The UK government recently published its “New approach to ensure regulators and regulation support growth” policy paper, outlining next steps for reforms across the UK regulatory landscape. The policy paper aims to create a more business-friendly regulatory system that improves administrative efficiency and reduces time and cost burdens. It also includes a consultation on potential legislative changes to the jurisdictional tests the Competition and Markets Authority uses when evaluating its jurisdiction over mergers.
In recent years, the Competition and Markets Authority (CMA) has exercised wide discretion when asserting jurisdiction over mergers, including receiving new legislative powers to review vertical mergers and “killer acquisitions.”[1] However, the new UK government has questioned the CMA’s powers and enforcement practices. In its published draft strategic steer, dated February 13, 2025, the government made clear that it is expecting the CMA to act in line with the government’s pro-growth and pro-investments agenda through actions that are proportionate, certain, and aligned with the government’s agenda.
The CMA responded to the government’s strategic steer with a set of proposals aimed at ensuring predictability, proportionality, and a heightened involvement of businesses in its merger review process.
The UK government’s consultation sets out its plans to make further legislative changes to the CMA’s merger control powers. To this end, there will be:
In the last few years, the CMA has exercised wide discretion in its application of the “share of supply” test and the “material influence” test and has used them aggressively to assert jurisdiction over mergers that often have limited nexus to the United Kingdom.
For example, in Sabre/Farelogix, the CMA asserted jurisdiction over the transaction even though the target did not supply clients in the UK and did not have a UK turnover. The CMA deemed that the “share of supply” test was satisfied because (1) Farelogix supplied services to American Airlines, which shared an interlining arrangement with British Airways, and (2) Farelogix was indirectly supplying—and receiving a remuneration for—services provided to British Airways when such services were used by American Airlines in relation to British Airways interline segment. The Competition Appeal Tribunal (CAT) upheld the CMA’s decision on jurisdiction, and in doing so, it underscored the wide discretion available to the CMA in the interpretation of its jurisdictional thresholds.[4]
This level of discretion has permitted the CMA to conduct lengthy and often burdensome investigative processes in borderline cases, which occasionally has resulted in them being closed following months of investigation and without the CMA accepting jurisdiction over the transaction. This approach is burdensome, uncertain, and time and cost inefficient. This is because the merger review procedure is such that the CMA must undertake a full Phase 1 merger review before it can determine whether it has jurisdiction to review the merger.[5]
The CMA has also exercised its discretion to assert jurisdiction over high-value mergers in sectors such as life sciences and technology (often with a limited UK nexus), with the aim of identifying and blocking (or mitigating) “killer acquisitions,” which the CMA thinks would hinder innovation specifically in sectors where innovation is key. For example:
In all these cases, the merger/partnership was allowed to proceed, but the respective investigations by the CMA were uncertain in outcome and time and cost intensive.
In response to the CMA’s approach, businesses have raised significant concerns. Therefore, it is not surprising that the government is consulting on legislation that may serve to curb the CMA discretion and the scope of its jurisdiction over mergers.
While the government has not yet announced the changes it plans to make,[6] we would expect that these will include:[7]
These kinds of reforms would align the CMA merger control regime with many of its national and supranational peers, whose merger control rules provide for (1) well-defined turnover thresholds for notification and (2) a heightened definition of “relevant merger,” which only covers changes in control of a company.
This consultation and the UK government’s aim to increase certainty in the UK merger control system may result in more certainty to businesses interested in growing or investing in the UK.
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[1] On January 1, 2025, the Digital Markets, Competition and Consumer Act 2024 (DMCC) came into force. The DMCC introduces a new threshold allowing the CMA to investigate mergers where (1) one party to the merger holds a 33% share of supply in the UK and has a UK turnover of at least £350 million, and (2) the other party as a “nexus” (i.e., supplies goods or services, or carries out activities in) with the UK.
[2] Under the current “share of supply test,” the CMA is allowed to review mergers that result in an increment to the share of supply or consumption, which result in a share of at least 25%. While this test can theoretically be satisfied only if all the parties to the merger supply similar products in the UK, the CMA has benefitted from broad discretion in defining the relevant “goods or services” that the parties can supply to find an overlap, and such definitions may be broader than the relevant “product market” to which the products belong.
[3] Material influence is generally considered as the ability of one party to influence the strategic behaviour of another entity, even if it does not properly consist in outright control or majority ownership. The CMA assesses each case individually, considering the specific context and the overall relationship between the parties involved, and taking into account a variety of factors, such as shareholding (generally, 15% or more is considered relevant), number of board representatives appointed, or other rights, such as veto rights, or commercial relationships between the “acquirer” and the target.
[4] Competition Appeal Tribunal, Judgment of 5 May 2021, 1345/4/12/20 Sabre Corporation v Competition and Markets Authority.
[5] In practice this meant that merging parties, whose view may be that the CMA’s claim over jurisdiction was tenuous, would argue that the merger did not give rise to a substantial lessening of competition rather than argue that the CMA did not have jurisdiction. This was because an argument on the substantive merits of the case was more likely to be successful than a jurisdictional argument.
[6] As this is an initial consultation, any changes to the law may still take several years to come into effect.
[7] The scope of this review will be clarified as part of the government’s consultation process.
[8] There is currently no statutory definition of “a substantial part,” and while there is no fixed definition, the House of Lords (now the Supreme Court of the UK) concluded that the area of areas considered must be of such size, character and importance as to make it worth consideration for the purposes of merger control. In practice, the CMA will take such factors into account as: the size, population, social, political, economic, financial, and geographic significance of the specified area or areas, and whether it is (or they are) special or significant in some way. However, the CMA has interpreted the “substantial part” test broadly, which can give rise to a small geographic area, e.g., a London borough being deemed a substantial part of the UK. (see Cineworld/City Screen).