In recent years, the CMA has been strengthening its approach to merger control as it prepares for its new status as a global enforcer with expanded jurisdiction following the UK’s exit from the EU. Since 1 January 2021, the CMA has been able to investigate the UK aspects of mergers that also qualify for review by the EU Commission (EC). Many transactions, including major global deals, are therefore now subject to parallel review by the EC and CMA.
Parallel merger review by the CMA is particularly significant because the CMA has become one of the strictest enforcers of merger control in the world. It has effectively prohibited more than 20 transactions since 2018, with around 70% of Phase 2 investigations resulting in prohibition or abandonment in the last two years (a significant increase on its historical average of 35%). It has taken an expansive view on jurisdiction, reviewing transactions like Sabre/Farelogix or Roche/Spark, where the target had no revenues in the relevant markets in the UK – and the Competition Appeal Tribunal (CAT) has recently endorsed the CMA’s approach in its Sabre judgment. It has adopted new Merger Assessment Guidelines that signal an overall tougher approach to its substantive assessment. And it has enforced its procedural powers more frequently and more rigorously, penalising companies for breaching hold-separate orders, and requiring companies to unwind lawfully-taken integration steps.
Against this background, the CMA recently joined the Australian Competition and Consumer Counsel (ACCC) and Bundeskartellamt (the Federal Cartel Office (FCO), the German competition authority) in publishing a statement intended to highlight “the need for rigorous and effective merger enforcement.” The statement and the accompanying panel interview of the three agency heads provide insight into the merger enforcement priorities of the three agencies. It is interesting and important for a number of reasons – it represents a powerful and public rebuttal of the Franco-German Manifesto’s call for more permissive enforcement; it underscores the emergence of a coalition of agencies that believe merger control has been under-enforced in Europe and the U.S. and that a more sceptical, interventionist, and muscular policy is needed; it serves as a reminder that the U.S. agencies and EC are by no means the only agencies of importance; and it confirms that businesses cannot expect an easy ride from at least the CMA, FCO and ACCC once the world emerges from the pandemic. Although the joint statement contained little that had not been trailed by the CMA, FCO and ACCC over the past 18 months, the fact that the agency heads authored and presented the document together was unusual and significant. Five notable points can be identified:
First, the agencies warn of a perceived danger of increasing concentration in many industries. According to the CMA’s Chief Executive, Andrea Coscelli, “we have learned over the last few years that concentration has increased too much in a number of markets and when we look at the outcomes… [they] are not good.” He explained, for example, that the market for accountancy services is concentrated due to a “mistake many years ago in merger under-enforcement” stemming from the 1997 combination of Price Waterhouse and Coopers & Lybrand, which reduced the number of elite accountancy firms from 6 to 5.
Second, in line with several recent reports and initiatives, such as the Furman report and the EC’s report on Competition policy for a digital era, the agencies believe that the trend for increased concentration is particularly pronounced in digital markets. According to Bundeskartellamt President Andreas Mundt, “we have all been struggling for quite a while with platforms, ecosystems, digital gatekeepers and the effects they have on the economy and antitrust.” Dr Coscelli also highlighted the ad technology sector as an example of a highly concentrated market, claiming that the Google/DoubleClick merger is “clearly the source of a number of the problems we find.”
Third, the agencies note the challenge raised by the “forward-looking nature of merger control,” which is particularly difficult in dynamic markets or with mergers involving small companies with large potential. They stress, however, that “uncertainty as to the future should not necessarily mean that potentially anticompetitive mergers are cleared because of that uncertainty”; the agencies will re-assess their historic approach “so that a degree of uncertainty about future developments in the relevant markets does not lead, by default, to a clearance decision.” Accordingly, the agencies emphasise that in the future they want “to challenge the presumption […] that mergers are generally efficiency-enhancing and should be restrained only where there is certainty that serious detriment will result.” Going even further, the ACCC Chair Rod Sims suggested introducing a new presumption for mergers that “if in doubt, bias towards competition.”
