All questions

Merger review

The CMA carries out both Phase I and, if warranted, in-depth Phase II merger investigations in the UK. Except for a limited category of investigations (in which the government makes the final decision), decisions at Phase II are made by an independent panel to avoid any 'confirmation bias'. The UK regime is also unusual in that merger notifications are voluntary, but the CMA has the ability to investigate non-notified transactions (and, if found necessary, impose remedies in completed mergers). The CMA has an active Merger Intelligence Unit that monitors merger and acquisition activity for transactions that may raise competition concerns.

To fall within CMA jurisdiction a transaction must qualify as a 'relevant merger situation' insofar as (1) two or more enterprises will cease to be distinct,51 and (2) the jurisdictional thresholds are met. The ordinary jurisdictional thresholds require that the value of the target's turnover in the UK exceeds £70 million or the 'share of supply' test is met.52 The share of supply test requires that the parties to the transaction together supply or acquire goods or services that, after the merger, represent at least 25 per cent of those goods or services supplied in the UK or a part of it,53 so long as there is an overlap in the parties' activities such that the merger results in an increment in the share of supply.54

Relevant merger situations may also be subject to review, via the issue of an intervention notice by the Secretary of State (SoS), if he or she considers that public interest considerations may be relevant to the transaction.55 The specified public interest grounds are set out in Section 58 of the EA02. These include cases relating to accurate news and free expression (e.g., newspapers),56 media plurality, media standards and broadcasting,57 prudential regulation,58 and the UK's 'capability to combat, and to mitigate the effects of, public health emergencies.59 If the relevant SoS considers that one or more of these public interest grounds are met, and has 'reasonable grounds' to suspect that the transaction in question results in a relevant merger situation (or is so informed by a competition regulator), then the SoS can issue a public interest intervention notice.60 Notably, the SoS also has the power to intervene in transactions on the basis of a consideration that is not specified but that, in his or her opinion, ought to be.61 In these cases, the SoS must present an order for approval before both Houses of Parliament, where such approvals must be given within 28 days.62 As such, the public interest grounds upon which the UK government can intervene in a transaction that creates a relevant merger situation are relatively fluid and flexible, allowing the government continually to revise and alter its approach to these forms of investment in the UK. If a public interest intervention notice is issued, the CMA (or Ofcom for media mergers) initiates an investigation into the merger, including a review of any public interest (and, if applicable, any competition) issues. The CMA can be expected to have less work emanating from public interest reviews in future, however. This is because, to date, the vast majority of public interest intervention notices have been issued in transactions falling within the (former) national-security public interest category. As the National Security and Investment Act 2021 (NSIA) regime became operational on 4 January 2022, transactions of this nature will now be dealt with under its auspices and reviews will fall to the Investment Security Unit within the Cabinet Office, following a completely separate process, rather than under the EA02 merger regime.

i Significant casesCargotec/Konecranes

The Cargotec/Konecranes case was the first time that, post-Brexit, the CMA reached a different decision from that taken by the European Commission. On 29 March 2022, following a Phase II investigation, the CMA prohibited the merger between Cargotec and Konecranes on the basis that the merger would harm competition in the supply of a wide range of container handling equipment products.63 Just a month earlier, the European Commission had cleared the transaction with conditions, also after an in-depth investigation.64

This case presents an important reminder that, despite close cooperation between the CMA and the European Commission, the post-Brexit competition landscape brings with it the risk of divergent outcomes between Europe's competition authorities. The divergent result was despite the CMA and European Commission having reviewed the transaction in the same markets and on the same theories of harm. Shortly after the CMA's prohibition decision, the merging parties abandoned the transaction, resulting in the CMA cancelling its merger reference on 31 March 2022.


