New Merger’s Charter and merger remedies review: should business leaders be toasting this news from the CMA?

As discussed in our blog post last month on the competition law regulators' response to the government, the government has issued the Competition and Markets Authority (CMA) with a "Strategic Steer" to exercise its regulatory responsibilities in a manner that supports economic growth.

What does this mean for merger control in the UK? It will take time for this to become clear, but the CMA has been dropping some strong hints about what to expect. Last month, CEO Sarah Cardell published a piece promising that under her leadership the CMA would apply four key principles to the CMA’s merger control function, with the intention that these principles will also apply across all areas of the CMA’s activities:

• Pace (reaching faster decision on mergers, and minimising in-depth reviews)
• Predictability (clarifying the CMA’s remit)    
• Proportionality (minimising burden on business)
• Process (more direct business engagement)

Under the "proportionality" heading of her article, Cardell said:

“Our objective is for as many of the deals as possible which raise competition concerns to be cleared with effective remedies, rather than be prohibited... So, in March we are launching a review of our approach to remedies, looking not just at process but also how we strike the right balance between different types of remedies.”

Under the "process" heading, we were told:

"It is vital for investor confidence that all businesses… recognise a sense of fairness and consistent treatment across all investigations. That’s why, in March, the CMA will publish a Mergers Charter. The charter will include our firm public commitment to pace, predictability, proportionality and process, as well as laying out what will be needed - from the CMA, businesses and advisors - to ensure the success of this new approach.”

Today, the CMA has followed through on both counts.

Merger remedies review

The CMA is inviting feedback on three key topics: 

1. How the CMA approaches remedies, including the circumstances in which a behavioural remedy may be appropriate. This is likely to be an area of focus for responses, following the decision of the CMA to accept an innovative behavioural remedy in the Vodafone/Three merger, thereby allowing it to proceed.
2. How remedies can be used to preserve any pro-competitive effects of a merger and other customer benefits.
3. How the process of assessing remedies can be made as quick and efficient as possible.

Interested parties can provide feedback on the above in writing here, or in person by attending a webinar on 19 March. Further roundtable discussions are also planned.

Mergers Charter

This publication is described as “a statement of intent”, which will be supported by further CMA guidance in due course. As well as setting out the clear principles and overarching expectations for how the CMA will engage with business and their advisors during merger reviews, it also contains some interesting comments about the support the CMA expects from business in order to deliver on its “four ps” approach. These include the following:

“To ensure the CMA can be as predictable as possible, we expect:

• engagement between business executives and the CMA to be conducted in a full and frank manner, recognising the benefits of direct engagement where possible.
• businesses to keep the CMA updated and share relevant information directly with the CMA, rather than our learning of it through other channels.” 

“To facilitate constructive engagement with the CMA, we expect:

• businesses (including senior business personnel) to engage directly with the CMA where possible.
• advisors to provide and facilitate constructive and timely engagement with the CMA at all times.”

“To enable us to progress our merger reviews efficiently and at pace, businesses are expected to:

• streamline the provision of information and analysis, whilst ensuring comprehensive responses to relevant lines of inquiry.”

“To ensure the CMA operates proportionately, we expect to:

• receive tightly-scoped submissions which are focussed on the main issues of potential concern identified by the CMA”.

Our comment

The Mergers Charter is underpinned by the goal of reaching the right decisions as quickly as possible, whilst minimising the burden on business. Building on this theme, there is much in the Charter that businesses may welcome, at least in principle. For example, it contains commitments from the CMA to: 

• Conduct its reviews efficiently, focussing rapidly on any important emerging areas of concerns while standing down other lines of inquiry where no clear evidence of concern arises
• Conduct targeted, efficient and proportionate information gathering, focusing on information that is relevant and specific to areas of concern
• Act proportionately, including when designing remedies to address identified concerns – a theme that will be explored in the call for evidence on mergers remedies.

It is also clear that, from the CMA’s perspective, the success of the “four ps” approach will depend on businesses and advisors recognising that this is a shared endeavour. The CMA sees constructive and direct engagement with business as being vital to the CMA’s ability to take well-informed, evidence-based and timely decisions. The Charter therefore makes it clear that businesses will be expected to meet deadlines for information requests, field appropriate personnel for meetings (including senior personnel) and engage directly with the CMA where possible. The Charter also sets out the CMA’s expectation (perhaps relevant to advisors as much to businesses) that it should receive “tightly-scoped submissions” focussed on the main issues of potential concern that it has identified: a clear indication that less can be more. 

While business leaders may be encouraged by the CMA’s announcements, it may be too soon to raise a toast. It is clear that the success of the Charter will hinge on businesses’ cooperation as well as the CMA embedding the “four Ps” in its work, and only time will tell how the Charter will apply in practice. That said, if the Charter and the CMA’s approach to remedies does translate into the CMA reaching the right decisions as quickly as possible, whilst minimising the burden on business, there will be much to celebrate.  

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