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OFT cuts merger red tape

The Office of Fair trading has revised its guidelines regarding mergers and referrals to the Competition Commission (CC).

Under the existing rules, the OFT will consider a merger in a market worth as little as £400,000 per year to be of sufficient importance to justify a reference to the CC. The revised guidance raises the market size threshold to £10 million.

John Fingleton, chief executive of the OFT, said: “The changes we proposed are carefully designed to remove unnecessary regulatory burdens on business with no lessening of consumer and business protection from anti-competitive mergers.

“These changes will benefit the taxpayer, businesses directly, and consumers indirectly. We welcome views from consumers and business and their representatives on these changes and how we can ensure that they have the greatest positive impact.”

The OFT may still refer businesses to the CC if ‘market concentration is very high and entry prospects are low, if there was evidence of price-fixing between competitors in one or more of the markets in question, if a reference would have important precedent value for business or if a substantial proportion of the likely detriment is suffered by vulnerable consumers’.

The OFT decided to review its guidance in this area because it was concerned that a narrow interpretation of the exception might result in mergers being referred to the CC where the risk of consumer harm was low and any adverse effect there might be would be small-scale.

In such case the costs involved potentially outweigh any benefit of intervention.

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