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Volume XII, Number 136


May 13, 2022

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Competition Currents February 2021: the UK and the EU

United Kingdom

UK merger control – a new dawn?

The start of 2021 coincides with the end of the transition period following the UK’s withdrawal from the EU. In turn, this brings about the most significant change to UK merger control since the introduction of the current UK regime by the Enterprise Act 2002.

This is because, as reported in previous editions of Competition Currents, one of the key consequences of the end of the transition period is that the EU’s “one-stop shop” merger control regime no longer covers the UK: new M&A transactions are now potentially subject to parallel investigations in Brussels and London.

The UK’s Competition and Markets Authority (CMA) anticipates that it will handle up to an additional 50 merger cases annually as a result of Brexit. To put that figure into perspective, the CMA has in the last five years investigated an average of 60 merger cases per year. In addition to the expected significant increase in case volume, the additional cases will also enrich the CMA’s merger “diet” as they are likely to involve substantially larger and more multinational transactions than the CMA’s (already varied) existing caseload – requiring significantly more coordination with regulators in other jurisdictions to minimize the risk of divergent timelines and, more importantly, outcomes.

Key features of the UK regime

While it is significant that the UK merger control regime operated by the CMA has now “decoupled” from the EU merger control regime administered by the European Commission, the key features of domestic UK regime remain unchanged:

  • The CMA continues to operate a voluntary regime, meaning that acquirers are not obliged to notify the CMA of transactions that exceed the jurisdictional thresholds, and parties generally do not need to await clearance before closing.

  • The CMA is, however, empowered to “call in” for mandatory review any qualifying non-notified transaction, and it frequently does so. When the CMA calls in a completed deal, it will invariably impose wide-ranging “hold-separate” obligations on the merging parties – freezing integration (often on a worldwide basis) for the duration of the CMA’s review.

  • The CMA’s jurisdictional thresholds are flexible, and the CMA has in a number of recent decisions further stretched the outer limits of its jurisdiction, capturing (and ultimately blocking) foreign-to-foreign transactions with only a limited UK nexus.

  • The CMA has wide-ranging powers to remedy anti-competitive mergers – including divestment orders – regardless of whether a deal is anticipated, completed, voluntarily notified, or called in by the CMA. Indeed, many of the CMA’s recent prohibition and unwinding decisions concerned non-notified mergers that completed before CMA intervention.

While the key features of the regime remain the same, the CMA has in recent months undertaken an extensive exercise in updating and streamlining its key merger control guidance, including the following:

  • On Dec. 23, 2020, the CMA published the final version of its revised jurisdictional and procedural mergers guidance – the first update since 2014. Amendments and revised sections include jurisdictional and procedural changes brought about by the UK’s withdrawal from the EU, the introduction of new jurisdictional thresholds (enabling public interest “national security” reviews of certain transactions) as well as updates reflecting the latest CMA decisional practice and case law, in particular in relation to the way in which the CMA approaches its extremely flexible jurisdictional tests.

  • The CMA has recently completed a consultation on its draft revised Merger Assessment Guidelines, which detail the substantive approach taken by the CMA in its analysis of mergers. The current version was published in 2010 and pre-dates the creation of the CMA. The revised guidelines take account of the CMA’s recent experience and case law, with a particular focus on rapidly evolving dynamic – often digital – markets (e.g., an increased focus on the potential for future competition, innovation theories of harm and other non-price-related effects). The revised guidelines are expected to be adopted in the near future.

Recent developments in UK merger enforcement

The CMA has in recent years developed a formidable merger enforcement track record, notwithstanding that the body of mergers investigated by the CMA in any one year contains a higher proportion of problematic mergers, due to the voluntary nature of the UK regime. Many non-problematic mergers are not notified to the CMA, and the CMA generally starts own-initiative investigations only where it identifies that non-notified mergers may raise concerns.

