Speech: Sarah Cardell: the future of UK merger control

Competition Markets Authority

November 20
16:01 2023


The operation of the UKs merger control regime has attracted an unprecedented level of attention both domestically and internationally in 2023. In many ways, this shouldnt come as a surprise. Post-Brexit, the CMA has both the jurisdiction and the responsibility to review the UK impact of many global deals where that UK dimension would previously have been considered by the European Commission.

As we discharge that responsibility, we do not shy away from taking, and defending, robust decisions to prevent anti-competitive mergers which would harm UK consumers or businesses, and where the merging parties cant, or wont, offer remedies sufficient to address our concerns. And we are committed to ensuring that our substantive analysis keeps pace with the competitive dynamics at play in the markets and transactions under review including in fast moving and dynamic digital markets. So, it is perhaps not unexpected that we find ourselves at the frontier of complex merger control decisions, including in global deals.

But let me be clear. That does not mean we are excessively interventionist or unpredictable in our approach. On the contrary, as you will hear repeatedly through this afternoons discussions, the CMA is an organisation that takes immense pride in our independent, objective and evidence-based approach to merger control. We strive to ensure that our processes are fair and transparent, that merging parties can engage fully and directly with decision-makers and that we hear from a range of representative and affected third parties. We are an organisation driven by outcomes rather than ideology. We are not anti-business or anti-mergers. Thousands of mergers proceed every year without intervention by the CMA. And where credible remedies are offered that comprehensively address our competition concerns, we will work with parties to reach an acceptable outcome. Our focus is, quite simply, to ensure that UK consumers and UK businesses are protected from the detriment that would be caused by the handful of anti-competitive mergers that some parties seek to progress.

Importantly, the CMA is an organisation that listens and learns. Both in the course of every individual investigation that we undertake but also as we evolve our processes and seek to ensure that the UK merger control regime operates as effectively as possible. Im truly excited to be sharing with you today the results of our Phase 2 process stocktake which I believe have the potential to deliver a real step-change in aspects of the way the regime operates. Youll be hearing more about those changes from Martin, Colin and Naomi later.

But first, Id like to take the opportunity to address some of the more debated aspects of the UK merger control regime this year and to reflect on where that leaves us going forward. Of course, I cant do so without mentioning the Microsoft/Activisiontransaction which has acted as something of a lightning rod for discussions about the regime. Im going to touch on 5 topics, all of which pick up aspects of the discussion around the Microsoft/Activision case but are also of broader importance going forward and connect with points that will be covered by later speakers. And I very much hope that by the end of this afternoons discussion we can also move our collective focus forward to the future operation of the regime.

In particular, the key topics that I would like to cover are:

  • the relationship between merger control and economic growth
  • whether it is appropriate to make merger control interventions in markets at an early stage of development
  • various procedural aspects of the CMAs decision-making
  • how we assess what kinds of remedies should be accepted to address competition concerns
  • whether and how we should align outcomes with other agencies globally

The relationship between merger control and economic growth

When reviewing mergers, our statutory responsibility is to assess whether the transaction in question will substantially lessen competition. There is no legal basis for us to consider separately or more broadly the wider impact on economic growth.

But there is no tension here. Open, competitive markets provide the foundation for a vibrant, innovative economy and are critical to attract investment and drive economic growth. Merger control is a key part of this, ensuring that mergers that harm competition are prohibited or modified so that markets remain open to effective competition over the medium and long term. This benefits not only the UK consumers and businesses dependent on those markets but also the UK and international businesses seeking to invest, grow and innovate in a competitive marketplace.

And, of course, the many thousands of deals that go ahead every year with no negative impact on competition in the UK can also contribute to that economic growth. Indeed, since 2013, the CMA has prohibited just 16 deals out of approximately 7,000 mergers we have considered, and 500 that have been subject to a formal review.

That said, we continue to look for ways to minimise the burden on merging parties and ensure that the CMA focuses its resources on the most appropriate cases. To this end, as part of the proposed reforms we are announcing today, we are proposing changes to the application of the de minimis exception to the duty to refer cases to Phase 2 investigations.

Is it right to intervene in early-stage markets?

We have seen an increase in the number of deals being assessed in more dynamic and rapidly evolving markets including but not limited to digital and technology markets.

The potential harms resulting from the loss of dynamic and future competition in these markets are well documented. In recent years, a significant number of expert reports and academic papers have underlined the risks associated with under-enforcement in merger control in these dynamic and evolving markets, including at an early stage. The CMA recognised the need to evolve our analytical framework to better reflect the competition concerns arising with these mergers in our 2021 update to the Merger Assessment Guidelines with changes that are in some cases broadly similar to some of those now being proposed in the revised US guidelines.

In some cases our intervention may be to prevent an established player buying out a nascent or emerging competitor which does or could provide an important competitive constraint as the market develops. But mergers between well-established companies can also be problematic in emerging markets. In Microsoft/Activision, we intervened to prevent Microsoft from reinforcingits incumbency advantage in the nascent but growing cloud gaming sector because of the risk that locking up access to Activisions important content would have reduced competition.

The common theme underpinning our interventions in emerging market cases is the need to ensure that mergers dont reduce innovative or dynamic competition in relation to early-stage markets or business activities. That reflects the importance of merger control as an ex-ante tool to prevent the creation or consolidation of market power rather than relying on ex-post intervention further down the track. Its sometimes put to me that, with the new digital markets regulatory regime, we might be more relaxed about allowing such deals to proceed, relying on the ability to manage conduct after the event if concerns arise. I dont agree. Merger control remains the most effective way to avoid situations of market power being created in the first place, including in emerging markets. Looking forward, you should expect scrutiny of such deals to remain a priority for the CMA.

But of course, a forward-looking assessment of competition in dynamic and rapidly evolving markets may equally be the basis for clearing a deal, as with the recent merger of Viasat and Inmarsat.

The CMAs decision-making procedure

Turning now to the CMAs decision-making procedure, Id like to touch on three aspects: political independence, engagement with CMA decision-makers, and speculation around a Phase 3 process.

The independence of the CMA

In 2002, the Enterprise Act took politics out of merger decisions. This was a conscious and widely-supported move to confirm that questions of competition policy should be decided by independent and expert decision-makers, applying an evidence-based and economics-led test.

It was also premised on the consensus that businesses are entitled to know that decisions in this important area will not be influenced by short term political considerations. And with some limited exceptions for example, relating to national security this remains the position today.

Of course, it is natural for there to be some political interest in high-profile transactions. Whilst we take our decisions independently, the CMA is accountable to Parliament and needs to be able to explain the actions it is taking and reasons for them. However, there is an important distinction between political interest and intervention. It is fundamental to the integrity of the UK merger regime that, outside of specific statutory exceptions, the CMAs decision-making is free from political interference. And that has been without exception my experience in 10 years at the CMA, both as General Counsel and then as Chief Executive.

More specifically, I would like to put to rest, once and for all, the speculation that political intervention influenced th

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