Introduction
Thank you for the opportunity to deliver this keynote speech commemorating more than 20 years of UK merger control under the Enterprise Act 2002. I'm also very much looking forward to joining the panel discussion after this with some former heads of the CMA, and its predecessors the OFT and CC.
Some 20 years on from the commencement of the Enterprise Act - and, in fact, 10 years on from the creation of the CMA - merger control has evolved significantly, with new theories of harm, precedents and guidance. Major cases have come and gone, changing the way we think about and approach this area of competition policy. And our operating environment has changed too - we have had a global financial crisis and a global pandemic. We have seen challenging macroeconomic conditions and we have witnessed the explosion of digital technologies.
To put this in some context, in the year the Enterprise Act was passed, Facebook, Twitter, and YouTube had yet to launch. And if, like me, you were a lawyer in 2002 you might have had had one of the first Blackberrys. On a personal note, in 2002 I was cutting my teeth as a junior lawyer successfully representing Airtours against the Commission before the European Court of First Instance, as it was then, in the seminal collective dominance merger case - how times have changed!
So this is an opportunity to look back at what has been achieved since the Enterprise Act was passed, and also to take stock and look forward into the future for UK merger control.
The purpose of merger control
Case for competition test
Going back to the beginning also means going back to first principles, thinking about the purpose of merger control and how the CMA's work can advance these objectives.
At its heart, merger control is about ensuring markets continue to sustain open and effective competition. And thriving competition serves important public interests, notably economic growth, innovation, more choice and lower prices for consumers.
Last year, we undertook a major refresh of the CMA's strategic framework setting out our ambition to ensure that people can be confident they are getting great choices and fair deals, that competitive and fair dealing businesses can thrive, and that the whole UK economy can grow productively and sustainably.
Our mergers work goes to the core of these ambitions, as is reflected in any number of our past decisions. To name just a few, our intervention in cases such as Sainsbury's / ASDA, the recent vets merger cases and Veolia / Suez affected the day-to-day lives of people and communities - from their grocery shopping to vets bills for their pets, and waste management services which impacts our council tax bills. Other cases, like Illumina / PacBio, Adobe / Figma, and Meta / Giphy ensured that innovation would continue to thrive, with exciting new products being developed by independent companies. Effective merger control ensures companies remain hungry for organic growth, for differentiation, working hard to win and keep customers. Indeed, at a time when there is much anticipation of a new "ex ante" competition regime for digital markets, it is worth reminding ourselves that one of the most effective "ex ante" interventions to protect and promote competition is of course merger control.
A critical feature underpinning the robust and objective nature of UK merger control is its independence. The UK merger control regime and process is independent of government. Other than in exceptional public interest cases, there is no role for ministers in merger decisions. Moreover, in phase 2, the decision to approve or prohibit the merger (or to accept remedies) is taken by an independent Inquiry Group. The group members are selected for each case from an independent CMA panel appointed by the UK government and are not CMA employees. They have deep expertise drawn from a variety of relevant professions. This independence is hard-wired into the statutory regime and deeply embedded in the long-standing practice of the CMA. This is a crucial piece of institutional governance design, which has earned the UK a strong reputation for high-quality independent decision-making.
To the sceptics
There will, understandably, always be those for whom merger control is felt to be little more than a barrier to getting their deal through. We sometimes hear that merger control, and intervention against anti-competitive mergers, has a "chilling effect" on innovation, investment, and growth, though I have yet to see any robust evidence to this effect. Some critics even say that we are ideologically "interventionist", "anti-mergers" by default - a fact which is readily addressed by publicly available data to the contrary.
Over 2023, PWC and Bloomberg identified approximately 50,000 M&A deals. During the financial year 2022 to 2023, the CMA looked at around 700 cases, carried out 43 Phase 1 and 13 in-depth Phase 2 investigations and prohibited only 3 deals (with a further 3 abandoned during the review process). If we are anti-mergers by default, we're going about it in a rather strange fashion!
