The Office of Fair Trading (OFT) has confirmed that it has used the "de minimis" exception in deciding not to refer two mergers to the Competition Commission (CC). This is the first time the de minimis exception has been used following the issue of revised guidance in November 2007.
The exception allows the OFT to decide not to refer for CC investigation a transaction which otherwise meets the reference criteria provided the markets in question are not of sufficient importance to justify a reference. This is where the relevant markets are valued at less than £10 million in total, although transactions in smaller markets may still be referred, in particular in very highly concentrated markets where the prospect of entry is low and in markets where there is evidence of coordination between competitors.
The mergers involved were the award of the Intercity East Coast (ICEC) rail franchise to National Express Group and the award of the Cross Country rail franchise to Arriva plc. In each case, the OFT considered that competition concerns existed which were realistic enough technically to establish a duty to refer the merger to the CC but that, given the size of the markets involved, those concerns were not sufficient to warrant the costs of a CC investigation.
The OFT's analysis in the ICEC case focused on coach revenues, the overlap market for which was valued at below £1 million. In the Cross Country case, the total size of the only traffic flow raising concerns was just above £1 million. The OFT has noted that its analysis focused on:
- the peculiar issues raised by rail franchises awards;
- the lack of impact on deterrence if the exception were used;
- the conclusion that the OFT's concerns were more marginal than in many other reference cases; and
- the fact that the relevant turnover in each case was very modest.
Before the OFT revised its guidance on the de minimis exception in November 2007, increasing the threshold for the application of the exception to £10 million from £400,000, there were no reported cases of the exception having been relied upon. The revised guidance was widely welcomed and it is encouraging that the OFT has now used the exception. This benefits businesses operating in the UK by decreasing the regulatory burdens they face, particularly in mergers involving smaller markets.
Please click here for the OFT's press release relating to the first use of the de minimis exception and here for the November 2007 revised guidance.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 07/01/2008.
