The UK government considers that transactions in the following sectors can raise national security concerns:
1. quantum technology;
2. computing hardware; and
3. the development or production of items for military or military and civilian use.
In order to allow the UK’s Secretary of State to intervene in transactions in these sectors, the UK government has proposed amendments to the Enterprise Act 2002 that would expand the Competition & Markets Authority’s (“CMA”) jurisdiction to review transactions in these sectors from a competition perspective.
More specifically, the jurisdictional thresholds for transactions in these sectors would be as follows:
- the target generates turnover in the UK of GBP 1 million (a reduction from GBP 70 million); OR
- a 25 per cent share of supply of goods or services in the UK (or a substantial part of it) is created or increased as a result of the transaction (i.e. the current test requiring an overlap between the activities of the parties to the transaction), OR the transaction involves a target with a 25 per cent or more share of supply of goods or services in the UK (or a substantial part of it) in one of the three sectors.
In practice, these proposals would expand the CMA’s jurisdictional thresholds in a substantial way: the CMA would have jurisdiction to investigate most transactions in the three sectors, assuming that the target has a presence in the UK. The proposed changes reflect a European trend to expand the jurisdiction of merger control in the field of tech M&A.
The CMA’s guidance paper on the changes to the jurisdictional thresholds is intended to assist parties with the decision on whether to notify transactions in the three sectors. The consultation aims to seek feedback on whether the draft guidance that has been published is sufficiently clear, whether any changes could be made to improve it and seeks any other feedback on the guidance.
The consultation closes on 12 April 2018.
Consultation documents are available here: https://www.gov.uk/government/consultations/draft-guidance-on-changes-to-uk-merger-thresholds