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UK merger control: A toughening of the voluntary regime?

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Long Dominic
Dominic Long



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Weaver David
David Weaver

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25 July 2019

The UK’s competition authority has stepped up its enforcement of procedural breaches of merger control rules in the past 12 months. This is part of a global trend that has seen enforcement fines exceed EUR140 million globally in 2018.

The UK is one of a handful of countries globally that operates a voluntary merger control regime. There is no mandatory notification threshold and merging firms can complete a merger without first obtaining UK merger control approval (ie it is not “suspensory”). The UK’s Competition and Markets Authority (CMA) is therefore somewhat unique in that it is often tasked with investigating completed mergers, where businesses may have already begun the process of integration. Should the CMA conclude that a completed merger raises competition concerns, a high degree of integration can give rise to significant problems in remedying the concern. The CMA has sought to address this issue (and the related risk of harm to competition occurring whilst it conducts its investigation) by imposing “interim measures” that require parties to hold newly acquired businesses separate from legacy business operations and potentially unwind any integration that has already occurred. In June 2018, the CMA imposed its first ever fine for a breach of interim measures. Since then, the CMA has imposed a further four fines bringing the total to GBP866,000 in around 12 months. We understand there are further fines in the pipeline. In this brief note, we explore the implications of increased use and enforcement of interim measures and whether it heralds a toughening of the UK’s voluntary regime.

The voluntary regime and the need for interim measures

The voluntary nature of the UK’s merger control regime is intended to reduce the burden on merging businesses where there is little prospect of competition concerns arising from a deal; under the UK regime, merging businesses are able to avoid the potentially significant additional costs inherent with mandatory and suspensory merger control regimes, including legal fees, management time and delayed cost and revenue synergies. There is also a public cost-saving benefit in that the CMA is not required to investigate mergers that would clearly be benign from a competition perspective. Whilst many merging firms choose to voluntarily notify the CMA, others do not and instead decide to proceed to completion without prior CMA approval. This is a perfectly legitimate strategy and can be useful for dealmakers in certain contexts (particularly those involved in competitive auctions where a buyer is willing or being incentivised to take all UK merger control risk, there are clearly no competition concerns or in failing firm situations).

However, the CMA retains the power to investigate and intervene in completed mergers for up to four months from when completion is made public (or, if earlier, from the date the CMA was told about the merger), and frequently “calls in” mergers not notified to it.

It is in this context that interim measures become a valuable tool for the CMA. By forcing merging parties to “stand still” and suspend any further integration, the CMA retains its ability to intervene should it conclude there are competition concerns to be addressed (even if other competition authorities have cleared the deal). Without such a power, the CMA could find it difficult to remedy any concerns, as a high degree of integration makes it much more difficult to “unscramble” a deal or prevent it from occurring.

IEOs and Interim Orders

The CMA has the power under the Enterprise Act 2002 (the Act) to prevent integration of merging businesses – in other words, to require that the two businesses are held separate during its investigation.

The CMA can issue an initial enforcement order (IEO) under section 72 of the Act during a Phase 1 investigation or accept interim undertakings, or issue an interim order under section 81 of the Act during a Phase 2 investigation (collectively known as interim measures).

In completed mergers, it is standard practice for the CMA to impose interim measures even in Phase 1 cases. It remains rare for the CMA to impose interim measures in anticipated (ie not yet completed) Phase 1 cases, though this has happened and is likely where merging parties have set a date for completion to occur (in which case they would bite on completion).1

The underlying purpose of interim measures is to prevent “pre-emptive action”, which is a broad concept defined by the Act as “action which might prejudice the [investigation] concerned or impede the taking of any action […] which may be justified by the CMA’s decisions [in the investigation]” (section 80(1)). To reflect the broad forms of conduct that may constitute pre-emptive action, the CMA’s template interim measures are drafted very widely and capture a vast range of conduct. Given the need to act quickly in completed cases, the CMA will usually stick very closely to its templates, and discussions around scope or consent for certain integration actions are dealt with by way of derogations from the order once imposed.2

Enforcement of interim measures

To strengthen the regime, in 2014, the CMA gained the power to impose interim measures at Phase 1 and to impose penalties on merging firms that conduct themselves in breach of such interim measures.3 Where the CMA considers that a merging firm has, without reasonable excuse, failed to comply with interim measures, it may impose a fine of up to 5% of the total value of the global group turnover of the party involved. Fines have not approached this level to date, but there is potential for very large fines on global entities that are found in breach. The CMA did not make use of its new power for almost five years. However, in June 2018, it issued its first fine in Electro Rent/Microlease.4 Electro Rent was fined GBP100,000 for failing to first seek the consent of the CMA before issuing a notice in a break clause terminating the lease over the only premises Electro Rent had in the UK, in the context where the UK business was subject to a divestment remedy to obtain deal clearance. This was despite the company discussing the conduct with the monitoring trustee appointed at the CMA’s direction – the CMA made clear that only its consent was good enough to avoid a finding that actions breached the interim measures.

