A new era for the UK’s merger control regime
After much anticipation, changes to the UK’s merger control regime brought about by the Digital Markets, Competition and Consumers Act 2024 (Act) took effect on 1 January 2025.
Representing the most significant reform to UK competition and consumer protection laws for over 20 years, the Act introduces substantial changes to the UK’s merger control regime, expanding further the UK regulator’s wide powers of review.
Key features of the UK’s merger control regime
Aside for certain transactions by firms designated as having Strategic Market Status (SMS) in relation to one or more digital activities, the UK’s merger control regime remains voluntary and non-suspensory. This means there is no obligation to inform the Competition and Markets Authority (CMA) about a qualifying transaction or wait for clearance from the CMA before completing a qualifying transaction.
However, the CMA has the power to “call in” qualifying transactions for review, including completed deals. The CMA is vigilant in monitoring deal activity, and through its market intelligence function, the CMA frequently reviews a considerable number of transactions each year which have not been notified to it. If a completed deal is “called in” for an investigation and the CMA identifies substantive competition concerns, this raises significant legal and commercial risks for the merger parties – including the risk of the CMA ultimately ordering the parties to unwind the transaction.
The question of whether to notify the CMA about a transaction is therefore a commercial decision based on an assessment of a range of factors, including whether the transaction qualifies for review; the risk of the transaction resulting in substantive competition concerns; whether the subject matter of the transaction is likely to be of interest to the CMA; and the risk of third party complaints.
Changes to the UK’s merger control thresholds – key takeaways
The CMA can review deals which meet the following thresholds:
- The target generates UK turnover of £100 million (approx. US$ 131.5 million / €118.7 million), adjusted upwards from £70 million
- The acquirer and target together account for a share of supply of goods or services in the UK of 25% or more
Importantly, the Act expands the jurisdiction of the CMA to review transactions by introducing a new hybrid test. The new test will enable the CMA to review acquisitions where:
- At least one merging party (eg the acquirer) has an existing share of supply of 33% in the UK AND UK turnover of at least £350 million (approx. US $460.5 million / €415.5 million)
- The other party (eg the target) has a UK nexus. This is satisfied when the relevant party is incorporated in the UK, carries on activities in the UK, and/or supplies goods or services in the UK
The test operates in such a way that the buyer alone can meet the threshold, without there being any increment at all to its market share. This therefore brings more types of transactions within the scope of the CMA’s jurisdiction, including:
- “Vertical” mergers (between parties who operate at different levels of the supply chain)
- “Conglomerate” mergers (where the parties supply complementary goods / services)
- So-called “killer acquisitions” (where the target is a nascent / start-up company, with little or no turnover)
The Act also introduces a new “safe harbour” for small deals. Where the UK turnover generated by each party is less than £10 million, the CMA will not have jurisdiction to review it.
Procedural changes – key takeaways
The CMA’s formal powers to compel the production of information relating to transactions will have extra-territorial effect. The CMA can also assist overseas regulators, including through issuing formal requests for information.
The CMA will also gain enhanced powers to impose significant penalties (up to 1% of global turnover or 5% of global daily turnover) on businesses for failure to comply with formal information requests.
Failure to comply with final orders made by the CMA and undertakings given to the CMA can also result in significant penalties of up to 5% of global turnover.
The Act will also introduce changes to bring enhanced efficiencies to the CMA’s processes, including the ability for the merger parties to request a “fast track” reference to a detailed Phase 2 investigation, without needing to concede competition concerns.
Implications
The expanded jurisdiction of the CMA will bring more complexity to the UK’s merger control regime. Domestic and international businesses who are considering transactions which have a UK nexus will need to consider carefully whether the transaction is likely to qualify for review by the CMA; and if so, formulate an appropriate regulatory strategy for managing regulatory risk.
Enhanced penalties for procedural infringements also significantly raise the stakes in terms of compliance with the CMA’s processes.
The anti-trust practice at Mills & Reeve has extensive experience of advising clients on all aspects of the UK’s merger control regime, including strategic advice on deal structure; conducting risk assessments; advising on strategy for navigating the regulatory process; and representing clients on complex Phase 1 and Phase 2 merger investigations by the CMA.
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