1. Key takeaways
- EU Merger Regulation ("EUMR") rules no longer apply to transactions that were not notified to the European Commission prior to 31 December 2020.From 1 January 2021, parties may need to notify both the European Commission and the CMA independently.
- Loss of the EU's "one-stop-shop" coverage in the UK will impact deal timetables and substantive scrutiny of deals – e.g. the UK regime allows for scrutiny of minority investment shareholdings even as low as 15%.
- The EU-UK Trade and Cooperation Agreement ("TCA") does not provide for a harmonised EU-UK approach to merger control, though it permits future cooperation between the Commission and the CMA. However, there is no such agreement currently in place.
- Lack of formal cooperation and parallel merger investigations may lead to divergent outcomes.
2. Limited merger control provisions in the TCA
The TCA contains only a limited reference to merger control.1 The key takeaway is that UK and EU merger control regimes are now distinct and operate in parallel. There is no requirement in the TCA for the regimes to be substantively aligned, i.e. the CMA can define its own scope of what it considers to be a concentration with "significant anticompetitive effects" going forward.
The TCA requires "endeavours" from the CMA/Commission to cooperate and coordinate enforcement activities concerning the same/related transactions, where doing so is "possible and appropriate". Such cooperation extends to exchange of information, to the extent permitted by EU/UK law, and permission to conclude a CMA/Commission cooperation agreement.
No materials have been published to date on a cooperation agreement between the CMA and Commission, though it is reasonable to expect one to be concluded by the end of 2021. It is unclear whether this agreement would cover the Commission's jurisdiction alone, or also include the national competition authorities of the EU Member States ("NCAs"), or even national courts, and aim to replicate the CMA's previous European Competition Network access. In the interim, the CMA's Brexit guidance notes that it will endeavour to coordinate merger reviews in cases where the Commission also has jurisdiction.2
The substantive rules governing the respective jurisdictions of the CMA and the Commission post-Brexit – i.e. after 31 December 2020, are found in the EU-UK Withdrawal Agreement. Key points are:
- Continued competence cases: the Commission remains the competent authority for investigation and clearance/prohibition of mergers notified to it before 31 December 2020 ("EUMR cases"), though these will reduce over time. The CMA is prevented from taking action in respect of EUMR cases.
- Commitments: the Commission remains the competent authority for the monitoring and enforcement of any commitments given in EUMR cases, including where the commitments were given by the parties after 31 December 2020 in relation to those cases. Monitoring and enforcement may be transferred to the CMA by the Commission.
- Following successful appeal / annulment of a Commission decision: the CMA may assume jurisdiction to review any UK elements of the merger that would not be re-examined by the Commission, even though the case forms part of the Commission's pre-Brexit jurisdiction.
3. Re-focus on the UK regime
The EU "one-stop-shop" filing – which prevents the NCAs from investigating a merger that has been notified to the Commission – no longer applies to the UK. Parties will therefore need to consider whether a separate UK filing will also be required, which may trigger parallel merger reviews in the UK and the EU. Key points of difference in the UK regime are:
Key deal considerations:
- Voluntary regime – the UK is a voluntary filing regime.A "call-in" power of non-notified transactions for up to 4 months after completion/deal publication means a decision not to file needs to be taken with care.
- Deal timetables – the UK review timetable is longer than that under the EUMR,in particular in a first phase review (8 weeks to the EU's 5 weeks), in both cases requiring potentially extensive pre-notification exchanges.
- UK conditions to clearance – the UK will no longer be covered by an EUMR condition to clearance in transaction documents, and consideration will need to be given to any UK substantive issues that may affect timing and the parties' obligations.
- Impact of the proposed FDI regime – where parties are required to notify the Department of Business and Industrial Strategy (BEIS) of an acquisition, e.g. in the proposed mandatory sectors, a merger notification to the CMA may be inevitable (noting that the legislationprovides for cooperation between the CMA and BEIS). The new regime is expected to enter into force this year (see our commentary here).