[ESTABLISHING A BUSINESS ENTITY IN ENGLAND] 168
the European Commission. In practice, the UK rules are interpreted consistently with their EU counterparts and so it makes little difference which of them are applicable to a particular situation. The Chapter I and Chapter II (and Article 101 and 102) prohibitions apply to two main types of anti-competitive activity: • restrictive agreements or arrangements between enterprises which have an appreciable impact on competition (as set out under the Chapter I/Article 101 prohibitions); and • conduct which amounts to an abuse of a dominant market position (as set out under the Chapter II/Article 102 prohibitions). The penalties for breaching these rules are significant. Parties can be liable for fines of up to 10% of global turnover, whilst provisions in agreements that breach Chapter I or Article 101 are void and unenforceable. Companies can also be subject to actions for damages from competitors and/or customers who are able to demonstrate that they have suffered loss(es) as a consequence of the competition law breach. The most serious infringements of Chapter I/Article 101 can result in individuals being subject to criminal sanctions and directors facing disqualification orders. As well as the CMA, various UK “sectoral” regulators have powers to apply the competition law rules in particular industries, for example Ofcom within the communications sector and Ofgem in the gas and electricity sector. These authorities (in common with the CMA) have significant powers to investigate suspected anti-competitive activity, including entering and searching business and private premises without any prior warning. Competition law cases are also increasingly being prosecuted through the UK courts and via
the specialist Competition Appeal Tribunal ( CAT ). Merger control Mergers in the UK are governed by the Enterprise Act 2002. A qualifying transaction for UK merger control purposes is one which involves (at least) the acquisition of material influence by one enterprise over another and where either: • the UK turnover of the target enterprise is more than £70 million; or • the merging parties’ combined share of supply of goods/services of a particular description in the UK/a substantial part of the UK is 25% or more. Unlike most of its equivalents in other jurisdictions, the UK has a “voluntary” system of merger control which means that parties to a qualifying merger are not under an obligation to notify and seek approval from the CMA prior to completing their transaction. However, where they fail to do so, the parties run the risk that the CMA decides to intervene and carry out an investigation into the competitive impact of the deal, which it is entitled to do at any point up to 4 months from completion or from when it first becomes aware of the transaction (whichever is later). In those circumstances, the CMA has powers to impose “hold separate” obligations on the parties forcing them to keep the merging businesses running as separate entities pending completion of any investigation. Ultimately, if the CMA decides there are competition issues, it can demand concessions from the parties or even force the buyer to sell the acquired firm/assets. It is therefore important to assess at the outset, whether the CMA might wish to review any qualifying transaction and what steps to take to mitigate any concerns it might otherwise have.
ILN Corporate Group – Establishing a Business Entity Series
Made with FlippingBook Ebook Creator