Mergers
A proper framework for control of mergers is important to ensure that competition is not damaged when businesses come together. UK mergers are considered by the competition authorities under the Enterprise Act 2002.
UK Mergers
Mergers which meet the jurisdictional tests in the Enterprise Act 2002, fall to the UK competition authorities for investigation: Office of Fair Trading (OFT), Competition Commission (CC) and, in the case of public interest considerations, BIS's Secretary of State.
Public interest considerations are specified in the Enterprise Act as being national security, media plurality and stability of the UK financial system.
Generally, mergers will be considered by the UK competition authorities if the annual UK turnover of the enterprise being taken over exceeds £70m, or the merger creates a 25% share or more in a market for goods or services in the UK or a substantial part of it. There is no statutory requirement to pre-notify mergers to the UK competition authorities.
Investigation by the OFT
The OFT investigates mergers in the first instance and, with the exception of public interest cases, decides whether or not they should be referred to the CC for further investigation. The test is whether the OFT believes a merger has resulted or may be expected to result in a substantial lessening of competition.
In making decisions, the OFT will either:
1. refer to the CC for further investigation;
2. clear the merger;
3. clear it subject to undertakings in lieu of a reference to the CC.
Details of mergers investigated by the OFT can be found on the OFT website.
All of the merger and monopoly undertakings subject to the previous merger regime under the Fair Trading Act 1973 and given to the Secretary of State have been transferred to the competition authorities in a number of Statutory Orders. Details of these can be seen on the Statutory Orders and Undertakings page.
Investigation by the CC
Where a merger is referred to the CC, it is required to determine whether it has resulted in a substantial lessening of competition and to take the action it considers reasonable and practicable to address any adverse effects arising from the merger.
All CC reports are published. Details of mergers investigated by the CC can be found on the Competition Commission website. Companies can also obtain guidance and informal advice from the OFT on its merger procedures.
Mergers between water and sewerage companies
A special regime exists for mergers between water and sewerage companies. These are considered under sections 32-35 of the Water Industry Act 1991, as amended (from 29 December 2004) by the Enterprise Act and the Water Act.
European Community Merger Regulation (ECMR)
Large mergers with a European dimension that breach certain jurisdictional thresholds of the European Community Merger Regulation (ECMR) - Council Regulation No. 139/2004 fall to the European Commission for investigation.
Broadly speaking mergers involving enterprises with an aggregate world-wide turnover of more than Euro 5bn (around £3.5bn) and where the aggregate Community-wide turnover of each of at least two of the enterprises concerned is more than Euro 250m (around £200m) will be investigated by the European Commission taking into account the views of Member States.
However, those mergers where more than two-thirds of the Community-wide turnover of each enterprise concerned falls within one and the same Member State, are not caught by the EC Merger Regulation.
The Office of Fair Trading will normally advise the EC on competition issues it sees relevant to cases being considered under the EC Merger Regulation.
Information on individual cases under the ECMR can be found on the Commission's website.
Public Interest Cases under the EC Merger Regulation
The Secretary of State may also intervene on public interest grounds in mergers being considered under the EC Merger Regulation, where the public interest consideration in question is also recognised in the EC Merger Regulation. In such cases the European Commission will continue to consider the competition issues whilst the UK authorities consider public interest aspects.
Review of Merger Decisions Under the Enterprise Act 2002
Deloitte was commissioned by BERR, the Office of Fair Trading and the Competition Commission to conduct an external review of merger decisions made under the Enterprise Act 2002.
That review looked at 8 merger cases between 2004 and 2006 with the aim of reviewing decisions made by the competition authorities. It also comments on the approaches to those cases taken by the competition authorities with hindsight and in the light of subsequent market developments.
The full report can be viewed on the Competition Commission website.
