Other Author      Ruth Neligan, Trainee Solicitor

Last week, the CMA unwound the acquisition by Cérélia of Jus-Rol's UK and Ireland dough business. This is an interesting decision at the start of 2023, indicative of the CMA's approach to merger control. Although the UK authority has always been a serious regulator, post Brexit, in a number of cases, it has showcased its clear sense of purpose, and willingness to weigh in with its hefty fining powers and decisions.

The UK's formal exit from the European Union on 31 January 2020 resulted in a number of changes to the country's merger control regime - some anticipated, others less so. Below, we look at seven key trends we have seen emerge since Brexit, and how they appear to be shaping the merger control landscape into 2023 and beyond. We also look at new reforms being cooked up, and the impacts they could have going forward.

1. (Not quite) double helpings of merger review

When the UK left the European Union, much was made of the end of the 'one-stop shop', with concerns around divergent outcomes and uncoordinated decisions, and questions about how the CMA could take on so much additional merger work. Much of this has not happened in practice:

  • Of the predicted 30-50 parallel i.e. extra cases (which would have been a 50% increase), only 121 were opened in 2021 and nine in 2022. This is far less than half the number mooted, and six of these were granted unconditional parallel clearances.
  • Of those 20 cases, five reached a divergent outcome, meaning that in five cases, one authority blocked a deal whilst another permitted it.2
  • The CMA has increased head count, and staff work across tools meaning that the CMA has enough flex in its system to resource cases up and down as need be.

2. Too many cooks? The CMA's collaboration with other authorities

The CMA has emphasised the need to work closely with other authorities post-Brexit. By way of recent example, the theme of collaboration features prominently in its Annual Plan which is currently out for consultation. Similarly, the CMA has emphasised in speeches the need to work closely with other authorities – see for example, this speech by Sarah Cardell, now CEO of the CMA, given at the Berkeley Forum last year, where she summarised a number of key issues in UK merger control, including post Brexit co-operation (Berkeley Spring Forum: Mergers policy and practice - GOV.UK (www.gov.uk)). The CMA's Jurisdictional Guidelines, updated following Brexit, emphasise the need for authorities to coordinate on merger review and remedies. We have seen this for example, in its collaboration with the Australian Competition and Consumer Commission ("ACCC") and the German Bundeskartellamt in a joint statement on merger control

The French Autorité de la concurrence's ("FCA's") activity has mirrored this trend of joined up working, taking a proactive approach to pursue mergers which may block innovation, but fall short of the statutory thresholds at which the FCA could claim jurisdiction. It has done this by making use of the European Commission's statement3 that it will accept referral of sensitive mergers, even when they do not meet the criteria for examination at the national level (for example, the FCA's referral of the Illumina/GRAIL matter). Interestingly, the Bundeskartellamt has bucked the trend, by investigating Meta/Kustomer in parallel with the Commission, putting the 'one-stop shop' principle under further strain. See further on this case below.

Some notable instances of collaboration for the CMA have been:

  • Cargotec/Konecranes: on this case, the CMA, DOJ, ACCC and European Commission all raised similar concerns regarding the merger. All authorities applied a broadly similar analytical framework, but the CMA rejected the proposed remedies. Although the DOJ's and ACCC's investigations did not finish before the merger was abandoned, both authorities also indicated that they had concerns with the remedy and the DOJ told the parties that it was preparing a challenge to the transaction. The European Commission came to a different conclusion on remedies based on its evidence from players on the market, reflecting to some extent, differences in the underlying evidence base;
  • Stryker/Wright: the parties offered a divestment package to address competition concerns in both the US and the UK, the CMA extended its timetable for considering remedies to align with the Federal Trade Commission's timetable and ensure that any remedy accepted by the CMA was also acceptable in the US (and vice versa); 
  • S&P/IHS: the CMA worked closely with the US and the European Commission on a material divestment package; and

All that said, the CMA frequently stresses that its priority is to get the right outcome for UK consumers, not to avoid divergence per se. The CMA, reaches its own decisions based on UK law, guidance, and the facts of each case. For example, in Veolia/Suez, a case in which the Commission cleared the merger with Phase 1 remedies (which are detailed here), only for the CMA to refer the merger to a Phase 2 investigation a week later. The CMA has subsequently ordered that the deal be unwound in the UK. Note that it often only takes one authority to block a deal to render the deal 'not viable'. Roll on a formal co-operation agreement with the EU…in the meantime, in practice, parties are giving confidentiality waivers to permit co-ordination.

