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The rules apply to trade between member states in the common market. The merger may be restricted or prevented if it impedes competition significantly and therefore adversely affects consumers. Parties may agree to take particular steps to mitigate the reduced competition, and therefore avoid prohibition — such as granting a license to another company to use the technology of the companies involved in the merger.

Cartels are illegal under EU competition law. In general terms, EU Treaty law forbids national governments from giving unfair assistance to its industries — such as through subsidies. However, there are some exceptions, including development aid for especially poor regions, or where the social benefits of aid will not distort the operation of the single market - for example, areas with very high unemployment.

This continues to be an area where the future is uncertain. Multinational mergers will need to be considered in the UK as well as the EU, in the same way as multinational mergers often need to be considered in any number of jurisdictions worldwide.

There is no suggestion of changing the basic test for prohibition i. However, there is no clarity at this stage in relation to these ideas and some resistance to them on the grounds that they would increase uncertainty. It seems very likely that rules on state aid will continue to operate at a similar level, and the government has confirmed that, for the duration of the implementation period, the Commission will still be enforcing EU state aid rules. Indeed, the government has recently confirmed its intention to transpose EU state aid rules wholesale under the EU Withdrawal Bill, and these rules will continue to apply to all sectors, including agriculture, fisheries and transport and will replicate any existing exemptions from state aid rules.

Should the UK have more of a free hand as regards state aid controls, the key focus of change appears currently to not be the level of aid permissible, but streamlining the procedures for approving aid. The government appears to have recognised that Brexit will lead to a significant growth in the work of the CMA, both in relation to mergers and anti-trust cases.


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The government has recently confirmed that at the point that a UK state aid authority is required, the CMA would be best placed to take on the role of state aid regulator. This reflects its experience and understanding of markets and the independence of its decision-making from government. A high degree of future co-operation between competition enforcement bodies seems to be likely. This will mean a comprehensive competition co-operation agreement will need to be negotiated with the EU and similar agreements will be required with those jurisdictions with whom the EU currently has similar bilateral agreements.

In the latest draft of the Transitional Agreement draft 3 between the UK and the EU it has been agreed that there will be a transition or implementation period that will start on Brexit day, 29 March and end on 31 December Though negotiations remain ongoing with much still to be agreed, the aim is to agree a final draft by October If you would like to learn how Lexology can drive your content marketing strategy forward, please email enquiries lexology.

Consequently, I find the news releases put out by the various law firms invaluable in keeping me up to date on developments in the law and recent case law. The service that Lexology provides, through consolidating those various news releases and grouping them under the relevant categories, is a timesaver for me and allows me to do a quick daily scan of recent developments. The use of initial enforcement orders in anticipated mergers is less common. Such an order will not normally prevent formal legal completion of the transaction, but it will restrict any integration steps being taken either before or after completion.

Finally, the CMA can order the reversal of any integration steps that may already have been taken. If the Phase 1 review is curtailed to the extent that the CMA cannot gather sufficient evidence to satisfy itself that the merger does not give rise to competition concerns, it may take the cautious approach and refer it for a Phase 2 investigation in circumstances where, had there been more time, a Phase 2 reference would not have been necessary.

Bibliographic Information

Since prior clearance is not mandatory in the UK, there is no need to delay completion to await UK clearance, or to carve-out the UK aspects of the transaction pending UK clearance. The factors to be taken into account in deciding whether to notify in the UK are discussed above see question 3. This will depend on the structure of the transaction and of the businesses concerned. It is also important to note that the CMA has powers to require and enforce the continued separation of the merging businesses pending the conclusion of its investigation see question 3.

Mergers caught by UK merger control can be notified before or after completion, since there is no requirement to seek clearance prior to completion. The merger or the merger plans must, however, be considered to be in the public domain before a notification is filed, as the CMA will need to publicise the notification and will consult third parties. A planned merger can be notified from the point at which the structure is reasonably clear and stable, and confidentiality about the planned merger is not a concern. As regards public offers, notification can be made at any point after the intention to bid has been announced — there is no requirement to wait until the offer itself has been made indeed, with a pre-conditional public offer, announcement of the intention to make an offer is made before the offer document has been posted to shareholders, because the offer cannot be made formally until and unless competition clearance is received — see question 3.

Note also that the CMA has discretion not to refer a proposed merger for a Phase 2 investigation where it considers that the merger is not sufficiently advanced or which it considers is not sufficiently likely to proceed. This process is conducted in strictest confidence, without third-party consultation. Parties are therefore expected to articulate to the CMA the potential jurisdictional or substantive concern. Informal advice is not binding on the CMA.

For example, if subsequent third-party consultation reveals competition concerns of which the CMA was not previously aware, its ultimate decision on whether to refer may differ from the informal advice previously given.

CLIENT INTELLIGENCE

It is also possible, once a merger agreement has been signed, to seek guidance from the Mergers Intelligence Committee on whether a merger is likely to be investigated. Following submission of a briefing note, the CMA will either follow-up with further questions, open an investigation, or indicate that it does not have any further questions. This can be a useful source of reassurance for the parties to qualifying mergers which do not raise material competition concerns about the risk of deciding not to notify.

Nonetheless, this does not preclude further questions at a later stage and, if further information comes to light, the CMA may open an investigation at any point until the expiry of the four-month statutory period set out in section 24 of the Enterprise Act. What are the main stages in the regulatory process? Can the timeframe be suspended by the authority? Since 1 April , there has been a statutory time frame for all Phase 1 investigations. The statutory timetable starts to run the day after the CMA notifies the parties that the notification see question 3.

