Fuel for thought? Developments in CMA local merger assessment

Abstract

This article considers ongoing developments in the Competition and Markets Authority's approach to local merger assessment as highlighted by its recent EG/Asda Phase I decision. The CMA appears to be moving away from its traditional two-stage approach of applying initial competition filters augmented by detailed local assessment of cases identified by those filters, and towards a binary system determined solely on the basis of mechanical rules. This shift has been justified on the grounds of procedural efficiency and as providing a more systematic approach to local merger review. This article demonstrates that the CMA's decisional practice shows that the move away from two-stage filtering is not justified by efficiency considerations, and that the emerging approach of using mechanical rules reduces the quality of merger control by disregarding relevant evidence at the expense of relatively crude structural thresholds. Whereas merger control over the past two decades has generally moved away from thresholds based on numbers of firms or market shares, the CMA's adoption of mechanical decision rules appears to be moving back towards such an approach for the Phase I assessment of local mergers. The new approach may be related to a more general CMA shift towards avoiding the risk of under-intervention in merger review, even if this is at the expense of increasing over-intervention. While the new approach to local merger review may be expected to generate greater intervention, however it will not address any perceived risk of under-intervention.