On 18 March, the CMA published new Merger Assessment Guidelines (the New Guidelines). Under the New Guidelines, the CMA will adopt a more flexible approach to the substantive assessment of mergers, particularly in digital markets. The New Guidelines also suggest the CMA will look to intervene in mergers where market shares are low or where the evidence of anticompetitive effects is slim.
The New Guidelines closely reflect the draft Guidelines published for consultation in November 2020 (the Draft Guidelines), but with some notable differences reflecting comments received in the public consultation. The CMA has also published a summary of responses to its consultation (Summary of Responses) alongside the New Guidelines.
The New Guidelines differ from the CMA’s previous Merger Assessment Guidelines, published in 2010 (the 2010 Guidelines), in the following important respects.
- Substantial lessening of The substantive test under UK merger control is whether a transaction would result in a substantial lessening of competition (SLC). Reflecting more recent case-law, the New Guidelines explain that “substantial” in this context does not necessarily mean “large”, “considerable” or “weighty” and can “encompass a range of meanings and will depend on the facts of the case”. The New Guidelines provide a list of scenarios that are likely to give rise to an SLC, and explain that the size of the market concerned and its importance to UK consumers is relevant to determining whether the lessening of competition is “substantial”.
- No market-share thresholds or safe- The New Guidelines stress that the CMA “does not apply any threshold to market share, number of remaining competitors or any other measure to determine whether a loss of competition is substantial.” This represents a significant departure from the 2010 Guidelines, which – while noting that they would not be applied “mechanistically” – included concentration thresholds based on market shares, number of firms, and Herfindahl-Hirschman Index levels for where the CMA would not “often” identify competition concerns. Despite the shift in the CMA’s approach, concentration levels can still provide a useful starting point for the competitive assessment of a merger. The New Guidelines make clear in several places that shares of supply “can be useful evidence when assessing closeness of competition,” and they include references to concentration levels in other contexts.
- SLCs in minority The New Guidelines include specific guidance on how the CMA will assess acquisitions of minority shareholdings. The New Guidelines state that the relevant theories of harm may “depend on the level of control that one merger firm is acquiring over the other.” Citing the Amazon/Deliveroo case, the New Guidelines emphasise that theories of harm that may apply following an acquisition of material influence are likely to be different from those that arise following an acquisition of full legal control.
- Less emphasis on market definition. The New Guidelines state that, while market definition can be an important part of the merger assessment process, “the CMA’s experience is that in most mergers, the evidence gathered as part of the competitive assessment, which will assess the potentially significant constraints on the merger firms’ behaviour, captures the competitive dynamics more fully than formal market definition”.
Instead, the CMA will consider whether different products pose ‘strong’ or ‘weak’ competitive constraints. Similarly, the New Guidelines state that “not every ‘firm’ in a market will be equal”, and the constraint posed by firms outside the market will also be considered as part of the competitive assessment.
- Assessment of potential and dynamic The New Guidelines provide more detail on how the CMA will consider whether mergers are expected to result in a lessening of potential or dynamic competition. Under the New Guidelines, the CMA will consider whether a merger results in a loss of potential competition in two ways:
- First, a merger “may imply a loss of the future competition between the merger firms after the potential entrant would have entered or expanded”. A merger involving a potential entrant may lead to a loss of future competition if: (i) absent the merger, either of the merging parties would have entered or expanded; and (ii) the loss of future competition brought about by the merger would give rise to an SLC, taking into account other constraints and potential In assessing (i), the CMA considers that entry is more likely where the firm has the incentive and ability to enter; it has well- developed plans or has already taken significant steps towards entry; where incumbent firms are taking action in anticipation of its entry; or where it has a past history of entry into related markets. In assessing (ii), the CMA will consider the remaining competitive constraints on the merged entity; whether the other merger firm already has market power absent the merger; entry or expansion by non- merging rivals over a similar time horizon as the merger firms’ entry or expansion; or whether new technologies or services that may supersede the merged entity or render its services obsolete. In these cases, the CMA’s assessment may focus on the parties’ internal documents, business forecasts, and valuation models, and the likely characteristics of the potential entrant’s future product or service.
