Merger assessment in the UK is characterised by the split in responsibilities for assessing and clearing a merger between the Office of Fair Trading ("OFT") and the Competition Commission ("CC"). Under the UK merger regime, companies are not required, but are often inclined, to refer a merger to the OFT in order to obtain formal clearance and hence "comfort" about the legitimacy of their deals. The OFT in turn, has no duty to refer a merger to the CC for further investigation, unless it has reason to believe that it has, or will result in, a "substantial lessening of competition". Bearing the two-tiered system in mind, the importance of a joined-up approach from the competition authorities in assessing mergers is crucial in lending certainty to merging companies. Up until now, however, this consistency has not always been obvious, with the approach to assessment differing between the two bodies often substantially. To avoid such difficulties in the future, the OFT and CC published joint Merger Assessment Guidelines on 16 September 2010 ("the Guidelines").
The Guidelines are intended to provide greater clarity on the respective approaches which both the OFT and CC will adopt when analysing the competitive effects of a merger. The guidance on "substantial lessening of competition", "theories of harm" and the "counterfactual" will assist practitioners when advising on how the authorities are likely to view the effects of a proposed merger. The Guidelines state that the OFT and CC will look at evidence of whether a merger is likely to lead to an adverse effect for consumers, and if so, they will be inclined to find that a "substantial lessening of competition" is likely to result. Further, the Guidelines state that the authorities will regularly request documentary evidence in order to assess the rationale of the transaction in order to establish any appropriate "theor[ies] of harm". The Guidelines stipulate that this level of assessment will be applied in order to determine whether a "substantial lessening of competition" is likely to occur. Similarly, the Guidelines clarify that both the OFT and CC will assess the relevance of the "counterfactual" argument on the basis of whether such a position is reasonably foreseeable, and not simply speculative. Having an agreed insight into the formulae which the OFT and CC will apply in their assessments at each stage of their review will undoubtedly help merging parties.
When the US competition authorities released a similar guidance note on merger regulation, they emphasised that whilst there is an effort to impose some consistency to the application of the merger regime, there will always be a subjective element to any assessment as a merger review is always fact-specific. To the same end, John Fingleton, CEO of the OFT, said that "these new guidelines will help to ensure that the steps that we follow are clear and that analysis is carried out consistently", whilst Peter Freeman, Chairman of the CC, has stated that "this is only guidance - merger analysis cannot be done rigidly or mechanistically - as cases vary considerably in practice". Undoubtedly handy though they are, therefore, the Guidelines should not be seen as being encyclopedic. There is still no substitute for assistance from experienced economists and lawyers.
For further reading, please access the Guidelines via the OFT website at: http://www.oft.gov.uk/news-andupdates/ press/2010/97-10