Mergers and the Public Interest: the hardest nut to crack for CMA’s new Chief Executive?

(by David Reader) After two years at its helm, the Chief Executive of the UK’s Competition & Markets Authority (CMA), Alex Chisholm, is stepping down to become the new Permanent Secretary at the Department for Energy and Climate Change (DECC). His departure marks the end of an era for the competition watchdog which, despite only becoming fully operational in April 2014, has reached a number of key milestones during his tenure. In a recent speech reflecting on the CMA’s achievements over the last two years, Chisholm made reference to notable progress on enforcement activity, efficient merger control and, of course, some very high-profile market inquiries.[1] His verdict, then, is that there is cause for optimism as the authority embarks on a new chapter. But the outgoing CEO is also mindful of ‘the 3 big challenges’ that lay ahead for his successor.  Perhaps the most striking of these ‘harder nuts to crack’, as Chisholm puts it, is the CMA’s ability to deal with ‘challenges to the primacy of competition analysis when sensitive mergers give rise to calls for public interest interventions’.[2]

The role of so-called ‘public interest’ considerations in UK merger control is subject to specific legal requirements. Broadly speaking, the default position is for the CMA to assess mergers according to their likely impact on competition, but the Secretary of State has the capacity to intervene in any merger investigation that is suspected to raise certain public interest concerns; namely, concerns relating to (i) national security, (ii) media plurality, or (iii) financial stability.[3] Significantly, the Secretary of State may also propose new public interest considerations which, subject to Parliamentary approval, can be added to this list.[4] This therefore creates the possibility that the CMA’s competition-based assessments will one day be overridden by broader and more frequent public interest interventions.

Although very few public interest cases have materialised in practice, the calls for public interest intervention have been more common, particularly in mergers within certain ‘sensitive’ industries or involving so-called ‘crown jewel’ firms. Pfizer’s failed attempt to acquire AstraZeneca in 2014 is one of the more recent examples of how public interest arguments – be they made by lobby groups, trade unions, the media or politicians themselves – can exert pressure on the Secretary of State to make an intervention and propose new public interest criteria.[5] Nevertheless, there are a couple of features of the Pfizer/AstraZeneca bid that suggest public interest interventions are still some way off becoming the norm.

Firstly, the mergers that are most likely to have a significant impact on the public interest in the UK are the large-scale transactions with a ‘Union dimension’ that fall within the jurisdiction of the European Commission’s assessment procedure,[6] by virtue of exceeding the turnover thresholds of the EU Merger Regulation.[7] Had Pfizer been successful in its bid for AstraZeneca, it would certainly have fallen to the Commission to assess the merger on competition grounds. And, although the UK Government could have requested the competence to rule on the merger in order to protect its legitimate national interests,[8] it seemed very unlikely that the Commission would grant this request. Secondly, the current Conservative Government appears reluctant to extend the use of public interest interventions in the UK, having rejected such calls within its own party as recently as 2013.[9] That said, the Labour Party and Liberal Democrats each included pledges for a ‘stronger public interest test’ in their 2015 General Election manifestos, indicating that the political debate is far from settled.

Indeed, even if the public interest provisions are unlikely to change in the near future, it is still conceivable that ‘sensitive’ mergers will arise under this Government’s administration, prompting politicians – and other stakeholders – to raise the public interest argument.[10] In an address to the Fordham Competition Law Institute in 2014,[11] Alex Chisholm himself noted the problems that such scenarios create for promoting the long-term benefits of competition in the public’s eye, particularly where the media and lobby groups focus on the ‘headline-grabbing’ short-term consequences of a particular deal. This is an issue that is inherently linked to another of ‘the 3 big challenges’ awaiting Chisholm’s successor; namely, ‘embedding a competition culture right across the UK economy’. If more UK businesses and consumers were instilled with an appreciation of the benefits that competition can deliver, the calls for public interest interventions would become less fixated on the short-term and could ascribe greater value to long-term economic rewards.[12] It is to his credit that Alex Chisholm has steered the CMA to actively engage in the ‘broader public dialogue’ in this area and, moreover, to show a willingness to present the case for competition in a ‘public and accessible fashion’. It is paramount that this becomes one of his enduring legacies at the CMA and, even if no ‘sensitive’ mergers are on the horizon, the new Chief Executive should waste no time in adding their voice to the discussion.

