1. Relevant legislation
Enterprise Act 2002 (as amended pursuant to the Enterprise and Regulatory Reform Act 2013) and related subordinate statutory instruments (“EA”).
The Digital Markets, Competition and Consumers Act 2024 (DMCCA), which became law on 24 May 2024, has made certain amendments to the EA. The CMA’s enforcement powers came into force on 6 April 2025 (excluding the regime for subscription contracts, expected to come into force in Spring 2026).
2. Authority
Competition and Markets Authority (“CMA”), The Cabot, 25 Cabot Square, London, E14 4QZ, United Kingdom (https://www.gov.uk/government/organisations/competition-andmarkets-authority)
The Digital Markets Unit (the DMU) was launched on 7 April 2021, to boost competition in online markets. The DMU is an administrative unit within the CMA that makes day-to-day decisions on the digital markets regime introduced by the DMCCA.
3. Types of transactions caught
Any transaction resulting in “two enterprises ceasing to be distinct”, whereby they come under common ownership or “control” – the latter concept entails (i) a controlling interest (de jure or legal control); (ii) de facto control (control of commercial policy); and (iii) material influence (ability materially to influence commercial policy, irrespective of shareholding).
Control can be acquired in stages (with each stage being caught) and joint ventures can be caught where more than one shareholder acquires “control” within the meaning of the regime.
The CMA already had jurisdiction to review foreign-to-foreign mergers with UK effects under the Enterprise Act 2002. The DMCCA did not expand this jurisdiction but introduced new mandatory reporting requirements and thresholds for certain large digital firms with Strategic Market Status. As a result of these changes, we can expect even more foreign to foreign mergers requiring notification with the CMA.
4. Thresholds
There are three alternative thresholds:
- Turnover test: The target’s UK turnover exceeds GBP 100 million;
- Share of supply test: The transaction results in the creation of, or increase in, a 25% or more combined share of sales or purchases in (or in a substantial part of) the UK of goods or services of a particular description;
- Acquirer-centric threshold (introduced by the DMCCA): captures transactions involving firms with a 33% UK market share and £350mn UK turnover where the target has a UK nexus (has some sales or activities in the UK).
As indicated below, following the introduction of the DMCCA, there will be an exception from jurisdiction where none of the parties to the transaction has UK turnover of £10 million or more.
The DMCCA has introduced new thresholds for mandatory merger reporting for ‘Strategic Market Status’ (SMS) firms. SMS undertakings possess similar characteristics to “gatekeepers” under the Digital Markets Act. SMS firms are those that are large digital platforms with entrenched market power in the UK. SMS firms must notify the DMU in the event of a merger where:
- the event results in the purchaser having qualifying status in respect of shares or voting rights in relation to the UK-connected body corporate, and
- the value of all consideration provided by the purchaser, whether before or as part of the events, for shares or voting rights in the UK connected body is at least GBP 25 million.
SMS firms must notify the DMU in the event of a joint venture agreement where:
- the expectation or intention is that the joint venture vehicle will be a UK-connected body corporate,
- one of the parties to the agreement has qualifying status in respect of shares or voting rights in relation to the joint venture vehicle, and
- the total value of:
- all capital and assets contributed by the relevant party to the joint venture vehicle when it is formed, and
- all other consideration provided by the relevant party, whether directly or indirectly, in relation to the joint venture vehicle,
is at least £25 million.
An event results in ‘qualifying status’ where the event results in the percentage of shares or the voting rights increasing:
- from less than 15% to 15% or more,
- from 25% or less to more than 25%, or
- from 50% or less to more than 50%.
5. Exceptions
Note that the regime in the UK is voluntary, so there is never a formal requirement to notify. The risk of not notifying is that the CMA may investigate on its own initiative. However, the CMA will have jurisdiction to investigate mergers (and order that merging companies be held separate pending completion of the investigation) where the thresholds set out at above (Q4) are met.
A new small-mergers exemption applies to transactions where none of the parties concerned in the merger have UK turnover under GBP 10 million. Previously, even small mergers could be notifiable where the “share of supply” test was met.
6. Notifying party(-ies)
Either party can notify, although it is normally the acquirer that does so.
7. Submission deadline
Notification can be made at any time. It is not mandatory but in order to achieve certainty that a transaction will not be held up or unwound after completion, an acquirer may wish to make a notification in advance of completion and make completion conditional upon clearance.
Under the DMCCA, parties cannot complete a transaction until 5 working days after the DMU has officially accepted the merger report as sufficient (s 62 DMCCA).
8. Filing fee
The fee depends on the size of the target’s UK turnover:
- GBP 40,000 where turnover is below GBP 20 million;
- GBP 80,000 where turnover is GBP 20 to GBP 70 million;
- GBP 120,000 where turnover is GBP 70 to GBP 120 million;
- GBP 160,000 where turnover exceeds GBP 120 million.
There are limited exemptions from the filing fee, notably for small and medium-sized enterprises. The fees are payable in all cases when the CMA publishes either a reference decision or any decision not to refer.
9. Proceedings timetable
UK merger control procedure comprises of two main Phases, commenced by either notification or by the CMA deciding to investigate on its own initiative:
1) Phase I: Initial investigation – 40 business days, as follows:
Day 1: Process begins on the first business day after the CMA confirms it has received a complete Merger Notice or that it has sufficient information (for an own-initiative investigation).
The CMA then commences its information gathering activities and invites views from interested third parties (it may also contact third parties directly).
Days 15 to 20: The CMA holds “state of play” discussions with the parties (usually over the phone).
