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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.
Larger
mergers are often looked at by the European Commission under the EU
Merger rules.
 Any
UK mergers which do not fall under the EC Merger
Regulation (ECMR), and which meet the jurisdictional tests in
the Enterprise Act 2002, fall to the UK authorities: Office
of Fair Trading (OFT), Competition
Commission (CC) and, in the case of public interest
considerations and, for the time being, mergers between
water and
sewerage companies, the Secretary of State for Trade and Industry (SoS).
The public interest considerations relate to national security and
media mergers. The
latter covers newspapers, broadcasting and cross-media mergers.
Generally,
mergers can only be considered by the UK competition authorities if
the turnover in the UK of the enterprise being taken over exceeds £70m,
or the merger creates or increases a 25% share in a market for goods
or services in the UK or a substantial part of it. There
is no general requirement to notify mergers to the UK competition
authorities.
Investigation
by the OFT
The
OFT investigates all 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.
At this stage there are three ways in which a merger
may be treated:
•
it may be referred to the CC for further
investigation;
• it may be cleared;
• or undertakings may be sought in
lieu of a reference to the CC.
Details of mergers investigated by
the OFT can be found on the OFT
website.
Investigation
by the CC
Where
a merger is referred to the CC, they are required to determine whether
it has resulted or may be expected to result in a substantial
lessening of competition and to take the action it considers
reasonable and practicable to address any adverse effects of the
merger that they have identified.
All
CC reports are published. Details of mergers investigated by the CC
can be found on the CC
website. Companies can also obtain confidential guidance or
informal advice from the OFT on whether or not a potential merger
would be likely to be referred.
Public
interest cases
For
public interest cases, the SoS will decide whether to clear a
merger, refer it to the CC, or seek undertakings in lieu of a
reference following receipt of advice from the OFT and, in the case
of media mergers, from OFCOM.
The
SoS will also decide whether to make an adverse public interest
finding following receipt of the CC’s report. In making these
decisions, the SoS must accept the views of OFT and CC as to
jurisdiction and whether there is an anti-competitive outcome.
Copies of the OFT and OFCOM
advice in public interest cases, together with the original intervention
notices from the SoS asking OFT to investigate in particular cases,
are available here.
The public
interest considerations relating to media mergers (newspaper
and broadcasting) came into
force on 29 December 2003 when they were inserted into the Enterprise
Act by the Communications Act 2003.
   This
guidance
on the public
interest considerations relating to media mergers
sets out the background to the new regime, explains when
intervention in media mergers by the Secretary of State is possible,
and the process for considering mergers on media public interest
grounds.
Click to have a free printed copy mailed to you.
For a merger
situation raising defined public interest issues, but which falls
below the turnover and share of supply tests, the SoS may issue a
special intervention notice allowing the competition authorities to
consider those issues. As
with other public interest cases, the SoS will make any decision on
reference to the CC and on an adverse public interest finding.
All
CC reports are published. Details of mergers investigated by the CC
can be found on the CC
website. Companies can also obtain confidential guidance or
informal advice from the OFT on whether or not a potential merger
would be likely to be referred.
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.
The
Enterprise Act 2002 provides for fees to be payable to recover the
costs of the regulatory consideration of mergers. Section 121
of the Act provides the power to make orders defining the amount of
such fees and the scope of their application.
Merger
fees were first introduced in 1990. Full details of merger fees may
be found on the OFT
website.
Following
a consultation,
the Government announced on 6 January 2006 that it was increasing
the fees charged in respect of the regulatory control of mergers.
Details
of the Government’s proposals for revising merger fees are set out
in the Government’s response to the consultation on changing the
system of charging for the costs of merger control. The response document
and associated Regulatory Impact Assessment (RIA) can be found by clicking
here.
Large Mergers
with a European dimension may be covered by the European
Community Merger Regulation (ECMR) -
Council Regulation No. 139/2004.
Information on
mergers which do not fall to the ECMR are covered under
UK Mergers
(above).
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,
mergers where more than two-thirds of the Community-wide turnover of
each enterprise concerned is in the same Member State, are not
caught by the EC Merger Regulation.
There is
also a supplementary set of thresholds designed to catch mergers
which would otherwise fall to multiple jurisdiction and a system of
both pre- and post-notification referral to and from the Commission
and Member States.
The
Office of Fair Trading is responsible for UK input to the
European Commission on 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 in question is
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.
Guidance
Contacts
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