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Process and timing
Is the notification process voluntary or mandatory?
Notification to the Competition and Markets Authority (CMA) is voluntary. Guidance issued by the CMA notes that:
it is perfectly acceptable for parties not to notify a merger which meets the jurisdictional thresholds, and the fact that a merger has not been notified does not negatively affect the CMA's substantive evaluation of the competitive effects of a merger.
Nevertheless, where a merger meets the thresholds for notification and raises the possibility of competition concerns, the merger parties may choose to notify the CMA so as to avoid the risks associated with not notifying a transaction. Such risks include the imposition of an initial enforcement order and the potential divestment of all or part of the acquired business (or parts of its existing business) should the transaction raise competition concerns.
Where parties fail to notify a relevant merger, the CMA can become aware of the merger through the work of its mergers intelligence committee or third-party complaints. The CMA will take a decision to investigate a non-notified decision where it believes that there is a reasonable chance that the test for a reference for a Phase 2 investigation will be met.
Where merger parties do not intend to submit a merger notice to the CMA but nevertheless wish to obtain a degree of comfort that the CMA is unlikely to investigate the transaction, they may submit a short briefing note to the CMA providing information about the merger and explaining why they do not propose to submit a merger notice. For more information, see “Guidance on the CMA's Mergers Intelligence Function” (CMA56).
In response, the CMA may seek additional information from the parties or decide to open an investigation. Alternatively, the CMA may conclude that an investigation into the transaction is unwarranted and will indicate to the parties that it has no further questions at that point. This outcome does not preclude the CMA from asking further questions at a later stage, particularly if further information comes to light. The CMA may open an investigation at any point until the expiry of the four-month statutory deadline for making a reference decision.
As a general rule, the CMA will consider a briefing note only after there is a signed merger agreement (ie, after exchange). In the absence of that, the parties should provide evidence which demonstrates their binding intention to merge.
What timing requirements apply when filing a notification?
As notification is voluntary under the UK merger control regime, no timing requirements apply in relation to the filing of a notification.
What form should the notification take? What content is required?
The CMA's standard template merger notice, together with the accompanying guidance notes, sets out the 'prescribed information' that the CMA considers necessary for the purposes of a satisfactory notification.
The template merger notice was revised in September 2017 to include, among other things:
- new standalone questions relating to:
- the share of supply by value and, where appropriate, volume for the merger parties and their principal competitors in the affected markets; and
- the drivers behind customer purchasing decisions; and
- more detailed requests in relation to the merger parties' price-setting processes, including – where relevant – requests for internal documents which outline the processes and any analyses employed by the parties to set prices.
Notifying parties can choose to supply the requisite information either in the format of the template merger notice or in a written format of their choosing (that indicates clearly where the information responsive to each question in the template merger notice can be found in the submission).
The specific nature and extent of information required as part of a satisfactory notification will vary from case to case, and will depend, for example, on the activities of the merger parties or the extent of overlap in their activities. The areas that the CMA may expect the parties to address as part of a satisfactory notification include:
- market definition;
- horizontal effects, including – where relevant – data in relation to capacities, switching data or variable profit margins for the overlapping products, together with an explanation of how pricing is determined;
- the parties' buyer power post-transaction;
- loss of potential competition as a result of the transaction;
- vertical, coordinated and conglomerate effects;
- market entry and expansion, with a particular emphasis on recent examples in the affected markets rather than potential future entry;
- countervailing buyer power;
- efficiencies arising from the transaction; and
- contact details of the parties' customers, suppliers and competitors. Where (as is often the case) the merger parties do not hold competitor contact details, the CMA will expect the parties to undertake a search of any publicly available data sources.
In addition, parties are generally required to submit large volumes of supporting documentation, including copies of contemporaneous internal documents (eg, the parties' pre-merger business plans, documents setting out the business case for the transaction, post-transaction business plans and internal and external reports analysing competitive conditions within the markets in which a horizontal overlap exists).
As set out in the revised merger notice template, the CMA increasingly places emphasis on the merger parties' internal documents and has shown an increasing willingness to use its powers under Section 109 of the Enterprise Act to require the parties to produce responsive documents. Failure to comply with the CMA's statutory notice can result in a fine being imposed on the merger parties (Hungryhouse/JustEat.co.uk).
The final merger notice must be signed by an individual with the authority to bind the company submitting the merger notice (usually the acquiring company). In signing the merger notice, the individual acknowledges that it is a criminal offence to recklessly or knowingly supply the CMA with information which is false or misleading in any respect.
Is there a pre-notification process before formal notification, and if so, what does this involve?
Yes. Pre-notification discussions take place when the parties to a merger have decided to notify the CMA and wish to engage with it – typically in relation to the contents of a draft merger notice – before formal submission of the final merger notice.
Parties seeking to engage in pre-notification discussions should submit a case team allocation form (available at www.gov.uk/government/publications/mergers-forms-and-fee-information). The CMA will then seek to allocate a case team within five working days.
Pre-notification discussions are an iterative process and are used by the case team to familiarise itself with the affected markets and to request any further evidence, typically through a series of separate requests for information before it begins its 40-working day Phase 1 investigation.
To some extent, pre-notification discussions also provide the parties with an opportunity to informally discuss the CMA's likely approach to a novel issue, or the assessment of a particular competition concern, with the case team.
