UK Law and Practice Contributed by: Becket McGrath and Marc Freedman, Van Bael & Bellis
must be “clear-cut” – as these are designed to have immediate and lasting market impact and do not require ongoing oversight. Divestments typically relate to the business being acquired. However, the CMA will consider divestment in relation to the acquirer, as long as the SLC can be effectively addressed in that way. In determining the scope of the divestiture package, the CMA will typically seek to identify the smallest viable, standalone business that can independently compete successfully on an ongoing basis and that includes all the relevant operations applicable to the area of competitive overlap. At Phase I, the CMA will usually require an “upfront buyer” for a divestment. An “upfront buyer” is a pur - chaser who: • has contractually committed to purchasing the divested business; and • is approved by the CMA. Where no such buyer is found, the CMA may still refer the transaction for a Phase II review. At Phase II, although the parties are still able to pro - actively offer remedies, the CMA has the power to ultimately impose remedies, such as full divestment of the target’s business in a completed transaction. Behavioural Remedies Whilst the CMA remains generally more sceptical of behavioural remedies (ie, commitments by the par - ties to behave in a certain way on the market) – since the CMA considers that most such remedies do not directly address the SLC at source and are subject to a variety of risks which might limit their effectiveness – in its recently revised merger remedies guidance, the CMA nevertheless considers that behavioural remedies can be effective in some cases (including because they encompass a wide range of measures with different risk profiles). Although such effective - ness will be assessed on a case-by-case basis, in its recently-updated merger remedies guidance, the CMA identifies the following factors which may reduce the risks associated with behavioural remedies:
• the remedy has a limited duration; • there is an industry regulator with appropriate expertise, powers and resources to effectively monitor/enforce the remedy; • the relevant industry has certain characteristics (eg, a high degree of market transparency), which make it more likely that third parties are in a strong posi - tion to identify non-compliance; • the remedy aligns with pre-existing market prac - tices and norms in the relevant industry; • the relevant market is sufficiently mature and sta - ble, such that competitive conditions are unlikely to materially change in ways which mean that the remedy becomes ineffective; and • the merging parties appoint and remunerate a monitoring trustee, to assist the CMA in fulfilling its monitoring responsibilities effectively. Examples of behavioural remedies include supply obligations, access to key technology or infrastruc - ture, licensing commitments and firewall measures. Note that the CMA may also use behavioural commit - ments to supplement structural remedies. Process for Proposing Remedies at Phase I and Phase II Process for proposing UILs at Phase I Offered UILs should be formally submitted to the CMA using the CMA’s Remedies Form for Offers of Under - takings in Lieu of Reference and the CMA’s applicable template (available from its website). The UIL process at Phase I can be summarised as follows. • Upon receipt of the CMA’s SLC decision, the par - ties have up to five working days to offer UILs to address the SLC(s). • Once UILs are offered, the CMA has until the tenth working day after receipt of the SLC decision by the parties to decide on the acceptability of the offer. If the CMA decides to accept a modified version of the UILs offered, the parties will have a short period of time to confirm their agreement with the modified package. • If the CMA decides that the offered UILs might be acceptable in principle, it will confirm this to the parties and publish a non-confidential version of
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