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Competition law


UK merger control


The Enterprise Act 2002 (EA) replaced the former merger regulation in the Fair Trading Act 1973. Further significant changes were made by the Enterprise and Regulatory Reform Act 2013.

As a result of these changes, decisions on merger control are in general taken by the Competition and Markets Authority (CMA) which took over the functions of the former Office of Fair Trading (OFT) and the Competition Commission, rather than the Secretary of State; and mergers are assessed against a pure competition test, rather than the wider public interest test which formerly applied.

Special arrangements apply in the case of media mergers, water and sewerage undertakings and special public interest cases.

Further reading: CMA Mergers Guidance

Merger situations

A merger must meet all three of the following criteria to constitute a relevant merger situation for the purposes of the EA:

1. Either two or more enterprises must cease to be distinct, or there must be arrangements in progress or in contemplation which, if carried into effect, will lead to enterprises ceasing to be distinct.

2. Either the UK turnover associated with the enterprise which is being acquired exceeds £70 million (‘the turnover test’) or the enterprises which cease to be distinct supply or acquire goods or services of any description and, after the merger, together supply or acquire at least 25% of all those particular goods or services of that kind supplied in the UK or in a substantial part of it; the merger must also result in an increment to the share of supply or acquisition (‘the share of supply test’).

3. Either the merger must not yet have taken place, or it must have taken place not more than four months before the day the reference is made, unless the merger took place without having been made public and without the CMA being informed of it (in which case the four-month period starts from the earlier of the time the merger was made public or the time the CMA was told about it). The four-month deadline may be extended in certain circumstances.

Enterprises ceasing to be distinct

Two enterprises will ‘cease to be distinct’ if they are brought under common ownership or control. A joint venture may qualify as a relevant merger situation in the UK in circumstances where it does not qualify as a concentration under the EU Merger Regulation given the wide definition of an enterprise [EA s.129] compared to that of a full function joint venture in Article 3 of the EU Merger Regulation.

The EA’s definition of a ‘relevant merger situation’ covers several different kinds of transaction and arrangement. A common example is where a company acquires or intends to acquire a majority or a significant minority shareholding in another company. Other types of merger include the transfer or pooling of assets or the creation of a joint venture. The EA applies both to mergers which have already taken place (subject to time limits) and to those that are proposed or in contemplation.


The term ‘enterprise’ is defined in EA s.129 as the activities, or part of the activities, of a business. This does not mean that the enterprise in question need be a separate legal entity: it simply means that the activities in question could be carried on for gain or reward. However, there is no requirement that the transferred activities generate a profit or dividend for shareholders: indeed, the transferred activities may be loss making or conducted on a not-for-profit basis.


‘Ceasing to be distinct’ is defined in EA s.26 as two enterprises being brought under common ownership or control. ‘Control’ is not limited to the acquisition of outright voting control but may include situations falling short of outright voting control. Three levels of interest are distinguished in EA (in ascending order):

* material influence;

* de facto control, and

* a controlling interest (also known as ‘de jure’, or ‘legal’ control).

The CMA may treat material influence and ‘de facto’ control as equivalent to ‘control’, for the purposes of establishing whether enterprises have been ‘brought under common ownership or control’.

Time limits for reference decisions

After starting an investigation, the CMA is in most cases required to decide whether the test for reference is met within a timetable of 40 working days, failing which it loses its ability to refer. This is known as the ‘Phase 1’ stage. During this phase, the CMA determines whether it believes that the merger results in a realistic prospect of a substantial lessening of competition (SLC). If so, the CMA has a duty to launch an in-depth assessment (Phase 2), although merging parties may offer undertakings to modify aspects of the transaction to remedy the SLC concerns.

Where parties notify the CMA using a Merger Notice, that timetable (the 'initial period') starts on the first working day after the CMA confirms to the parties that the Merger Notice is complete. In other cases, the timetable starts on the first working day after the CMA confirms that it has received sufficient information to enable it to begin its investigation.

The 40 working day deadline is subject to extension in certain circumstances, and does not apply to decisions by the Secretary of State to refer a merger after issuing a public interest intervention notice or a special public interest intervention notice.

In addition, for the CMA to be able to refer a merger either:

* the merger must not yet have taken place (that is, it must not have completed), or

* the completed merger must have taken place not more than four months before the reference is made, unless the merger took place without having been made public and without the CMA being informed of it (in which case the four-month period starts from the earlier of the time that material facts are made public or the time the CMA is told of material facts).

The test under EA for when material facts are ‘made public’ is when they are ‘so publicised as to be generally known or readily ascertainable’.

How does the CMA come to review a merger?

