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Enterprise Act 2002

Section 23: Relevant merger situations

100.This section sets out the criteria for a merger to qualify for investigation by the competition authorities, thereby making it a ‘relevant merger situation’. It in substantial part reproduces sections 64 and 68 FTA 1973.

101.It provides that a ‘relevant merger situation’ is created if: two or more enterprises have ceased to be distinct at a time or in circumstances set out in section 24, and at least one of the following thresholds is met:

  • the value of the turnover in the UK of the enterprise being taken over exceeds £70m (the “turnover test”); or

  • the merger would result in the creation or enhancement of at least a 25% share of supply of goods or services in the UK, or in a substantial part of the UK (the “share of supply” test). This would cover, for example, both the case of a merger between two enterprises each having a 15% share of supply, and that between two enterprises where one which already has a 25% share of supply mergers with another having a 5% share.

102.The share of supply test is being retained from FTA 1973, but the turnover test is new, replacing an assets test. Section 123 gives the Secretary of State a power to amend the share of supply test.

103.Subsections (3) to (8) make further provision as to the share of supply test. Subsections (3) and (4) enable the test to be applied to the net share of goods or services supplied by or to the merging enterprises. Subsection (5) allows the authorities to apply such criteria (such as value, cost, quantity, etc) as they consider appropriate to determine whether the 25% threshold is satisfied, and subsections (6) and (7) allow the authorities to consider whether goods or services subject to different forms of supply should be aggregated for this purpose. Subsection (8) gives the competition authorities the discretion to decide whether goods or services are to be treated as goods or services of a separate description for this purpose.

104.Subsection (9) has the effect that the question of whether there is a relevant merger situation is to be determined immediately before the time when the reference has been, or is to be made, except in circumstances where the CC has decided to treat the reference of an anticipated merger as that of a completed merger by virtue of section 36(2), when it is to be determined as at such time as the CC may determine.

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