(by Tom Carr) On the 12 April 2018 the BBC reported that International Airlines Group (IAG) had acquired a 4.6% stake in Norwegian Air Shuttle (Norwegian). IAG (which includes BA, Iberia and its most recent acquisition, Aer Lingus) responded that their “minority investment is intended to establish a position from which to initiate discussions with Norwegian, including the possibility of a full offer for Norwegian”. Norwegian is bigger than Aer Lingus at Gatwick, has a higher route overlap than BA had with Aer Lingus, and is currently an industry disrupter in the lucrative transatlantic market. Will the standard remedy of a few slot divestitures be sufficient to address the competition concerns, or is it time to start blocking mergers? Read the rest of this entry »
(by David Reader) After Melrose plc last week formalised its £7.4bn hostile takeover bid for the Armed Forces supplier GKN plc, Business Secretary Greg Clark is facing renewed pressure from the Labour Party and the UK’s largest trade union, Unite, to block any forthcoming deal on national security grounds. Moreover, in response to questions over the transaction, the Prime Minister has herself declared that ‘the government as a whole will always act in the UK national interest’ when faced with such takeovers. Yet, although there is every possibility that the resulting merger would be subjected to national security scrutiny, there is only a very remote chance that the transaction would be blocked outright. Read the rest of this entry »
(by Mike Walker^) In his post last month, Steve Davies bemoaned the lack of evidence on the magnitude of harm deterred by the activities of the Competition Agencies. He presented some estimates from research in CCP on cartel deterrence, concluding most strikingly: “On the most conservative of our estimates, more than half of all potential cartel harm never occurs, because it is deterred. This is very much a lower bound, and the proportion could be as high as 90%.” Read the rest of this entry »
(by Peter Ormosi) While it is widely recognised that last year’s EU referendum caused significant uncertainty for markets, some early indications were that it had not reduced the level of business confidence. Almost a year on, our research – based on a careful study design of a treatment and control group and using data from S&P’s Capital IQ – finds that the uncertainty surrounding the referendum has in fact led to a significant drop in merger numbers and the numbers have failed to recover to earlier levels. Apart from establishing a causal relationship, the study suggests that the post-referendum policy uncertainty is helping the largest M&A transactions, while hindering the smaller ones, with possible negative consequences.
(by Andreas Stephan) The UK’s decision to leave the European Union has come as a shock to markets, politicians and indeed to many ‘Brexiteers’. Although protests demanding a reversal of the outcome and legal wrangling over Art 50 (the process for leaving the EU) continue, mainstream politicians have almost universally accepted the result (the obvious exception being in Scotland) and there is little evidence of public perceptions having shifted towards ‘Remain’ since the vote, despite accusations of a dishonest and misleading campaign by the ‘Leave’ camp. It is therefore almost certain that the UK will cease to be a full member of the EU. Bruce Lyons wrote about the (limited) advantages and (greater) disadvantages of Brexit for competition policy in an earlier blog, but here I suggest that much may remain the same regardless of what the UK’s new relationship with the EU ends up being. Read the rest of this entry »
(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. 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’. Read the rest of this entry »
(by Richard Cadman) Last Friday, the Competition and Markets Authority (CMA) gave unconditional approval to the acquisition by BT, the UK’s largest fixed telecommunications provider, of EE, its largest mobile communications provider. The CMA concluded, after a nine-month long investigation, that the merger would not lead to a Substantial Lessening of Competition (SLC) and that neither the wholesale nor retail customers of both companies would suffer any harm from the merger. How much did this depend on product market definition? Read the rest of this entry »