The CMA may come to review a merger in one of two ways: (i) notification by the parties; (ii) CMA’s own initiative investigation.


Enterprises may formally notify a merger to the CMA by completing a Merger Notice. A template Merger Notice is available at It sets out the categories of information required by the CMA, together with guidance notes to assist businesses in identifying the specific nature and extent of information required in their case.

Enterprises may not formally submit a Merger Notice until the merger has been made public. However, the CMA encourages enterprises to approach the CMA to discuss their merger and submit a draft Merger Notice on a confidential basis before submitting a Merger Notice. This ‘pre-notification’ process may take place before the merger is public knowledge and can help to reduce the amount of information that the CMA needs from the enterprises.

There is no requirement that enterprises seek the CMA’s approval before merging, even where the CMA would have jurisdiction to review the merger. However, enterprises should consider carefully whether to tell the CMA about their merger before completing. The CMA strongly encourages them to do so where the merger could give rise to possible competition concerns.

Approval before merging benefits enterprises by giving legal certainty that the merger can proceed. In addition, there may be business risks if they do not do so. Not telling the CMA about a merger does not mean that it cannot or will not review it. As noted above, the CMA has a responsibility to keep merger activity under review and may investigate, on its own initiative, mergers that have not been notified. The CMA has four months from the merger being made public or it being completed (whichever is the later) to decide whether or not to launch an in-depth Phase 2 assessment. Completing a merger without notifying the CMA before doing so can also result in significant additional costs for enterprises.

A fee is payable by the notifying enterprise for the CMA’s review, subject to some limited exceptions (including where the merger is found to be outside the CMA’s jurisdiction). The fee is the same if the merger is reviewed by the CMA on its own initiative.

CMA own-initiative investigation

The CMA has a duty to keep merger activity under review and has powers to investigate mergers that have not been notified to it. The CMA obtains information about anticipated and completed mergers from a range of sources, including from third parties. Where the CMA learns of a merger which it considers might harm competition, the CMA may open an investigation on its own initiative. The CMA may contact the enterprises concerned in order to establish whether the thresholds that trigger its jurisdiction are met and to obtain information about the merger.

Phase 2 investigations

If in the course of a Phase 1 investigation, the CMA determines believes that:

* a relevant merger situation has been created, or arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and

* the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the UK for goods or services;

it must refer the case to a CMA panel of independent Members [EA ss.22/33]

The CMA may decide not to make a reference to a panel if it believes that:

* the market concerned is not, or the markets concerned are not, of sufficient importance to justify the making of a reference; or

* any relevant customer benefits in relation to the creation of the relevant merger situation concerned outweigh the substantial lessening of competition concerned and any adverse effects of the substantial lessening of competition concerned.

During Phase 2 the CMA panel conducts an in-depth investigation to assess if a merger is expected to result in an SLC. If an SLC is expected, the CMA decides upon the remedies required. Such remedies may include prohibiting the merger or requiring the divestiture (sale) of parts of the business.

This period is generally limited to 24 weeks because within that period, the CMA is required to issue its final report. The period may be extended by up to 8 weeks if the CMA considers there are special reasons, or indefinitely if that a relevant person has failed (whether with or without a reasonable excuse) to comply with any requirement to give evidence or provide documents. A ‘relevant person’ is any of the enterprises concerned in the merger, anyone who controls such a person or any officer, employee or agent of the foregoing.

Having issued a final report in which it has decided that a merger gives rise to an SLC, the CMA has a statutory deadline of 12 weeks (extendable by up to 6 weeks for special reasons) to make an order or accept undertakings to give effect to its Phase 2 remedies.

Interaction with EU merger control

If a merger meets the tests for assessment by the European Commission, the CMA will not investigate and cannot refer the merger.


Civil enforcement

Compliance with undertakings accepted and orders made by the CMA as part of the remedies for a merger may be enforced in the civil courts by the CMA which may seek an injunction or any other appropriate relief or remedy.

In addition, any other person who may be affected by a contravention of the undertaking or order, and damages may bring a civil action to recover loss or damage caused by the contravention.

There is a due diligence defence available to the person contravening the undertaking or order.

[EA s.94]

The CMA may impose a penalty for failure to provide evidence or produce documents; the maximum fixed penalty is £30,000 and daily penalty up to £15,000 [EA ss.110/111; Competition and Markets Authority (Penalties) Order 2014 (SI 2014/559)]

Criminal enforcement

It is an offence knowingly to provide false or misleading information to the CMA or which the CMA will rely upon; the offence is punishable on conviction on indictment to imprisonment for a term not exceeding two years or to a fine or to both. There is provision for Directors’ liability. [EEA ss.117/125]

[Page created: 08/01/2014]


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