UK Law and Practice Contributed by: Becket McGrath and Marc Freedman, Van Bael & Bellis
share or concentration thresholds to assess whether a loss of competition is substantial. If, on the basis of its review, the CMA determines that a transaction is likely to result in an SLC (meaning a 50% or more likelihood), it must refer the transaction for a Phase II review. If the likelihood of a transaction resulting in an SLC is less than 50% but is still a dis - tinct possibility, the CMA must exercise its discretion as to whether a Phase II reference is required. However, the CMA may decide not to refer a transac - tion for a Phase II investigation if it believes that: • in the case of an anticipated transaction, the arrangements are insufficiently advanced, or insuf - ficiently likely to proceed, to justify a reference; • regardless of whether the transaction has been completed, the market(s) concerned is/are not of sufficient importance to justify a reference (known as the “de minimis” exception, this may be avail - able where the value of the relevant UK market(s) is less than GBP30 million in aggregate – subject to various wider considerations); or • regardless of whether the transaction has been completed, any relevant customer benefits arising from the transaction outweigh the SLC (and any adverse effect(s) of the SLC). At Phase II, if the CMA establishes – on the balance of probabilities – that the transaction has resulted, or may be expected to result, in an SLC, it must decide whether the SLC or any resulting adverse effect(s) should be remedied, mitigated or prevented. 4.2 Markets Affected by a Transaction The CMA does not apply any thresholds on market share or number of remaining competitors, nor on any other measure to determine whether a loss of compe - tition is substantial. Based on the range of evidence before it, considered in the round, the CMA will consider whether a merger would give rise to an SLC on one or more of the fol - lowing bases: • unilateral effects – where a horizontal merger involves two competitors and effectively removes
the rivalry between them, resulting in a loss of competition that would enable the new merged entity to profitably raise prices; • co-ordinated effects – where a merger (horizontal or non-horizontal) impacts market conditions in such a way that it allows or increases the potential for several entities within the market, including the merged entity, to co-ordinate their activities and jointly raise prices; and/or • vertical or conglomerate effects – where a merger (principally, a non-horizontal merger) reduces rivalry by enabling the merged entity, through either creating or strengthening its ability, to use its mar - ket power in at least one relevant market. In order to determine which markets may be affected by a transaction, the CMA assesses the competitive effects of a transaction by examining the relevant mar - ket, typically taking account of the product scope as well as the geographic scope. Product Scope Determining the relevant product market includes identifying the most significant competitive alterna - tives available to the merging parties’ customers. The CMA will generally consider evidence from the parties, the parties’ customers and/or competitors, as well as third-party reports. • The CMA will examine the parties’ overlapping products in the narrowest plausible candidate product pool in a horizontal merger (ie, where merging parties are competitors). • In a non-horizontal merger (ie, where parties are at different levels of the supply chain or at the same level but not competing), the CMA will start with at least one party’s product. • The CMA may then widen the product scope and consider either demand-side substitution (eg, how customers would respond to a small but signifi - cant and sustained increase in price – the “SSNIP” test), or supply-side substitution (eg, how competi - tors would respond to a small but significant and sustained increase in price). Note that the CMA may also review evidence that relates to non-price considerations. • While the CMA’s assessment is representative of current competitive constraints, it will also take
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