Finally, a word on the UK’s upcoming EU Membership Referendum and the potential impact that a ‘Brexit’ could have on the challenges faced by the incoming Chief Executive. In the event of the British public voting to withdraw from the EU, plans will be put in motion to disentangle EU legislation from domestic law, meaning the EU Merger Regulation would ultimately cease to apply in the UK. The result would be an end to ‘one-stop’ merger control,[13] as UK mergers that also had a Union dimension would be subject to separate investigations by the CMA and the European Commission. Significantly, this also leaves the UK merger regime more prone to political interventions on public interest grounds. Brexit would remove the Commission’s ability to counteract any UK Government measure that appears inconsistent with free movement or EU merger principles.[14] The removal of this important safety valve would, at the very least, offer greater traction to the arguments of public interest lobbyists and, at most, could increase the temptation for politicians to intervene more frequently in the future. Unquestionably, the challenge of preserving the primacy of competition-based merger control appears far more formidable in a post-Brexit Britain.


[1] The CMA has targeted markets that have the potential to deliver tangible benefits to consumers, including the investigation into energy markets. Of course, it remains to be seen whether this investigation will allow such benefits to be realised; see David Deller’s recent post on this blog.

[2] From a personal perspective, having written a PhD on this exact topic, I am extremely grateful to Mr Chisholm for the role he has played in keeping ‘public interest’ mergers on the UK policy agenda during his time at the CMA.

[3] The Secretary of State derives the power to intervene and seize the decision-making from the CMA under the Enterprise Act 2002, s 42(2).

[4] ibid s 58(3). Indeed, this power was exercised to propose the ‘financial stability’ criterion, which was applied to the Lloyds/HBOS merger during the financial crisis.

[5] The public interest arguments raised in Pfizer/AstraZeneca originated from various quarters and included ‘retention of skilled jobs’, ‘development of new drugs’ and ‘crucial interests relating to the UK’s science base’.

[6] David Reader, ‘Pfizer/AstraZeneca and the Public Interest: Do UK Foreign Takeover Proposals Prescribe an Effective Remedy?’ (2014) 10(1) CPI Antitrust Chronicle 1, 5.

[7] Council Regulation (EC) 139/2004 on the control of concentrations between undertakings (EC Merger Regulation) [2004] OJ L24/1, art 1(2). This is subject to the ‘two-thirds’ rule, under Article 1(3), which could conceivably place large-scale public interest mergers within the jurisdiction of the Secretary of State.

[8] ibid, art 21(4).

[9] Department for Business, Innovation and Skills, Government’s response to the Heseltine review (Cm 8587, 2013) 59. Here, the Government rejected a recommendation by Conservative peer, Michael Heseltine, for the UK to signal a greater willingness to use public interest interventions in an effort to underpin the Government’s bargaining position with foreign investors where ‘vital national interests’ are at stake. Bruce Lyons has previously addressed Heseltine’s comments on this blog.

[10] Intriguingly, shortly before the 2015 General Election, a source in the Financial Times revealed that the Conservatives would openly oppose any foreign takeover bid for British oil giant BP.

[11] An expanded version of this speech has been adapted into an interesting article; Alex Chisholm and Nelson Jung, ‘The Public Interest and Competition-based Scrutiny of Mergers: Lessons from the evolution of merger control in the United Kingdom’ (2014) 4(1) CPI Antitrust Chronicle.

[12] This may very well be the hardest nut to crack, particularly where mergers involve a takeover by a foreign firm. A survey in 2014 found that 39/100 UK respondents consider foreign investment to be desirable, while 53/100 deem it undesirable. For a meticulous recent study providing additional insights on public perceptions of competition, see Andreas Stephan, ‘Survey of Public Attitudes to Price Fixing in the UK, Germany, Italy and the USA’ (2015) CCP Working Paper 15-8.

[13] Richard Whish, ‘Brexit and EU Competition Policy’ (2016) 7(5) Journal of European Competition Law & Practice 297.

[14] Alison Jones and John Davies, ‘Merger Control and the Public Interest: Balancing EU and National Law in the Protectionist Debate’ (2014) 10(3) European Competition Journal 453, 493.

2 Responses to Mergers and the Public Interest: the hardest nut to crack for CMA’s new Chief Executive?

  1. […] [3] It is also worth noting that there are formal channels in the current system through which the UK can influence the Commission in Brussels (e.g. ECN), and informal pressure can be exerted as illustrated by the CMA’s letter to the European Commission in relation to the prohibition of Hutchinson 3G’s proposed acquisition of Telefonica (O2).  Public interest issues in relation to mergers are further discussed by David Reader in his recent blog post. […]

  2. […] Mergers and the Public Interest: the hardest nut to crack for CMA’s new Chief Executive? (by David Reader) After two years at its helm, the Chief Executive of the UK’s Competition & Markets Authority (CMA), Alex Chisholm, is stepping down to become the new Permanent Secretary at the Department for Energy and Climate Change (DECC). […]

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