Abstract
The Competition and Markets Authority (‘CMA’) assesses both the price and the non-price effects of mergers. The relative importance of each depends on the process of rivalry between the merging firms and their competitors. Dynamic non-price effects, for instance on innovation, are potentially important, as the CMA found in the ICE/Trayport merger, which was prohibited. Non-price parameters such as quality, range and service are also important and are considered in particular when mergers occur in markets where price competition is limited, for example public services such as hospitals and regulated markets such as pharmacies.
Highlights
The Competition and Markets Authority (CMA) has responsibility for the review of mergers under the Enterprise Act 2002
The CMA has a duty to refer a merger for a second in-depth (Phase 2) investigation where it believes there to be a realistic prospect that the merger will result in a substantial lessening of competition (‘SLC’) in a market in the UK
The CMA applies the SLC test in its Phase 2 decision-making but decisions are based on a balance of probabilities and are made by a panel of independent members
Summary
The CMA has responsibility for the review of mergers under the Enterprise Act 2002. Under the UK merger control rules, mergers qualify for review if they meet either of the following tests: (i) the UK turnover of the business to be acquired exceeds £70 million; or (ii) the merger creates or enhances a share of 25% or more in the supply or purchase of any goods or services in the UK, or in a substantial part of the UK. The CMA has a duty to refer a merger for a second in-depth (Phase 2) investigation where it believes there to be a realistic prospect that the merger will result in a substantial lessening of competition (‘SLC’) in a market in the UK. A merger gives rise to an SLC when it has a significant effect on rivalry over time, and on the competitive pressure on firms to improve their offer to customers or become more efficient or innovative. The CMA will generally consider both evidence relating directly to the loss of rivalry and evidence relating to the likely effects of the merger. With regard to evidence on likely effects, the CMA will consider both price and non-price effects (‘NPEs’), depending on the circumstances of the merger concerned and the markets affected. ** Assistant Director of Economics, Competition and Markets Authority. † Economic Adviser, Competition and Markets Authority
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