UK merger control expanded: public health intervention and technology mergers

With effect from 23 June 2020, the UK Government can intervene in UK merger control assessments in order to maintain the UK's capability to combat, and mitigate the effects of, public health emergencies. In simple terms, this means that the UK Government can now block a deal or (more likely) impose remedies if it has concerns that an acquisition of a relevant UK entity may make it more difficult to combat public health emergencies, such as the current COVID-19 pandemic. 

Public interest intervention

Under UK merger control, the Competition and Markets Authority ("CMA") is generally the decision-maker. However, the Government can intervene on public interest grounds, in which case, the public interest consideration may trump the competition analysis conducted by the CMA. For example, the Government may block a deal or impose remedies on public interest grounds despite the CMA concluding there are no competition concerns. (As yet, no deals have actually been blocked on public interest grounds: typically, any concerns are dealt with by way of undertakings from the acquirer.) 

Until 23 June, there were three public interest intervention grounds: national security, media plurality and stability of the financial system. The public health emergency ground has now been added as a fourth intervention ground. This change is a response to the current COVID-19 pandemic and a concern that critical businesses in such a pandemic (e.g. ones producing vaccines or personal protective equipment) may be more susceptible to takeovers by foreign buyers. This could potentially prejudice the UK's ability to combat the current pandemic, and future ones.

If businesses or investors consider it possible that a transaction could raise such concerns, government guidance encourages them to speak to the department as early as possible.

The changes do not require any business or investor to take any direct action. They do not affect, for example: the fact that the UK retains a voluntary notification mergers system; the other procedural provisions under UK merger control; the European Commission’s powers under the EU Merger Regulation.

Reduced thresholds for more technology mergers

In addition, the Government will introduce (once approved by the UK Parliament) reduced thresholds for three additional sectors which are perceived as important for national security:

• artificial intelligence;
• cryptographic authentication technology; and
• advanced materials.

In those sectors, acquisition of the following targets will be caught by UK merger control:

• targets with a UK turnover of GBP 1 million, instead of the usual GBP 70 million; and
• targets which have a 25% share of supply in the UK in one of those sectors, even if the UK turnover of the target business is below GBP 1 million.

These lower thresholds have been in place for targets active in the defence, computing hardware and quantum technology sectors since 2018.

A draft statutory instrument to bring about the expanded scope of the lower thresholds has been published. This indicates that:

• advanced materials relate, amongst other things, to materials capable of modifying the appearance, detectability, traceability or identification of any object to humans or sensors, and alloys formed by chemical or electrochemical reduction of feedstocks in the solid state; and
• cryptographic authentication is defined as the method of verifying a person, user, process or device, or the origin or content of a message, data or information, by means of electronic communication, where the method of verification has been encrypted. 

National Security and Investment Bill 

Finally, the Government plans to introduce a National Security and Investment Bill to Parliament soon. This will introduce a more typical system of control on foreign investments as exists in many other jurisdictions (e.g. CFIUS in the US and FIRB in Australia). It remains to be seen whether the Bill will be largely modelled on the previous Government's 2018 White Paper (see our summary update).

For more on the UK merger control regime, see our Quickguide.