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December 17, 2021
Mergers and acquisitions can be worth billions of pounds, involve a variety of shareholders and impact workforces numbering in the thousands, so it’s essential this industry is regulated. Learn how and bolster your commercial awareness.

The UK: The Competition and Markets Authority

In the United Kingdom, mergers and acquisitions are regulated by the CMA (Competition and Markets Authority). The regulator stands independent from the government and is responsible for preventing and reducing anti-competitive activities.

Instances Where the CMA Has Intervened

JD Sports Forced To Sell Footasylum

Just last week, the CMA confirmed an earlier decision to require British sports-fashion retail company JD sports to sell trainer retailer Footasylum. The competition regulator found that the takeover had reduced competition for high-street shoppers. The £90 million takeover was first announced in March 2019 and has since been criticised for disadvantaging consumers. The CMA will now oversee the sale of Footasylum.

Crowdfunding Merger

In March this year, the CMA began investigating the £140 million merger of Crowdcube and Seedrs, two of the largest equity crowdfunding platforms in the UK. If the merger had gone ahead, the combined company would have a 90% market share.

Viagogo And StubHub

In 2020, the UK’s competition regulator enacted an in-depth investigation into Viagogo’s failed acquisition of StubHub from eBay for £2.9 billion. Consequently, the CMA ordered Viagogo to sell StubHub’s operations outside North America. Without this, the combined Viagogo-StubHub entity would hold a 90% market share of resold tickets for gigs, sports and theatre in the UK. Following this, in September 2021, the CMA approved the merger.

Sainsbury’s Blocked From Merging With Asda

Another high-profile CMA intervention concerned the blocked merger of Sainsbury’s with Asda in April 2019. The CMA ruled that combining the two supermarkets would in effect create a duopoly: Sainsbury’s-Asda would hold 29% of market share, with Tesco closely behind on 27%. At the time, the next nearest competitor would have been Morrisons with 10%. The CMA cited the threat of rising prices, particularly at the companies’ petrol stations as another factor against the merger.

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The US: The Federal Trade Commission

The US relied on the FTC (Federal Trade Commission) and accompanying Antitrust Division of the Department of Justice to enforce US antitrust laws. The main issue the agencies look for is any acquisition that will substantially lessen competition.

Instances Where the FTC Has Intervened

Simon & Schuster Takeover Blocked

In early November, US regulators at the US Department of Justice sued to block the merger of multinational publishing conglomerate Penguin Random House and American publishing company Simon & Schuster. Had Penguin Random House been allowed to pursue its $2.175 billion takeover of Simon & Schuster, two of America’s ‘Big Five’ publishers would have combined.

Criticism Of Big Tech Mergers

Critics and politicians, particularly Democrats have argued that the FTC has failed to create a competitive marketplace in the technology sphere, using Big Tech as their evidence.

The growth of companies such as Facebook, Google and Amazon exist arguably as monopolies, and recent findings have revealed a series of unreported mergers by the Big Tech companies. Refinitiv data shows that the five Big Tech companies have spent more than $264 billion buying up smaller potential rivals, worth less than $1 billion, across 9,222 transactions since the start of 2021 alone.

The FTC has argued that aggressive acquisition patterns block off the kind of competition that can bring innovation, in turn disadvantaging the consumer. Little action has been taken so far.

Talking point:

  • Which competition regulator is the most stringent: the European Commission for Europe, the CMA for the UK or the FTC for the USA?
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