The Meta/Giphy case saw another eventful year in 2022. In October, the CMA prohibited the Meta acquisition of Giphy, and ordered Meta to sell Giphy off in its entirety to an approved buyer.65 The CMA determined that the transaction would result in a substantial lessening of competition (SLC) in social media and display advertising. This remittal decision followed the CMA's Phase II prohibition of the transaction in November 2021, and Meta's subsequent appeal to the CAT. The CAT issued its judgment in June 2022, upholding the CMA's decision on all substantive grounds.66

Meta initially acquired Giphy in May 2020. The merger was not notified to the CMA, but the CMA opened an investigation on the basis of its powers to assert jurisdiction where the jurisdictional thresholds are met. The CMA put a hold-separate order in place in June 2020 and referred the transaction to a Phase II review on 1 April 2021. The case is one of many examples of the CMA taking a generous approach to its own jurisdiction under the share of supply test, not least given Giphy does not generate any turnover in the UK. On jurisdiction, the CAT stated that it was 'in no doubt' that the CMA had jurisdiction, however, it also stressed that the 'demands of comity do require the CMA to be at least conscious of the international dimension'.67 This could hint that the CAT may be keeping a close eye on the CMA's increasing willingness to intervene in global deals with a very limited UK nexus.

One of the striking features of the CMA's Phase II report is the extent to which the CMA appears to have relied on a very wide-ranging review of the parties' internal documents: the CMA collected over 280,000 internal documents in the course of its assessment.68 Meta/Giphy had perhaps the misfortune of being the first major merger on the chopping block to enjoy the convergence of the CMA's more aggressive enforcement approach in Phase II merger reviews and its fascination with digital markets; it seems likely that it will not be the last.


The long-running saga in JD Sports/Footasylum, which began in 2019, continued into 2022. The completed merger was referred for a Phase II investigation on 1 October 2019 and subsequently blocked in May 2020, with the CMA finding that the merger would result in an SLC in sports-inspired casual footwear and apparel products sold both in stores and online, ultimately leaving this retail segment worse off.69 The CMA recommended the divestment of the entirety of the Footasylum business to a suitable buyer. As if foreshadowing events to come, the CMA included a disclaimer in its final report, writing that the uncertain and challenging trading conditions that many retailers were facing because of covid-19 had only arisen during the final stage of the investigation and that, accordingly, the evidence gathering for its investigation was mostly completed before the effects of covid-19 arose. JD Sports appealed the CMA's decision before the CAT on the grounds that the CMA erred in law or acted irrationally by excluding the effect of covid-19 on Footasylum when considering the relevant counterfactual, or when assessing the impact of the merger on competition in the relevant market.70 Significantly, the CAT partially upheld JD Sport's appeal finding that, generally speaking, the CMA had acted irrationally in not gathering sufficiently robust evidence in relation to the impact of covid-19 on the parties and that, accordingly, the regulator did not have the necessary evidence for drawing the conclusions that it did. Additionally, the CAT found that the CMA had acted irrationally in not requesting information from the suppliers on the impact of the pandemic to determine whether this would have created a stronger constraint on the merged entity and therefore not resulted in an SLC. Instead, the CMA relied on evidence from the suppliers that was only relevant to a pre-pandemic market. The case was therefore remitted back to the CMA for reconsideration on these points, with the CAT remarking that the 'assessment of the effects [of covid-19 are] sufficiently material to the CMA's overall conclusions as to require further examination of the final report as a whole'.71

In December 2020, the CAT rejected the CMA's request for appeal of its judgment, restating that on two particular aspects of its investigation the CMA did not seek sufficient evidence, and drew conclusions on the impact of covid-19 that the evidence before it did not allow it properly to draw.72 Therefore, it was right that the case be remitted back to the CMA for a second review. In its final report on remittal published in November 2021, the CMA concluded that the takeover could lead to a substantial reduction in competition and a worse deal for Footasylum's customers. The CMA considered that the requirement imposed on JD Sports to sell Footasylum was the only way to address its competition concerns and protect consumers. On 14 January 2022, the CMA accepted final undertakings from JD Sports, including the divestiture of Footasylum. The merger investigation was brought to a close in August 2022 when the CMA approved Aurelius Group as the new buyer for Footasylum.

ii Trends, developments and strategies

The CMA is certainly engaging with the full breadth of its powers when it comes to exercising its jurisdiction in merger control cases, and that trend is likely to continue. It has been widely remarked that although the UK's merger control regime remains voluntary, its approach of late has brought it closer to being a de facto mandatory regime. That characterisation is as a result of a number of trends, including its (sometimes contentious) approach to asserting jurisdiction and requiring remedial action when investigating completed mergers, and its approach to initial enforcement orders (IEOs), which impose onerous obligations on parties to completed mergers to ensure, inter alia, they are managed separately pending the CMA's decision. The CMA has in recent years regularly investigated alleged breaches of IEOs and imposed fines for failing to comply with them.

