■The OFT may investigate mergers which meet either
a ‘turnover test’ or a ‘share of supply’ test. The ‘turn-
over test’, which replaces the previous assets test, will
be met if the target company has a UK turnover of at
least £70 million. The ‘share of supply test’ will be met
if the merged companies will together supply at least
25 per cent of the goods or services of a market, either
in the UK as a whole or in a substantial part of it. If
the merger meets the EC merger test, the OFT will not
investigate and cannot refer the merger.
■The OFT can investigate changes in levels of control
of companies. The provisions envisage three different
levels of control: material influence over policy, con-
trol of policy (known as de factocontrol) and having
a controlling interest (known as de jurecontrol),
which normally involves acquiring 50 per cent of
voting rights.
■The OFT must refer a merger to the CC if it believes
that the merger may substantially lessen competition.
Alternatively, the OFT may seek undertakings from
the merging companies to remedy the adverse effects
of the merger. The duty to refer does not apply in
three situations:
(a) where the merger is insufficiently advanced;
(b) if the market is of insufficient importance; or
(c) the benefits to consumers outweigh the adverse
effect on competition.
■If the merger is referred to the CC, it will conduct a
full investigation. If the CC concludes that the merger
has caused or will cause a substantial lessening of
competition, the CC can stop the merger or impose
remedies, such as undertakings from the parties or
orders. The OFT will monitor compliance with any
undertakings or orders.
■Mergers involving defence companies, newspapers
and water companies will be treated as special cases
and may be subject to different procedures.
■The Secretary of State will continue to decide mer-
gers which raise public interest considerations, e.g.
national security concerns.
4 Market investigation references.Part 4 of the EA
2002 established a new system of market investigations
by the CC, which replaced the system of monopoly
enquiries under the Fair Trading Act 1973. The OFT
(and specified regulators such as the rail regulator) may
make market investigation references to the CC where it
appears that the structure of the market or the conduct
of businesses is harming competition. The CC will carry
out a detailed investigation to establish whether any
aspects of the referred market prevents, restricts or dis-
torts competition in relation to the supply or acquisition
of goods or services in the UK as a whole or part of it.
If the CC identifies an adverse effect, it must decide on
action to remedy the effect, which may include seek-
ing undertakings or making orders. The Secretary of
State has the power to intervene in cases involving pub-
lic interest considerations (currently only matters of
national security). Parties affected may seek a review of
the lawfulness and fairness of any decision by the OFT,
the CC or the Secretary of State by the Competition
Appeal Tribunal, which can ask for a reconsideration of
the decision.Part 3Business transactions
248
because, if it were accepted, there would be a relevant
merger situation within the terms of the EA 2002, which
had come into force on 20 June 2003. IBA, an Australian
company in the same market, complained to the OFT in
August about the proposed merger. The OFT investigated
the proposed merger and in November 2003 decided not
to refer the merger to the CC because, although the
merged company would have a significant market power,
it did not believe that the proposed merger would result in
substantial lessening of competition in the UK. In reach-
ing this view, the OFT had been influenced by forthcoming
changes to the process of procuring IT systems in the
NHS. IBA was unhappy with the outcome and applied to
the Competition Appeal Tribunal (CAT) for a review of the
decision. The CAT quashed the OFT’s decision. The OFT,
iSoft and Torex appealed against that decision. The
Court of Appeal held that the test to be applied was that
stated in s 33(1) of the EA 2002. The OFT had a duty to
make a reference if it had a reasonable and objectively
justified belief that the proposed merger may be ex-
pected to result in substantial lessening of competition.
The Court of Appeal held that, although the CAT had not
applied the proper test, its decision to quash the OFT’s
decision not to refer was correct. The court was not sat-
isfied that the OFT had taken all material matters into
account in reaching its decision.Office of Fair Tradingv IBA Health
Ltd(2004)
In July 2003 iSoft Group plc offered to acquire the share
capital of Torex Ltd. Both companies were engaged in
the supply of software and systems to the healthcare
applications market. The OFT was notified of the offer