I hope this data is making clear what is not, perhaps, always clear from reading media headlines. That whilst it is absolutely the case that the CMA will not shy away from taking, and defending, robust decisions to prevent anti-competitive mergers which would harm UK consumers or businesses, we take an objective, evidence-based and proportionate approach to merger control and our interventions focus only on the handful of deals that are problematic each year.
I was speaking in the US recently and I will say the same thing here that I said there: merger control is not a bureaucratic hurdle that runs contrary to free market principles. It is a fundamental safeguard for free market dynamics and consumer welfare. So it is in the interests of every company operating or investing in the UK to have a robust, independent UK competition authority protecting free and open markets. We have seen the counterfactuals. Markets characterised by a high degree of concentration or even monopolies leading to increased prices or lower quality and innovation. The resilience risk of institutions 'too big to fail'. This is not what we aspire to today.
Instead, the market conditions which the CMA protects and fosters through robust merger control are those which drive growth and innovation; which generate positive returns to investors; and which allow fair-dealing businesses, challengers, and innovators access into the market to compete on a level playing field, delivering a wealth of benefits for consumers and the broader economy. The anti-merger control commentary focuses on the companies being prevented from merging. But the impact of allowing anti-competitive mergers is felt by everyone in the market, both customers getting worse products at higher prices, as well as competitors being squeezed out of the market and innovators not being allowed to enter in the first place.
Current state and the future merger control
With first principles reaffirmed, let's look at what has changed in the last 20 or so years.
International
Firstly, globalisation and Brexit have added a much stronger international dimension to the CMA's work. Many markets, businesses and technologies straddle the globe but also directly impact UK consumers and businesses. The CMA is now, necessarily and regularly, taking decisions in respect of large, high-profile international deals. This is a very different world to 2002 and it requires the CMA to be an active member of the international competition community, collaborating and sharing information about common challenges and evolving thinking.
So we work very closely with international counterparts such as the European Commission and the US Department of Justice (DOJ) and Federal Trade Commission (FTC), both bilaterally and through multilateral fora. And we seek to be thought leaders on issues of substance and process, from how to assess mergers in digital markets through to the use of documentary and economic evidence.
In mergers specifically, our experience is that open channels of communication between different authorities internationally reviewing the same transaction are generally beneficial, both for the authorities themselves and the merging parties. We see procedural benefits in allowing us, as far as possible, to align on process and timing. And where the markets concerned have regional or global dynamics, it can assist our substantive assessments, including resulting in more aligned outcomes across different jurisdictions. Businesses can actually help facilitate a joined-up approach, for instance, through waivers and keeping agencies updated with timely and accurate information.
The recent Adobe/Figma deal, for example, involved a merger in the creative design sector. A number of agencies were reviewing the merger alongside the CMA, including the US Department of Justice and the European Commission. The agencies discussed procedural issues around areas such as document production and substantive issues around assessment of forward-looking competition. There was not only broad alignment on concerns across all the agencies but, to the point often raised by advisors, also broad alignment on the case timetables. The Commission published its Statement of Objections on 17 November, followed closely by the publication of our Provisional Findings on 28 November. Of course in this case, on 18 December 2023, the merger parties abandoned the deal so we didn't see whether all of those alignments would continue to the final outcome.
I do want to be clear, though, that consistency of outcome is not an end in itself. With different statutory regimes and different decision makers, as well as variances in market features and evidence bases, some divergence is inevitable. This is true both for assessments of competition concerns raised by a merger, and the appropriate solutions to remedy them.
Microsoft/Activision is a case in point. The CMA intervened to prevent Microsoft from reinforcing its incumbency advantage in cloud gaming, an important and rapidly growing form of entertainment for millions of UK consumers. These concerns were shared by the European Commission and the Federal Trade Commission, with whom we engaged closely throughout. However, while the Commission accepted Microsoft's original behavioural remedy, we did not. Ultimately the parties put forward a substantially restructured deal to the CMA which addressed our concerns. And of course, the deal is still being challenged in the US.