3. The challenges with catering to all tastes

As per other agencies, the CMA has recently adopted an increasingly expansive approach to jurisdiction, particularly to deal with digital and dynamic markets. For example:

  • Roche/Spark, when the CMA measured share of supply by reference to number of employees and number of patents; and 
  • Sabre/Farelogix, when the CMA attributed a UK of share of supply to the target, despite the target having no direct UK customers and no UK turnover. This was subsequently upheld in the CAT which affirmed the wide discretion of the CMA in applying the SoS test including the need for no minimum increment; and
  • Facebook/Giphy, when the CMA asserted jurisdiction over the transaction on the basis of its share of supply test, even though Giphy did not generate any revenue in the UK. The CMA found that Facebook and GIPHY overlap in "the supply of apps and/or websites that allow UK users to search for and share GIFs" – so a very wide definition,  especially given the vertical integration of GIPHY's GIFs into Facebook's services.

The share of supply test therefore enables the CMA to sometimes review transactions which would otherwise not be capable of investigation in other countries (which, for example, only have a turnover test). However even that has its limits; it is not applicable in purely vertical cases, so the CMA could not call in Illumina/GRAIL, whilst the European Commission, and other National Competition Authorities relied on Article 22 EUMR to ensure the merger was reviewed.

Proposed CMA reforms published in April 2022 will see the CMA's review powers expanding even further both in terms of turnover thresholds for review and considering amendments to the share of supply test. The CMA has said that it will take a more focused approach, excluding smaller enterprises from merger review and capturing 'killer acquisitions' and other mergers which do not involve direct competitors.4 These reforms are detailed in point 7 of this Article. Should they become law, the new thresholds will enable the CMA to scrutinise a greater range of transactions. In this context, the fairly new briefing note procedure (which really just brings back into play, the informal / confidential guidance that the OFT used to provide), that is becoming more widely used, and that in appropriate cases can provide informal comfort within a few days that the CMA does not intend to investigate, might be employed by parties and their advisors even more.5

4. A crème de la crème caseload

Post Brexit, the CMA has been involved with some larger and more complex mergers than previously in part due to the end of the one stop shop. Key cases include:

  • Illumina/PacBio; ThermoFisher/Gatan; and Nvidia/Arm: all deals abandoned;
  • Sabre/Farelogix (see above);
  • Facebook/Kustomer: the CMA cleared Facebook's acquisition of Kustomer unconditionally at Phase 1, and the EC cleared at Phase 2 review without remedies;
  • Carpenter/Recticel: The CMA accepted a fast track remedy following a Phase 2 investigation. It concluded the acquisition would reduce competition in the UK, and that Carpenter will be required to sell the majority of the UK arm of Recticel's engineered foams business to an independent third-party, approved in advance by the CMA. Carpenter has now agreed to divest Recticel’s UK assets and operations to a “suitable upfront purchaser.”
  • Sika/MBCC: The CMA accepted remedies at Phase 2 after the parties conceded the SLC found at Phase I.  Sika and MBCC are the two largest UK suppliers of chemical admixtures used in concrete and cement. Sika's acquisition of MBCC was completed in November 2021 as part of a £4.5 billion deal.
  • Microsoft/Activision: On 5 January 2023 the CMA issued an eight week extension for the issue of its final report into this Phase  merger enquiry. The updated report will now be issued by 23 April 2023. This is due to the scope and complexity of the investigation, and the need to consider evidence, main party and third party submissions. This $69bn deal is also being looked at by the US Federal Trade Commission (who recently announced they would file a lawsuit to block the merger), the European Commission and around 8 other national competition agencies. In a similar vein, Broadcom’s $61 billion acquisition of virtualization software specialist VMware is currently being looked at by the CMA in Phase 1. This deal is also being reviewed by the European Commission (Phase 2) and the US Federal Trade Commission, which issued a second request in July. The parties also need clearance from China and South Korea. Brazil gave its unconditional approval last October.

5. Bold administrative penalties leaving a bitter taste

The CMA has recently imposed administrative fines on Facebook (£50.5m, in relation to the Facebook/Giphy case) and ION Trading Technologies (£325,000) for non-compliance with its Initial Enforcement Orders ("IEO's"). The fine on Facebook is notable for its scale, which is significantly above previous fines issued by the CMA. It is also notable that prior to the imposition of the fine, Facebook had twice appealed the scope of the IEO imposed on it by the CMA, and the CMA's refusal to grant derogations from that IEO. The Competition Appeal Tribunal (the "CAT"), and subsequently the Court of Appeal, endorsed the CMA's approach to the imposition of IEOs, and we therefore expect that the CMA will continue to take a robust approach to enforcement of those orders and the operation of it investigations more generally. A practical effect of this is the need to provide contractually, for the possibility of intervention by the CMA, and corresponding allocation of risks.

