On 11 June 2018, new merger control thresholds entered into force in the UK, allowing for greater intervention in transactions raising national security concerns.
Under existing rules, the UK Government is only empowered to intervene in mergers on public interest grounds of national security, plurality and other considerations relating to newspapers and other media, and the stability of the UK financial system. However, according to the UK Government, there have been significant technological advances, economic developments and changes in the nature of threats to national security, which necessitated reform of the existing merger control regime (see VBB on Competition Law, Volume 2017, No. 10, available at www.vbb.com).
The new rules provide the UK Government with greater scope to intervene in transactions which raise national security concerns. In particular, the UK Secretary of State may now intervene if a target business engages in one of the following three activities: (i) the development or production of items for military or military and civilian use ("dual use"), (ii) the design and maintenance of aspects of computing hardware, or (iii) the development and production of quantum technology. The UK Secretary of State may intervene in transactions in the above three areas of economic activity where:
- The annual turnover of the target business in the UK exceeds £1 million (compared to £70 million under the standard regime); or
- The target business has a share of supply or purchase of at least 25% in a substantial part of the UK.
For transactions notified at national level in the UK to the UK Competition and Markets Authority ("CMA"), the UK Secretary of State may intervene by issuing a Public Interest Intervention Notice ("PIIN"). For transactions notified to the European Commission under the EU Merger Regulation, the UK Secretary of State may intervene by issuing a European Intervention Notice ("EIN"). Following either a PIIN or an EIN, the CMA will conduct a 'phase 1' report to the UK Secretary of State. If appropriate, the CMA may open a 'phase 2' investigation. Ultimately, the UK Secretary of State can accept final undertakings or make orders to remedy, mitigate or prevent any adverse effects to the public interest or (in extremis) block a merger altogether. Interestingly, on 17 June 2018, the UK Secretary of State issued the first PIIN in respect of the acquisition by Gardner Aerospace Holdings, a Chinese-owned company, of Northern Aerospace, an aircraft component manufacturer based in the UK.
The UK Government has published guidance on the new thresholds – available here.
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