The agencies’ statement about being more prepared to challenge mergers involving small companies with large potential can already be observed in the CMA’s decisional practice. In recent years, the CMA has investigated several cases with such fact patterns (such as PayPal/ iZettle, Sabre/Farelogix, and Amazon/Deliveroo) based on the theory that absent the merger there would be stronger competition than the prevailing conditions of competition. Most recently, the CMA found in Facebook/Giphy (at the end of a Phase 1 investigation) that the merger creates competition concerns in digital advertising even though Giphy is not active in that market but had plans to expand in the future. In the same vein, the CMA’s new Merger Assessment 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.”
Fourth, as to remedies, the agencies express clear preference for structural over behavioural remedies. They argue that “complex behavioural remedies” have five major downsides: (i) they create continuing economic links and dependencies that are therefore “unlikely to recreate the pre-merger competitive intensity of the market”, (ii) they can raise significant circumvention risks, (iii) they can quickly become outdated as market conditions change, (iv) they can distort the natural development of the market, and (v) “place a burden on competition agencies and businesses by necessitating extensive post-merger monitoring of companies and their conduct.”
Finally, the agencies discuss their approach to merger control in light of the difficulties companies face as a result of Covid-19. They oppose calls to relax enforcement standards beyond existing failing-firm defence legal frameworks, arguing that competitive market growth underpinned by strong merger control policy is the only sustainable path for economies to emerge from the pandemic with reduced debts and higher tax revenues. When necessary, the agencies may factor the short-term pandemic impact into some merger assessments. This, however, must be rigorous and evidence- based – and balanced against the merger’s impact on all firms in the market. While the pandemic should hopefully subside, these “mergers are forever” and the agencies are keen to avoid irreparable harm.
Overall, the joint statement from the agencies is consistent with several trends from the CMA since the UK left the EU. First, as also seen in the recent “Five Eyes” initiative, the CMA is keen to work closely with its international partners on merger review and align in its thinking, where possible. Second, the CMA will not, though, be afraid to deviate from other agencies where it considers it appropriate to do so: for example, while the joint statement expresses scepticism regarding behavioural remedies, the EC has shown it is more willing to accept such remedies, in cases like Intel/McAfee, Qualcomm/NXP, Microsoft/LinkedIn, and Google/Fitbit. Third, the CMA is seeking to take a more “vigilant” approach to merger control, given perceived indications of a weakening in competition across at least some sectors of the economy.
We identify five main implications for businesses planning future transactions that might affect the UK:
- The CMA’s expansive approach to jurisdiction is likely to The CMA may seek jurisdiction over transactions even if the target has no revenues or customers in the UK.
- The CMA is likely to remain one of the most interventionist agencies in the
- The CMA will review global transactions in parallel with the EC and other It will seek to coordinate with international agencies in those investigations, but it will not afraid to deviate from other agencies where believes there may be concerns.
- The CMA will actively focus on transactions in the digital It may be sceptical to clear a merger based on uncertainty as to whether one of the merging parties would have grown into a credible rival in the future. It should also be expected to be sceptical of behavioural remedies as a means to address competition concerns.
- The CMA will continue to require rigorous evidence to clear a merger based on the failing firm defence, even during the economic fallout from Covid-19.
 See Cleary Gottlieb alert memorandum, “CMA Ramps Up Merger Control Enforcement Ahead of Brexit”, 26 February 2020. See also “Waiting for Brexit: Five Ways the CMA Could Improve UK Merger Control” in the European Competition Law Review (ECLR) by N. Levy, P. Gilbert and L. Sheridan, 4 September 2020.
 Cleary Gottlieb Newsletter, CMA Signs ‘Five Eyes’ Cooperation Framework With US, Canadian, Australian, And New Zealand, August 2020.
 The CMA’s revised Jurisdictional & Procedural Guidance, for example, notes that it is beneficial for the CMA to “communicate and coordinate extensively with other authorities in reaching decisions on the competition assessment and remedies.”