Evolving analytical framework to keep up with market developments
Digital mergers
The 'anti-mergers by default' narrative seems particularly prevalent in relation to deals involving the so-called GAMMA firms. The data I provided earlier about the proportionate approach we take on merger control is all publicly available, but let's focus on the tech sector for a moment. Over recent years, we have cleared a number of high-profile transactions either unconditionally or subject to remedies. Recent examples include Broadcom's acquisition of VMware; Viasat's acquisition of Inmarsat; Facebook's acquisition of Kustomer; Amazon's acquisition of iRobot; and Microsoft's acquisitions of Nuance and, following a substantial restructuring of the transaction, Activision.
It is certainly true that we have evolved our analytical approach when assessing mergers in digital markets. This in part reflects well-documented (and widely recognised) historic under-enforcement in this area. And in part it's a necessary response the need for more forward-looking approaches in rapidly changing, innovation-driven markets. But each case is reviewed objectively on its own merits.
Another area worth touching on in this regard is mergers involving tech start-ups. One perspective is that merger control blocks routes to exit for entrepreneurs and innovators. The reality is that merger control exists to safeguard and nurture free and competitive markets in which all businesses can grow and thrive, and that includes those seeking to enter and compete with powerful incumbents. As borne out by the numbers, in many cases a trade sale will be unproblematic from a merger control perspective, including to a larger company, provided there is sufficient competition remaining in the market. Of course, where a new entrant is driving innovation and competition with a large incumbent (as we have seen in the internal documents of companies in a number of cases) it is vital this competition remains. Other investment or exit strategies still remain for those start-ups and we have seen many go on to be successful with continued independent growth or different owners. ARM, Pacbio and Farelogix are all examples of this.
What's new?
Process reforms
Finally, let me touch on some recent developments in the way we go about our work.
While the UK merger control process has generally been working well, no system is so good that it cannot be improved. With more than 2 years of practice to look at since the CMA took on our additional responsibilities post-Brexit, and with a changing portfolio and evolving theories of harm, we were keen to assess whether there were parts of the process that could work even better. We set out the results of that stock-take at our merger reform event back in November after a wide-ranging consultation with businesses, legal and economic advisors, consumer and industry groups, and other competition authorities internationally. While the legal tests we use to assess mergers remain unchanged, the process reforms we have proposed should improve the running of our investigations and have the potential to deliver a real step-change in aspects of the way the UK merger regime operates, particularly in a global context.
Proposals include an earlier focus during the phase 2 investigation on the key issues at stake in the case; improving the opportunities for all businesses affected by a merger to engage with the CMA Inquiry Group overseeing the investigation; and changes to our process for considering remedies. Overall, our aim is simple: we want "best in class" procedures for merger control in the UK which are clear, transparent, agile and efficient. We'll be publishing an update on those reforms in the next couple of months, so do look out for that.
Merger reporting under the DMCC Bill
The Digital Markets, Competition and Consumers Bill (the DMCC Bill) will also bring forward new merger reporting requirements for firms with Strategic Market Status (SMS) as part of the new Digital Markets competition regime. While these reporting requirements - which will apply only to a small number of SMS firms - should increase the visibility of some large transactions, they will not affect the threshold for approving a merger. SMS firms will have to report mergers to CMA before their completion, where they have a value of £25 million or more and a UK connection. Where we think a merger might cause competition problems, the CMA will then be able to launch a merger investigation under our normal merger review powers.
Conclusion
To conclude, or perhaps to open up the discussion, I will leave you with this thought:
Individual cases, along with anniversaries, will come and go. But the fundamentals of UK merger control remain constant: we have a world class merger control regime which delivers robust yet proportionate and targeted interventions to protect and promote competitive markets that are critical to driving investment, innovation and growth and protecting consumers from higher prices, lower quality or reduced innovation. Our decisions are evidence-based, objective and independent. It is a regime that anyone who has the privilege to lead a UK competition authority has a responsibility to nurture and protect, as I'm sure my fellow panellists will agree.
