Merger Litigation in the United Kingdom

• Published date: 01 June 2013
• Date: 01 June 2013
• DOI: 10.1177/0003603X1305800209
• Subject Matter: Article

* Partner, Burges Salmon LLP, London and Bristol, United Kingdom.

** Associate, Burges Salmon LLP,London and Bristol, United Kingdom.

THE ANTITRUST BULLETIN:Vol. 58, Nos. 2 & 3/S ummer-F all 2013 :433

Merger litigation in

the United Kingdom

BY MATTHEW O’REGA N*AND RUT H JEFFERS ON**

Although the number of challenge s to merger decisions is low, the

jurispru dence of th e Competi tion Appeal Tribun al (CAT) and the

Court of App eal has c ontributed significa ntly to th e United King-

dom’s administrative system of merger control. This article outlines

the structure of merger control in the United Kingdom, including the

jurisdiction, functions, procedures, and responsibilities of the Office

of Fair Trading and the Competition Commission, as well as the

application of the substantive “substantial lessening of competition”

test. It also summarizes the specific assessment of the limited number

of mergers that may raise public interest issues. This article then

examines in detail the judicial supervision by the CAT and Court of

Appeal, the nature of judicial review, and an in-depth assessment of

key judgments in merger cases.

KEY WORDS:Merger control, Enterprise Act 2002, merger litigation, Com-

petition Appeal Tribunal,judicial review, United Kingdom

I. INTRODUCTION

In common with the systems of merger control in the European

Union (EU ) and m ost E U Mem ber S tat es, m erge r con tro l in th e

United Kingdom is an administrative process undertaken by special-

ist independent agencies, the Office of Fair Trading (OFT), and the

© 2013by Federal Legal Publications, Inc.

Competition Commission, under the judicial supervision of a special-

ist tribunal, the Competition Appeal Tribunal (CAT). The CAT does

not itself make decisions on mergers, but reviews the legality of deci-

sions made by the OFT and Competition Commission in applying the

mergers provisions of the Enterprise Act 2002 (the Enterprise Act).1

When it entered into force in 2003, the Enterprise Act made signifi-

cant changes, both substantive and procedural, to merger control in

the United Kingdom.2

In this articl e, we will exami ne how merger lit igation has co n-

tributed to the development of both the procedural and substantive

aspects of merger control in the United Kingdom. We will also exam-

ine the procedural aspects of merger litigation before the CAT.

The OFT is a first-stage review agency. Under the Enterprise Act,

there i s no obl igat ion to notify a merge r to the OFT, or to awa it

approval before implementing a merger. However, in practice, many

mergers are notified on a voluntary basis and the OFT has powers

and indeed a duty to investigate mergers that are not notified to it,

including mergers that have already been consummated. If the OFT

believes that a merger may result in a substantial lessening of compe-

tition, it will (unless it accepts appropriate remedies) refer it to the

Competition Commission for a second stage in-depth investigation. If

434 :THE ANT I T R U S T BULLETIN:Vol. 58, Nos. 2 & 3/Summer-Fall 2013

1Enterprise Act 2002, ch. 40, available at http://www.legislation.gov.uk

/ukpga/2002/40. In this article, we do not consider the special merger con-

trol regime applicable to mergers of water enterprises in England and Wales,

under the provisions of the Water IndustryAct 1991, c. 56, § 32 (as amended),

available at http: //www.le gisla tion .gov.uk/u kpga/ 1991/ 56 /se ction /32.

Under t his regi me, merg ers of ce rtain w ater en terpr ises are s ubjec t to a

mandatory review (on referral by the OFT) by the Competition Commission

to determine whether the merger would have an adverse impact on the abil-

ity of the sector economic regulator, the Water Services Regulation Authority,

to regulate monopoly providers through a system of comparative regulation.

However, the system of judicial supervision by the CAT is the same as for

mergers considered under the Enterprise Act, although there have, as yet, not

been any appeals against Competition Commission decisions under the

Water Industry Act regime.

2See generally MARK FURSE, COMPETITION AND THE ENTERPRISE ACT 2002

(2003); NIGEL PARR, ROGER FINBOW & MATTHEWHUGHES, UK MERGER CONTROL:

LAW AND PRACTICE (2 d ed. 2005). Se e also RICHARD WH ISH & DAVID BAILEY,

COMPETITION LAW ch. 22 (7th ed. 2012).

the Competition Commission finds that a merger will substantially

lessen competition, it will either impose remedies or prohibit the

merger; this can include ordering the unwinding of a merger that has

already been consummated. The United Kingdom government has

announced plans to merge the OFT and Competition Commission

into a single antitrust agency, the Competition and MarketsAuthority

(CMA). These changes are expected to take full effect by April 2014,

although the two-stage system of merger review will be retained.

Appeals from decisions of the OFT and Competition Commission

are hea rd by th e CAT. With lea ve, fu rthe r app eals c an be ma de,

depending on the forum, to the Court of Appeal (England and Wales),

the Court of Session (Scotland) or the Court of Appeal in Northern

Ireland (Northern Ireland) and thence to the Supreme Court of the

United K ingdom ( former ly the Hou se of Lords, and to wh ich the

appellate functions of the House of Lords were transferred on Octo-

ber 1, 2009).

The British system, therefore, is different from the adversarial

judicial process seen in jurisdictions such as the United States, in

which an antitrust agency cannot itself prohibit a merger, but must

bring proceedings before a court, in which the agency is a party to the

proceedings, but not a final decisionmaker.

II. ADMINISTRATIVE CONTROL OF MERGERS

IN THE UNITED KINGDOM

Under the scheme of merger control set out in the Enterprise Act,

the two independent competition agencies, the OFT and the Competi-

tion Commission, undertake the review of mergers and reach a final

decision on whether to approve a merger, and if so, whether to

impose conditions. The OFT is a first phase review agency, while the

Competition Commission is a second phase review agency, to which

the OFT refers mergers that, on an initial review, may raise competi-

tion concerns. Only in exceptional cases, which raise special “public

interest” issues (typically in the defense and media sectors), do gov-

ernment ministers have any role in merger control, and even then this

does not extend to competition matters, but only to the specified pub-

lic interest matters.

UNITED KI N G D O M :435