Other Regulatory Bodies - The Competition And Markets Authority

Question 1

Briefly explain what the CMA is

Answer 1

1. The Competition and Markets Authority (CMA), established under the Enterprise and Regulatory Reform Act 2013.
2. Is responsible for promoting competition, preventing anti-competitive practices, and protecting consumer interests in UK markets.
3. CMA will investigate all mergers that meet the:
   A. The existing turnover test
   B. The share of supply test
   C. The new acquirer test.

Question 2

Explain the concepts around:

1. Turnover test
2. Share of supply test
3. New acquirer test

Answer 2

1. Turnover test - is met if the target company has a UK turnover of £100m or more.
2. Share of supply test - is met if the merging parties together supply at least 25% of goods or services either in the UK as a whole or a substantial part of it
3. New acquirer test - is met if they have both:
   A. Existing share of supply of goods or services of 33% in the UK.
   B. OR, a substantial part of the UK
   C. AND, UK turnover of £350m

Question 3

What are some of the concepts around the CMA prohibiting a merger?

Answer 3

1. CMA has up to 40 days to study about a merger and see if it harms competition.
2. If the CMA believes that the merger will lead to a “substantial lessening of competition” then, it moves to to phase 2.
3. In phase 2, if it finds that the merger will substantially reduce the competition - the CMA can either prohibit the merger or impose remedies if the merger has taken place. (Fix the problem)

Question 4

Why do we need the different tests as mentioned within the CMA?

Answer 4

1. These tests are used to decide whether a merger OR acquisition should be reviewed to ensure it doesn’t harm competition.
2. Share of Supply Test – Checks if the merging companies together provide at least 25% of a product or service in the UK or a significant part of it. If they do, the CMA may investigate.
3. New Acquirer Test – Looks at whether a company that wasn’t previously involved in a particular market is now entering it by acquiring another company. This can be reviewed to see if it changes competition.
4. Turnover Test – If the company being acquired has a UK turnover of £100m or more, the CMA may review the deal to see if it could negatively impact competition.

Question 5

What is the difference between a merger and an acquisition?

Answer 5

1. A merger happens when two companies join together to form one bigger company.
2. An acquisition happens when one company buys another company and takes control of it.

Both can affect competition, so regulators might want to review them to make sure they don’t harm consumers.