# MERGER CONTROL
## Introduction
Merger control is a fundamental component of competition law, designed to prevent business consolidations that could harm market competition and, ultimately, consumer welfare. In the United Kingdom, the system is primarily governed by the Enterprise Act 2002 (EA 2002) and enforced by the Competition and Markets Authority (CMA). Since the UK’s departure from the European Union, the CMA has assumed a more prominent global role, making an understanding of the domestic regime more important than ever. This essay will provide an overview of the UK merger control system, outlining the jurisdictional tests used by the CMA to review mergers and the substantive assessment it applies to determine whether a merger should be permitted.
## The UK Merger Control Framework
The legal framework for merger control in England and Wales is set out in Part 3 of the EA 2002. The CMA is the independent body responsible for investigating mergers that could restrict competition (Whish and Bailey, 2021). A key feature of the UK system is that it is, in principle, a voluntary and non-suspensory regime. This means that, unlike in many other jurisdictions, companies are not legally required to notify the CMA of a proposed merger before it is completed. However, there are significant risks associated with not notifying a potentially problematic merger. The CMA has the power to investigate mergers on its own initiative, both anticipated and completed. If it finds that a completed merger harms competition, it can order remedies up to and including requiring the merger to be unwound, which can be a costly and disruptive process for the businesses involved.
## Jurisdictional Thresholds
For the CMA to have the authority to investigate a merger, a “relevant merger situation” must be created. Section 23 of the EA 2002 establishes two alternative jurisdictional tests for this purpose. The CMA has jurisdiction if either:
1. The **turnover test** is met: The UK turnover of the enterprise being acquired exceeds £70 million.
2. The **share of supply test** is met: The merger will result in the creation or strengthening of a 25% or greater share of the supply or purchase of particular goods or services in the UK, or a substantial part of it.
The share of supply test is notably flexible. It does not require a formal market definition and allows the CMA to aggregate different categories of goods or services. This breadth gives the CMA considerable discretion to review mergers, even where the parties have a relatively small market share in a narrowly defined economic market (Whish and Bailey, 2021). This ensures that the CMA can scrutinise mergers that may not involve large companies but could still have a significant negative impact on competition in specific niche areas.
## Substantive Assessment and Remedies
Once the CMA establishes it has jurisdiction, it proceeds to the substantive assessment. The core question, set out in section 22 of the EA 2002, is whether the merger “has resulted, or may be expected to result, in a substantial lessening of competition” (SLC). An SLC can manifest in various ways, such as higher prices for consumers, reduced product quality, less innovation, or a reduction in choice.
The CMA’s investigation process is typically divided into two phases. A Phase 1 investigation is a preliminary review to determine if there is a “realistic prospect” of an SLC. If the CMA finds this to be the case, and the parties do not offer suitable undertakings to resolve the concerns, the investigation is referred for a more in-depth Phase 2 review.
If a Phase 2 investigation concludes that a merger is likely to result in an SLC, the CMA has a duty to remedy the situation. It has wide-ranging powers to impose remedies, which can be either structural or behavioural. Structural remedies are generally preferred as they are a one-off solution that restores the competitive structure of the market, such as requiring the sale of a part of the merged business. A high-profile example of the CMA’s powers was its prohibition of the proposed merger between Sainsbury’s and Asda in 2019, on the grounds that it would lead to a substantial lessening of competition at both a national and local level, resulting in higher prices and reduced choice for consumers (Competition and Markets Authority, 2019).
## Conclusion
In summary, the UK merger control regime, administered by the CMA under the Enterprise Act 2002, provides a robust framework for scrutinising mergers and acquisitions. Through the application of its jurisdictional thresholds and the substantive SLC test, the CMA aims to ensure that markets remain competitive and that consumers are protected from the adverse effects of anti-competitive consolidation. While the notification system is voluntary, the CMA’s powers to investigate completed mergers and impose significant remedies create a strong incentive for businesses to engage with the authority on any transaction that could raise competition concerns.
## References
- Competition and Markets Authority (2019) Sainsbury’s / Asda merger inquiry. Gov.uk.
- Enterprise Act 2002, c. 40.
- Whish, R. and Bailey, D. (2021) Competition Law. 10th edn. Oxford University Press.
