On April 20, 2022, the UK government announced its intention to introduce new powers for the UK's antitrust and consumer protection regulator, the Competition and Markets Authority (CMA). These include an expansion of the CMA's already extensive merger jurisdiction to capture so-called killer acquisitions and larger fines for failure to comply with antitrust investigations. These changes were announced following a 2021 public consultation on reforming competition and consumer policy. The government has not yet released the text of any proposed legislative changes.

Merger Reviews: Lower Thresholds and Faster Processes

Currently, the CMA has jurisdiction over a merger or acquisition if: (1) the target has UK turnover of £70 million (ca. $91 million) or more or (2) the transaction would create or enhance at least a 25 percent share of the supply of particular goods or services in the UK or a substantial part of it (the "share of supply" test). Because of the "create or enhance" language, this test requires at least some minimal horizontal overlap. Under the latest proposals, an additional ground or jurisdiction would be established to target so-called "killer acquisitions" (i.e., where a large firm acquires a potential competitor before it can release new products or services). Under the proposed changes, the CMA would have jurisdiction over a merger if at least one of the parties has an existing share of supply of goods or services of 33 percent, and a UK turnover of £350m (ca. $269.2m). There is also a "UK nexus" requirement to ensure that only deals with a sufficient link to the UK would be captured.

Other merger-related proposals include:

• A safe harbor, which would exempt mergers from review where each party's UK turnover is less than £10 million (ca. $13 million).
• An updated "fast track" merger route, allowing the CMA discretion to refer a merger straight to Phase II when requested by the parties at any stage of pre-notification or Phase I, rather than only before a Phase I review begins (as is the case now). Under the proposals, companies would also be able to proffer remedies at any time during a Phase II review, rather than just at the end as is the case today.

Changes to the Cartel Offense and Increased Penalties for Failure to Comply with CMA Orders

The UK's prohibitions on anticompetitive agreements (including prohibitions on price-fixing) will be amended to clarify that the prohibitions apply to agreements which are implemented outside of the UK if there is the requisite effect in the UK. Companies will be able to offer remedies at an earlier stage in market investigations. The CMA will also be given increased flexibility in terms of the remedies that it can impose at the conclusion of a market investigation. The government also proposes bolstering the evidence-gathering powers of the CMA.

Under the announced proposals, the CMA will be empowered to:

• Issue fines of up to one percent of a company's annual worldwide turnover for failure to comply with CMA investigative measures.
• Issue fines of up to five percent of a company's annual worldwide turnover for violating CMA remedial orders.
• Issue additional daily penalties for continuing refusals to comply.

Currently, the CMA is limited to a maximum fine of £30,000 (ca. $39,000) for non-compliance with its antitrust probes. The turnover threshold for which financial penalties can be imposed for abuse of dominance will be reduced from £50 million to £20 million (ca. $65 million to ca. $15.3 million), providing the CMA with powers to penalize companies for abusing their market position "even in smaller markets."

Last, the CMA will now be able to levy penalties for consumer protection violations without having to first go to court, with new powers to fine firms up to 10 percent of their global turnover for violations. The government proposed this change in response to concerns about the prevalence of fake online product reviews and unfair subscription contracts.

Wilson Sonsini Observations

Whilst many of these new powers require legislative changes, if enacted in its current form, this package of reforms considerably strengthens the powers of a regulator which has become increasingly assertive in recent years (as discussed in this Wilson Sonsini client alert).

Although some of the changes appear designed to streamline the merger review process, the new merger jurisdictional threshold to transactions without any horizontal overlap would considerably expand the CMA's already expansive jurisdiction. Any firms considering M&A activity should consider this jurisdictional expansion, particularly in tech, pharma, and life sciences mergers in which the CMA has demonstrated a keen interest.