previous financial year; or if the transaction creates or enhances a 25% share of supply or purchases of goods or services of a particular description in the UK or a substantial part of it (known as the share of supply test). The CMA does not need to consider the share of supply test by reference to a relevant economic markets; it can assert jurisdiction where there is any credible category of goods or services in which the transaction would lead to or enhance a 25% share in the UK.

The Secretary of State may intervene in special public interest cases even where the above thresholds are not met. Such cases are limited and include mergers involving government contractors, newspaper suppliers and broadcasters.

There is a separate regime for water mergers, which are governed by the Water Industry Act 1991 (as amended) and may be subject to mandatory reference to the CMA.

2.3 Are there circumstances in which a foreign-to-foreign merger may require notification, and is a local effect required to give the authority jurisdiction?


There is no difference in the treatment of foreign-to-foreign mergers and domestic mergers where the relevant thresholds are met.


3.1 Is filing mandatory or voluntary and must closing be suspended pending clearance? Are there any sanctions for non-compliance, and are these applied in practice?


The UK merger control regime is voluntary. Consequently, there is no obligation to notify mergers in the UK, although in practice a large number of transactions are notified in the interests of legal certainty.

The CMA may investigate non-notified mergers that fall under its jurisdiction on its own initiative, including completed mergers, and make a phase 2 reference up to four months after completion of the transaction has been made sufficiently public. The CMA has dedicated mergers intelligence staff responsible for monitoring non-notified merger activity and liaising with other competition authorities and it can therefore pick up on mergers of its own accord. Third parties (competitors or customers) may also complain to the CMA about specific mergers where they are affected.

There is no general obligation that closing must be suspended pending clearance. However, the CMA has a discretionary power to impose hold-separate undertakings (suspending – and potentially reversing – integration of merging businesses pending clearance) in relation to anticipated as well as completed mergers. This power is backed up by the threat of fines (up to five percent of worldwide turnover) for breach of such undertakings.

3.2 Who is responsible for filing and what, if any, filing fee applies?


In the case of an acquisition, the acquirer typically makes the filing, but this can be done jointly. Any merger that qualifies as a relevant merger situation and in which the CMA reaches a decision on whether or not to refer the merger for a phase 2 investigation is subject to a merger fee. Fees are charged on a sliding scale between £40,000 and £160,000 depending on the size of the transaction. Small and medium sized enterprises as defined under the Companies Act 2006 are exempt from fees. The fee becomes payable on publication by the CMA of a reference decision or any decision not to make a reference.

3.3 What are the filing requirements and how onerous are these?


Notification should be made by means of the statutory Merger Notice. The Notice requires a full description of the transaction and proposed timetable, information relating to the main products and services supplied by the merging enterprises and estimates of market shares in any UK market. Information on horizontal overlaps, vertical links, barriers to entry, buyer power and customer benefits is also required.

The time needed to complete a merger notice depends on the complexity of the case and the ability of the parties to collate the relevant information promptly.

3.4 Are pre-notification contacts available, encouraged or required? How long does this process take and what steps does it involve?


The CMA strongly encourages parties to contact it to engage in pre-notification discussions, on the basis of a draft notification submitted by the parties, in order to clarify the information and evidence the CMA will require to enable it to formally start its investigation. Parties should allow at least 20 working days (it often takes a lot longer) for pre-notification before the formal review can commence.


4.1 What is the standard timetable for clearance and is there a fast-track process? Can the authority extend or delay this process?


In phase 1, the CMA has a statutory period of 40 working days to reach a decision and decide whether to make a phase 2 reference (which entails a more in-depth review). This period starts running on the first working day after the CMA confirms that the Merger Notice is complete or, where no notification is made, on the first working day after the CMA confirms that it has received sufficient information to start its investigation. The CMA has the ability to stop the clock during the 40 working days if the parties do not provide the information it has requested.

If the CMA believes the test for reference for a phase 2 review is satisfied, the parties at that point have five working days to offer undertakings in lieu of a reference (UILs). The CMA has up to the tenth working day from the announcement of its phase 1 decision to consider the UILs proposed by the parties and to decide whether to pursue UILs and suspend its duty to refer. The CMA has 50 working days from the day of announcement of the phase 1 decision to agree the UILs. This period can be extended once by up to 40 working days if there are special reasons (such as a requirement for an upfront buyer).

In phase 2, CMA has a maximum of 24 weeks to complete its investigation and make its decision on remedies. This period may be extended once by up to eight weeks if the CMA considers there are special reasons why the statutory deadline cannot be met. Phase 2 remedies must be agreed within 12 weeks from publication of the CMA's final report. This period can be extended by six weeks for special reasons.

There is no formal fast-track clearance process but in complex cases where there is sufficient evidence that the phase 2 reference test is met at an early stage in the investigation, the parties may request the CMA skip its usual phase 1 review and begin its review at phase 2.