Days 25 to 35: An issues meeting is held in more complex cases or ones more likely to present issues. The CMA sends an issues letter in advance of the meeting.
At the end of Phase I the CMA will either clear the merger or refer it for an in-depth Phase II investigation. Alternatively, it may agree to clear the transaction subject to commitments from the parties in the form of ‘undertakings in lieu of reference’ approved by the CMA.
Undertakings in Lieu: Upon receiving proposed undertakings in lieu of a reference, a subsidiary timetable commences (suspending the Phase I ‘clock’), outlined in the CMA’s table at the Annex to this form.
2) Phase II: full investigation by the CMA – 24 weeks
The CMA has a statutory period of 24 weeks to conduct its full Phase II investigation and publish a report. This period can be extended by up to eight weeks at the CMA’s discretion.
The investigation includes both:
- Written submissions from the parties to the transaction and interested third parties;
- Oral hearings with the parties to the transaction and very significant third parties.
At the conclusion of Phase II, the CMA will decide whether to (i) clear the transaction unconditionally, (ii) clear with conditions or (iii) prohibit the transaction outright.
3) Remedies Implementation
If the CMA decides clearance can only be granted upon conditions (e.g. divestment of part of the merged business, or behavioural commitments such as price controls) it will have a further period of up to 12 weeks to finalise and implement these (i.e. to identify and conclude a sale to an ‘up front’ divestment buyer and/or appoint a “monitoring trustee” to oversee compliance with behavioural conditions).
4) Appeal
The merging parties may appeal the decision of the CMA to the Competition Appeal Tribunal (CAT). Appeal must be lodged within four weeks of the appellant being notified of the decision or of its publication (whichever is earlier). In determining an appeal of a merger decision by the CMA, the CAT must apply the same principles a court applies for judicial review (public law) applications. Third parties with an interest in the merger may also file an appeal against the decision.
10. Availability of pre-notification/informal consultation
Pre-notification discussions are possible and would typically take place around two weeks before notification. Should the parties wish to voluntarily notify their transaction, they can seek pre-notification discussions with the CMA (who will allocate suitable staff and/or even go on to appoint a case team, if initial contact leads to submission of a case team allocation form). Discussions will focus on the information that will need to be provided in a notification. Case teams may also be open to initial discussions around the likelihood of a reference to Phase II and the need for (and likely nature and extent of) remedial undertakings that might be proposed to address the CMA’s potential concerns.
11. Test for clearance/prohibition
The CMA must refer a transaction for a Phase II investigation if it considers that it may result in a substantial lessening of competition (“SLC”) on the market or markets concerned. The CMA must refer the transaction when it believes the transaction will more likely than not give rise to an SLC. If the CMA believes the likelihood of an SLC is significant, but below 50%, it has a wide margin of appreciation in exercising its judgment. In such cases, it has a duty to refer when it believes there is a realistic prospect that the merger will result in an SLC. If a reference is made, the CMA must decide whether the transaction has resulted, or may be expected to result, in an SLC.
12. Conditional clearance – remedies
See above – the parties can agree undertakings in lieu of reference at the conclusion of Phase I or, alternatively, the CMA can impose divestment or behavioural conditions on clearance at the conclusion of Phase II.
13. Stand-still obligation
There is no obligation on the parties to suspend a transaction and no outright prohibition on completing a transaction without clearance from the CMA. However, the CMA may:
- make an interim order to prevent or unwind pre-emptive integration by the merging parties and to ‘hold the parties separate’ unless and until the merger is cleared or cleared with conditions;
- issue a notice requiring a person to provide information or documents, or to give evidence as a witness (section 109 of the EA) and extend its statutory timetable to investigate for as long as the information remains outstanding (including, where relevant, the four month statutory deadline for completed mergers).
In addition, at Phase II, the buyer must not acquire any more shares in the target without first obtaining the CMA’s consent (section 78 of the EA). With completed mergers, the merged entity must obtain consent from the CMA before further integrating the constituent businesses (section 77, Enterprise Act).
For mergers between companies quoted on the London Stock Exchange, which are thus subject to the City Code on Takeovers and Mergers, a Phase II investigation by the CMA automatically causes the offer to lapse if it starts before the first closing date, or the date when the offer is declared or becomes unconditional (whichever is the later).
14. Failure to notify/obtain clearance
Notification is voluntary and there is no penalty for completing a transaction without clearance prior to a Phase II investigation. However, the CMA can impose fines for:
- failing to comply with interim measures (up to 5% of worldwide group turnover);
- either intentionally or without reasonable excuse, failing to comply with investigatory requirements, including to attend interviews or meetings with the CMA or to produce documents and other evidence (in the form of a fixed amount of up to GBP 30,000, by reference to a daily rate of up to GBP 15,000, or a combination of the two).
The CMA can also enforce any non-observance of clearance conditions or interim measures before the UK Courts (e.g. by way of injunction proceedings).
In addition, parties and their officers should be aware that it is a criminal offence to:
- Intentionally alter, suppress or destroy any information that the CMA has required to be produced under an information request notice; or
- Knowingly or recklessly supply false or misleading information to the CMA, the Office of Communications (Ofcom), Monitor or the Secretary of State in connection with their merger control functions.
15. Other key changes effected by the DMCCA
The DMCCA has introduced the further key changes to the competition law regime:
- the CMA can now launch a market investigation even if it has previously decided not to, provided that 2 years have passed or there has been a material change in circumstances (s 135 DMCCA)
- the CMA can accept binding commitments at any stage of the process (s 137 DMCCA).