6. Merger control, Subsidy Control and NS&I…a recipe for success?

One of the biggest changes to the UK merger regulatory regime has been the introduction of the UK's new national security regime, which came into force in January 2022 and which we are now beginning to feel the impact of. Both the CMA and Investment Security Unit have publicly acknowledged that coordination between the authorities is to be expected. The CMA issued a revised version of its "Guidance on the CMA's Jurisdiction and Procedure" on 4 January 2022, in which it notes that "the CMA and the ISU expect to coordinate, as may be appropriate, to manage the interactions between the two regimes that may arise in specific cases".

Separately, on 4 January 2023, the UK's new Subsidy Control Act came into effect. This sees the CMA establish a Subsidy Advice Unit ("SAU"). In contrast to the EU's State Aid Regime, the SAU will not provide an ex ante approval, but will be able to provide a non-binding assessment on the basis of its analysis. All subsidy awards can be challenged in the Competition Appeal Tribunal ("CAT") for judicial review.

7. What's cooking for 2023 and beyond?

The Digital Markets Act entered into force in the European Union on 1 November 2022 and digital markets have clearly been a global focus for merger control in recent years. The CMA has advised the introduction of a mandatory notification for certain mergers by companies designated as having "strategic market status" too. In addition, the forthcoming  Digital Markets, Competition and Consumer Bill will be brought forward early this year and see the establishment of a specialist Digital Markets Unit within the CMA.
On 20 April 2022 the UK Government published its consultation response on Competition and Consumer Policy, detailing key reforms to be undertaken in the coming years. These look set to include:

  1. raising the turnover threshold in line with inflation;
  2. creating an additional basis for establishing jurisdiction to enable review of so-called 'killer acquisition' and other mergers which do not involve direct competitors. Jurisdiction would be established where at least one of the merging businesses has: (a) an existing share of supply of goods or services of 33% in the UK or a substantial part of the UK; and (b) a UK turnover of £350m. In response to feedback received these thresholds have been raised from the levels originally consulted upon;
  3. introducing a small merger safe harbour, exempting mergers from review where each party's UK turnover is less than £10 million, to reduce the burden on small and micro enterprises;
  4. the government will also continue to monitor the operation of the share of supply test and may consider further proposals on how to reform it;
  5. enabling the CMA to deliver more effective and efficient merger investigations by:
    1. accepting commitments from businesses which resolve competition issues earlier during a phase 2 investigation
    2. enhancing and streamlining the merger 'fast track' procedure
    3. updating how the CMA is required to publish its merger notice

A lesson in the importance of preparation…

As the CMA heads into a post-Brexit brave new world it has been keen to ensure that it is seen as an equal to other regulators like DG Comp. Its interventionist approach towards some of today's most high profile deals and its decision to impose large penalties on others suggest it is ready to show its teeth and step into its new role with confidence (even if some of its expanded powers are still in draft form). 

Crucially, the CMA's intervention in the Facebook/Giphy case serves as a timely reminder that it only takes one jurisdiction blocking a merger to jeopardise a deal. For this reason, whilst the UK regime remains unique in that it is voluntary (maybe now more hybrid?) and non-suspensory (subject to IEOs), it is a force to be reckoned. Early engagement with the CMA is always advisable wherever possible to ensure the smooth running of a deal, not least because the UK merger control timetable is longer than that of the EU and most other leading merger control regimes.

1 Including Facebook/Kustomer, Cargotec/Konecranes (UK), NVIDIA/Arm (UK), Veolia/Suez, S&P Global/IHS Markit, Thermo Fisher/PPD, SK Hynix/Intel's NAND and SSD business, Graphic Packaging/AR Packaging, and AstraZeneca plc/Alexion Pharmaceuticals, Inc.

Being reviewed in 'different phases', are not considered divergent outcomes for these purposes.


'A rebalanced Merger control system' Reforming competition and consumer policy: government response - GOV.UK (www.gov.uk)

5 The number of briefing papers submitted in 2020/21 represented an increase of 112% relative to 2020/21 according to the CMA’s figures.