A year on from the launch of the CMA’s mergers charter, we’re sharing what’s working well and what would help it to work even better.
Last March, the Competition and Markets Authority (CMA) published its mergers charter.
The charter outlines our commitment to 4 principles – pace, predictability, proportionality and process (the 4Ps) – in our merger reviews. The aim is straightforward: to reach the right decisions as quickly as possible, while minimising the burden on businesses.
Delivering on that aim is very much a shared endeavour. It relies on commitment and cooperation from the CMA, businesses and advisers alike – so the charter also explains how we expect everyone to engage with the merger review process in practice.
One year in, we have had very positive feedback about the new processes and practices we have introduced to deliver on our commitment to the 4Ps. In most cases, businesses and their advisers have engaged positively and constructively, which really helps the process run smoothly. Every so often, though, we still see approaches that make it harder to deliver the benefits the charter is designed to bring.
To keep the charter practical and useful, here are a few reflections on behaviours that have helped us achieve our goal – and a few that can unintentionally slow things down.
Pace
We committed to conducting our reviews as efficiently as possible, in line with our KPIs of:
- completing pre-notification within 40 working days
- issuing clearance decisions in straightforward cases within 25 working days of starting the statutory phase 1 clock
This expedited process has been well received. Merging businesses have appreciated the compressed overall timeline during a period of uncertainty and found the KPIs helpful to understand likely timings.
We received some feedback that the process around the start of pre-notification can be time consuming, involving iterative information requests that are burdensome for businesses. We will continue to work to ensure that we are clear about our expectations regarding the information that needs to be provided to start pre-notification, with a view to streamlining this process.
To make the most of these timelines, it really matters that the information and evidence we need for our review is provided in a complete and timely manner. In a small number of cases, we’ve found:
- merging businesses or their advisers taking an extremely narrow approach to providing internal documents that is clearly inconsistent with our request
- a very large number of internal documents, that should have been provided at the start of pre-notification, only being identified at a late stage
- repeated delays in providing information and late-stage changes to information provided (including material updates being made through changes to footnotes)
Where this happens, it can create avoidable delays in starting the pre-notification KPI, because the case team needs to follow up to obtain information required as part of the draft merger notice. And where we find that information has not been provided following the start of the pre-notification, this may mean that we will need to disapply the KPI or, in some circumstances, even reject the merger notice after starting the statutory clock (which happened in one case this year).
Predictability
We said we would operate predictably, including through providing regular updates to merging business in our reviews. We have introduced regular update calls to give merging businesses and their advisers feedback on progress made in pre-notification and the issues under consideration. These calls have been welcomed.
We have been told that, on some occasions, businesses have found it challenging to predict the theories of harm that the CMA will focus on. We will continue to address this through direct engagement with merging businesses and their advisers during our reviews, alongside wider updates (for example, to our published guidance) where appropriate.
In general, merging businesses and their advisers have been proactive in keeping the CMA updated on relevant developments, and have engaged with us directly and openly. That said, predictability works best where parties engage with us in a full and frank manner throughout. In a few instances, we have seen:
- merging businesses change their position on the effectiveness of a remedy package after the CMA decided to accept in principle undertakings in lieu of a reference to phase 2
- merging businesses repeatedly changing their position on the necessity of derogation requests, including on ‘urgent’ requests
This sort of behaviour can make it harder for the CMA to accurately – and in a timely way – assess issues directly relevant to its review. It can also lead to delays that are unhelpful both for the CMA and for merging parties.
Proportionality
We committed to acting proportionately, including through prioritising potential concerns for investigation and scoping of information requests. Merging businesses have welcomed case teams’ approach to streamlining the issues under investigation and sending targeted information requests.
This notwithstanding, we have heard that information requests remain burdensome for businesses. It has been suggested that further opportunities for direct engagement between merging businesses and CMA case teams in relation to the scoping and implications of information requests would help to ensure requests are appropriately targeted. We absolutely welcome such engagement and will seek to make this clearer to merging businesses and their advisers during reviews and our wider outreach.
In general, merging businesses and their advisers can be relied on to submit responses that are:
- clear, complete and accurate
- appropriately scoped to the main issues identified by the CMA
As with some of the examples under ‘pace’ and ‘predictability’, there are occasions where submissions have later been revealed to be materially incomplete or inaccurate. When that happens, it can directly affect our ability to prioritise and streamline the issues under investigation.
We have also had repeated, extensive confidentiality requests in relation to decisions for publication, including repeated requests to redact public information or CMA analysis that relates to non-confidential information. Where the CMA receives such requests, we may need to return the full document to have the parties redo the confidentiality claims with a short deadline as the initial claims cannot be relied on and we need to publish the document. We recognise this can result in costs to merging businesses who may need to pay advisers to repeat the confidentiality exercise a second time.
Process
We said we would engage directly with merging businesses and ensure that they have a clear understanding of the progress, timeline and focus of our review. Merging businesses have praised the more frequent and direct engagement with the CMA, including with senior staff at teach-ins. Merging businesses have told us that they would welcome more engagement of this nature, such as:
- having a direct line of communication with the case team where that may be helpful to resolve an issue more quickly
- more regular updates on the current statutory deadlines in cases where the clock is ‘stopped’
We will seek to make clearer that we are open to such discussions and provide more regular updates on deadlines in applicable cases.
Generally, merging businesses have made a positive effort to ensure the right people attend teach-ins and meetings, enabling open and constructive engagement on important issues.
Even so, in some instances the behaviour of merging businesses or their advisers has obstructed effective engagement. In particular, merging businesses being advised not to attend teach-ins or join update calls, leading them to feel as though access to the CMA is restricted (when in fact we encourage attendance, particularly at teach-ins, which are now expected on every case). This behaviour by a few advisers cuts directly across the CMA’s commitment to engage directly with business during its merger reviews.
Looking ahead
Overall, we see the first year of the charter as a success. For example:
- the 40 working day pre-notification KPI has been met in all cases in which it has applied (in 2 cases the merging businesses ‘opted out’ and in one case it was disapplied)
- the 25 working day KPI for issuing clearance decisions in straightforward cases has been met in all such cases
This would not be possible without the commitment and cooperation of the CMA case teams, businesses and their advisers.
To keep delivering against our goal, businesses and their advisers must continue to familiarise themselves with the expectations set out for them in the charter – and make every effort to meet them.
Engaging with us during an investigation – more advice
More resources for merging businesses are available on GOV.UK.
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