UK's New Merger Control Rules Go Live

New UK merger control thresholds now apply to all deals completed after January 1, 2025, unless they were already under formal review in 2024.

The changes are the result of aspects of the UK Digital Markets, Competition and Consumers Act 2024 (DMCCA) officially coming into effect. For our in-depth analyses of the DMCCA, including the UK’s enhanced competition law investigative and enforcement powers, please see the Sidley Updates here, here, and here.

“Voluntary” Nature of UK Merger Control

The UK merger control regime, unlike many regimes globally, is voluntary and non-suspensory. This means there is no obligation for acquirers to notify a transaction to the UK’s Competition and Markets Authority (CMA) and no obligation to await CMA clearance before closing. However, the CMA has the power to “call in” an unnotified transaction (even after closing) where it considers there may be a risk to competition, and has the power to order that a transaction cannot be completed pending CMA review (and, in the case of a completed transaction, the power to order that an acquired business must be held and operated separately). In consequence, in some situations, there can be powerful incentives for parties to make a voluntary filing and secure the certainty of an approval decision.

But the CMA’s powers to review deals are predicated on it having jurisdiction to do so. Critically, the DMCCA has amended the thresholds that give the CMA jurisdiction to review a transaction, with the effect that the CMA can call in a transaction where:

1. the target has UK turnover of £100 million (up from the pre-DMCCA threshold of £70 million) or
2. the parties to the transaction have a combined share of supply in the UK (or a part thereof) of 25% or more (no change from the pre-DMCCA position) or
3. the transaction meets the DMCCA’s new “Hybrid”/“Acquirer” threshold¹  (see below).

New “Hybrid”/“Acquirer” Threshold

Under the new “Hybrid”/“Acquirer” threshold, the CMA will be able to review transactions where neither of the thresholds at 1) or 2) above is met but where (a) one party (most likely the acquirer) has a “share of supply” in the UK (or a substantial part thereof) of at least 33% and UK turnover exceeding £350 million and (b) the other party (most likely the target²) meets certain UK nexus criteria.

The CMA’s revised Guidance – issued on January 2, 2025 – explicitly states that no overlap or increment is required between the target’s activities and the activities of the acquirer that give rise to a share of supply of 33% or more.³  This means that when an acquirer with groupwide UK revenues over £350 million already holds a 33% share of supply in the UK (even in a sector that is wholly unrelated to the target’s activities), a transaction will meet the thresholds if the target has the relevant UK nexus. The UK nexus criteria (established in the DMCCA and clarified in the Guidance) are very broad - simply providing services to UK customers, having UK IP rights and/or making future plans for entry into the UK, among other criteria, may be sufficient.

The UK nexus criteria (established in the DMCCA and clarified in the Guidance) are very broad; simply providing services to UK customers, having UK intellectual property rights, and/or making plans for entry into the UK, among other criteria, may be sufficient.

As a result of the broad nature of the UK nexus test, it is highly likely that some acquirers will see an increased number of deals triggering the thresholds for notification despite only a loose nexus to the UK and no overlap between the parties.

Interim Orders

In the Guidance, the CMA has further detailed when it intends to use “hold separate orders” (also known as Initial Enforcement Orders or IEOs) as an interim remedy. These very disruptive orders, which can be issued before or after closing, require that the target business is operated separately from the acquirer in order to ensure that the parties’ businesses do not integrate while the CMA is still considering a transaction.

However, the Guidance provides some welcome relief for private equity acquirers by suggesting that certain aspects of a hold separate order may be limited to the portfolio companies whose activities overlap with the target business, rather than applying across the whole of a private equity investor’s portfolio.⁴

Extraterritorial Reach of Information Requests

The CMA also now has expansive powers to issue extraterritorial information requests to overseas individuals or companies either in connection with merger reviews or subsequent enforcement action after a review.⁵

The potential broad reach of these new powers could result in businesses that have no direct customers, suppliers, or entities in their wider group in the UK being compelled to respond to information requests from the CMA. Failure to comply with such requests, or withholding relevant information, could result in fines up to 5% of turnover.

Conclusion

The new thresholds under the DMCCA significantly expand the jurisdiction of the CMA. In particular, the Guidance does not limit the “Hybrid”/“Acquirer” threshold to those deals most likely to have some form of impact on competition in the UK (for example, because they involve potential competition, give rise to vertical links, or involve parties active in neighbouring markets). The result is a higher degree of uncertainty, as a consequence of which it is possible that there will be an uptick in the use of informal “briefing papers” to obtain comfort from the CMA that it does not intend to assert jurisdiction over deals which have no impact on competition but may nonetheless meet the Hybrid/Acquirer threshold.

¹See paragraph 4.72 of the Guidance.

²See paragraph 4.75 of the Guidance.

³See paragraph 4.79 of the Guidance.

⁴See paragraphs 2.15-2.17 of the CMA’s new interim measures in merger investigations guidance (updated January 2025).

⁵See paragraphs 9.20-9.33 of the Guidance.