PN 66/02    18 October 2002

The OFT today published a consultation paper on how the provisions of the Enterprise Bill will work in relation to merger references. In a separate move, the OFT is also seeking views on the future of its mergers panel.

When the Enterprise Bill becomes law, the examination of mergers by the competition authorities will be subject to two main changes:

• the OFT will decide directly which mergers are referred to the Competition Commission (CC) [see note 7] (at present the OFT advises the Secretary for State for Trade and Industry which mergers to refer)
• in assessing mergers both the OFT and CC will apply a 'substantial lessening of competition test' (replacing the current 'public interest' test). In practice, however, the change in the legal test is expected to make little difference to how mergers are assessed. For some years, the effect of a merger on competition has been the prime consideration.

The Bill also creates a new right of appeal on merger decisions (along judicial review lines) to the Competition Appeal Tribunal.

Today's merger guidance is aimed at the legal, business, economics and academic communities. It explains and seeks views on how the OFT intends to approach the substantive assessment of mergers under the Enterprise Act (in particular the substantial lessening of competition test) and the grounds on which the OFT would refer a merger to the Competition Commission. The guidance covers:

• what is a relevant merger situation
• the substantial lessening of competition test
• assessment of horizontal, vertical and conglomerate mergers
• undertakings in lieu of a reference
• special provisions for mergers in certain industries and exceptions to the OFT's duty to refer
• exceptional public interest cases
• interaction with the EC merger regime.

The OFT also today announced - in a speech by John Vickers, Director General of Fair Trading, at the European Competition Law Review Conference in London - an informal consultation on the future of its mergers panel. The panel meets to discuss mergers that raise significant competition issues. It is made up of officials from the OFT and other government departments and regulators that may have expertise on a particular merger. It does not reach a view on whether or not to refer a particular transaction. Rather, it is an opportunity to gather information, explore issues, and test views before the Director General advises the Secretary of State whether or not to refer a merger.

The consultation sets out four possible options:

• retention of the status quo
• creation of a new panel incorporating some non-OFT members
• having an exclusively OFT internal forum for discussion
• having no panel.

NOTES

1. Download Mergers: substantive assessment (pdf format 208 kb) or telephone 0870 60 60 321 for printed copies. Further information is also available in the Consultations area of this website.

2. The consultation is being carried out in accordance with the provisions in the consultation code of practice prepared by the Cabinet Office, available at http//archive.cabinet-office.gov.uk/servicefirst/2000/consult/code/consultationcode.htm

3. The consultation period on the substantive assessment guidelines will last 12 weeks and the closing date for consultation is 10 January 2003. The consultation period on the future of the mergers panel closes on 29 November 2002.

4. Download the consultation letter concerning the mergers panel (pdf format 52 kb).

5. The Enterprise Bill is currently being considered by Parliament and may therefore be subject to amendments during the consultation period. If this occurs the OFT will keep all consultees informed of any substantial changes. The Enterprise Bill is expected to receive royal assent in the autumn and should come into effect in the spring of 2003.

6. The guidance document on mergers is one of a series being issued for consultation by the OFT on aspects of the Enterprise Bill. A summary document providing guidance on the main provisions of the Enterprise Bill will also be published in the autumn for information.

7. In exceptional public interest cases the Secretary of State retains the power to make references to the Competition Commission.