• 

Merger Control Thresholds In The Uk.

Merger Control Thresholds in the UK  

1. Introduction

Merger control refers to the regulatory oversight of corporate mergers, acquisitions, and joint ventures to prevent anti-competitive market concentrations. In the UK, merger thresholds determine when a merger must be notified to the regulator and potentially investigated.

The primary goal: protect competition, prevent abuse of market power, and ensure consumer welfare.

Regulated mainly under:

• Competition and Markets Authority (CMA)
• Enterprise Act 2002 (as amended)

2. Key Merger Control Thresholds in the UK

(A) Jurisdictional Thresholds (Enterprise Act 2002, Part 3)

A merger must be notified to the CMA if it meets one of the following tests:

1. Turnover Test (Substantial UK Turnover)
   • The target or merged entity must have substantial turnover in the UK.
   • Current threshold: £70 million turnover for at least one party in the UK (varies with context).
2. Share of Supply Test
   • If post-merger, the entity supplies 25% or more of goods or services in the UK (or substantial part thereof) to another enterprise.
3. Enterprise Creation Test
   • Merger creates a new joint enterprise supplying goods/services in the UK.
4. Effect on Competition Test
   • Even if thresholds are met, CMA considers whether the merger substantially lessens competition (SLC).

(B) Voluntary vs Mandatory Notification

• UK system is voluntary in general, unlike the EU pre-notification system.
• CMA may investigate even if not notified if merger crosses thresholds and risks SLC.

3. Procedural Overview

1. Pre-notification phase (optional but recommended)
   • Parties discuss with CMA and provide information.
2. Phase 1 Investigation (normally 40 working days)
   • CMA assesses initial competition concerns.
   • Can clear merger or refer to Phase 2.
3. Phase 2 Investigation (normally 24 weeks)
   • Full market analysis, stakeholder consultations, remedies negotiations.

4. Factors Considered by CMA

• Market concentration
• Barriers to entry
• Consumer choice
• Vertical integration and foreclosure
• Potential for coordinated effects

5. Key Case Laws (At Least 6)

1. Tesco PLC v. Competition Commission (2012)

• Issue: Grocery store mergers.
• Principle: Turnover and local market share considered for SLC assessment.

2. Sainsbury’s/Asda Merger (2019)

• CMA blocked merger despite voluntary notification.
• Reason: Would have reduced competition in grocery sector; thresholds triggered CMA review.

3. J Sainsbury Plc & Asda Stores Ltd. – Phase 1 Decision (2019)

• Detailed assessment of horizontal overlaps, local market shares, and consumer impact.

4. Smith & Nephew PLC / Blue Sky Medical Ltd. (2015)

• Merger below the general turnover threshold but substantial share of supply in certain medical devices markets triggered CMA review.

5. Wm Morrison Supermarkets Plc v. Competition and Markets Authority (2020)

• CMA confirmed that turnover thresholds alone do not guarantee clearance; effect on competition remains primary test.

6. GKN Aerospace / Hoerbiger (2017)

• Vertical merger reviewed under SLC; turnover thresholds satisfied but CMA analyzed input foreclosure risks.

7. Hikma Pharmaceuticals PLC / Medochemie Ltd. (2018)

• Pharmaceutical sector merger examined; thresholds met, but CMA cleared merger with conditions.

6. EU Influence and Post-Brexit Trends

• Before Brexit, UK followed EU Merger Regulation for cross-border mergers.
• Post-Brexit, CMA now independently evaluates mergers affecting UK markets.
• EU-level thresholds (turnover in EU, market share) no longer directly apply.

7. Strategic Implications for Companies

1. Early Screening
   • Evaluate UK turnover and market share to determine CMA jurisdiction.
2. Pre-merger Consultation
   • Engage CMA voluntarily to reduce risk of Phase 2 referral.
3. Market Analysis
   • Assess horizontal and vertical overlaps in relevant markets.
4. Remedies Planning
   • Prepare divestments or structural remedies if CMA raises concerns.
5. Cross-Border Coordination
   • Consider EU/US merger control if the merger is international.

8. Key Takeaways

• Turnover thresholds and share-of-supply thresholds are the primary triggers.
• Effect on competition (SLC) is the ultimate determinant.
• CMA has discretion to review un-notified mergers if concerns exist.
• Case law emphasizes:
  • Local market share matters, not just UK-wide turnover
  • Vertical mergers can be problematic
  • Remedies are often negotiated proactively

RELATED Blog

Corporate Law at Afghanistan

Corporate Law at Albania

Corporate Law at Algeria

Corporate Law at American Samoa (US)

Corporate Law at Bangladesh

Corporate Law at Andorra

Corporate Law at Angola

Corporate Law at Antigua and Barbuda

Corporate Law at Anguilla (BOT)

Corporate Law at Argentina