What do the 4Ps mean for you? CMA consults on updates to core merger guidance

Background

The UK’s merger control regime is undergoing one of its most significant transformations in years. The Competition and Markets Authority (CMA) recently consulted on proposed updates to its mergers guidance, which mainly aims to embed its four new principles - pace, predictability, proportionality, and process (the 4Ps) - at the core of its functions.

Unlike many jurisdictions, the UK merger regime is voluntary, which means parties who might otherwise meet the UK jurisdictional thresholds, are not obliged to notify their transactions to the CMA before completion. However, the CMA retains broad powers to call in transactions for review, up to four months after completion, and can impose interim “hold separate” orders to prevent business integration while it investigates the impact of a transaction on relevant markets. This flexibility has made the UK regime attractive, but also unpredictable.

The CMA has adopted three principal jurisdictional tests:

• Turnover test, which captures transactions where the target’s UK turnover exceeds £100 million.
• Share of supply test, which captures transactions where the merging parties would together supply or purchase at least 25% of a particular category of goods or services in the UK and one of the parties has a UK turnover of at least £10 million.
• Hybrid test, introduced by the Digital Markets, Competition and Consumers Act 2024 (effective from 1 January 2025) and which applies when one party supplies or purchases at least 33% of goods or services of any description in the UK and has an annual UK turnover of more than £350 million. The other party must simply have a UK connection. Accordingly, the hybrid test can be substantially met by one party (usually the acquirer), thereby catching so called "killer acquisitions".

The CMA’s review process includes: pre-notification (usually through the submission of a short briefing paper) and information gathering, followed by Phase 1 and Phase 2 reviews. Most transactions are cleared at Phase 1.  Pre-notification typically lasts between 10 to 20 working days, Phase 1 reviews can take up to 130 working days from formal notification and Phase 2 reviews are much more intensive and can last for several months.

The 4Ps: What's changing?

The CMA’s consultation, in many ways, reacts to concerns expressed primarily by the UK government (and shared by industry and wider market players) regarding the CMA's historic operational inefficiencies and opaque decision making, which has affected incoming investment activities in the UK over the past few years.  The CMA's adoption of the 4Ps framework aims to make the merger review process faster, clearer and more proportionate:

• Pace: The CMA aims to accelerate its pre-notification investigations, pledging to complete these within 40 working days (the current average is 65). For straightforward Phase 1 reviews, the CMA intends to announce its decision by day 25 of the 40 working day review period. These changes are designed to create greater certainty and speed in the review process, and address businesses' current frustrations with early-stage delays.
• Predictability: The CMA plans to clarify its interpretation of the share of supply and material influence tests, which have historically been applied at the CMA's discretion. While legislative constraints limit fundamental changes to the share of supply test, the CMA is considering narrowing its interpretation of the test to reduce the risk of capturing benign transactions. This approach should help businesses better assess whether their transactions fall within the CMA's jurisdiction.
• Proportionality: The CMA is showing greater willingness to accept behavioural remedies (ie obligations relating to the ongoing conduct of merging parties following a merger, such as implementing non-discriminatory terms/providing a level of interoperability in services offered). Until recently, the CMA has required structural remedies (eg divestments of overlapping businesses to remove its competition concerns). The CMA's changing approach to remedies was recently illustrated in its decision to approve the Vodafone/Three merger, subject to behavioural remedies (without requiring any structural remedy). This flexible approach to remedies is particularly beneficial in transactions if structural remedies are commercially unworkable. However, behavioural remedies bring their own challenges, particularly concerning long-term monitoring and enforcement.
• Process: The CMA's overall investigation and review processes are set to become more transparent. The CMA has proposed publishing a case webpage for each review, providing more information to the market, and increasing opportunities for parties to engage with the regulator. This greater transparency is intended to demystify the review process for merging parties and provide them with increased touchpoints with the regulator for the duration of any reviews or investigations.

The CMA has also signalled a shift away from reviewing international mergers with minimal UK impact, promising a more focused allocation of resources, with intervention only occurring where UK consumer interests would genuinely be at stake. This change reflects both government pressure for the CMA to support UK investment and growth and the CMA’s own strategic review of how best to use its resources.

What does this mean for you?

The CMA’s proposed reforms are likely to have a tangible commercial impact on UK deal-making.

The promise of faster timelines is undoubtedly attractive for parties facing tight transaction schedules or competitive auction processes. However, in complex cases, the CMA's information gathering and third-party engagement may still cause delays. Businesses should therefore continue to build in contingency for potential hold-ups to their transactions, even if average merger review times begin to improve.

The prospect of greater predictability in jurisdictional assessments is also welcome. While the current consultation may lead to some narrowing of the CMA's interpretation of the share of supply test, the CMA's broad discretion will likely remain unchanged. Parties should therefore continue to seek early advice on whether the CMA has jurisdiction to review a transaction and the potential impact on competition.

The CMA’s openness to behavioural remedies offers parties more options to address competition concerns without resorting to forced divestments. This will be particularly relevant in sectors where structural remedies may be disproportionate or commercially unworkable. However, behavioural remedies require ongoing regulatory oversight and the risk of future enforcement action if the parties fail to comply.

Greater transparency and third-party involvement are double-edged swords. While increased openness can help parties understand and respond effectively to the CMA, it may also encourage premature and unsubstantiated complaints from competitors or other stakeholders. Businesses should therefore be prepared for more public scrutiny and should manage stakeholder engagement proactively during all stages of the CMA's review processes.

Overall, while the CMA’s intentions are clear, the 4Ps framework is still a work in progress and its practical impacts will depend on how effectively and consistently the CMA implements these changes. In the meantime, businesses should continue to monitor developments in the CMA's guidance and, as ever, seek early advice on transactions that may fall within the UK merger regime.