The CMA has issued several further fines to merging parties:

  • two fines of GBP150,000 each in December 2018 on Ausurus for (i) directing customers and suppliers of the Target to make payment into bank accounts of Ausurus Group without seeking the consent of the CMA; and (ii) failing to give the managing director of the target business a clear delegation of authority to take decisions without consulting, or obtaining the permission of, Ausurus;5
  • a further fine of GBP200,000 in February 2019 on Electro Rent for failing to seek the prior written consent of the CMA before appointing the CEO of Electro Rent as a director of the target;6
  • a fine of GBP120,000 in March 2019 on JLA for entering into an agreement with a third party to sell certain assets that it was due to acquire under the deal being reviewed by the CMA;7 and 
  • fines totalling GBP146,000 in July 2019 on Nicholls’ (Fuel Oils) for relocating staff, using its assets to service the target business and failing to provide compliance statements on time. 

In our view, it is not a coincidence that several merging parties have been found in breach of interim measures in this brief period. Rather, we consider that the CMA is taking a more stringent approach to enforcement in order to send a clear deterrence message to merging parties and encourage CMA notification prior to completion in cases that have the potential to raise competition concerns. Indeed, it is worth noting that every deal in which a fine has been issued involves merging parties that chose not to pre-notify the CMA and the deal was subsequently “called in” for review. 

More stringent enforcement of procedural rules should not be a surprise; one of the primary objectives of strengthening the regime in 2014 was to achieve just this outcome. At the time of the legislative changes, the predecessor to the Department for Business, Energy and Industrial Strategy stated in its impact assessment that: 

Strengthened interim measures should transfer the risk of completing a merger from the economy to the merging parties, making businesses less likely to complete mergers before receiving clearance. […] given the increased risk to the merging parties that the authority will use its strengthened powers to keep the businesses separate, they are more likely to notify prior to completion. Enabling the CMA to halt integration and incentivising the notification of anticipated as opposed to completed cases, directly addresses the problem identified in the current regime that the authorities investigate many completed cases which are more complex and difficult to remedy”.8 

Judicial support and renewed guidance 

The UK courts have been supportive of increased enforcement. The Competition Appeal Tribunal (CAT) in its judgment upholding the CMA’s first fine on Electro Rent noted that interim measures “serve a particularly important function […]” and that “[the] CMA’s role in regulating merger activity, and its ability to do so effectively, is a matter of public importance”.9 

Moreover, the CAT has previously confirmed that firms may be fined for conduct in breach of interim measures even where such action has no actual effect on the CMA’s investigation. What is important is that the conduct might have impeded the CMA’s investigation. In this context, the CAT has found that there is a “relatively low threshold of expectation” to determine whether conduct might impede an investigation, and that the onus is on a merging firm to seek the CMA’s consent: 

The word ‘might’ means that it is the possibility of prejudice to the [investigation] or an impediment to justified action which is prohibited. [interim measures] catches more than just actual prejudice or impediments, which is why the onus is on the addressee of the [Interim Measure] to seek consent from the CMA if their conduct creates the possibility of prejudice or an impediment”.11 

It appears that the CMA is conscious of potential under-enforcement in this area in the past and is now taking steps to address that. In its Ausurus Group fining decision, the CMA considered as a relevant factor that it had only recently imposed its first ever fine for breach of interim measures, noting that “the CMA may consider proportionately larger penalties in future cases should this prove necessary in the interests of general deterrence”.12 Indeed, in its most recent guidance on the use of interim measures (published in June 2019), the CMA noted that it has not made full use of its fining power to date but that in the future “the CMA will not hesitate to make full use of its fining powers [and] will therefore impose proportionately larger penalties in future cases should this prove necessary in the interests of deterrence”.13 

The new guidelines also indicate a much tougher approach to controlling merging parties’ conduct whilst interim measures are in place. For example, they set out clearer limits on the type and nature of information that can be shared between merging parties and the level of financial control that an acquirer can expect to have over a target in a completed merger whilst an investigation takes place. 

Merging parties in the future should consider themselves warned: if in doubt, check with the CMA. 

A broader view of enforcement action

Fines for breaches of interim measures should be viewed against a “stepping up” of enforcement action for breaches of other procedural rules across the CMA’s merger control function. 

In November 2017, the CMA imposed on Hungryhouse its first ever fine (of GBP20,000) for failure to fully disclose relevant documents in response to a formal information request.14 This has recently been followed with a GBP15,000 fine issued to AL-KO Kober for similarly failing to disclose relevant documents in response to a request.15 

Stricter enforcement of procedural rules is a trend not just in the UK, but also globally. We note in our recent report on global merger trends that fines for breaches of procedural rules exceeded EUR140m in 2018.16 

Whilst the level of these fines in the UK pales in comparison to the EUR110m fine imposed on Facebook or the EUR52m fine imposed on General Electric by the European Commission for supplying misleading information in the course of a merger investigation, it does indicate an increased willingness by the CMA to pursue such actions. The CMA’s recent proposals for reform also suggest increasing the level of fine that the CMA can issue in these circumstances,17 so that the CMA’s fining powers are more comparable to those of the European Commission.18 Therefore, the imposition of fines in the UK is very much aligned with a broader shift to tougher enforcement of merger control procedural rules. 

