The Virgin/O2 merger will be a key milestone in merger control history

One consequence of Brexit is the end of the “one stop shop” of European Commission (“Commission”) merger control from 1 January 2021, under which large scale European mergers fell under the exclusive jurisdiction of the Commission, subject to various referral mechanisms to and from member states.  Arguably, this is already impacting merger control assessments. For example, the Commission has agreed to the Competition Market Authority’s (“CMA”) request to take over the investigation of the Virgin/O2 merger. The Parties have asked the CMA to fast track the merger to in-depth Phase 2 review, and the CMA has stated that it is likely to accept this request.

A further factor influencing the importance of UK merger control is the CMA’s willingness to intervene in mergers whose centre of gravity is outside the UK, with its recent prohibition of the Sabre/Fairlogix merger illustrating this point well. The CMA’s decision has been appealed to the Competition Appeal Tribunal, and it was particularly noteworthy that the CMA’s decision was reached two days after a US court dismissed a lawsuit from the US Department of Justice seeking to block the merger.

So what should the merging parties expect from an e-discovery perspective from the CMA’s investigation process?

The CMA’s draft revised Merger Assessment Guidelines, which were published for consultation on 17 November 2020, clearly indicate that the CMA may attach considerable weight to internal documents to assess all aspects of the competitive effects of mergers.  This is in line with the CMA’s recent practice and has a range of implications.

First, in some cases, it will be important for the parties and their advisors to consider document reviews early on in the appraisal of mergers that might be problematic.  Such evidence might make a real difference to outcomes.

Second, it may well be important to contextualise documents, not just identify them. For example, who is producing, receiving and acting on the documents in question – do they reflect decision making, or merely aspirations, and how well informed are they? Why are certain competitors monitored and not others? Does this reflect ancient history or which rivals are most visible or provide an easy way of proxying market wide conditions? Do recent documents suggest any changes in competitive conditions compared with documents from 3-5 years ago? 

In this regard, visualising documents and document distribution patterns within a company and how these may change over time may be very useful for understanding the messages that should be drawn from internal documents.

Third, it can be important to consider the actual behaviour of parties alongside documentary evidence.  For example, documents suggesting that a firm monitors certain rivals might not mean that this influences the firm’s behaviour, such as seeking to match their prices.

Fourth, given the wide range of documents that may need to be reviewed, it is also important to consider how this is best done. In our experience, the CMA generally prefers a more targeted disclosure, in contrast with the European Commission's preference to see all non-privileged results of wide-ranging searches, particularly in Phase 2 mergers. The former approach requires a more laborious review process.

Given the potential volume of information that can be generated in such matters, we would therefore expect to see certain useful approaches continue to gain traction:

a. Some merging parties will choose to work with a single provider who will help them with the review process, thereby benefiting from economies of scale and ensuring that consistent approaches are adopted. With separate counsel and the appropriate use of information barriers, this approach is often sensible and effective;

b. The parties may negotiate more routinely with the CMA to reduce their review burden, such as by seeking approval to implement machine learning strategies to accelerate the review process, and potentially improve its quality as well. On a number of cases the CMA has proved to be sophisticated on the topic of analytics, and it seems reasonable that well-reasoned proposals to modernise this process will be accepted. We would also expect the European Commission’s approach to evolve over time.

UK merger control will evolve post-Brexit and we expect e-discovery will evolve with it. Merging parties and their advisors need to plan for this.