The publication of the Competition and Markets Authority’s Strategic Steer today caps a tumultuous first half of 2025 for the regulator, although one that looks to now be settling.
The Government removed the Chair, extensive new digital markets powers took effect – with two investigations already launched – new consumer law powers have come into force and the final Strategic Steer has now been published.
Alongside this the CMA published a new Mergers Charter, consulted on changes to merger remedies, and the Government has committed to consulting on the CMA’s jurisdictional thresholds.
But what has driven this shift, what’s changed in practice for mergers and what does this mean for future M&A activity in the UK?
A long-history of scrutiny – what has driven the changes?
Although scrutiny of the CMA has never been greater, criticism has been simmering for the last decade. Politicians from across the spectrum have long called on the CMA to be more interventionist, after it was deemed to have been asleep at the wheel with early tech acquisitions, Facebook / Instagram in particular.
The major tipping point was Brexit, when the CMA took on significantly greater powers, and with that came criticism that the organisation was unpredictable, burdensome and a closed shop. Indeed, CMA Chief Strategy Officer Jess Lennard acknowledged recently that the perception was that the CMA operated in an “ivory tower”.
Alongside this suggestions of overreach in legal circles grew. The initial review of Amazon’s acquisition of 16% of Deliveroo; and Roche’s acquisition of Spark Therapeutics were the clearest examples of this. This then came to a head with Microsoft’s purchase of Activision, when the CMA initially prohibited the merger but the European Commission cleared it. The CMA’s U-turn less than six months later, on the basis that this was a ‘new transaction’, followed excoriating criticism from Microsoft and much of the British commentariat, which led Chancellor Jeremy Hunt to emphasise the CMA must consider its “wider responsibilities” to promote economic growth.
New government, new CMA?
Since taking office the Labour Government’s response has been swift, centring on the perception that the CMA’s approach was misaligned with UK growth ambitions and the need to drive investment into the UK.
In some quarters the Government’s sudden focus on the CMA was seen as opportunistic, with competition not a priority in opposition nor a focus for the manifesto.
It was also not missed in industry circles that the Treasury LinkedIn page posted a smiling Satya Nadella, CEO of Microsoft, alongside the Chancellor shortly after CMA Chair Marcus Bokkerink’s defenestration in January.
Political intrigue aside, the changes and today’s Strategic Steer have the potential to be far-reaching.
A spotlight on mergers – what’s changed?
The most high-profile and contentious area for the CMA has long been its approach to mergers. This explains why the largest shifts have been in this area, as the CMA – driven by Government pressure – looks to evolve its approach.
First, the support for behavioural remedies in Vodafone / Three marked a clear change. The CMA has long dismissed behavioural remedies as ineffective, but they are back in vogue and provide a new avenue to secure deal clearance. Similarly innovative remedies in Schlumberger / Champion X recently at Phase 1 have continued this trend. The CMA’s commitment to further consider the pro-competitive benefits of a deal, including possible rivalry enhancing efficiencies and customer benefits, also aligns with the Government’s wider plans, with the OBR now weighing the economic benefits policy delivers.
Second, proposed changes to the share of supply and material influence tests should provide clarification, with the aim to avoid the CMA investigating deals without a clear UK impact. The CMA itself has recognised UK regulation provides “unusually broad jurisdiction”, with this therefore viewed as a necessary regulatory correction.
Third, geopolitics and the ambition to avoid duplicating work from competition authorities overseas has the potential to be significant. How this will work in practice is unclear, but finding credible solutions in other jurisdictions on global deals – particularly the US or EU – may support UK deal execution.
What does this mean for UK M&A activity?
The current political environment has significant ramifications for those looking to progress deals in the UK.
The chance to avoid a prohibition on a deal that previously could have been blocked is at least theoretically now better. The shift with behavioural remedies, and direct pressure exerted by the new Strategic Steer, have the potential to be important. This doesn’t mean major market consolidation will be waved through, but the recent 4-3 clearance of Vodafone/Three highlights the shift. Clear evidence of the consumer and growth benefits are therefore now more important than ever.
Alongside this wider interest in the CMA is heightened, with the CMA the topic of two thinktank papers in the last fortnight alone (from the IPPR and Centre for British Progress). This is therefore now a front of paper issue as political journalists analyse if Government rhetoric is just that, or if there is a notable change in outcomes. This is a double-edged sword for dealmakers, there is more scope for engaging with the media; but also more scrutiny. It will therefore be key to ensure strong media understanding of a deal, particularly if the market is complex or controversial.
Ultimately this means that communications output must align to the competition narrative where there is CMA-driven execution risk. This should involve both media and political engagement aligned to the deal, emphasising the benefits to consumers and where possible the market at large. This will require a change in approach in some external communications from purely justifying the deal from a shareholder perspective.
In this new world the proof will be in the pudding. The CMA, and former Chair Marcus Bokkerink, has long insisted it is not more interventionist than other regulators – pointing to the relatively low numbers of mergers it has blocked. It is therefore too early to say how this new political pressure and media scrutiny will manifest itself. What is clear is lawyers, journalists and politicians are looking out for test cases – to see whether it’s the same old CMA or a new dawn really has broken.
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