UK Law and Practice Contributed by: Becket McGrath and Marc Freedman, Van Bael & Bellis
example, 1.2 Legislation Relating to Particular Sec- tors ). 2.6 Calculations of Jurisdictional Thresholds Calculation of the Turnover Test For the purposes of calculating the turnover thresh - old, the term “turnover” refers to revenue achieved by the target and derived from the sale of products and/ or the provision of services in the ordinary course of business in the UK in the last completed business year for which accounts are available (see 2.5 Juris- dictional Thresholds ). • Revenues are calculated on the basis of net turno - ver (ie, after the deduction of sales rebates, value added tax and any other taxes directly related to the relevant turnover). • The CMA may adjust the turnover value if it is appropriate to do so (eg, where an acquisition or divestment following the end of the financial year materially impacts the turnover value). Note that the CMA’s merger guidance provides addi - tional details on applying the Turnover Test to different contexts such as joint ventures, and outlines the spe - cific provisions that apply to enterprises in financially regulated markets, such as credit institutions, financial In determining share of supply, the CMA will exam - ine three key elements and, in doing so, will exercise broad discretion. • Product – the CMA will give a description of the goods or services supplied or procured by the parties. This is distinct from a market share test, but the CMA will have regard to any “reasonable description” of a group of goods or services. • Territory – the CMA will determine what constitutes a substantial part of the UK. Although the CMA will take several key factors into account, including the size of the territory, population and economic importance, the “substantial part of the UK” is not required to be comprised of a single, unified geo - graphic area. • Level of supply or purchase – the CMA will con - sider what measures are appropriate to calculate institutions and insurance businesses. Calculation of the Share of Supply Test
in a single two-year period, the CMA may consider the transactions as a whole and, for the purposes of review, take the date of the most recent transaction as the date of completion. In this context, the CMA may also take account of transactions that have not yet completed but are in contemplation. 2.5 Jurisdictional Thresholds Under the general UK merger control regime, there are three alternative jurisdictional thresholds that apply, and the CMA can open an investigation if one is met. • Turnover Test – this applies if the annual UK turno - ver of the target exceeded GBP100 million. • Share of Supply Test – this applies if (i) at least one of the parties has a UK turnover exceeding GBP10 million; (ii) there are at least two enterprises that supply or purchase goods or services of a par - ticular description; and (iii) the transaction results in a combined share of supply or procurement of 25% in the UK, or a substantial part of the UK, for those goods or services – provided that there is an increment in such share of supply as a result of the transaction. Importantly, this is not a market share test (see 2.6 Calculations of Jurisdictional Thresh- olds ) and the CMA enjoys significant discretion in its application of this test (thus enabling it to assert jurisdiction over mergers that do not meet the Turnover Test). • Hybrid Test – introduced by the DMCCA, this addi - tional threshold (which was implemented to enable the CMA to review so-called “killer acquisitions” and vertical/conglomerate transactions where there is no share of supply increment) applies where: (a) one of the enterprises ceasing to be distinct supplies or acquires 33% or more of goods or services of a particular description in the UK or a substantial part of the UK and has a UK turnover exceeding GBP350 million; and (b) the other enterprise is a UK entity, has activi - ties in the UK, or supplies goods or services to UK persons. Note that, in certain sector-specific merger situations (such as those involving two or more water and sew - age companies) and certain public interest mergers, alternative jurisdictional thresholds apply (see, for
703 CHAMBERS.COM
Powered by FlippingBook