On 15 May 2015, the English Court of Appeal found in the Eurotunnel case by a 2:1 majority that the UK Competition and Markets Authority (CMA) had taken an “irrationally wrong” decision when analysing whether a collection of assets amounted to all or part of a business for the purposes of UK merger control. Since no business, or part of it, had been transferred, UK merger control did not apply to the acquisition in question.

It is generally assumed that UK merger control (as with other regimes around the world) has a very wide scope of application, going well beyond a simple acquisition of a business via a share sale, to encompass a wide range of “asset” purchases (as well as minority stakes in businesses, joint ventures and the like). This remains the case, but Eurotunnel shows that at the margin, arguments can be made on the issue of whether a business (or part of it) has been acquired and this issue should not be overlooked.

As with all such situations, the case is fact-dependent, involving a business (ferry operator SeaFrance) which had gone into liquidation and whose employees had been made redundant. Before the Court of Appeal, the key issue was whether those employees, when rehired by the purchaser of SeaFrance’s other assets (Eurotunnel), could properly be characterised as having transferred to the purchaser several months after they had been made redundant and SeaFrance had stopped trading.

The Court of Appeal’s majority view is perhaps best described in the following caustic passage from Sir Colin Rimer’s analysis:

... If one were to explain the facts to the ubiquitous reasonable man and ask him whether the employees either transferred, or “effectively” transferred, from SeaFrance to the [purchaser], or so transferred “in effect” or as a matter of reality, I would expect him to respond testily with a robust negative…He would say that the simple reason for their re-employment … was referable to the combination of [the purchaser]'s successful bid [for the assets] and the various incentives provided by [a statutory job saving plan] for the re-employment of SeaFrance's ex-employees. He would be right. He might wonder why he was being asked such a peculiar question.

There was therefore no business transfer and the CMA’s decision that there had been, as well as being “irrationally wrong”, was “materially flawed” and set aside. The CMA has stated that it will seek permission to appeal this judgment (which appeal would be heard by the UK Supreme Court).