Merger Control in the UK

Date Added 08.03.16

If you are contemplating mergers, acquisitions or joint ventures then it is vital that you consider merger control rules that apply in your jurisdiction beforehand in order to avoid the risks and costs that may apply for non-compliance.

What is merger control?

Merger controls have been implemented worldwide to prevent anti-competitive consequences of merger and acquisition transactions. UK merger control is governed by the Enterprise Act 2002 as amended by the Enterprise and Regulatory Reform Act 2013. The Competition and Markets Authority (CMA) is the regulatory body that investigates mergers that may restrict competition and it decides whether or not the transaction is prohibited.

When do the merger control rules apply?

A ‘relevant merger situation’ is triggered by the following events:

1)       Two or more enterprises cease to be distinct; and

2)       The target’s UK turnover exceeds £70 million or the deal creates or enhances a share of supply of 25% or more of sales or purchases of goods or services in the UK or a substantial part of it; and

3)       The merger is in contemplation or took place not more than 4 months before reference to the CMA was made or from when the merger was made public.

There is often a perception that these rules apply to mergers and acquisitions for large corporations and businesses. Whilst this may be the case, the share of supply test means that the rules also apply to small acquisitions.

Notifying the CMA

The parties’ decision to notify the CMA of a merger situation is voluntary however the decision to not notify the CMA can carry risks if the transaction raises competition issues. Also, the CMA may open up an investigation itself if the transaction meets the above thresholds and/or if it receives a complaint that it believes has merit. Notification is made by way of a Merger Notice.

CMA Phase 1 and Phase 2 investigations

Once the CMA receives the Merger Notice or when it decides to make its own enquiries, the formal timetable for investigation begins. The CMA has a 40 working day assessment period. At the end of the assessment period, the CMA will decide whether the transaction gives rise to competition concerns (sometimes clearance is conditional and subject to legally binding undertakings by parties) or to refer the matter to Phase 2 investigation. Reference to a Phase 2 investigation is usually made if the CMA considers that the merger is more than likely to result in a ‘substantial lessening of competition’. The timetable for Phase 2 investigation is 24 weeks.

What remedies can the CMA require?

In order to address any competition issues that may arise as a result of the merger, the CMA may require the parties to negotiate and agree legally binding undertakings (subject to the CMA’s approval). For example, undertakings can include divestment of part of the business related to competition issues.

Additionally, the CMA has powers to impose interim measures to prevent or unwind pre-emptive actions by the merging parties which would prejudice or hinder the CMA’s investigation. These interim measures apply to mergers that have completed or those that are yet to complete and will remain in force until the merger is cleared or when remedial action is taken.

This, therefore, presents great risks for merging parties who complete a merger without voluntarily notifying the CMA and obtaining clearance. Parties will incur a considerable amount of costs if the CMA (via its own investigations) prohibit the merger, require the divestment of the business and/or impose interim orders or onerous conditions on the parties (for example, unwind completed actions).

The penalties listed below highlight the additional risks (and costs) that parties may face if they do not comply with merger control rules.


The following penalties apply if a party fails to comply with merger control rules:

  • A fixed penalty capped at 5% of the worldwide turnover of the enterprise for failure to comply with interim measures imposed by the CMA;
  • A fine if a party fails to comply with investigatory requirements imposed by CMA;
  • Civil proceedings initiated by CMA or a 3rd party that suffers loss/damage for an injunction or other relief for a party’s failure to comply with undertakings imposed by the CMA;
  • A criminal offence will be committed if any party intentionally alters or destroys any information that CMA require or knowingly supply false or misleading information to the CMA – both punishable by a fine or 2 years imprisonment or both.

If you would like further information or would like to know how merger control rules may specifically apply to your transaction, please talk to Tollers on 01908 396 230 and ask for our Commercial Law Team.

All things Tollers

We partner with...

Headway Accreditation 2024
SIA Business Member Badge
Santander Logo
Barclays Logo
Sports Aid Logo
Harlestone Park Logo
NGC logo
Northamptonshire County Cricket Club Logo
Legal Fees Insurance Logo