UK Law and Practice Contributed by: Alex Stratakis and Marc Freedman, Van Bael & Bellis
4.2 Markets Affected by a Transaction The CMA does not apply any thresholds on mar - ket share or number of remaining competitors, nor on any other measure to determine whether a loss of competition is substantial. Based on the range of evidence before it, con - sidered in the round, the CMA will consider whether a merger would give rise to an SLC on one or more of the following 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 mar - ket 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 market 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 examin - ing the relevant market, 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 alter - natives available to the merging parties’ custom - ers. 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’ overlap - ping 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 significant and sustained increase in price – the “SSNIP” test), or supply-side substitu - tion (eg, how competitors 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 considera - tions. • While the CMA’s assessment is representative of current competitive constraints, it will also take account of how competitive conditions will develop and evolve in the future. Geographical Scope Determining the relevant geographic mar - ket involves identifying the territory where the merging parties’ customers can source the most important competitive alternatives. This assessment typically involves consideration of demand-side substitution, and the CMA will review relevant evidence. The CMA will usually only make a definitive assessment of the boundaries of the relevant market at the Phase 2 stage. At Phase 1, the CMA may formulate an initial analysis without reaching a definitive conclusion.
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