- Second, the merger may reduce “dynamic” competition between incumbents and potential This theory is centred around competition in innovation. As the CMA describes in the New Guidelines, potential entrants or expanding firms have an incentive to invest in improving their offering in order to win sales and profits from incumbents. For their part, incumbents are investing to improve their own offerings in the knowledge that their sales and profits could otherwise be lost to potential entrants or expanding firms. The CMA considers that loss of dynamic competition is more relevant where investments are an important part of the competitive process, where entry takes place over a long period and involves costs or risks, and where significant aspects of firms’ offering are set during the investment phase. The New Guidelines state that the CMA may assess dynamic competition by focusing on entry and expansion in relation to specific products, or, if it cannot identify specific overlaps between the parties in the present, may “consider a broader pattern of dynamic competition”. The CMA notes it may consider “any direct response of an incumbent merger firm to the threat of entry or expansion by the other merger firm or may consider evidence on the incumbent’s incentive to respond to any such threat”.
- Greater flexibility in assessing the When assessing mergers, the CMA seeks to determine whether a transaction would result in an SLC compared with the competitive situation that would otherwise exist (the counterfactual). Under the New Guidelines, the CMA expects to adopt a more flexible approach to determining the counterfactual against which a merger will be compared.
- The New Guidelines give greater guidance on the assessment of the loss of potential entry as part of a counterfactual When assessing the likelihood of entry or expansion by one of the merger firms, the CMA will consider “direct evidence of their intentions to enter or expand”, as well as “any history of entry into closely related markets”. Where its competitive assessment considers a loss of dynamic competition, the CMA may consider whether the merger firms would have continued making efforts towards new entry or expansion absent the merger (rather than limiting the assessment to whether entry or expansion would have ultimately occurred).
- The New Guidelines explain that the CMA will vary the time horizon over which it makes its counterfactual assessment depending on the context. This includes consideration of the market in question: relevant developments can take longer in some markets than in It also depends on the process in question: successful entry can take more than two years, whilst exiting a market can take place over a much shorter time period.
- Assessment of two-sided platforms. The New Guidelines contain far more detail than the 2010 Guidelines on the assessment of two-sided Two-sided platforms intermediate between two distinct customer groups. Examples include credit card schemes (cardholders and merchants) and social media networks (users and advertisers). The New Guidelines note that the CMA may (i) consider each side of the platform separately, or (ii) analyse the overall competition between the platforms in an incorporated assessment of both sides. Its approach in any given case will depend on how competition works in practice (whether competition primarily focuses on one side or both), the competitive conditions in the market (including the number and strength of alternatives available), and the strength of network effects. The New Guidelines also state that, where network effects are present, “mergers are more likely to induce a tipping effect” and “barriers to entry are likely to be high” (though this can be mitigated slightly by the presence of multi-homing).
- Use of The CMA will rely on a broad range of evidence in its assessment and in support of the new theories of harm anticipated. In particular, the New Guidelines note that the CMA is increasingly scrutinizing merger firms’ internal documents and evidence on deal valuation. The New Guidelines state that the CMA has a “wide margin of appreciation” in its use of evidence, and may apply different approaches depending on the context. The CMA will also interpret evidence differently depending on the context in which that evidence was generated. For example, “[a] n absence of internal documents pointing to, for example, competitive interactions between the merger firms may not be probative if the merger firms do not normally generate documents in the ordinary course of business or where merger firms have document retention policies whereby documents are regularly deleted.”
- Standard of The New Guidelines make a number of statements about the CMA’s approach to uncertainty.
- They explain that uncertainty over the likely impact of a merger will not preclude the CMA from finding competition concerns, but “the degree of uncertainty will be appropriately weighted in the CMA’s assessment of whether the standard of proof is met”.
- Similarly, in the context of the CMA’s assessment of the counterfactual, the New Guidelines explain that uncertainty about the future “will not in itself lead the CMA to assume the pre-merger situation to be the appropriate counterfactual”.
- Finally, the New Guidelines state that, when considering a possible loss of dynamic competition, uncertainty about the outcome of investments and innovation efforts absent the merger will not prevent the CMA from assessing the impact of the merger on that dynamic competitive  The New Guidelines note that there can be a higher degree of uncertainty in some markets, “such as those characterised by potentially significant changes in competitive conditions”.
Summary of consultation responses and changes to the Draft Guidelines
Several of the changes summarised above are controversial and were opposed by respondents to the CMA’s consultation. In particular, respondents raised concerns that the CMA was seeking to lower the legal threshold for intervention, while removing important safe-harbours that provide valuable guidance to parties considering transactions.
