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