Legal development

CMA adopts new Phase 2 merger process 

CMA adopts new Phase 2 merger process

    On 25 April 2024 the UK Competition and Markets Authority (CMA) issued updated guidance on its merger review process, which will apply to all new cases. The most significant changes are to the process for in-depth 'phase 2' merger reviews, which are designed to streamline the process, increase engagement with the Inquiry Group that determines the case, and encourage earlier discussions on remedies.

    Key takeaways

    • The new phase 2 process will give merger parties the opportunity to put their case to the Inquiry Group at an earlier stage and to increase engagement throughout the process.
    • The 'issues statement' (previously issued at the beginning of a phase 2 investigation) has been abolished and parties will instead respond to the phase 1 decision.
    • The CMA will issue an interim report (which will replace the provisional findings report) earlier in the process, and parties will be given the opportunity to respond to any concerns in the main party hearing.
    • There are changes to encourage earlier discussions on remedies and a new phase 2 remedies form has been introduced.


    The revised guidance follows the CMA's consultation process, which closed in January 2024. 

    The majority of changes relate to the CMA's phase 2 merger process. The CMA will conduct an in-depth 'phase 2' investigation where, following its initial phase 1 review, it considers that there is a realistic prospect that the merger will result in a substantial lessening of competition. Unlike a phase 1 review, phase 2 investigations are led by an independent Inquiry Group, consisting of individuals drawn from a panel of experts who are not employees of the CMA. The Inquiry Group serves as a "fresh pair of eyes". 

    New phase 2 process 

    The CMA has outlined a revised four stage process for phase 2 investigations:

    • Commencement and response to phase 1 decision (weeks 1-6): the merger parties (and third parties) will be invited to respond to the CMA's phase 1 decision, typically within 14 days of referral to phase 2. The CMA will then conduct its initial information gathering, including attending a "teach in" and/or site visit with the parties, and an "initial substantive meeting" during which the merger parties will be able to set out their views on the competition issues raised in phase 1 decision.
    • Interim report (weeks 7-14): during this stage, the CMA will assess the evidence and update the merger parties periodically. At the end of this stage, the CMA will set out its provisional findings in the interim report.
    • Final report (weeks 15-24): the CMA will consider responses to the interim report and hold a hearing with the merger parties. During this stage, the CMA will consult on any proposed remedies, if relevant. By week 24, the CMA will publish its final report setting out its final decision.
    • Implementation of remedies (weeks 24-36): if relevant, the CMA will consult on final undertakings to implement the proposed remedies and issue its final acceptance of these undertakings.

    Key changes

    The reforms are designed to streamline the phase 2 process, increase early engagement with the Inquiry Group and add flexibility to the remedies process. Post-Brexit, the CMA is reviewing an increasing number of multi-jurisdictional and complex cases and it believes that these changes will assist in the management of its caseload.

    The key changes to the phase 2 process include:

    • Abolishing the issues statement: the CMA previously published an issues statement (which often largely reflected the phase 1 decision) at the start of phase 2. Under the revised guidance, the phase 1 decision will be used as the starting point for the phase 2 investigation to streamline the process.
    • Earlier and increased engagement with the Inquiry Group: merger parties will be encouraged to set up teach in sessions and site visits with the Inquiry Group early in the phase 2 process. In addition, a new "initial substantive meeting" will be offered to merger parties after their response to the phase 1 decision. The CMA also anticipates more frequent informal update calls throughout phase 2 and will facilitate direct engagement between the CMA and the merger parties' economists on aspects of the CMA's analysis if appropriate.
    • Interim report issued ahead of main party hearing: the CMA will publish an interim report, setting out its provisional assessment, earlier in the process (this report will replace the provisional findings report). Parties will be given the opportunity to submit written responses to the interim report and will also able to respond to the findings during the "main party hearing".
    • Earlier remedy discussions: the guidance clarifies that parties are able to discuss remedies with the CMA at early stages of the investigation on a without prejudice basis. It also allows for earlier engagement on "specific, credible" remedy proposals. In order to facilitate this, a Phase 2 Remedies Form has been introduced, which parties are encouraged to submit prior to the interim report.

    The CMA has made other changes to its guidance to reflect changes to the CMA's practice across both phase 1 and phase 2, recent judgments and certain legislative changes. The CMA has also issued new template forms.

    De minimis exception to referral increased to £30 million

    The CMA may decide not to refer a merger for a phase 2 investigation if it believes the markets are of insufficient importance to justify a reference. The CMA has made changes to its guidance on the de minimis exception, stating that it may now apply the exception where the size of the market concerned is below £30 million (previously £15 million). However, the CMA retains discretion to find that reference may nevertheless be justified.

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.

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