The CMA is reviewing past requirements on firms to see if they are still necessary.
As a first stage of this programme, the Competition and Markets Authority (CMA) is commencing a review of 76 ‘structural’ merger undertakings given by companies before 1 January 2005 to see if any of these can be removed or, if still required, varied.
Broadly speaking, the structural merger undertakings in question involved commitments:
- not to proceed with a contemplated merger, or to proceed only on the basis that certain parts of the business to be acquired would be sold (divested), (in some cases only to approved purchasers); and/or
- to divest all or part of an acquired business (in some cases selling that business only to approved purchasers); and/or
- not to reacquire a divested business or part of a business (see note)
While the obligation to implement a divestiture is typically implemented within a relatively short period (eg 6 months) following the acceptance of undertakings, the obligation not to reacquire divested operations is an ongoing obligation on firms.
The CMA has a statutory duty to keep under review undertakings made under the Fair Trading Act 1973 and the Enterprise Act 2002. From time to time, it must consider whether, by reason of any change of circumstances, undertakings are no longer appropriate and need to be varied, superseded or released.
The CMA’s current merger remedy guidelines (see paragraph 3.8 of Merger Remedies: Competition Commission Guidelines) state that the CMA’s present general approach is for such undertakings to be subject to a ‘sunset clause’ period of 10 years. Given that a similar period of time has elapsed for undertakings made before 2005, the CMA considers that it is appropriate to review these and see whether they need to be removed or varied.
The CMA has decided to review 76 such cases and a group will be appointed from the CMA’s panel members, chaired by Simon Polito, to act as the decision maker. The CMA is seeking views from interested parties as to whether or not there is a case for removing or varying any of these undertakings.
This review will form part of a programme of work to systematically review existing remedies, announced in the CMA’s annual plan earlier this week.
Adam Land, the CMA’s Senior Director of Remedies, Business and Financial Analysis, said:
We sometimes recommend that others reduce or remove unnecessary regulations in order to allow innovation and competition to flourish. So whilst it is sometimes necessary for us to impose requirements on firms in order to prevent harm to consumers or enhance competition, it also incumbent to remove these when they are no longer needed as a result of changes in the market concerned.
Doing so also enables us to focus our monitoring and enforcement efforts on those remedies that continue to benefit UK consumers. Given that all of these undertakings date back for more than a decade – and in some cases for much longer than this – we believe it is appropriate to review them and see if we can clear the decks a little.
- ‘Acquire’ and ‘reacquire’ may include acquisition of material or controlling influence as well as outright acquisition. These terms are explained in the CMA’s mergers guidance.