The Office of Fair Trading ("OFT") has recently announced a change to its policy of providing advice to parties considering a proposed merger. This means we will see an end to the provision of confidential guidance and informal advice to such parties. Under the previous policy, the OFT has given both confidential guidance and informal advice (often referred to as a "fireside chat") to parties as to the likelihood of a proposed merger being referred to the Competition Commission ("CC") for further investigation. 

As such advice was only available when the proposed merger was still confidential, the OFT were providing guidance without consulting third parties such as the merging parties' customers or consumers.  Recent case law has emphasised the need for the OFT to take account of such third party comment when considering a decision on any proposed merger.

Although the OFT has not indicated that this is the end for all confidential guidance and informal advice, it has stated that it intends to undertake a public consultation early in its next financial year (beginning April 2006) regarding the long-term provision of these services.  Until such a decision has been reached, the OFT will not be providing confidential guidance at all and informal advice will be confined only to exceptional or "pro bono" cases, e.g. where the requesting party is unable to afford external competition advice.

The only service to remain intact is "focussed" pre-notification contact which is available for practical matters concerning transactions which are close to being concluded on matters such as timing, format and drafting of notifications.

When justifying the policy change, the OFT has stated that circumstances have changed fundamentally since they began offering parties the option of confidential guidance or informal advice.  The duty to refer merger cases to the CC imposed on the OFT under the Enterprise Act 2002, along with judicial guidance on this, had made it "more difficult to give helpful guidance on whether the OFT is likely to refer a case" to the CC. The OFT added that the value of such advice was inherently limited by dependence on inquiring parties' submissions without any ability to test arguments with, or gather evidence from other market participants. The OFT were also finding that their increasing workload had meant that a cut in services was necessary in order to adequately resource the other services that they are required to provide.

The practical implications for parties involved in potential merger activity is that, under the new policy, a merger notification will now only be possible where there has been a public announcement about the merger.  Parties will, therefore, have the choice between forming a view (guided by their advisors) on whether it may be referred to the CC and publicly announcing a proposed merger then pre-notifying the OFT for prior merger clearance.  This latter option is likely to be unpopular with vendors due to the risk of their business being adversely affected by commercial uncertainty while waiting for the OFT to grant merger clearance.

On a practical level, parties considering a merger will require to become far more dependant on expert competition law advice which should be sought at the early stages of a transaction.

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