CAT upholds CMA decision on Dye & Durham merger remedy

The Competition Appeal Tribunal (“CAT”) has dismissed a judicial review challenge against the CMA’s decision to reject a novel merger remedy proposed by a provider of cloud-based services for property transactions.  In a judgment issued on 10 July 2023, the CAT dismissed all three grounds of challenge advanced by Dye & Durham (“D&D”), holding that the CMA was entitled to be concerned about the impact that the proposal could have on competition between the merging parties.

In August 2022, the CMA blocked the merger between D&D and TMG, both of whom provide property search report bundles in England and Wales, ordering D&D to sell TMG to an independent approved purchaser.  D&D agreed and provided final undertakings to the CMA in October 2022.  Half-way through the sale process, however, D&D sought the CMA’s approval for a novel process whereby TMG would be divested to D&D’s shareholders and then listed for sale on the AIM stock exchange.  The rationale for the proposal was to maximise the price that could be obtained for TMG in light of a perceived downturn in the UK property market since the final undertakings were given.

The CMA rejected the proposal, finding that:

1. It would require a variation to the final undertakings, which envisaged a private sale to a single approved purchaser.
2. No such variation was justified.
3. In any event, the proposal would result in D&D and TMG having identical shareholders, which would compromise their incentive and ability to compete.

D&D challenged each of those findings before the CAT, but the CMA’s decision was upheld in its entirety.  The CAT’s observations on the impact of common shareholdings on competition will be of particular interest for practitioners and economists.  This is a hot topic in competition circles and has generated a considerable amount of literature both in Europe and the USA.  Whilst the CAT acknowledged that this was a matter of ongoing debate, it held that it was reasonable for the CMA to conclude that there were competition risks in light of market conditions and in circumstances where the 100% overlap between the shareholders could well reduce incentives to compete.  The CAT confirmed that it was not incumbent on the CMA to obtain its own empirical evidence in relation to the impact of common shareholdings.

The CMA was represented by Ben Lask KC and Thomas Sebastian.  A copy of the judgment is here.