The Digital Markets, Competition and Consumers Act 2024 (DMCC Act) received Royal Assent shortly before Parliament was dissolved for the 2024 General Election. Barring any surprises, it is expected to come into force this autumn. Among changes to UK competition and consumer law and the regulation of big tech, the DMCC Act will also change which mergers fall under the jurisdiction of the UK's Competition and Markets Authority (CMA) – a development that is likely to be of interest to the oil and gas industry.
Under the Enterprise Act 2002, mergers can be examined by the CMA (and therefore potentially blocked or made subject to conditions, such as divestment of some activities, or conduct rules) if they either (1) involve a target with a UK turnover of £70m or more, or (2) result in the combined business gaining (or increasing) a market share of 25% or more in any market.
Because the CMA has a lot of discretion to decide what constitutes a market, this "market share" test has sometimes been criticised for allowing it to call-in any merger where the merging parties have overlapping activities, even where the target's activities are very narrow or its UK turnover is negligible. This can be a particular issue in niche markets, for example specialist goods and services supplied to the oil industry, which may only have a very small number of players to begin with.
The DMCC Act increases the "UK turnover" jurisdiction test from £70m to £100m, and amends the "market share" test to add a £10m "de minimis" threshold, so a merger where neither of the parties has a UK turnover of more than £10m will no longer be caught by the CMA's jurisdiction. This will provide more certainty to international mergers with a limited UK dimension.
However, what the DMCC Act gives with one hand it takes away with the other. It will add a third way in which the CMA can assert jurisdiction over a merger:
- where one of the parties has a UK turnover of £350m or more and a market share (in any market) of 33% or more, and the other party is registered in the UK, carries on activities in the UK, or supplies to customers in the UK (which need not be in the same market in which the first party has its 33%+ market share).
The idea of this third test is to capture mergers that are caught by neither of the existing thresholds: i.e. those where the target has a UK turnover of below £100m (or even no UK turnover at all) and the buyer is a big player in its own market but has no overlapping activities with the target. This "gap" was identified in the context of big tech players buying startups (with niche or unique services and negligible turnovers) in order to incorporate their IP and prevent them growing into competitors. However it may just as easily apply to acquisitions by major oil and gas services companies, where they buy small, niche service providers in order to add to the services they can provide.
The CMA has taken an increasingly aggressive approach to mergers in the years since the UK left the EU, and has expressed particular concerns about concentration in the oil and gas sector. By adding to the CMA's options for intervening in mergers, particularly those involving niche goods and services, the DMCC Act may also add to the toolkit available to the CMA to regulate competition in the oil and gas sector.
(First published in Oil & Gas Voice)
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