While each case hinges on its own facts, in the last year, nearly 25% of phase 1 cases were referred to in-depth phase 2 review. Coupled with that, the CMA’s intervention rate at phase 2 is also currently very high – of the transactions referred to phase 2 in the last two years:

  • 72% were prohibited, ordered to unwind or abandoned by the parties during phase 2;

  • a further 8% were cleared conditionally (i.e., subject to remedies); and

  • only 20% were cleared unconditionally.

The first few weeks of 2021 suggest a continuation of the CMA’s enforcement record:

  • On Jan. 4, 2021, the CMA announced its intention to refer the anticipated acquisition by Tronox Holdings plc of TiZir Titanium and Iron A.S. for an in-depth phase 2 investigation unless acceptable undertakings in lieu of reference were offered. The target business is one of the two main global suppliers of chloride slag, one of the minerals used to make titanium dioxide pigment, and Tronox is one of the main producers of titanium dioxide pigment. The CMA’s phase 1 investigation found that Tronox intended to use all of the target’s chloride slag in its own production and discontinue future sales to third parties. According to the CMA’s phase 1 findings, this would have left Rio Tinto (the target’s main competitor) with an effective monopoly.

Tronox offered undertakings to avoid a phase 2 reference but the CMA announced on Jan. 18, 2021, that it would not accept them, as they were not sufficiently clear-cut. As noted above, Tronox subsequently announced that it would not proceed with the acquisition.

  • On Jan. 12, 2021, the CMA issued its final decision in relation to the completed acquisition of 3G Truck & Trailer Parts Limited by TVS Europe Distribution Limited. The CMA found that the deal may be expected to result in a substantial lessening of competition in the “wide range wholesale supply of commercial vehicle and trailer parts to motor factors in the independent aftermarket in the UK” – serving as a useful reminder, if needed, that the CMA is not opposed to defining relevant markets narrowly.

The CMA’s final report concludes that full divestiture of the acquired business is the only effective and comprehensive remedy. 

In other noteworthy recent UK merger control developments:

  • On Dec. 24, 2020, the CMA announced that it took the unprecedented step of asking the Competition Appeal Tribunal (CAT) to overturn the CMA’s own decision in relation to FNZ’s completed acquisition of GBST. The CMA’s final report in question found in November 2020 that this fintech merger resulted in a substantial lessening of competition in the supply of retail platform solutions to investment platforms and required divestiture of GBST. FNZ appealed the decision to the CAT. Following receipt of the FNZ’s appeal, the CMA confirmed that it had identified “certain potential errors in its market share calculations as a result of the provision of inconsistent information during the course of the CMA’s investigation” and asked the CAT to remit the case back to the CMA for reconsideration.

  • The first example of a potential parallel review of a transaction under the EU and UK merger control regimes may be the anticipated acquisition by NVIDIA Corporation of the Intellectual Property Group business of Arm Limited. The deal is understood to be notifiable in Brussels under the EU regime and the CMA issued a preliminary invitation to comment on Jan. 6, 2021. This information-gathering step often precedes a formal CMA investigation.

European Union

European Commission (EC or the Commission)

The Commission consults member states on the proposal to further prolong and adjust the State Aid Temporary Framework.

In view of the evolving COVID-19 pandemic, on Jan. 19, 2021, the Commission sent to member states for consultation a draft proposal to prolong and further adjust the scope of the State aid Temporary Framework (Temporary Framework), initially adopted March 19, 2020, and subsequently amended April 3, May 8, June 29, and Oct. 13, 2020, to support the economy given the current crisis. The draft proposal takes into account the initial feedback received from member states in the framework of a survey of December 2020 concerning the implementation of the Temporary Framework. Specifically, the draft proposes to:

  • prolong the existing provisions of the Temporary Framework from June 30, 2021, to Dec. 31, 2021;

  • increase the ceilings for (i) limited amounts of aid granted under the Temporary Framework (currently up to Euro 120,000 per company active in the fishery and aquaculture sector, Euro 100,000 per company active in the production of agricultural products, and Euro 800,000 per company active in all other sectors) and for (ii) measures contributing to the fixed costs of companies that are not covered by their revenues (currently up to Euro 3 million per company);

  • enable member states to convert, at a later stage, granted repayable instruments (including loans) into direct grants, for an amount up to Euro 800,000 per company (or up to Euro 120,000 and Euro 100,000 per company active in the fishery sector and in the production of agricultural products, respectively).