The CMA "strongly encourages" merger parties to engage in pre-notification discussions at least two weeks before the intended date for completion, even in cases that do not appear to be problematic. However, the pre-notification stage often takes significantly longer than this. In the 2017/2018 financial year, the average length of pre-notification was 28 days (compared with 33 days the previous year).
Where the transaction has already been made public, the CMA may invite third parties to comment on the merger during the pre-notification stage.
Can a merger be implemented before clearance is obtained?
The UK merger control regime is voluntary. Accordingly, clearance is generally not required before the completion of a transaction.
That said, when the CMA is investigating a completed merger, it will normally serve an initial enforcement order on the parties, preventing any further integration of the merger parties' businesses while the order remains in place. The CMA will typically impose such an order as soon as the completed merger comes to its attention.
In exceptional circumstances, the CMA can serve an initial enforcement order on the parties to an anticipated transaction which may prevent completion of the transaction (where the act of completion itself would constitute pre-emptive action).
In addition, the CMA can use initial enforcement orders to require merger parties to unwind any integration that has already taken place. At Phase 1, the CMA would typically use this power only where there are risks of such integration prejudicing the CMA's investigation or impeding it from taking remedial action. At Phase 2, the CMA is more likely to use these powers.
While it is rare, the CMA can and has imposed initial enforcement orders on the parties to anticipated transactions, precluding the parties from taking any steps towards integration, as opposed to preventing completion itself (Linergy Limited/Ulster Farm By-products Limited).
While an initial enforcement order is in place, the merger parties will need to obtain derogations from the CMA if they wish to undertake any substantive actions towards integration.
Guidance from authorities
What guidance is available from the authorities?
The guidance papers issued (or adopted) by CMA include the following:
- “Mergers: Guidance on the CMA's jurisdiction and procedure” (CMA2);
- “Quick Guide to UK Merger Assessment” (CMA18);
- “Guidance on the Review of NHS Mergers” (CMA29);
- “Water and Sewage Mergers” (CMA49);
- “Guidance on the CMA's Mergers Intelligence Function” (CMA56);
- “Retails Mergers Commentary” (CMA62);
- “Mergers: How to Notify the CMA of a Merger”;
- “Guidance on Initial enforcement orders and derogations in merger investigations” (CMA 60); and
- “Mergers: Exceptions to the Duty to Refer and Undertakings in lieu of Reference Guidance” (CMA64).
It has also adopted the following existing Office of Fair Trading (OFT) and Competition Commission (CC) guidance:
- “Merger Assessment Guidelines” (OFT 1254/CC 2) (revised);
- “Merger Remedies: Competition Commission Guidelines” (CC8);
- “Good Practice in the Design and Presentation of Consumer Survey Evidence in Merger Enquiries” (OFT 1230/CC com1);
- “Chairman's Guidance on Disclosure of Information in Merger and Market Inquiries” (CC7);
- “Suggested Best Practice for Submission of Technical Economic Analysis” (CC2 com3); and
- “Government in Markets” (OFT1113).
In addition, the CMA has recently concluded a public consultation on draft guidance which it intends to publish relating to requests for internal documents in merger investigations. The draft guidance notes that "the CMA is likely to use Section 109 notices as standard in future investigations where internal documents are requested from main parties in Phase 1 and Phase 2 investigations".
What fees are payable to the authority for filing a notification?
Fees payable for filing a notification vary according to the UK turnover of the target in the business year preceding either completion of the merger (for completed mergers) or the date of the reference decision (for anticipated mergers). However, the CMA or secretary of state may nominate an alternative reference year where they consider it appropriate.
At the time of writing, the fees payable are:
- £40,000 where the target's UK turnover did not exceed £20 million;
- £80,000 where the target's UK turnover exceeded £20 million but did not exceed £70 million;
- £120,000 where the target's UK turnover exceeded £70 million but did not exceed £120 million; and
- £160,000 where the target's UK turnover exceeded £120 million.
The filing fee becomes payable on the publication by the CMA of its reference decision or, for cases resolved through undertakings in lieu of reference, when the CMA formally accepts these.
No filing fees are payable where:
- The CMA determines that the transaction does not give rise to a relevant merger situation;
- the merger involves the acquisition of an interest that is less than a controlling interest and the CMA investigated the acquisition on its own initiative; or
- the acquirer is a small or medium-sized enterprise.
No further administrative fees are payable for mergers that are referred for a Phase 2 investigation.
Publicity and confidentiality
What provisions apply regarding publicity and confidentiality?
Where a transaction has not yet been made public, the existence of pre-notification discussions and their content will remain confidential. Similarly, both the content and the fact that parties have submitted a briefing note or applied for informal advice are confidential.
On the commencement of a Phase 1 investigation, the CMA will publish a notice on its website and make an announcement via the regulatory news service. Redacted copies of any initial enforcement orders and derogations granted by the CMA will also be published on the CMA's website.
During the Phase 1 investigation, the CMA will invite comments from interested third parties in relation to the transaction and will typically contact the customers, suppliers and competitors of the merger parties directly.
The CMA also announces and publishes its Phase 1 decisions and decisions as to whether undertakings in lieu of reference offered may be suitable to remedy competition concerns, but will provide merger parties and third parties with the opportunity to redact any commercially sensitive information from the text of the decision in advance of doing so.
At Phase 2, the CMA will publish redacted versions of issues statements, any provisional findings, remedies statements, submissions made to the CMA and summaries of hearings and third-party feedback.
Are there any penalties for failing to notify a merger?
No. The UK merger control regime is voluntary.
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