In brief:
- The CMA is consulting on proposed changes to its merger guidance and merger notification template, alongside considering responses to a recent call for evidence on proposed changes to its approach to merger remedies. We are also expecting further legislative change in the near future regarding the thresholds for merger review in the UK.
- The CMA's proposals are intended to achieve more efficient and streamlined decision-making, provide businesses with greater predictability by clarifying when mergers might trigger the jurisdictional thresholds for review, and improve engagement between the parties and the CMA throughout investigations.
- With respect to merger remedies, the CMA appears to be moving towards a more flexible approach which is less resistant to behavioural remedies, which will be welcome news to many.
- If you have any questions about how these proposed changes might impact your business' plans, we encourage you to get in touch with our team.
In recent years, the Competition and Markets Authority ("CMA") has faced criticism regarding its jurisdictional reach over mergers, the unpredictability and demanding nature of the investigation process, and perceive inflexible approach to remedies. In line with the government's strategic steer published earlier this year, the CMA's recent proposed changes to its merger guidance on jurisdiction and procedure ("Merger Guidance") and to the merger notification template ("Merger Notice") are a notable effort to address these criticisms and to set the scene for a more business-friendly approach to merger control in the UK. That said, if adopted, businesses should be alive to the potential implications of these proposed changes when considering transactions with a UK nexus, particularly where jurisdiction may be an area of contention.
The CMA's new "4Ps" - positive or problematic?
The proposed changes to the Merger Guidance are designed to reflect the CMA's new "4Ps" - pace, predictability, proportionality, and process - framework explained in the Mergers Charter. This "4Ps" framework is intended to support and encourage confidence in the UK's competition and consumer protection regimes as well broader economic growth, reflecting the direction and ambitions of the strategic steer. In the Consultation Document, the CMA explains that the proposed changes to the Merger Guidance will therefore help the CMA to:
- reach robust phase 1 decisions at pace by achieving more streamlined decision-making and determining straight-forward clearances well ahead of the statutory deadline;
- provide businesses with greater predictability regarding the CMA's approach to jurisdiction, including by: (i) clarifying the nature and potential sources of "material influence" relevant to the creation of a relevant merger situation; and (ii) confirming the criteria that are typically relevant to determining whether the 25% "share of supply" test is met (value, cost, price, quantity, capacity and number of employees);
- adopt a more proportionate approach to transactions that concern international markets, confirming that the CMA is less likely to prioritise for investigation deals where remedies implemented in other jurisdictions would be likely to address any competition concerns that could arise in the UK; and
- improve the investigation process by enhancing direct engagement between the merger parties and the CMA (including senior staff) particularly at the outset of an investigation, including by: (i) streamlining the pre-notification process (for example, reducing the volume of material required) and aiming to complete the process within 40 working days (down from the current average of 65 days); (ii) facilitating teach-in sessions for the parties (as opposed to their advisors) to provide relevant back on the deal and relevant markets; and (iii) targeting announcement of straight-forward clearance decisions within 25 working days (down from the current practice of 35 working days).
These proposed process changes are accompanied by amendments to the Merger Notice which seek to clarify the information that parties should provide as early as possible to enable the CMA to efficiently make a call on its investigation priorities. In practice, this means that parties will need to ensure they provide an initial response to each question in the Merger Notice to enable the CMA to identify and engage with potential areas of competition concerns, together with supporting documentation, contact details, and consent for the CMA to announce the pre-notification stage on its website (save in exceptional circumstances).
In parallel, the CMA is considering responses to a call for evidence on its proposed revised approach to merger remedies, which signals greater flexibility and willingness to accept behavioural remedies, and acknowledgement of the role of efficiencies. The CMA is expecting to consult on proposed revised Merger Remedies Guidelines later this year but the public statement by Sarah Cardell (Chief Executive, CMA) that "only a truly problematic merger, where the harm to businesses and consumers cannot be effectively addressed through remedies, should not proceed" indicates a promising shift in the CMA's historical practice.
Taken together with the proposed amendments to the Merger Guidance, the direction of travel is towards formalising a more efficient, effective, and pro-growth approach to merger control which will resonate with businesses in the UK and around the world: indeed, the UK may no longer be perceived as being "closed for business". In turn, the CMA will be better placed to prioritise investigations and focus the use of its resources.
Where to next?
The CMA will need to consider the responses received to the consultation on the proposed changes to the Merger Guidance and the Merger Notice before the documents are finalised, so additional changes can be expected. Further legislative change is also on the horizon with the stated aim of providing businesses with more certainty on when mergers will be subject to investigation in the UK. Additional enhanced certainty will be a welcome improvement to the UK merger control regime, though any proposed legislative changes will no doubt be closely scrutinised by business and practitioners.
For now, we encourage you to get in touch with our team if you have questions about how these changes might impact your potential transactions.