Two recent cases highlight the Office of Fair Trading's (OFT) enthusiasm to apply the revised de minimis 'exception' in merger cases, though only, where the competitive harm anticipated by a proposed merger is not considered capable of being neutralised by 'clear-cut' undertakings.
In the first case, Dunfermline Press Ltd acquired eight newspaper titles from Trinity Mirror Plc. Even though the OFT identified the potential that the proposed merger may result in the substantial lessening of competition, the value of the markets that would be affected by the merger were found to be less than the £10 million de minimis threshold. Accordingly, the OFT could have exercised its discretion not to refer the merger to the Competition Commission for a full scale investigation. Instead, though, the OFT elected to seek undertakings from the parties to address the anticipated substantial lessening of competition.
The substantial lessening of competition that the OFT identified only related to one of the eight titles being purchased by Dunfermline Press Ltd and in the OFT's view could be addressed by divestment of an overlapping area of Dunfermline's business. Given the relatively 'clear cut' nature of that solution, the OFT exercised its discretion to accept a divestment undertaking in lieu of a reference to the Competition Commission. Considering undertakings before applying the de minimis provisions is a logical way for the OFT to balance protection of consumers in all markets against the costs of a Competition Commission reference. Crucially, however, the OFT has retained its ability to ensure the terms of the divestment undertakings are appropriate by confirming that it will refer the merger (rather than use de minimis) if agreement with Dunfermline cannot be reached.
The second case, the acquisition of East Midland's Rail Franchise by Stagecoach, provides an example of where the undertakings that would be required would not be 'clear cut'. In this case the OFT exercised its de minimis discretion rather than referring the merger to the CC. The substantial lessening of competition that the OFT identified related to the overlapping demand for the bus services that Stagecoach already operated and the rail services acquired under the franchise. The changes that would be required to remedy that issue would not have been clear cut and so the OFT relied on a number of other factors, including the relatively low £3m value of the affected markets, to not make a reference.
It appears from these cases that the OFT has taken on board previous criticisms over its failure to apply the de minimis exception (previously set much lower at £400,000). The fact that the de minimis exception has already been referred to in several cases since only being revised in November last year should provide businesses involved in smaller value merger transactions with a greater degree of comfort that they are less likely to become involved in a full scale Competition Commission reference.