Shifting sands? U.K. CMA to review approach to behavioral merger remedies

Most notably, this will include a review of when behavioral merger control remedies may be appropriate. It will also consider whether any distinction should be made between regulated and non-regulated sectors.

This is big news. In recent years, the CMA—alongside other key antitrust authorities across the globe such as the European Commission (EC) and U.S. agencies—has voiced a strong preference for structural divestments. These authorities view structural remedies as the best way to address antitrust concerns in a clear-cut way.

Any change to the CMA’s approach would therefore amount to a significant shift in its stated policy. In the past four years, the CMA has accepted behavioral commitments in just a handful of phase 1 cases, and there have been none after phase 2 reviews. The original review of the Microsoft/Activision Blizzard transaction shows the CMA’s hard line: it rejected the behavioral licensing remedy offered by the parties, instead choosing to block the deal.

Already a hint of change?

However, more recently we have seen hints that the CMA might not view behavioral remedies with quite the same skepticism as previously, at least in regulated sectors.

In the coming weeks, the authority looks set to clear the Vodafone/Three transaction with novel remedies that commit the parties to delivering their pre-agreed business plan, with oversight by both the CMA and Ofcom. While much of the detail behind this remedy remains redacted from the CMA’s public consultation, it appears to have been presented as a commitment to (inter alia) maintain a minimum number of sites over an eight-year period or, in other words, not to go too far in terms of network de-duplication. To that extent, it is notable that the CMA—which previously referred to this remedy as an investment commitment—is now referring to it as a network commitment. The parties have also offered to retain certain existing mobile tariffs and data plans and to commit to pre-agreed prices and terms of access for mobile virtual network operators.

This fits with what we have seen in practice (even if not in policy) in other jurisdictions. The EC, for example, accepted the licensing remedy in Microsoft/Activision and has given the green light to access conditions in several other recent cases. The two consent decrees accepted in the U.S. so far this year have both been behavioral in nature. Our analysis of merger activity in 25 jurisdictions shows that, in 2023, the proportion of conditional clearances involving behavioral commitments actually increased for the second year in a row, to 40% (see our global trends in merger control enforcement report, cited by the Financial Times in a Lex article discussing Cardell’s speech). 

So, if the CMA’s review leads to any retreat from its previous position on behavioral remedies, while significant, this would not be wholly out of line with the broader merger control landscape.

More than just behavioral

The CMA’s merger remedies review will not only consider behavioral commitments.

It will also look at the scope for remedies that lock in rivalry-enhancing efficiencies and assess how remedies can preserve relevant customer benefits which may offset anticompetitive effects. Cardell notes, however, that the evidential bar for these considerations is high “for good reason” and the CMA does not invite advocacy on merger cases based on “spurious and insufficiently evidenced efficiencies”.

Initiating discussions on remedies with merging parties as quickly as possible is another focus, building on the reforms to the CMA’s phase 2 review process of earlier this year. More generally, Cardell commits to enhancing the CMA’s engagement with business, investment and start-up communities through a new outreach initiative.

Contributing to a growth agenda

Cardell’s announcement came as the CMA published its response to the U.K. Government’s Industrial Strategy Green Paper. Last month, U.K. prime minister Kier Starmer urged the authority to prioritize growth, investment and innovation. The CMA’s response, and Cardell’s speech, attempt to show how competition policy and the CMA’s work is core to the Government’s growth mission.

Cardell notes that the CMA takes “seriously any concerns that the way in which the regime is applied could chill investment”. She is clear that the authority “must deliver a regime that leaves no one in any doubt that the UK is open to business”, while helping “realise for the UK all the benefits that flow from effective competition”.

Looser merger control enforcement?

Whether all this ultimately paves the way for a softening of the CMA’s approach to merger control enforcement remains to be seen. Businesses will pay close attention to the CMA’s review, once launched, and will welcome Cardell’s statement that: “only a truly problematic merger, where the harm to businesses and consumers cannot be effectively addressed through remedies, should not proceed.”

We will keep you updated as the review progresses.