Out-Law News 3 min. read

BT and EE request fast-track competition review of proposed merger

BT and EE have asked the UK's lead competition authority to fast-track its review of their proposed merger.

The companies said they want the Competition and Markets Authority (CMA) to skip their normal 'phase one' information gathering process and jump straight into a 'phase two' inquiry. They said the move would allow the regulator to "consider any complex issues in depth without delay, and offers a shorter end-to-end review period compared to the CMA’s usual processes". BT announced in February that it had agreed a £12.5 billion takeover of mobile network operator EE.

The CMA has opened a consultation on whether to invoke the fast-track procedure. It is expected to reach a decision on the issue within three weeks. It would be the first time the CMA has engaged the fast-track procedure in a merger review case since it took over responsibilities for the regulation of competition from the now-defunct Office of Fair Trading.

"It is possible to accelerate the referral of merger cases to phase two when requested by the merging parties and the CMA has sufficient evidence that the test for reference is met," the CMA said in a statement.

Competition law expert Natasha Pearman of Pinsent Masons, the law firm behind Out-Law.com, said: "Parties to a transaction are able to request that the CMA fast track a merger for reference to a more in-depth phase two review where there is sufficient evidence available to meet the CMA’s statutory threshold for reference – i.e. that the merger has resulted, or may be expected to result in a substantial lessening of competition within any market in the UK for goods or services, and where the parties to the transaction have requested and given consent for use of the procedure."

Pearman said there are benefits and drawbacks to asking the CMA to fast-track a review of a merger deal.

She said that companies planning a merger and seeking such a fast-track review "need to agree and provide evidence to the CMA that the merger is likely to lead to a substantial lessening of competition" but at the same time set out "arguments as to why ultimately the merger should be cleared".

Ordinarily the CMA has 40 days to make initial inquiries about companies' merger plans after being notified of their merger proposal before having to decide whether to undertake a broader phase two review of the plans. Under the fast-track regime, however, the CMA generally only has been 10 to 15 days to reach such a decision. Pearman said, though, that companies that request a fast-track review of their merger plans will not always avoid the administrative burdens involved in engaging with the CMA over those proposals.

"Since the statutory timetable for phase one reviews came into effect, parties notifying transactions to the CMA are experiencing increased demands for information during the pre-notification periods which are unlikely to be avoided even using the fast-track procedure," Pearman said.

Pearman said that the fast-tracking procedure removes one potential outcome of that review process from being engaged which could otherwise have helped businesses seeking a merger obtain regulatory approval from the CMA.

In cases where the CMA decides that it should refer a merger case straight to a phase two inquiry, it also has the ability to accept undertakings in lieu of reference to remedy, mitigate or prevent the substantial lessening of competition concerned or any adverse effect of it," Pearman said. "The fast-track procedure removes this option."

Businesses thinking about a merger therefore need to consider whether the "commercial objectives" they are pursuing through the deal could be achieved by accepting divestments or structural changes to resolve competition concerns and therefore whether to proceed with a request for a fast-tracking of the review, Pearman said.

"Where the parties are seeking unconditional clearance they may be more likely to opt for the fast-track procedure," she said. "It appears likely that BT/EE will rely on the strength of their economic arguments to persuade the CMA at phase two that the merger will not in fact result in a substantial lessening of competition. No doubt BT’s decision to request the fast-track process will also be influenced by the proposed Hutchinson/O2 deal and the general consolidation taking place in the telecoms market."

In a statement, BT said that its planned merger with EE would not harm competition.

"BT’s acquisition of EE will be good for consumers, businesses and UK plc, as well as for BT shareholders, so we are keen to get regulatory clearance," Gavin Patterson, BT Group chief executive, said. "A larger BT will be able to invest and innovate even more than now, something that’s good for jobs and good for customers. The acquisition will lead to greater competition, given our history as a natural and willing wholesaler, enabling other companies to use the networks we own."

"We provide wholesale access to companies in the broadband market and we are happy to support others who wish to compete in the mobile market as well. The UK is one of the most tightly regulated marketplaces in the world and that will continue to be the case ensuring all companies can compete on a fair basis," he said.

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