This period can last a couple of weeks or a number of months, depending on the complexity of the competition issues and markets affected by the merger. If the CMA decides that its statutory duty to refer the merger for a Phase 2 investigation has been engaged, the parties then have a period of five working days from the Phase 1 decision within which they may propose remedies to remove the competition concerns. If it decides that they are, it has a period of up to 50 working days from the Phase 1 decision to consider, consult and accept the undertakings.

This period can be extended by a further 40 working days, such that the CMA has a maximum of 90 working days from the date of its Phase 1 decision within which to accept undertakings in lieu. If a Phase 2 reference is made, the timetable can be suspended by up to three weeks if the parties are considering whether to abandon the transaction in which case the Phase 2 investigation will not proceed. If, on the other hand, the parties clearly wish to proceed, Phase 2 can commence without any suspension of time.

Once it is clear that the parties wish to proceed, the CMA Inquiry Group has 24 weeks to complete its Phase 2 investigation although it has stated that it will aim to complete its review more quickly than that. Extensions have become fairly common in more complex cases where additional time is required by the Inquiry Group and CMA staff to complete the competition analysis. The CMA Inquiry Group then has a further 12 weeks from the date of the Phase 2 decision within which it must take any decision on remedies.

This period can be extended by no more than six weeks where the CMA considers there are special reasons for doing so see further question 5.

The maximum duration of Phase 2 is therefore 50 weeks. All of the above time limits Phase 1, Phase 2 and remedies can be suspended where the parties fail to respond in time, or fully, to a formal information request. Time will cease to run until the parties have provided the required information. The timeframe for assessment may also be extended where the public interest provisions of the Enterprise Act are triggered see further question 1. What are the risks in completing before clearance is received? As explained above in response to questions 3.

However, the CMA has extensive powers to prevent integration of merging businesses pending clearance:. Initial enforcement orders are kept in place throughout the investigation for more complex cases but are typically released during the course of Phase 1 in cases where the CMA becomes satisfied that the merger in question is likely to be cleared unconditionally. As noted above in response to question 3. It notes that this is more likely to occur in an asset acquisition than where a functioning business is being acquired.

However, the order will restrict any integration steps being taken either before or after completion. It also provides some useful examples of the types of derogation requests which will typically be granted such as the provision of back-office support services by the acquirer to the target , and the types of derogation requests which will typically not be granted for example, the transfer of sales functions from the target company to the acquirer.

In relation to derogation requests relating to the flow of information between the target and the acquirer, ring-fencing arrangements may be required to limit the potential impact of granting the derogation request. For example, where a listed company needs to have certain monthly financial information about the target business, a derogation may require this information to be disclosed only to individuals who do not have any involvement in the day-to-day commercial activity of the parent business. Where more than one derogation is being requested, all the requests should ideally be collated and submitted together, rather than submitting separate requests over a period of time.

At Phase 2, an existing Phase 1 initial enforcement order may be adopted and extended and amended if required. The purchaser is permitted to complete and take legal title to shares where it is legally obliged to do so pursuant to an obligation assumed before the Phase 2 reference was made — e. The prohibition on dealing does not apply to anticipated asset purchases.

Generally, the CMA will reach a case-by-case decision on whether Phase 2 hold separate arrangements are required including where an anticipated merger is completed during the reference period, or where the merger will take the form of an asset purchase. Phase 2 hold separates can be imposed by way of an order or can be given voluntarily by the parties in the form of undertakings. The CMA found that Electro Rent had failed to notify it of action it had taken in breach of the initial enforcement order, namely the termination of the lease over its UK premises.

At the time of writing, this is the first and only such fine imposed by the CMA. At the time of writing, the final guidance has not been published. The enquiry letter is likely to commence by asking for information to allow the CMA to establish whether it has jurisdiction over the transaction, and whether there are likely to be competition concerns arising from the merger. If the Mergers Intelligence Committee reaches the view that the CMA has jurisdiction and that there is merit in devoting resources to investigating the merger, further questions will be asked.

European Union - guide

Ultimately the information requested will be similar to what the parties would have provided had they notified the merger voluntarily using a Merger Notice. In particular, the statutory timetable see question 3. Where supporting documentation is in a foreign language, it would usually be appropriate to provide a translation. There are no documentation formalities, such as a requirement for copies or translations to be notarised, etc.

However, the CMA may be willing to grant derogations from the obligation to provide certain pieces or categories of information required in the Merger Notice, particularly in cases which are unlikely to give rise to substantive competition concerns. This can be discussed with the Case Team. As noted in the response to question 3. As noted, requests for derogations from the information requirements in the Merger Notice can also be made during pre-notification discussions. Depending on the complexity of the merger, the number of markets potentially affected and the extent of possible competition concerns, pre-notification discussions can take a number of weeks or even months.

Are there any informal ways in which the clearance timetable can be speeded up? The CMA does, however, offer a fast track reference to a Phase 2 investigation for cases where the CMA finds a concern with the merger which affects the whole or substantially all of the transaction and not just one part which could be dealt with by undertakings in lieu.

Competition and Markets Authority

This procedure accelerates the process leading up to a Phase 2 reference and is not available in relation to a Phase 1 clearance. The parties are expected to waive their normal Phase 1 procedural rights and absent any issues relating to EU Merger Regulation referral processes — see further question 2.

This procedure is not often used in practice. Accordingly, requesting a fast track reference does not involve any admission in relation to the merits of the case; it is simply an acknowledgement that the case is too complex to resolve within the limitations of the Phase 1 process.


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No party is responsible for notifying as there is no obligation to notify see question 3. Where the merger situation is an acquisition, the acquirer will typically take the lead in preparing any notification.