UK's CMA Merger Process Overhaul: Fears of Cronyism and Political Interference Rise

A UK government proposal to remove an independent panel of adjudicators on high-profile mergers risks political interference and “cronyism”, according to people with knowledge of the system. In a consultation published on Tuesday, the government outlined a raft of proposals to help speed up the UK’s approach to merger clearance as part of its drive to improve economic growth, which includes overhauling the decision-making process at the Competition and Markets Authority. Under the current system, any merger that could lead to less competition is reviewed by an independent panel of academics and business experts at the CMA to determine if the deal can proceed. The government is proposing to replace that panel with members of the CMA board who are more directly accountable to parliament. “While decisions are ultimately CMA decisions, the senior leaders of the organisation who are accountable to parliament for its performance are legally prevented from engaging in . . . [some] of its most significant decision-making functions,” the Department for Business and Trade said in the consultation, which runs to the end of March. “This can create confusion regarding accountability for those impacted by decisions.” However, some people with knowledge of the CMA’s panel system have warned that such changes could lead to government involvement in merger decisions and more pressure from companies keen to do deals in the UK. “One of the pros of the panel system is you remove political interference and prevent cronyism,” said one person who has worked in the agency’s merger function. “In extremis, the government may apply pressure in a case that’s in their interest.” Tom Smith, a competition lawyer at Geradin Partners and former legal director at the CMA, said the reforms read a bit like a “wishlist” from company advisers. He added: “These reforms will make the CMA slightly more susceptible to political influence by reducing its independence, but they will also increase the regime’s predictability and speed. The government clearly wants to send out some mildly deregulatory vibes.” DBT did not immediately respond to requests for comment on the criticisms. CMA chief executive Sarah Cardell said the proposals “will enhance the accountability of our decision making . . . [and] support the CMA’s commitment to promote competition and protect consumers with a clear end goal in mind: to drive economic growth and improve household prosperity.” The proposals come after the government targeted the CMA last year, ousting its former chair, Marcus Bokkerink, in January and replacing him on an interim basis with former UK Amazon boss Doug Gurr, in a bid to push the agency to become more business friendly. The CMA did not block any deals last year for the first time since 2017, according to data published this month. The government is also proposing to change the tests that determine whether the CMA reviews a merger, as mooted by chancellor Rachel Reeves last year. Many of the proposed changes will require legislation. Under the current “share of supply” and “material influence” tests — based on measures such as company turnover and dominance in a market — the CMA has broad discretion to review a large number of mergers. The government is proposing to limit the breadth of these tests. “For the small number of high‑stake transactions that get referred for a more in-depth review, the changes matter as they amplify the importance of broad political and industry support for a deal’s central pro-competitive rationale,” said Philipp Girardet, an antitrust partner at Clifford Chance.