The UK’s Competition and Markets Authority (CMA) on 6 November published draft updates to two of its merger guidance documents (CMA2 and CMA56) in preparation for the end of the Brexit Transition Period on 31 December 2020.
The CMA has launched a consultation on the proposed amendments which will remain open for feedback until 4 December 2020. The CMA expects to have the final updated guidance in place by the end of 2020 to coincide with the end of the Transition Period.
According to the CMA, the updated merger guidance aims to streamline the CMA’s processes, increase investigative efficiency, and emphasise the importance of cooperation and coordination with international competition agencies post-Brexit. With these objectives in mind, the key updates and their potential impacts have been summarised below.
CONTINUED COOPERATION WITH OTHER COMPETITION AUTHORITIES
As a result of Brexit, the CMA will conduct its own review of the impact of any mergers in the United Kingdom and the Commission review will no longer cover the UK markets. The CMA will additionally no longer be part of the European Competition Authorities (ECA) network which facilitates cooperation among competition authorities in the EU/EEA. Accordingly, the updated merger guidance clearly focuses on ensuring that the CMA can continue to work effectively with other competition authorities on large multijurisdictional mergers.
In this regard, the updated merger guidance expressly allows the CMA to take account of any merger control proceedings in other jurisdictions. For example, the CMA may not decide to open any investigation where remedies imposed in other merger control proceedings are likely to address competition concerns in the United Kingdom.
The CMA may also depart from its own guidance in order to align with the processes of other competition authorities, or alternatively, it may fast-track cases or accept concessions of a substantial lessening of competition (SLC) from the parties. Furthermore, the updated merger guidance explains that the investigation of the same merger by other competition authorities is one of the circumstances in which the CMA may engage in remedies discussions before the SLC decision has been made.
NEW AND UPDATED STREAMLINED PROCESSES
A new chapter has been introduced in the updated merger guidance titled “fast track processes and ‘conceding’ an SLC.” This now includes separate sections on the two different purposes for which cases can be fast-tracked at Phase 1, namely: (i) to proceed more quickly to offering undertakings in lieu (UIL); or (ii) to proceed more quickly to an in-depth Phase 2 investigation. The updated merger guidance no longer states that the treatment of cases may only “exceptionally” be accelerated significantly. On the contrary, the parties can request a case to be referred for the consideration of UILs or a Phase 2 investigation either early during the Phase 1 investigation, or alternatively during the pre-notification stage.
In addition, parties undergoing a Phase 2 investigation may also wish to “concede” to an SLC in order to facilitate the efficient conduct of the case, e.g., where this would aid the alignment of the CMA’s remedies process with proceedings in other jurisdictions or where it would enable the CMA and merger parties to focus their efforts during the remainder of the CMA’s substantive assessment on other areas. Whereas a UIL at Phase 1 requires the parties to accept that the test for reference for an in-depth Phase 2 has been met, “conceding” to an SLC at Phase 2 requires the parties to accept in writing that an SLC arises within a specified market or markets for goods or services in the United Kingdom and that they agree to waive their right to challenge that position during a Phase 2 investigation.
INCREASED GUIDANCE FOR BUSINESS
The updated merger guidance reflects a number of recent developments arising from case law and previous CMA decisional practice since the current guidance was issued in 2014. These references and examples provide additional context to the existing guidance and demonstrate how these principles have been applied in practice.
In addition to recent judgments and CMA decisions, the updated merger guidance also takes account of legislative changes since the current guidance was issued in 2014 (for example, the alternative jurisdictional thresholds for ‘relevant enterprises’ in takeover situations).
Overall, the updated guidance is to be welcomed as the CMA has provided more colour in terms of, for example, its information gathering practices (including its recent practice of obtaining information through formal oral interviews), and how updates regarding the status of proceedings in other jurisdictions may make the CMA’s review more efficient. Many explanations have also been streamlined in order to make the updated merger guidance clearer and more user-friendly for businesses. This consultation follows criticism of the CMA’s processes and procedures in a number of recent merger decisions some of which are currently being appealed. UK merger control enforcement in 2021 will thus be an important test for the CMA in terms of being able to adapt to the post-Brexit landscape and balance its aim of being a strong enforcer with the desire by business for speed, predictability and legal certainty.