Mergers and the Public Interest: A Wolf in Sheep’s Clothing?

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John Fingleton’s October 2018 paper on the public interest test in mergers focuses on the UK government’s ongoing consultation into expanding its powers to intervene on national security grounds.

The paper argues that the existing public interest tests – on the grounds of media quality and plurality, financial stability and the current national security grounds – work reasonably well, but that the powers the government is proposing to give itself would represent a significant change in the public interest test that would reduce foreign investment in Britain and harm the UK’s economy.

The proposed regime would triple the number of mergers that are investigated and remedied on any grounds, and increase the number of mergers that are investigated on national security grounds by one hundred times.

It would give sweeping discretionary powers to the Secretary of State for Business to overrule the CMA. As the paper details, national security powers have already been used to extract undertakings during mergers that are unrelated to national security, such as in the takeover of GKN by Melrose. The paper argues that many more takeovers would be affected this way and the result would be less competition and less investment in British firms.

The paper argues for re-opening the consultation and considering powers that are more clearly focused on protecting national security and avoiding the creation of a new pathway for special interests to protect themselves at the expense of the consumer.