Merger Reforms

The Secretary of State for Trade and Industry has announced sweeping reforms which will take the politics out of UK merger control.

The current two-stage process will be retained, with preliminary investigations conducted by the Office of Fair Trading and second-stage investigations by the Competition Commission. The big difference, however, is that the DTI will not usually be involved. The OFT will no longer be merely advising the Secretary of State on whether to refer a merger to the Commission, but making and implementing its own independent decision. In full second-stage investigations the Commission's decision will be final and the Secretary of State will lose the power to overrule. For exceptional cases, such as defence or other sensitive public interest matters, the Secretary of State will retain a power to intervene.

The new regime will require primary legislation. The changes cannot be adopted in the life of the current Parliament. The reforms will therefore not be implemented until 2002 at the earliest. In the interim period before then, the Secretary of State has announced that he will informally implement the changes with immediate effect. He can henceforth be expected automatically to follow the OFT's advice on whether to refer a merger to the Competition Commission.

There are other proposed changes to the procedure : the current public interest test will be replaced by a competition test; the assets threshold (GBP 70m total gross assets of target) for qualifying mergers will be changed to a threshold of GBP 45m turnover of target in the UK, with the market share threshold at 25 percent remaining unchanged; and the timetables for both stages of investigation are to be shortened.

Copies of the government's Response to the Consultation on Proposals for Reform can be obtained from Orderline 0870 1502 500 or on the DTI website at http://www.dti.gov.uk/. The government has asked for comments on the proposals by 26th January 2001. Please contact any member of our competition team on Tel +44 (0)20 7367 3000 or by e-mail at [email protected] if you have any questions on the reforms or if you would like to submit comments through CMS Cameron McKenna.