4.2 What is the substantive test for clearance, and to what extent does the authority consider efficiencies arguments or non-competition factors such as industrial policy or the public interest in reaching its decisions?


The CMA must make a phase 2 reference if it believes that there is a realistic prospect that a transaction has resulted in a substantial lessening of competition (SLC) or may be expected to do so. The term SLC is not defined in the Enterprise Act but the CMA will consider whether the merger is expected to weaken rivalry to such an extent that customers would be harmed as a result. For the CMA to reach an adverse decision following a phase 2 reference, either the merger must have resulted in an SLC or the CMA must expect such a result on the balance of probabilities.

In both phase 1 and phase 2, the CMA will consider a variety of different factors, including the parties' market shares, market concentration, the likely effect of the merger on entry and exit from the relevant market and countervailing buyer power. It will assess unilateral effects, co-ordinated effects and/or vertical or conglomerate effects of the merger, as applicable.

The impact of a merger on the public interest may be considered in certain key sectors (for example national security, media plurality, stability of financial systems in the UK), and the CMA's processes are set up to deal with these issues.

The CMA considers efficiency arguments but it is rare for the CMA to conclude that merger efficiencies and concomitant consumer benefits outweigh the detriment to competition. Failing firm arguments can also be accepted by the CMA, although in practice it can be difficult for the parties to meet the high evidential threshold

4.3 Are remedies available to alleviate competition concerns? Please comment on the authority's approach to acceptance and implementation of remedies.


At phase 1, merging parties may offer UILs to prevent a reference to phase 2. If, following a phase 2 reference, the CMA concludes that a merger has resulted or may be expected to result in an SLC, the CMA is required to decide whether action should be taken to remedy, mitigate or prevent the SLC or any adverse effect resulting from the SLC. Remedies may be structural in nature (for example prohibition of the transaction, divestiture of part or the whole of the acquired business) or behavioural.


5.1 Please describe the parties' ability to appeal merger control decisions – how successful have such challenges been?


The merging parties, as well as interested third parties, can appeal the CMA's decision to the Competition Appeal Tribunal (CAT) within four weeks of notification of the decision. The standard of appeal is of judicial review – it is not a full merits review – but appeals have been successful. The judgment of the CAT may be appealed to the Court of Appeal on points of law only.


6.1 Outline any merger control regulatory trends in your jurisdiction.

The CMA has been in place as the single body responsible for merger control in the UK for over two years. In the past year, there has been an up-turn in the number of mergers referred to phase 2 and increased use of the new UILs mechanism to resolve cases at phase 1. The CMA has also been undertaking a project to review previous merger remedies and remove those that it considers no longer need to remain in force.

Looking ahead, the CMA is reviewing its merger notification form and its initial enforcement order template (which forms the basis for hold separate obligations during the process) to see if they can be simplified to streamline the process.

Following the UK's referendum decision in June 2016 to leave the EU, some uncertainty exists over the future scope of UK merger control. However, it is expected that there may be more UK mergers notified to the CMA since some transactions that are filed in the EU may also now be notified in parallel in the UK (with potentially divergent decisions). Government comments have also indicated that additional controls over foreign investment may be considered in future.

About the author



André Pretorius

Partner, Herbert Smith Freehills

London, UK

T: +44 20 7466 2738

E: andre.pretorius@hsf.com

W: www.herbertsmithfreehills.com

André Pretorius is a competition and regulatory lawyer in Herbert Smith Freehills' London office, where he practises UK and EU competition law. He advises clients on the full range of competition work including transactional, investigations and disputes. He has extensive experience as a transactional lawyer, both on high profile transactions and on complex matters that have not reached the public domain, and he wins standalone transactional work in his own right from a number of corporates.

Pretorius helps clients manage competition law risks and engage with (and sometimes challenge) regulators in a wide range of sectors. In recent years he has built up significant expertise in financial services, the consumer goods sector and the innovative economy. He also helps clients in the regulated sectors, including telecommunications and post. Internationally, Pretorius' adaptability has seen him work effectively with clients in relation to India, South Africa and other developing jurisdictions.

About the author



Suzy Campbell

Senior associate, Herbert Smith Freehills

London, UK

T: +44 20 7466 2835

E: suzy.campbell@hsf.com

W: www.herbertsmithfreehills.com

Suzy Campbell is a senior associate in Herbert Smith Freehills' London office. Her area of expertise covers the ambit of EU and UK competition law, including advising on competition issues affecting mergers and commercial agreements, and advising on anti-competitive practices and abuses of dominant position. Campbell has also spent some time on secondment to the Herbert Smith Freehills' Hong Kong office advising clients across the Asia-Pacific region on competition law issues.

Gift this article