Similarly – and in a third “first” – in February 2019, the CMA made use of its power to unwind integration steps and arrangements that had already occurred in a completed merger. In its review of Tobii/Smartbox19, the CMA forced the parties to terminate certain distribution agreements and to re instate the target’s development and R&D projects to a level that existed pre-completion (the CMA’s recent provisional decision in this case indicates that it is likely to require a full divestment of the acquired Smartbox business, ie akin to prohibition).

A Brexit angle…? 

It is perhaps tempting to suggest that tougher enforcement of procedural rules is a consequence, at least in part, of anticipated changes to the CMA’s functions as a result of Brexit. 

Should the UK leave the EU (and its single market) and not remain in a neighbouring organisation such as the EEA, the CMA in the future will be tasked with reviewing many more mergers, including those global mergers that would have previously been reviewed by the European Commission under the “one-stop-shop” principle. A high level of collaboration with global competition authorities will be necessary and, as a regulator of a voluntary regime, the CMA may find itself faced with reviewing deals that have been cleared by other competition authorities or where remedy packages have already been agreed with mandatory regimes. Commercial parties may seek to gain a process advantage by prioritising clearance decisions with certain key authorities (eg U.S., EU, China) and presenting the case to the CMA (either pre- or post completion) as a fait accompli. This has been acknowledged by the CMA Chair, Andrew Tyrie. 

Indicating a tougher approach to preventing integration and enforcing breaches robustly may help in this regard, particularly if it encourages merging firms to notify deals to the CMA near-simultaneously with mandatory regimes and before completion. Indeed, and going even further than this, the recent reform proposals from the CMA raise the possibility of a “semi-mandatory” regime post-Brexit.20 

If adopted, this looks likely to unfold into a two pronged approach: first, requiring notification of certain deals prior to completion (ie those which meet a threshold set at a level to capture large international mergers); and second, for deals not meeting that threshold, encouraging notification of potentially problematic deals before completion by increasing the risk to merging parties of not doing so (and perhaps reducing the commercial advantages of completing prior to notification).


The CMA is sending a strong message that a voluntary regime that allows the flexibility for parties to complete a deal does not mean more lax enforcement. The CMA is indicating that the purpose of interim measures is to put the merger on hold and, when used, should be considered as akin to the consequences of a mandatory and suspensory regime on the deal. As mentioned, enforcement of procedural rules is somewhat of a hot topic globally; the UK is no exception and, regardless of the regulatory position post-Brexit, we expect greater scrutiny of merging parties’ behaviour throughout the merger review process and the trend of increased enforcement to continue.



1. For example, during the investigation of Tullett Prebon’s acquisition of the ICAP voice broking business (2016). Allen & Overy LLP acted as legal adviser to Tullett Prebon.

2. ‘Interim measures in merger investigation’, CMA108, para. 2.29.

3. This was controversial at the time and criticised as bringing in a mandatory regime by the back door, particularly as the CMA also gained the ability, at Phase 1, to prevent a deal completing.

4. The completed acquisition by Electro Rent Corporation of Test Equipment Asset Management Limited and Microlease, Inc.

5. The completed acquisition by Ausurus Group Ltd through its subsidiary European Metal Recycling Limited of Metal & Waste Recycling Limited.

6. The completed acquisition by Electro Rent Corporation of Test Equipment Asset Management Limited and Microlease, Inc.

7. The completed acquisition by Vanilla Group Ltd (JLA) of Washstation Ltd.

8. ‘A Competition Regime for Growth: A Consultation on Options for Reform, Impact Assessment’, March 2012, para. 62.

9. Electro Rent Corporation v CMA [2019] CAT 4, para. 120.

10. Stericycle International LLC v Competition Commission [2006] CAT 21, para. 129.

11. Intercontinental Exchange, Inc. v CMA [2017] CAT 6, para. 220.

12. Decision to impose a penalty on Ausurus Group Ltd and European Metal Recycling Ltd under section 94A of the Enterprise Act 2002, para. 128.

13. Interim measures in merger investigation, CMA108, para. 7.6.

14. Anticipated acquisition by Just Limited of Hungryhouse Holdings Limited, 2017.

15. Anticipated acquisition by AL-KO Kober Holdings Limited of Bankside Patterson Limited, 2019.

16. Allen & Overy LLP, ‘Global trends in merger control enforcement’, February 2019. Available here.

17. Letter from Andrew Tyrie, CMA Chair, to the Secretary of State for Business, Energy and Industrial Strategy, Annex: Reform Proposals.

18. The CMA is currently restricted to imposing a fixed fine of up to GBP30,000, or fines of GBP15,000 per day of on going non-compilance for failure to respond to a formal information request under section 109 of the Act.

19. The completed acquisition by Tobii AB of Smartbox Assistive Technology Limited and Sensory Software International Limited.

20. Letter from Andrew Tyrie, CMA Chair, to the Secretary of State for Business, Energy and Industrial Strategy, Annex: Reform Proposals

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