In the first case of its type, the Competition Appeal Tribunal (the "CAT") last month rejected an application for the review of a merger decision of the Competition Commission (the "CC").

Somerfield's acquisition of 115 stores from Morrisons had been referred to the CC for investigation last year. Following its inquiry, the CC ordered Somerfield to divest 12 of the acquired stores in order to eliminate the adverse effects on competition arising from the merger. Somerfield then applied to the CAT for review of that order under section 120 of the Enterprise Act 2002.

At the heart of Somerfield's challenge was a complaint that the CC had acted irrationally or unfairly in requiring it to divest only newly acquired stores and not, for instance, stores which it owned prior to the merger. It had offered to do just this in negotiations with the CC, but the CC had decided that the most appropriate remedy was the divestment of the acquired stores. The CAT firmly rejected this complaint.

The CAT made it clear that – as required by the Enterprise Act – it had a very limited remit in reviewing CC decisions; essentially being confined to carrying out a 'judicial review' of those decisions. This ruled out any second-guessing of the CC which, according to the CAT, had a "clear margin of appreciation" to decide what reasonable action was appropriate for dealing with the anti-competitive effects of the merger.

In that respect, the CAT placed particular emphasis on the fact that the CC had been applying its own clear guidelines on merger remedies in ordering the divestments. In doing so, and by taking as a starting point the approach of reversing the completed acquisition to restore the status quo, the CC had been acting entirely reasonably. The CAT added that the onus lay with the merging parties to provide evidence (and not just assertion) to the CC to satisfy it that it should take a different starting point in the particular circumstances.

Somerfield was equally unsuccessful in its other arguments, for instance that the CC had ordered divestment of 'valuable' new stores in order to deprive it of 'ill gotten gains' rather than to restore effective competition. The CAT appeared to be rather unimpressed by the quality of evidence advanced by Somerfield in these areas.

Future applicants for review should bear in mind the deference likely to be shown by the CAT to the CC's decision-making discretion in similar cases.

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