In a speech on 11 September 2014, Alex Chisholm, Chief Executive of the UK Competition and Markets Authority (CMA) emphasised the importance of maintaining strict competition based merger controls to boost business confidence and incentivise investment in the UK economy.

This subject is topical given the increasing attempts to politicise UK merger control in recent years. Often sensitive issues like job losses and factory closures mean there is intense public and media scrutiny during takeovers. After the Kraft/Cadbury takeover in 2010, Kraft were strongly criticised for reneging on a pre-takeover pledge to keep a 500 job UK factory open. The merger led to further public distrust of foreign takeovers. Recently US pharmaceutical Pfizer’s dropped their bid for the UK’s AstraZeneca after months of intense media interest alongside a battle over the share price. Following a widely held belief that the takeover will soon resurface, some MPs and the Unite union called for a UK public interest test to be added to merger control considerations to safeguard against UK job losses.

The UK merger control system currently only allows for public interest exceptions under section 58 of the Enterprise Act 2002 including national security, the plurality of the media and financial stability (added in the aftermath of the financial crisis in 2007/8). It does not allow for any public interest test based upon UK jobs, premises or historically significant companies being retained.

In the face of this pressure, Alex Chisholm’s intervention in this debate is timely. In his speech he sent a clear message to Government and markets of the importance of independent merger control by the CMA and an absence of political or exceptional criteria when assessing mergers.

Mr Chisholm stated:

“Aside from attracting foreign investment for the benefit of the economy, a merger control regime that is based on sound competition economics can make companies, whether or not they are regarded as ‘national champions’, more efficient and innovative; fostering the creation of jobs and economic growth. A ‘re-politicisation’ by adding more exceptions to competitive-based merger controls, or introducing criteria in foreign investment control that have previously been abandoned in merger control by successive governments, could undermine business confidence and the credibility of any merger regime”

We welcome the CMA’s desire to retain independence, control and impartiality over merger assessment. The hallmark of the Enterprise Act 2002 was a competition (rather than political) based assessment in both merger, markets and competition policy. It was a refreshing break from the past of industrial policy based tests. However we have seen creeping politicisation in recent years from this high water mark with the ability of the CMA to look into public interest in Market Investigations introduced by the Enterprise and Regulatory Reform Act 2013.

The noises coming from politicians over the need for greater public interest tests in merger control can be viewed as short term populist considerations. If implemented they could spell considerable damage to the climate for investment in the UK as well as the credibility of the UK merger control regime in international eyes.

Therefore Alex Chisholm’s speech and his unqualified support for a competition based merger regime are likely to be widely welcomed by competition lawyers and UK business alike.

The full text of the speech can be found here.