Overview

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.  Before the commencement of the Act’s merger provisions on 20 June 2003, UK mergers were considered under the Fair Trading Act 1973.

Larger mergers are often looked at by the European Commission under the EU Merger rules.

UK Mergers

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 defined public interest considerations, newspaper mergers and (for the time being) mergers between water and sewerage companies, the Secretary of State for Trade and Industry (SoS).

Generally, mergers can only be considered by the UK 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 except in the case of newspaper mergers which must have the prior consent of the Secretary of State. 

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.

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. 

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.  Copies of the OFT advice in such cases, together with the original intervention notices from the SoS asking OFT to investigate in particular cases, will be available here.  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 will accept the views of OFT and CC as to whether there is an anti-competitive outcome.  National security is the only public interest consideration currently defined in the Act, although the Comunications Bill, which is currently before Parliament, will provide for a newspaper-related public interest consideration.

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.

Special regimes exist for newspaper transfers and mergers between water and sewerage companies.  The latter are currently considered under the Water Industry Act 1991, with changes to be made through the Enterprise Act and the Water Bill which is now before Parliament.  A key change will be that the OFT and the CC will replace SoS as relevant authorities in water mergers.   

Previous UK Merger Regime

Those mergers completed, notified to the OFT by means of the statutory merger notice or referred to the CC before 20 June 2003  are considered under the Fair Trading Act 1973.  Its merger provisions differ from the Enterprise Act as follows:

• final decisions on mergers taken by the SoS rather than the OFT and the CC;

• mergers considered against a broader public interest test rather than the new test of whether they result in a substantial lessening of competition;

• a worldwide assets-based criteria for determining whether a merger is subject to merger control procedures rather than a UK-based turnover test.

The DTI published a booklet "Guidance on DTI procedures for handling Merger references and reports" explaining the procedures governing the Department’s handling of Competition Commission merger reports and cases under the Fair Trading Act. The booklet can be viewed on this site by clicking on the button above. 

Newspaper Mergers or Transfers

Section 58 of the Fair Trading Act 1973 requires proprietors of newspapers circulating in the UK to obtain the Secretary of State's (Department of Trade & Industry) prior written consent to acquire a controlling interest in another newspaper or newspaper assets if the total sales (i.e. paid-for circulation) of all the newspapers concerned (the proprietor's existing titles plus those to be acquired) is 500,000 or more copies per day of publication.

The DTI publishes a booklet "Guidance on DTI procedures for handling Newspaper mergers" designed to help those who may have to seek consent to a newspaper transfer under the newspaper merger provisions of the Fair Trading Act 1973.

Reform of the newspaper merger regime 

The Government’s proposals for reforming the newspaper merger regime were introduced to the House of Commons on 19 November 2002 as part of the Communications Bill. The Bill makes provision for the repeal of the existing newspaper merger provisions and the integration of newspaper mergers into the overall structure of the Enterprise Act 2002 merger regime.

Draft guidance on the operation of the reformed newspaper merger regime

The provisions set out in the Communications Bill permit the Secretary of State to publish guidance on the operation of the reformed newspaper merger regime.

Although a formal consultation process in relation to such guidance will be carried out in due course, a preliminary draft of the guidance has been prepared to allow interested parties the opportunity to comment.

Draft guidance.

Any comments on this draft guidance should be sent to:

Tony Metcalfe
Room 634
Consumer and Competition Policy Directorate
Department of Trade and Industry
1 Victoria Street
London, SW1H 0ET
Tel: 020 7215 6772
Fax: 020 7215 6565
Email: Tony.Metcalfe@dti.gsi.gov.uk

EC Mergers (ECMR)

Large Mergers with a European dimension may be covered by the European Community Merger Regulation (ECMR) - Council Regulation No.4064/89 of 2 December 1989 as amended. Information on mergers which do not fall to the ECMR are covered under UK Mergers.

Broadly speaking this means that 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 ECMR. There is also a supplementary set of thresholds designed to catch mergers which would otherwise fall to multiple jurisdiction.

Both DTI and Office of Fair Trading are 'competent authorities' entitled to comment on cases to the Commission.

Guidance on the ECMR (141Kb).

Information on individual cases under the ECMR can be found on the Commission's website.

Review of EC Merger Regulation

Following a Green Paper, in December 2002 the European Commission has now published its proposals for amendments to the EC Merger Regulation (EEC No.4064/89). The proposal will be the subject of negotiation in Council during the course of the 2003. 

The Commission has also published two draft notices for public consultation. 

The first of these is a set of draft best practice notes which give basic guidance on how the Commission and interested parties will interact during a merger investigation. The note sets out a system of pre-notification and “state of play” meetings between the Mergers Task Force and the merging parties, together with a provision for triangular meetings which could also involve competitors and third parties with an interest. 

The second document published for public consultation contains draft guidelines on the appraisal of horizontal mergers in which the Commission explain how it will implement the regulation. The notice sets out, in detail, the elements the Commission may consider during the appraisal of a merger case. This includes the factors that will be taken into account when defining the scope of the affected markets and how they will determine the economic power of the merged entity and its competitors. 

The guidelines also set out how the Commission will look at merger related efficiencies and explain why the Commission believes that it is able to deal explicitly with the issue without any specific amendment to the Regulation.

The DTI would be very interested to receive copies of any comments provided to the Commission by UK companies.  We would also be happy to receive comments direct from interested parties.

Please copy your views to: 

Simon Dilks
Consumer and Competition Policy directorate
Room 638
Department of Trade and Industry
1 Victoria Street
London SW1H 0ET
Simon.Dilks@dti.gsi.gov.uk

The Green Paper on the Commission’s website.

The UK’s response to the Commission’s invitation to comment.

The House of Lords Report on the Review of the EC merger regulation and the Government’s response.

The Commission’s proposals to amend the EC Merger Regulation and their draft guidelines on horizontal mergers. 

The Commission’s draft best practice notes. 

UK response to Commission's best practice notes consultation.

UK response to Commission's consultation on draft horizontal merger guidelines.

DTI Contacts