Ten reflections on UK Merger Policy and Practice: Supporting Competition, Investment, and Growth

The CMA is evolving its approach to merger control. Guided by four principles – pace, predictability, proportionality, and process – it seeks to bolster business confidence and growth, and support the government’s call for regulators to “rip up the bureaucracy that blocks investment”.

At our recent annual UK Competition Policy Forum we discussed the CMA’s changes with senior leaders and experts in competition policy and practice. These are our ten reflections from that discussion.

Our collective insights do not reflect the views of any particular firm or individual and are not intended as a summary of the discussions, which are held under the Chatham House Rule.

1. The critical fifth "P": Purpose. The CMA is clear about its aims: driving growth and investment, and upholding consumer interests. However, it must also be clear how these objectives inform the CMA’s priorities, decision-making, and approach. That will be challenging, given the inherently complex interaction between competition, consumer welfare, investment, innovation, and growth. But it is necessary, to ensure an effective, expeditious, predictable, and proportionate process, that inspires investor confidence and avoids perceptions of arbitrariness or interference.
2. Shifting priorities must be clear priorities. The CMA’s case mix will change as it likely reviews fewer global deals, novel theories of harm, and transactions that may provide “material influence”, below the threshold of acquiring control. However, predictability for investment depends on how clearly the CMA can draw the boundaries of its interest, not just where it draws them. If it can reduce ambiguity – for instance, about whether a deal constitutes a “distinct and direct” impact on the UK, or provides “material influence” – it will better assist businesses to assess their jurisdictional risk.
3. Shorter decisions must be informative decisions. While the CMA aims to expedite its merger reviews partly by producing shorter decisions, it is crucial that brevity does not sacrifice how clearly and transparently it explains its key decisions. The detail in its decisions documents is a key determinant of businesses’ and advisers’ abilities to accurately self-assess merger risks. The CMA should, therefore, strategically focus written decisions on critical issues to maintain informative and useful decisions.
4. Greater engagement and flexibility shows the prospect of a more effective and efficient approach. The CMA has recently demonstrated greater engagement with parties’ senior leadership and flexibility in its processes. This is particularly true of the investigations relating to AI partnerships and the approach to assessing efficiencies in Vodafone/Three. This approach can significantly enhance efficiency and reduce the burden on both the CMA and parties. However, to be effective it requires commitment and tailoring to circumstances. Ultimately, the impact of the principles supporting these initiatives will depend on the extent to which they become part of the CMA’s culture.
5. Changes must be consistently applied to be successful. Ultimately, boosting business confidence and investment will hinge significantly on the CMA’s evolving approach being consistently applied in its decisions. Some sources of inconsistency, such as the current high turnover of staff, should be temporary. But others are structural, particularly given the role of independent panels, which significantly affect the case process and its outcomes.
6. Don’t overinterpret Vodafone/Three; it does not demonstrate that the CMA has become permissive, nor that its risk tolerance is high when assessing a merger. The CMA cites this transaction as proof that it considers the potential for deals to deliver pro-competitive investment benefits seriously. However, its approval is less surprising than some interpretations have suggested. This transaction involved relatively modest competitive risks from the outset, relatively certain and extensively evidenced benefits, and favourable regulatory conditions to ensure effective remedies through Ofcom. So, our firsthand experience suggests that the CMA will set a very high bar on what it considers to be “robust and well-evidenced” remedy proposals and claims around benefits.
7. A true litmus test on the CMA’s approach to risk and uncertainty lies ahead. Investment, particularly in high-growth sectors, necessarily involves risk. While some uncertainty can be mitigated through thorough analysis and detailed evidence, some uncertainty will irreducible. How effectively the CMA and merging parties can articulate, contextualise, and assess that uncertainty will be the real bell weather on how the merger regime affect investor confidence and outcomes for consumers.
8. Where it has concerns, expect the CMA to agree effective remedies more often, and agree them earlier. The CMA explicitly aims for as many of the deals as possible which raise competition concerns to be cleared with effective remedies, rather than be prohibited. Historically, many transactions referred to Phase 2 are subsequently abandoned, even when suitable remedies might have been available. Going forward, earlier identification and agreement of effective remedies at Phase 1 may save deals that would have otherwise been abandoned. Where effective remedies are possible, we may even see the successful return of some deals that parties have abandoned previously.
9. The CMA’s review merger remedies of a big opportunity. The remedies framework has been one of the least predictable and most impactful elements of UK merger control. So, the CMA’s review on how to balance different types of remedies, and ensure an efficient process, is welcome. Effective and tailored remedies represent the only truly effective way to navigate between the opposing risks of a regime that is either too permissive – unconditionally clearing deals despite problematic elements – or too interventionist, blocking deals that could have delivered real benefits. The scalpel of effective remedies is especially important given that the CMA has, across different decisions, been accused of both.
10. Developing effective behavioural remedies is an important but challenging goal. Some competition concerns are not well addressed by divestments, or cannot be addressed by structural remedies at all. While behavioural remedies offer the potential to benefit investment and consumers, they can be difficult to implement effectively and burdensome to maintain – particularly in markets that lack a specialist sector regulator to support oversight, as Ofcom provided for Vodafone/Three. While some competition authorities have shied away from the challenges these remedies pose, the CMA’s review provides it with the opportunity to identify the opportunities where they might be practically and effectively applied.