On 6 March 2017, the Competition Appeal Tribunal ("CAT") upheld the UK Competition and Markets Authority's ("CMA") decision to block Intercontinental Exchange, Inc.'s ("ICE") completed acquisition of Trayport, Inc. However, the CAT found that the CMA was guilty of a "serious failure" for not providing adequate reasons for part of its decision. The CAT therefore quashed the defective part of the CMA's Report, and remitted it to the CMA to reconsider.
In October 2016, the CMA concluded that the acquisition was likely to result in a substantial lessening of competition, and required that ICE sell Trayport and unwind an ancillary agreement between the merging parties (the "New Agreement"). On 4 November 2016, ICE wrote to the CMA, informing it that it intended nevertheless to implement the New Agreement, and on 11 November 2016, ICE appealed the CMA's decision to the CAT. In the meantime, the CMA issued a further decision on 10 November 2016 (the "Direction"), ordering the parties to cease implementation of the New Agreement.
ICE challenged the CMA's prohibition decision on five key grounds, claiming that the CMA had made various errors in relation to:
- not including the New Agreement in its assessment of what competition conditions would have been without the merger (known as the "counterfactual");
- assessing the benefits to ICE of restricting competitors' access to the relevant trading platforms (the partial foreclosure strategy);
- assessing the costs of such a foreclosure strategy;
- assessing the remedies proposed by ICE; and
- in ordering the unwinding of the New Agreement.
ICE also challenged the lawfulness of the Direction.
While the CAT dismissed ICE's first four grounds of appeal, it found that the CMA's remedy powers are limited to those which are specifically required to remedy the substantial lessening of competition identified. The CAT said that the CMA's final report "provides no articulation as to why the requirement to unwind the New Agreement would help ensure the effectiveness of the divestiture remedy". The CAT found that the CMA's reasons were "too cursory and too conclusory to meet the standards of intelligibility and adequacy".
Accordingly, the CAT quashed the requirement in the CMA's report to unwind the New Agreement and sent the issue back to the CMA to reconsider. Moreover, the CAT concluded that CMA had acted ultra vires in relation to the Direction to cease implementation of the New Agreement. However, the CAT has not quashed the CMA's Direction pending the CMA's reconsideration of the issues.
The case shows, once again, that the CAT will not hesitate to criticise the CMA and insists on rigorous procedural standards. However, on the main issue – the blocking of the transaction – the judgment offers little consolation to ICE, which has said that it is considering its options, including the possibility of a further appeal to the Court of Appeal.
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