OFT Uses De Minimis Merger Exception For The First Time

The Office of Fair Trading (OFT) has confirmed that it has used the "de minimis" exception in deciding not to refer two mergers to the Competition Commission (CC). This is the first time the de minimis exception has been used following the issue of revised guidance in November 2007.

The exception allows the OFT to decide not to refer for CC investigation a transaction which otherwise meets the reference criteria provided the markets in question are not of sufficient importance to justify a reference. This is where the relevant markets are valued at less than £10 million in total, although transactions in smaller markets may still be referred, in particular in very highly concentrated markets where the prospect of entry is low and in markets where there is evidence of coordination between competitors.

The mergers involved were the award of the Intercity East Coast (ICEC) rail franchise to National Express Group and the award of the Cross Country rail franchise to Arriva plc. In each case, the OFT considered that competition concerns existed which were realistic enough technically to establish a duty to refer the merger to the CC but that, given the size of the markets involved, those concerns were not sufficient to warrant the costs of a CC investigation.

The OFT's analysis in the ICEC case focused on coach revenues, the overlap market for which was valued at below £1 million. In the Cross Country case, the total size of the only traffic flow raising concerns was just above £1 million. The OFT has noted that its analysis focused on:

the peculiar issues raised by rail franchises awards;

the lack of impact on deterrence if the exception were used;

the conclusion that the OFT's concerns were more marginal than in many other reference cases; and

the fact that the relevant turnover in each case was very modest.

Before the OFT revised its guidance on the de minimis exception in November 2007, increasing the threshold for the application of the...