Merger Control In The UK'Three And A Half Things You Need To Know

• Published date: 17 September 2020
• Subject Matter: Corporate/Commercial Law, Anti-trust/Competition Law, Government, Public Sector, M&A/Private Equity, Inward/ Foreign Investment, Corporate and Company Law, Antitrust, EU Competition , Constitutional & Administrative Law
• Law Firm: Arnold & Porter
• Author: Mr John Schmidt and Ludovica Pizzetti

Merger control in the UK is changing. With Brexit at the doorstep, COVID-19 still looming, and growing trade tensions across the globe, UK merger reviews will become more prominent, and we believe the UK Competition and Markets Authority (CMA) is becoming more interventionist, despite (or maybe because of) the voluntary nature of the regime.

Core industries continue to be healthcare and the digital sector.¹ The CMA is also particularly sensitive where the acquisition involves innovation overlaps between actual or potential competitors.

Below you will find a status update of key changes that might impact your business. The three key changes are that (i) Brexit leads to UK merger filings in cases where previously a filing with the EU would have sufficed, (ii) a new and growing UK foreign direct investment regime will lead to increased scrutiny, and (iii) the CMA is becoming more interventionist in cases. The 'half' change is that the UK leaving the EU can lead to jurisdictional changes outside of the UK in cases that straddle the threshold requirements.

Brexit'the End of the EUMR "One-Stop-Shop" Principle for the UK

As we previously discussed,² "Brexit day" on 31 January 2020 did not affect merger control jurisdiction until 31 December 2020, meaning that'pursuant to the "one-stop-shop" principle'until the end of 2020 mergers that satisfy both the EU and the UK jurisdictional test will continue to be reviewed exclusively by the European Commission, including the UK aspects of the deal.

While the exact details of the position in 2021 will depend on the final exit agreement between the EU and the UK, one thing is now a near certainty: as of 1 January 2021, the "one-stop-shop" principle ceases to apply to the UK. This means that any transaction involving UK activities faces the potential for parallel EU and UK investigations. The main implications are twofold: (i) the CMA will conduct its own review of the impact of any mergers in the UK and the Commission's review will no longer cover the UK market(s)'the CMA expects a 40-50% increase in its annual merger workload as a result; and (ii) UK turnover will no longer count towards the EU jurisdictional thresholds.

Here is what you need to know in the run-up to the end of 2020:

• Which date determines jurisdictions? The date of formal notification is key: the Commission will maintain exclusive jurisdiction over deals which are formally registered (i.e., "on the clock") by the end of 2020.³ Given the Commission's last working day of the year is 23 December, only for deals which are notified, and jurisdiction by the Commission accepted, no later than 23 December 2020 will the "one-stop-shop" principle continue to apply. Transactions which were notified to an EU member state and subsequently referred to and accepted by the Commission before 23 December will also remain within the exclusive purview of the Commission.
• In practice, this means that any deal from now on will need to factor in the jurisdictional change, as (potentially lengthy) pre-notification discussions with the Commission are required to avoid the filing being rejected as incomplete.
• How will the thresholds change? After the "one-stop-shop" principle ceases to apply on 31 December 2020, turnover generated in the UK will no longer be included for the purpose of the EU thresholds. This means that some transactions which meet the EU test only when UK turnover is counted may end up needing to be filed with a number of EU national competition...