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Freshfields Transactions

| 6 minutes read

The UK competition authority updates its approach for merger analysis in the 2020s

The UK’s Competition and Markets Authority (CMA) has updated its guidelines on the way it assesses mergers to take account of the significant economic changes that have taken place since it published its previous guidance in 2010.  

As our earlier updates have shown, the CMA is taking an increasingly interventionist approach to deals – and the impact of this approach is being felt ever more widely now the authority is carrying out reviews in parallel to the European Commission (EC), as well as other authorities. The CMA’s approach, set out in its revised Merger Assessment Guidelines (MAGs), is now critical to deal execution in a greater number of cases, particularly where it could diverge from the approach taken by other authorities. 

In its updated guidance, the CMA has:

  • sought to address developments in digital markets and respond to some recommendations in reports such as the March 2019 Furman Report (PDF) and May 2019 Lear Report (PDF);
  • incorporated case law and CMA experience from the last decade;
  • included some guidance on how sustainability issues may be considered during merger assessment;
  • emphasised that the existence of uncertainty is not necessarily a barrier to findings on key issues such as substantial lessening of competition (SLC) or potential entry/expansion;
  • trimmed back many sections of the previous guidance, including the removal of thresholds or rules of thumb for when concerns are likely (or not likely) to arise; and
  • reserved for itself a high level of flexibility and discretion on key issues.

In this blog post, we highlight the more notable changes and how those compare with the EC’s currently stated approach. For a more detailed analysis, please get in touch.

Notable changes

Market definition

The changes suggest an ongoing shift towards a more qualitative approach to market definition, with the removal of some of the more detailed guidance on the hypothetical monopolist test and quantitative techniques. The CMA will also take a narrower approach to supply-side substitution.

Potential and dynamic competition

The CMA takes a broad approach when considering whether a merger leads to a loss of:

  • future competition – where a potential entrant would have entered or expanded absent the transaction; or
  • dynamic competition – where existing and potential competitors interact in an ongoing dynamic competitive process (eg by investing in innovation) and this competition is lost. The CMA gives examples from digital markets and the pharmaceuticals sector where dynamic competition may be considered particularly relevant.

The CMA may, for example, conclude on the prospect that one of the firms would have entered the market absent the merger, without needing to conclude on the precise characteristics of the product which that entering firm would launch or the assets it might acquire to enter. Similarly, the elimination of a dynamic competitor that is making efforts towards entry/expansion may lead to the CMA finding an SLC even where its entry is ‘unlikely and may ultimately be unsuccessful’. In the CMA’s view, removing that threat of entry may significantly reduce innovation or efforts by other firms to protect future profits.

SLC and the meaning of ‘substantial’

The CMA considers that ‘substantial’ in the context of an SLC can have a range of meanings and will depend on the facts of the case. Notably, the MAGs provide that a lessening of competition can be substantial even where the relevant segment or market is small in total size or value. When deciding whether a lessening of competition is ‘substantial’, the CMA may consider whether there is limited competition in the market to begin with (eg because of regulation) or whether the market is ‘large or otherwise important’ to UK customers.

Closeness of competition

The MAGs state that ‘where the CMA finds evidence that competition mainly takes place among few firms, any two would normally be sufficiently close competitors that the elimination of competition between them would raise competition concerns, subject to evidence to the contrary’. The CMA does not specify how few the number of firms would need to be, but this highlights the CMA’s presumption, already seen increasingly in CMA investigations, of closeness between all competitors in concentrated markets, with the relative closeness of competitors unlikely to be considered in the first instance. The CMA will require ‘persuasive evidence’ that the merging firms are not close competitors to allay any competition concerns. This suggests that the CMA is taking a different approach to the legal test set out by the EU’s General Court in the CK Telecoms appeal.

Two-sided platforms

The MAGs include more detail on factors the CMA will consider when examining two-sided platforms and network effects. These may arise in relation to digital services (such as media publishers, social media platforms and online food delivery platforms) or in other contexts (such as shopping centres). The guidance includes some consideration of network effects, tipping effects and multi-homing.

Non-price aspects of competition

The MAGs emphasise that both price and non-price aspects of competition are important parts of the competitive process, recognising that firms may use non-price factors such as ‘quality’ to win customers. In some cases, non-price competition may be the CMA’s primary focus, for example, where customers do not pay a monetary price for digital services or content, where firms mainly compete through innovation or where prices are regulated. The CMA gives many examples of non-price aspects, some of which reflect developments in digital markets and the growing use of online distribution channels. Examples include: 

  • staffing levels in store; 
  • speed and responsiveness to customer queries; 
  • the level of privacy offered to users of digital services; 
  • the benefits to users of a platform being able to interact with a large base of other users actively using the same platform; 
  • the reassurance afforded to customers by a well-known brand or good reputation; 
  • the sustainability of a product or service; and 
  • the ability to enjoy content without being served with advertisements. 

Non-price aspects can also be considered when assessing efficiencies.


The MAGs go some way to addressing how sustainability issues can be considered during a merger investigation, although the CMA is limited by legislation as to how these issues can be considered. The CMA recognises that the sustainability of a product or service is a non-price factor that may be considered as part of the ‘quality’ of a product or service. Environmental benefits, such as the reduction of carbon emissions, can therefore be considered a ‘relevant customer benefit’ in some instances, which could mitigate any SLC arising or be relevant when considering remedies.

The removal of thresholds and rules of thumb

The updated MAGs do not contain thresholds or rules of thumb that previously existed in relation to combined market share estimates (eg combined market shares of less than 40 per cent would not often raise concerns), the number of competitors (eg a reduction of the number of firms in the market from five to four does not usually raise concerns) and other measures of concentration. 

New guidance on how the CMA assesses evidence

The MAGs describe the CMA’s approach in cases where there is a high degree of uncertainty in how a market may develop or where there is a lack of direct evidence of anti-competitive effects and how the CMA will apply theoretical analyses of parties’ incentives and ability to take certain action. The MAGs emphasise the CMA’s view that the existence of uncertainty is not necessarily a barrier to findings on key issues such as SLC or potential entry/expansion.

Comparison with the European Commission’s approach

On a number of issues, the CMA appears to be taking a different approach from the EC’s current guidance and the approach set out by the EU’s General Court. These issues include closeness of competition, measures of concentration, market definition, coordinated effects and countervailing buyer power. However, some of the updated guidance in relation to the exiting firm or ‘failing firm’ scenario, vertical effects and entry/exit is closer to the EC’s approach.

The MAGs include new guidance on important issues such as digital markets and sustainability, reinforcing the CMA’s position as a ‘thought leading’ authority on these and other topics. The EC has not yet released updated guidance on some issues covered in the MAGs, such as two-sided platforms, potential or dynamic competition, the role of non-price aspects of competition and the role that sustainability and environmental benefits can play in merger assessment. It is, however, expected to address some of these developments as part of its review of the notice on market definition and following its recent consultation on the role of competition laws and policies in supporting sustainability objectives in the EU Green Deal.

To read more about these issues and developments in merger control laws and policies globally, please see our Global antitrust in 2021: 10 key themes report – merger control.


mergers and acquisitions, antitrust and competition, europe