Part 2: Competition Chapter 2: Mergers Schedule 4: Relevant and special merger situations
Schedule 4 makes several changes to the thresholds which determine what transactions are within jurisdiction of UK merger control.
	Section 23 of the Enterprise Act 2002 sets out the criteria for a merger to qualify as a "relevant merger situation" and therefore be subject to potential investigation by the CMA. This is the case where the transaction meets at least one of two "tests" detailed below:
the "turnover test": the value of the turnover in the UK of the target exceeds £70 million; or
the "share of supply test": the merger would result in the creation or enhancement of at least a 25% share of supply of goods or services in the UK, or in a substantial part of the UK. This test is met, for example, for a merger between two enterprises each having a 15% share of supply, as well as for a merger between two enterprises where one which already has a 25% share of supply merges with another having a 5% share.
	Schedule 4 amends the thresholds in three ways:
it increases the level of the turnover test,
it introduces a safe harbour for mergers involving parties with low levels of UK turnover, and
it introduces a new acquirer-focused threshold for merger review.
	Paragraph 2 of Schedule 4 implements these three amendments:
Subparagraph 2 increases the level of the turnover test from £70m UK turnover to £100 million UK turnover.
Subparagraph 3 introduces a safe harbour by adding a condition into the existing share of supply test in section 23(2) that requires at least one of the merging enterprises to have UK turnover of more than £10 million. This has the effect that any merger involving only enterprises with a respective UK turnover of £10 million or less is exempt from UK merger review on competition grounds.
Subparagraph 4 prevents turnover of the enterprise being taken over from being double counted in certain merger situations, such as a joint venture.
Subparagraph 5 introduces a new acquirer-focused threshold by inserting new subsections (4C) - (4G) into section 23. These specify the conditions which must be met in respect of one of the merging enterprises regarding share of supply (subsection (4D)) and turnover (subsection (4E)) and set out an additional condition intended to ensure the transaction has a sufficient connection with the UK (subsections (4F) and (4G)). The persons carrying on the enterprise concerned need to have at least a 33% share of supply of goods or services in the UK, or in a substantial part of the UK, and the enterprise must have a UK turnover of over £350 million. The UK nexus criterion is met where an enterprise other than the one that meets the share of supply and turnover conditions is carried on by a UK business or body, at least part of its activities are carried on in the UK, or it supplies goods or services in the UK. The conditions are to be assessed without taking the merger into account, i.e. on the assumption that it has not taken place or will not do so.
	Paragraph 3 makes consequential amendments to sections 28(5) and (6) of the Enterprise Act 2002 which includes a delegated power for the Secretary of State to amend section 23 by order so as to alter the turnover figures specified in that section. The changes ensure that the provisions of these subsections are applied not just to the existing turnover test but also the turnover elements of the new acquirer-focused threshold and the safe harbour. The exercise of this power is subject to the negative resolution procedure. The power is limited to substituting one figure for another and the Secretary of State is required to act in accordance with public law principles when doing so. The overall parameters for the thresholds, e.g. that there should be a safe harbour for mergers involving parties with a specified level of turnover or that there should be a threshold focussed on mergers involving larger, established market players, are set out in the primary legislation.
	Paragraph 6 amends the provisions in section 59 of the Enterprise Act 2002 on special public interest cases to ensure that public interest interventions in media mergers are not affected by the increase in the turnover test and the small merger safe harbour. The special public interest regime enables the Secretary of State to refer certain mergers for investigation on public interest grounds, even though they do not meet the jurisdictional thresholds outlined above. They are scrutinised against public interest considerations only, with no review on competition grounds. The Secretary of State will retain their ability to intervene in mergers where at least one of the enterprises concerned is a media enterprise or a newspaper enterprise and where the target turnover is over £70 million as well as where at least one of the enterprises concerned is a media enterprise or a newspaper enterprise and the share of supply test has been met, even if none of the enterprises has UK turnover of over £10 million.
	Paragraph 6 also amends section 59(6A) of the Enterprise Act 2002 to amend the conditions for application of the special public interest merger regime. Section 59(6A) previously allowed the Secretary of State by order to amend the conditions relating to mergers involving media and newspaper enterprises with an existing share of supply of 25%. Paragraph 6 amends that power so that it allows the Secretary of State to alter the turnover threshold figure of £70 million. The exercise of this power is subject to the negative resolution procedure. The power is limited to substituting one figure for another and the Secretary of state is required to act in accordance with public law principles when doing so. The overall parameters for the thresholds, i.e., that there should be a threshold focused on the target’s UK turnover, are set out in the primary legislation. Separately, the non-turnover elements of the thresholds are subject to amendment by a delegated power which is, however, subject to the draft affirmative procedure as it permits a wider range of amendments to the threshold tests than altering a turnover figure.
	Paragraph 7 amends Schedule 5A to the Enterprise Act 2002 which was recently inserted by Schedule 16 to the Energy Act 2023 as part of the amendments made by that Act to enable the CMA to investigate energy network mergers in Great Britain effectively. Paragraph 7 amends the modifications made by Schedule 5A to Chapter 1 of the Enterprise Act 2002 for the energy network merger regime, to reflect the changes made to the ordinary merger regime by the Act. Firstly, paragraph 7, subparagraph 2 amends the level of the turnover test for the energy network merger regime from £70 million GB turnover to £100 million GB turnover, in line with the amendment raising the threshold in the ordinary turnover test from £70 million UK turnover to £100 million UK turnover in paragraph 2, subparagraph 2 of Schedule 4. Secondly, paragraph 7, subparagraph 3 amends Schedule 5A to take account of the amendments made to section 28 of the Enterprise Act 2002 by Schedule 4 to the Act and corrects the modification made by paragraph 3(c) of Schedule 5A to section 28(6) of the Enterprise Act 2002.
	Paragraph 9 amends the existing delegated power to alter the share of supply test in section 123 of the Enterprise Act 2002. This power will extend to altering the new thresholds introduced by Schedule 4. The amendments introduce restrictions or safeguards in relation to these new uses of the power which are similar to those currently applying in relation to amendments of the share of supply test.
	Paragraphs 4 and 10 make minor consequential amendments.