The above measures aim to address the persistent economic uncertainty due to COVID-19, especially by enabling further aid by member states to companies affected by the crisis, mainly in the form of repayable instruments.

The EC issues a decision concerning publishers of PC video games alleging geo-blocking practices.

On Jan. 20, 2020, the Commission issued a decision concerning several undertakings following an antitrust investigation opened in February 2017. According to the Commission, by agreeing to restrict cross-border sales of personal computer (PC) video games based on customer location within the EEA (so called “geo-blocking practices”), Valve and five publishers partitioned the EEA market. As a consequence, the Commission imposed fines totaling approximately € 7.8 million.

The allegedly anticompetitive practices consisted in: (i) bilateral agreements and/or concerted practices implemented by means of geo-blocked activation keys, which prevented the activation of certain of these publishers' PC video games outside Czechia, Poland, Hungary, Romania, Slovakia, Estonia, Latvia and Lithuania, in response to unsolicited consumer requests (so-called “passive sales”) and (ii) geo-blocking practices in the form of licensing and distribution agreements concluded bilaterally between four out of the five PC video game publishers and some of their respective PC video games distributors in the EEA, containing clauses which restricted cross-border (passive) sales of the affected PC video games within the EEA.

The geo-blocking practices concerned around 100 PC video games and had the effect of preventing consumers from activating and playing PC video games sold by the publishers’ distributors either on physical media or through downloads. Reductions ranging from 10% and 15% were granted to five operators, which cooperated by providing evidence to the investigation and by expressly acknowledging the facts and the infringements of EU antitrust rules.

AG Pitruzzella proposes to confirm the GC judgment qualifying the Spanish treatment of financial goodwill as state aid

On Jan. 21, 2021, Advocate General (AG) Pitruzzella delivered his opinion on the “Spanish financial goodwill” case, which concerns several appeals by Spanish companies against the General Court’s judgment that confirmed that Spain’s tax treatment of financial goodwill qualified as illegal state aid. AG Pitruzzella advised to dismiss the appeals and to confirm the challenged judgment, with specific reference to the selectivity analysis set forth therein, which was contested by the applicants.

After recalling the main principles on selectivity developed by the EU courts, the AG stressed that, in order to assess whether the condition is met, it is crucial to determine whether the measure at issue provides for an unjustified discrimination between undertakings that are in a comparable situation. Indeed, state aid rules set boundaries on the fiscal sovereignty of member states by sanctioning such discriminations.

Based on such approach, the AG affirmed that the General Court correctly determined both the reference system and the objective on the basis of which the selectivity analysis had to be carried out. Additionally, the AG advised dismissal of the pleas alleging that the General Court committed an error of law in connection with (i) the allocation of the burden of proof and (ii) the imposition of an excessively high standard of proof on the member state and beneficiaries

Edoardo Gambaro, Yuji Ogiwara, Stephen M. Pepper, Gillian Sproul, Hans Urulus, Dawn (Dan) Zhang, Mari Arakawa, Filip Drgas, Simon Harms, Marta Kowanacka, Pietro Missanelli, Massimiliano Pizzonia, Anna Rajchert, Jose Abel Rivera-Pedroza, Ippei Suzuki and Rebecca Tracy Rotem also contributed to this article.

©2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume XI, Number 36

About this Author


Andrew G. Berg Chairs the Global Antitrust Litigation & Competition Regulation Practice and advises clients on litigation, mergers and acquisitions, and other antitrust and competition-related matters before the Federal Trade Commission (FTC), the Antitrust Division of the Department of Justice (DOJ), state attorneys general, and in private litigation. Andrew's practice includes a full range of antitrust transactional and mergers and acquisitions experience, including Hart-Scott-Rodino filings at the FTC and DOJ, and related merger analysis issues. He also counsels...

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