It’s been a great pleasure working with my friends at Aldwych Partners and NOCON on a study of merger remedies that the CMA has published today, alongside its own report.

The focus has been on so-called ‘carve out’ merger remedies.

These remedies involve the divestment of a combination of assets, contracts and staff, which were not previously a self-standing business or business unit.

Overall, our case studies show that carve-out remedies carry significant risks to their
effectiveness and that risk mitigations, such as fallback remedies, may only be of limited use.

Where the CMA concludes that a carve-out remedy is likely to be effective in addressing
competition concerns, the case studies indicate that additional safeguards may be warranted to address their risks.

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Key learning points from our five case studies, include the following:

• Carve-out remedies that unwind or undermine economies of scale, density or scope can be expected to significantly increase the risk to the remedy’s effectiveness.
• Carve-out remedies can provide merger parties with greater opportunities to influence the content of a divestment package and, through this, limit future competition.
• Carve-out remedies that transfer customers to a new supplier will depend on
  customer consent and this can pose a substantial risk to these remedies’
  effectiveness.
• Carve-out remedies pose additional challenges for purchasers’ ability to carry out
  effective due diligence as the divestment package is not based on a pre-existing
  business unit.
• Merger parties may be able to weaken future competition through their influence over the choice of purchaser for a divestment package. This is a greater risk in carve-out remedies, where fewer prospective purchasers have the ability to become effective
  competitors.
• Fallback remedies may not significantly mitigate the risks associated with carve-out remedies given the low probability of their use and their limited assistance to
  prospective purchasers in negotiating divestment packages.

Full reports here