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120/09 1 October 2009
The OFT has today published for consultation revised guidance on the exceptions to its duty to refer merger cases to the Competition Commission (CC), and its ability to accept undertakings in lieu of a reference.
The OFT has a duty under the Enterprise Act to refer a merger to the CC for investigation if it believes that it creates a realistic prospect of a substantial lessening of competition within a market in the UK. However, there are a number of circumstances in which the OFT may use its discretion not to make a referral.
The most common of these exceptions is the 'de minimis' provision used by the OFT in cases where it believes the market concerned is not of sufficient importance to justify a reference to the CC. The OFT can also use its discretion where the proposed merger is not sufficiently far advanced, or likely to proceed, or where customer benefits in relation to the merger outweigh the substantial lessening of competition.
Alternatively, where the OFT decides not to apply any available exceptions to its duty to refer, it may accept undertakings from merging parties to remedy any potential competition concerns without the need for an investigation by the CC.
The new draft guidance, as well as being updated to reflect six years of developing practice since the Enterprise Act came into force, seeks to explain in more detail where the OFT may still make a CC reference even where some factors would point to use of its 'de minimis' discretion. It sets out how the OFT assesses whether the expected impact of a merger outweighs the public cost of a reference to the CC, and how the OFT can use this discretion not to refer in order to reduce overall merger review costs.
Alastair Mordaunt, OFT Director of Mergers, said:
'This revised guidance takes into account the six years of practical experience the OFT has gained under the current merger regime. We hope that it will provide further clarity and predictability on the operation of the system.'
'We are keen to hear views from businesses and their legal representatives on this revised guidance to ensure that the merger decision making process results in the most effective and proportionate outcomes.'
Read the revised guidance (pdf 662kb). Consultation closes on 15 January 2010, and the OFT expects to publish the final revised guidance in early 2010.
1. This revised guidance will update and replace the existing guidance found in chapters 7 and 8 of the OFT Mergers substantive assessment guidance. It takes into account the OFT's decisional practice since November 2007 in the application of its revised guidance on the Exception to the duty to refer: markets of insufficient importance commonly known as the 'de minimis' guidance, which it will also supersede.
2. Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million; or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced.
3. The potential exceptions to the duty to refer are that: (i) the market or markets concerned is or are not of sufficient importance to justify the making of a reference to the CC; (ii) the arrangements concerned are not sufficiently far advanced, or are not sufficiently likely to proceed, to justify the making of a reference to the Commission; and (iii) any relevant customer benefits in relation to the creation of the relevant merger situation concerned outweigh the substantial lessening of competition concerned and any adverse effects of the substantial lessening of competition concerned.
4. Undertakings in lieu of a reference - under section 73 of the Enterprise Act 2002 the OFT may, instead of making a reference to the CC, and for the purpose of remedying, mitigating or preventing the substantial lessening of competition concerned, or any adverse effect which has or may have resulted from it or may be expected to result from it, accept from such of the parties concerned as it considers appropriate undertakings to take such action as it considers appropriate.
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