The CMA has largely rejected this criticism, arguing that the New Guidelines better reflect “the CMA’s approach to reviewing mergers, which has evolved over the last 10 years”, relevant case law, and “the ways in which the economy has evolved” since the 2010 Guidelines. It also stresses that there “has been no change to the legal thresholds that need to be met in order for the CMA to find that there has been an SLC”.
In particular, the CMA rejected criticism of the proposed changes relating to the following points:
- No thresholds or safe-harbours. The CMA rejected calls that the New Guidelines should contain specific thresholds below which the CMA would not find an  It stated that “the Revised Guidelines make it clear that each case will be assessed on its merits and the CMA does not apply market share, fascia count or other ‘thresholds’ to determine whether it is likely that an SLC will be found, nor does the CMA consider that this reflects economic reality”.
- No evidentiary thresholds or measures for dynamic The CMA rejected calls for more guidance on how the CMA would measure innovation. It stated that “there is no standard measure of innovation that the CMA thinks would be appropriate to codify” in the New Guidelines. The CMA also refused to indicate what evidence would be needed to demonstrate that a merger would result in a reduction in dynamic competition, stating that “the CMA would not consider it appropriate to establish a specific evidentiary threshold that requires evidence of the merger firms’ perceptions, when a firm’s documents may not contain evidence of those perceptions even when they exist.”
- No statement that non-horizontal mergers are “benign”. The 2010 Guidelines contained the statement: “it is a well-established principle that most [non-horizontal mergers] are benign and do not raise competition concerns”. The CMA rejected the suggestion that the New Guidelines should include a similar statement. It argued that “a number of commentators continue to warn of the substantial risks of under-enforcement”, and that this reflects the CMA’s view that “non- horizontal mergers remain an important focus of its work”.
- Less reliance on market definition. Some respondents expressed concerns about the CMA’s intention to place les weight on market definition in its assessment, highlighting that the CMA has a statutory obligation to determine whether there would be an SLC in a relevant  The CMA argues that a more flexible approach is appropriate in some cases and that its statutory obligation do not require the CMA to define a market in any particular way.
The CMA is keen to emphasise that the New Guidelines reflect changes to the assessment of mergers that have evolved over the last 10 years as well as more recent case law. They are nevertheless a statement of the CMA’s intentions and priorities for the coming years. The CMA has made it clear that the New Guidelines are targeted particularly toward intervening in transactions in digital markets: “Digital technologies have changed, and will continue to change, the way goods and services are sold, delivered and used by customers. […] The CMA needs to be prepared for these challenges to be able to take effective decisions for the benefit of consumers.”.
The changes will nevertheless have wider impact on merger control and are likely to result in more flexible approach to merger assessment, greater reliance on novel theories of harm, more creative assessment of evidence, and less predictability for companies. Together with the CMA’s recently published new Guidance on the CMA’s Jurisdiction and Procedure, and the ongoing updates to the CMA’s Guidance on Interim Measures, the New Merger Assessment Guidelines can been seen as part of the CMA’s wider ambitions to take on “a more active role in global cases” following Brexit.
 New Guidelines, ¶2.9.
 New Guidelines, ¶2.9.
 New Guidelines, ¶2.8.
 New Guidelines, ¶4.14.
 New Guidelines, ¶2.13.
 New Guidelines, ¶9.2.
 New Guidelines, ¶9.4.
 New Guidelines, ¶5.2.
 New Guidelines, ¶5.3.
 New Guidelines, ¶5.21.
 New Guidelines, ¶5.22.
 New Guidelines, ¶3.18.
 New Guidelines, ¶3.20.
 New Guidelines, ¶3.15.
 New Guidelines, ¶4.25.
 New Guidelines, ¶2.24.
 New Guidelines, ¶2.29.
 New Guidelines, ¶2.10.
 New Guidelines, ¶3.14.
 New Guidelines, ¶5.20.
 New Guidelines, ¶2.10.
 Summary of Responses, ¶2.10.
 Summary of Responses, ¶¶2.17 and 2.22.
 Summary of Responses, ¶2.22.
 Summary of Responses, ¶2.61.
 Summary of Responses, ¶2.61.
 2010 Guidelines, ¶5.6.1.
 Summary of Responses, ¶2.74.
 Summary of Responses, ¶2.74.
 Summary of Responses, ¶2.91.