CMA Brexit guidance emphasises merger notification

The UK regulator warned businesses that do not notify it of their merger plans that it will have the power to intervene in Commission-led cases that are still 'live' at the time of Brexit. It said it could use its powers to unwind deals that are later completed.

The CMA set out the warning in draft new guidance it is consulting on which is aimed at highlighting how a 'no deal' Brexit would impact the way it functions.

"If the European Commission has not reached a decision before exit day, the CMA can assert jurisdiction over the merger and review its effects within the UK after exit day if the UK jurisdictional requirements are met," the CMA said.

"While the UK merger control regime is voluntary (and therefore there is no obligation to notify), merging parties are encouraged to engage with the CMA at an early stage, particularly where the transaction may raise potential competition concerns in the UK," the CMA said. "In addition, not notifying a merger to the CMA raises certain risks for merging parties... These risks will apply equally to cases which had not been decided by the European Commission before exit day, including mergers cleared by the European Commission after exit day and subsequently completed."

"In particular, if merging parties decide to complete such mergers without notifying the CMA, there is a risk that the CMA could subsequently investigate and ultimately prohibit the merger or require other remedies to resolve competition concerns that could arise," it said.

Competition law expert Alan Davis of Pinsent Masons, the law firm behind Out-Law.com, said the guidance set out by the CMA on the treatment of merger cases in a 'no deal' scenario reflects messages the authority conveyed in guidance published last autumn.

Davis said "It is clear from what the CMA has set out in the draft guidance that businesses and their advisers should be thinking about how deals are structured, and where they should be notified, in order to minimise as far as possible the risks of post-Brexit disruption."

Currently, merger cases which meet EU turnover thresholds are handled by the European Commission, even if competition in the UK market would be most impacted by the transaction. Remaining cases that fall below the EU thresholds are handled by the CMA or sector regulators in the UK, such as Ofcom.

However, all mergers announced in the aftermath of a 'no deal' Brexit that meet the UK criteria for merger control would be subject to CMA scrutiny, even if those cases are also subject to investigation by the Commission or other competition authorities in EU countries.

In its draft guidance, the CMA explained the deadlines which would apply to its potential intervention in Commission-led 'live' cases in a 'no deal' scenario, and outlined the measures it could implement to prohibit companies completing the logistics of their merger.

"In all completed mergers, the initial period for the CMA’s Phase 1 investigation is subject to a four-month statutory deadline for a reference to Phase 2," the CMA said. "As the CMA will only obtain jurisdiction over mergers that would otherwise fall under the jurisdiction of the European Commission after exit day, the statutory four-month period will apply for completed mergers from EU exit or from the point at which the CMA is considered to have been provided with notice of the material facts about the merger (whichever is later)."

"Moreover, the CMA may make an interim order which is binding on the parties and which is intended to prevent any action which might prejudice the CMA’s inquiry or impede the taking of any remedial action by the CMA. If the CMA has reasonable grounds for suspecting that the parties to a completed merger may already have started integration of the merging businesses, the CMA may also require the parties to unwind any integration that has already occurred," it said.

The CMA said it would seek to work with other regulators in Europe, including the European Commission, where there are parallel investigations into planned mergers undertaken after Brexit.

"The CMA considers that where mergers are subject to investigation in more than one country, there can be substantial benefits to the parties and to the competition authorities in those jurisdictions from encouraging communication and cooperation between the competition authorities," it said. "This will be particularly important after Exit Day, as a significant proportion of mergers that will fall under UK jurisdiction will be investigated in parallel by the European Commission and other jurisdictions."

"Where possible and appropriate, the CMA will endeavour to coordinate merger reviews relating to the same or related cases with the European Commission as with other competition authorities. Where national legislation prevents the exchange of confidential information, the CMA and other competition authorities may seek permission from the parties to exchange confidential information," it said.

In relation to merger cases that it opens prior to Brexit which are still 'live' on exit day in a 'no deal' scenario, the CMA said it "does not envisage that there will be any change in the procedure".

The CMA's draft guidance, which also sets out the regulator's views on how a 'no deal' scenario would impact its enforcement of competition and consumer protection laws, is open to consultation until 25 February.