Following a public consultation, which closed on 8 January 2021, the CMA published its updated Merger Assessment Guidelines on 18 March 2021.73 The guidelines indicate an increased focus on the assessment of potential and dynamic competition as well as innovation, and other non-price-related effects, in the assessment of the likelihood of an SLC.74 The updated assessment guidelines accompany updates to the CMA's guidance on jurisdiction and procedure during merger reviews,75 and also revised guidance on its merger intelligence function.76

All three updates are significant in their own right, but a selection of some of the key points are as follows. In line with the CMA's increasingly elastic approach to asserting jurisdiction (as seen in the above case of Meta/Giphy, as well as previously in Amazon/Deliveroo, Roche/Spark and Sabre/Farelogix), the updated guidance on jurisdiction and procedure states that, while the CMA cannot apply the share of supply test unless the merging companies 'together supply or acquire the same category of goods and services (of any description)', it will consider the commercial reality of the merging companies' activities when assessing how goods or services are supplied, 'focussing on the substance rather than the legal form of arrangements'.77 It goes on to state that, in practice, this means that the test can be met by, or capture within its scope, pipeline products or services or any situation where 'there are sufficient elements of common functionality between the merger parties' activities'.78

The updated jurisdictional and procedural guidelines also formalise a procedure to fast-track cases to Phase I remedies or Phase II review, as well as setting out how companies can 'concede' that their deal has the potential to substantially lessen competition.79 On the first point, merger parties can now fast-track to the consideration of undertakings in lieu of reference (UILs) to a Phase II investigation; the objective being to reach a Phase I clearance with remedies more quickly. A request for referral for consideration of UILs can be submitted as early as the pre-notification stage (where the parties are in dialogue with the CMA on the completeness of the draft merger notification). The second purpose for fast-tracking is to proceed more quickly to an in-depth Phase II review, and requests can be made during the Phase I investigation or, again, during the pre-notification period.

2022 saw utilisation of the fast-track procedure at both Phase I and Phase II. In Ali Holding/Welbilt, the parties requested their case to be fast-tracked at Phase I in order to expedite consideration of undertakings in lieu of reference.80 In Carpenter/Recticel, the parties conceded an SLC and submitted a fast-track request once the transaction had been referred to Phase II.81 In both cases, the CMA accepted the fast-track request and delivered a final decision well within the relevant statutory timelines, demonstrating the potential timing benefits of the procedure.

In the updates to the Merger Assessment Guidelines, the CMA stresses that, when identifying the relevant market for the purposes of its investigation into whether a merger has, or will, result in an SLC, it will 'place more emphasis on the competitive assessment as opposed to the static market definition'.82 In other words, the CMA will ensure it is not bound or restricted by a formal market definition where that definition does not capture the competitive dynamics of the given market. The updated Merger Assessment Guidelines also introduce a much more comprehensive section on 'potential competition', which refers to competitive interactions involving at least one firm that has the potential to enter or expand in competition with other firms. This increased attention on potential competition is not coincidental; on the contrary it ties in with one of the recurrent themes throughout the updated guidance (and, for that matter, a great deal of the recently published CMA literature) namely, perceived under-enforcement in digital markets. After all, it is known that this market is one in which relatively early stage acquisitions of small firms by larger, more powerful, players can reduce if not eliminate potential or future competition in the market (the 'killer acquisition' hypothesis). Equally, an increased focus on potential competition might put the CMA in a better position to consider any efficiencies that could arise from digital mergers that, it has been argued, it might have previously overlooked.

The mandatory regime for national security cases

The NSIA regime, which became effective on 4 January 2022, requires mandatory notification of share acquisitions by investors involving companies active in certain sensitive sectors. Acquisitions are notifiable where an investor gains control of a qualifying entity or asset because of an increase in either shares or voting rights by exceeding any of the following thresholds: exceeding, for the first time, a threshold of 25, 50 or 75 per cent; gaining material influence over the company (whether alone or together with other interests or rights that the investor may already hold) or gaining the ability to block or pass resolutions of the target.

