What is the Competition and Markets Authority in England?

As a business looking to merge or acquire another company, it is important that you are aware of the role and jurisdiction of the Competition and Markets Authority (CMA). The Competition and Markets Authority is the UK’s regulator of competition law, and is responsible for preventing anti-competitive practices. 

This article will elaborate on what the Competition and Markets Authority does, what they are responsible for, and when you may want to engage with them.

What is the CMA?

The Competition and Markets Authority are the UK’s competition watchdogs, and have been fully operational in its current form since April 2014. The CMA is a non-ministerial department, and is concerned with ensuring that the UK economy has a healthy amount of competition, and does not disadvantage consumers from anti-competitive practices. 

Specifically, the CMA will deal with:

• overseeing competition law concerns in mergers through ‘Phase 1’ and ‘Phase 2’ investigations;
• investigating potential breaches of the Competition Act 1998;
• initiating criminal proceedings against individuals engaging in cartel activities;
• conducting market investigations; and
• enforcing certain consumer protection legislation;

Merger Control

Competition law concerns are most relevant in merger or acquisition situations. A merger or an acquisition is where one business buys or join forces with another business. In some cases, this can have adverse consequences for consumers. For example, if the newly merged company opts for higher prices, or because the consumer has less choice, or there is less incentive for the business to innovate. 

The CMA has the power to review a merger if:

• the turnover of the merging businesses exceeds £70 million in the UK; or 
• the two businesses supply or acquire at least 25 per cent of the same goods or services supplied in the UK market, and the merger increases their share of that supply.

How Does The CMA Begin a Review?

The CMA can begin a review of a merger in one of two ways. 

First, the CMA may choose to investigate the merger through their own initiative. If the CMA hears about a merger that it believes could raise competition law concerns, it can initiate a review provided that it has the jurisdiction to review the merger. The CMA may get in touch with the merging businesses to determine if they have jurisdiction. They will aim to learn about the details of the businesses and the market they operate in. 

Second, you may notify the CMA of a potential merger. Usually, businesses will first approach the CMA to discuss the merger and any potential competition law concerns, then they will submit a Merger Notice. 

You may decide to notify the CMA of their own initiative for a number of reasons. For example, if the CMA approves of the merger, then both parties can proceed without uncertainty about competition law concerns. Similarly, some businesses do not notify the CMA of mergers and acquisitions. If competition law concerns emerge, the CMA could impose interim measures on these businesses. These can be costly and time-consuming, so you should try to avoid them where you can. 

Phase 1 Reviews

If the CMA does decide to exercise its powers, it will begin with a Phase 1 review. 

In a Phase 1 review, the CMA will consider whether it believes that there is a realistic prospect that the merger will result in a substantial lessening of competition. This will involve considerations such as:

• whether the merged business will be able to raise prices in a way that disadvantages consumers, or offer a worse service, or reduce innovative efforts;
• impacts on other businesses (especially if the merging businesses operate at different stages of a supply chain);
• the number of businesses operating within that market; and
• the wider competitive forces within that market.

If the CMA determines that the merger will result in a substantial lessening of competition, it will then launch a more in-depth Phase 2 review. If possible, you can offer to modify aspects of the merger to eliminate any competition law concerns.

Phase 2 Reviews

A Phase 2 review is similar to a Phase 1 review, but is held to a different standard. The CMA must be convinced on the balance of probabilities that the merger is likely to result in a substantial lessening of competition. The balance of probabilities refers to the standard of proof that one outcome is more or less likely to occur than another. 

If the CMA determines there is a substantial lessening of competition, they can issue a range of remedies. This can include: 

• preventing the merger; or 
• requiring the sale of parts of the business.

Notably, however, the CMA has discretion to not launch a Phase 2 review if it believes that:

• the market in which the businesses are operating is not important enough;
• the merger is not sufficiently advanced or likely to proceed; or
• the merger is likely to bring benefits to consumers that outweigh the cons.

Key Takeaways

As a business in the UK, it is useful to know about regulatory watchdogs and their jurisdiction. The Competition and Markets Authority are competition specialists who oversee competition law concerns in the UK market. Their powers include initiating criminal proceedings, conducting Phase 1 and Phase 2 investigations, and enforcing the Competition Act 1998. 

If your business is looking to merge with or acquire another business, it may be useful to get in touch with the CMA to discuss any potential regulatory concerns. This can help your business save money in the long run, and give you certainty in going forward. 

If you have any questions about the CMA or merging with another business, our experienced corporate lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today at 0808 196 8584 or visit our membership page.

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