This is the fourth in our series of updates setting out key aspects of the reforms to UK competition law.  It focuses on the revised UK merger regime.  Our earlier updates on the creation of the Competition and Markets Authority (CMA), on the concurrency regime for regulated sectors and on the revised cartel offence can be found herehere and here.


The CMA published the final version of its Guidance on the CMA’s jurisdiction and procedure in operating the UK merger control regime in January 2014. 

The new rules introduce a number of procedural changes to strengthen and streamline the existing merger control regime in the UK, but many substantive areas remain unchanged.

  • The UK system is a voluntary notification regime.  The idea of a mandatory merger control regime similar to the EU system was mooted during the government’s consultation process.  However, the government decided to keep the voluntary notification regime in place on the basis that the CMA has clearer powers under the new regime.  We consider below whether the procedural changes may in fact create a less comfortably voluntary system than before.
  • The jurisdictional thresholds remain: (i) is it the case that as a result of the merger at least 25% of all goods or services of a particular description are supplied or acquired in the UK (or a substantial part of it) by the combined acquiring and target group; or (ii) does the annual UK turnover of the target exceed £70 million.
  • There is a two stage review process.
  • The statutory test for assessing whether a merger should be referred to a Phase 2 investigation or whether remedies are required, remains whether a relevant merger situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the UK for goods or services.

What is changing?

A number of measures are intended to streamline and strengthen the existing UK merger control regime.  The key changes include:

  • capturing the efficiencies of a unitary authority;
  • amending the notification process;
  • extending the formal information gathering powers to all stages of the Phase 1 and Phase 2 investigations;
  • strengthening the powers to impose or agree interim measures throughout the investigation; and
  • introducing new statutory time limits for all parts of the merger review/remedies process.

Efficiencies of a unitary authority

Under the previous regime, the OFT completed an initial stage of review of the proposed merger (Phase 1) and where it believed that the merger gave a realistic prospect of a substantial lessening of competition, the OFT had a duty to refer the merger for review by the CC (Phase 2).

Under the new regime, the CMA – a single body - will run the whole process.  There will be a continuation of case team members from Phase 1 to 2 leading to efficiencies in the use of information.  To ensure a level of transparency and objectivity, Phase 1 decisions will be taken by the CMA Board and Phase 2 decisions will be taken by an inquiry group of at least three people, selected from the independent experts appointed to the CMA’s panel by the Secretary of State. 

The notification process

Under the new regime, parties wishing to notify will be required to use a revised Merger Notice.  The old system of drafting informal submissions has gone.  The new Notice requires more information than did the old statutory form.  The fees remain the same – from £40,000 to £160,000 depending on the size of the businesses involved.

Information gathering powers

The CMA will now have the power to require notifying parties and third parties to provide documentation and to request the attendance of witnesses to assist in an investigation.  If a relevant party fails to comply, the CMA will have the ability to “stop the clock” and to impose fixed and/or daily fines.

In Phase 1 investigations, the CMA is likely to use these formal powers where (i) information is needed quickly to meet statutory timescales; and/or (ii) where there are doubts over compliance with an informal request or previous request to respond.  In Phase 2 investigations, requests are often informal save in the event of a delay or a failure to respond.

Interim Measures

Under the new regime, the CMA will have increased powers to impose interim orders to suspend all integration steps and prevent pre-emptive action, in relation to anticipated or completed mergers. 

The new guidance clarifies that the risk of pre-emptive action in an anticipated merger is generally much lower than in a completed merger.  The CMA would expect to make an interim order in anticipated mergers at Phase 1 only in those (relatively rare) cases that it considers raise concerns about pre-emptive action that would be difficult or costly to reverse, and would engage with parties to ensure that the interim order was tailored to the facts and the specific risks of the case.  The CMA would not expect to impose interim orders preventing the parties to an anticipated merger from completing the transaction, unless it had strong reasons to believe that completion would occur before the end of Phase 1 and would, of itself, constitute pre-emptive action (for example, where the act of completion would automatically lead to the loss of key staff or management capability for the acquired business).

In relation to completed mergers, the risk of pre-emptive action is much higher, particularly where post-merger integration has already begun.  The CMA would normally expect to make an interim order suspending (and/or preventing further) integration in completed merger cases.  The exception would be in cases in which the CMA has been provided with clear evidence that there is no risk of pre-emptive action.

Parties which fail to comply with an interim order will face fines of up to 5% of the aggregate group worldwide turnover of the party in breach.

Statutory limits for merger review/remedies process

Merger Review

A new statutory timetable has been introduced.  The CMA will now have a deadline of 40 working days to conduct a Phase 1 investigation.  There is no provision for fast track procedures.  The timeframe for Phase 2 investigations remains unchanged – Phase 2 investigations end within 24 weeks of the date when the reference is made, subject to an 8 week extension.

At more than a month, the Phase 1 timeframe is already longer than in many comparable merger control systems, even before a period of pre-notification discussions is factored in.  

Remedies Process

There will be a longer time period to negotiate remedies.  Parties will have 5 working days from the date of the Phase 1 decision to formally offer undertakings in lieu of reference. In relation to Phase 2 remedies, the period for negotiating remedies will be 12 weeks following the CMA’s final report (extendable by a further 6 weeks for special reasons).

Implications for business contemplating mergers and joint ventures

The UK remains a voluntary regime.  However, the changes introduced are likely to increase pressure on parties to pre-notify - particularly in those transactions involving substantive competition law issues – in light of the CMA’s increased powers to suspend integration in both anticipated and completed mergers.

It remains to be seen whether the new regime will be a faster and more efficient system given the new fixed timetable for Phase 1 investigations and the CMA’s power to “stop the clock”.