The 17 sectors subject to the mandatory notification regime under the NSIA are as follows: advanced materials, advanced robotics, artificial intelligence, civil nuclear, communications, computing hardware, critical suppliers to government, critical suppliers to the emergency services, cryptographic authentication, data infrastructure, defence, energy, military and dual-use technologies, satellite and space technologies, synthetic biology, transport, and quantum technologies. Notified transactions in these sectors are scrutinised to evaluate the extent to which they may pose a threat to national security, in which case the government will have the ability to impose conditions on parties, such as altering the equity level that an investor is allowed to acquire, restricting access to certain commercial information or controlling access to certain operational sites or works. There will also be a last-resort option to block a deal in any sector deemed to pose an unacceptable national security risk.

Transactions requiring mandatory notification that are closed without clearance will be legally void. The NSIA creates sanctions for non-compliance of up to 5 per cent of global turnover or £10 million – whichever is the greater.83 The NSIA also makes provision for criminal sanctions, including imprisonment of up to five years. This is a major change from the current position, where, because of the voluntary nature of UK merger control, there are no sanctions for completing deals without clearance, although such transactions can be investigated post-closing and remedies imposed (including partial or full divestment) if required to address any competition or, indeed, until the NSIA came into force, national security issues.

A significant feature of the NSIA is the five-year 'retrospective power' to review completed transactions that did not require mandatory notification but are nonetheless deemed to raise potential national security concerns. It should be noted that the five-year rule is not without exception. Should the SoS be made aware of the transaction, the 'call in' power only extends to six months. This means that there will be strong incentives for purchasers either to voluntarily notify transactions, when a mandatory notification is not required, or otherwise to make sure details of the transaction are publicised sufficiently to ensure the SoS is 'aware' of them. Furthermore, the power for retrospective review became effective for all deals concluded from 12 November 2020, which means the government is be able to review deals that completed after that date, a power it has used twice in prohibiting transactions that were closed before the NSIA came into force.

Notifications are reviewed by the Investment Security Unit, which, following a reshuffle, now sits within the Cabinet Office. The SoS will have exclusive competence to call in deals for review and make a determination on potential national security concerns. There is statutory deadline for the completion of an initial review of 30 working days from the date a complete notification is made, after which point transactions will be cleared or subject to a 'call-in review'. If a call-in notice is issued, either in respect of notified transactions or because the SoS has elected to issue the notice for un-notified or completed transactions (including under the retrospective powers), there will be an initial review period of 30 working days, extendable by a further 45 working days where required (subject to certain tests being met). In its first year of operations, nine conditional decisions were issued under the NSIA with five transactions blocked or unwound.

iii Outlook

The government's response to the consultation on reforming competition and consumer policy indicates an appetite for reform of CMA powers in this field. These include raising the turnover threshold from £70 million to £100 million and creating a safe harbour for mergers between small business where the worldwide turnover of the merging parties is less than £10 million (even if the parties might otherwise have met the share of supply test) in order to reduce the burden on small and micro enterprises.84 Further, the government also proposes the introduction of an additional jurisdictional threshold intended specifically to catch killer acquisitions: the CMA would be empowered to review a transaction where an acquirer has an existing share of supply of goods or services of 33 per cent in the UK (or a substantial part of the UK) and UK turnover of £350 million or more.85 A UK nexus criterion has also been proposed; this would ensure that only mergers with an appropriate link to the UK will be captured.86

Procedural proposals include: (1) introducing a more flexible Phase II commitments procedure to allow the CMA and the merging parties to resolve a merger investigation at any stage of the Phase II process; and (2) placing the existing fast-track procedure (as discussed above) on a statutory footing, giving the CMA discretion to refer a merger directly to Phase II where this is requested by the merging parties.87

These proposals will require legislative change, which is set to arrive in 2023; the UK Autumn Statement indicated that the Digital Markets Competition and Consumers Bill will be brought to Parliament in the third session of the current Parliament.88