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The Court of Appeal has handed down judgment today dismissing Cérélia’s appeal from the Competition Appeal Tribunal on all grounds. Both the Court of Appeal and the CAT upheld the decision of the CMA to require Cérélia to divest the Jus-Rol business that it had acquired in 2022.
The judgment is of interest in two important respects. First, it provides an analysis of the scope of judicial review by the CAT in merger cases. Second, it considers the circumstances in which the CMA is entitled to extend the statutory timetable within which it must conclude a merger investigation for “special reasons”.
Cérélia and Jus-Rol both supply dough-to-bake products to grocery retailers in the UK. Jus-Rol is the leading brand of such products, which include filo and shortcrust pastry, and bake-at-home croissants. Cérélia is the leading supplier of supermarket own-label dough-to-bake products, and also provides contract manufacturing services to Jus-Rol. The CMA found that the merger of the two suppliers would give rise to a substantial lessening of competition in the market for the wholesale supply of dough-to-bake items, and imposed a requirement of divestiture by way of remedy. Following an unsuccessful appeal to the Competition Appeal Tribunal (whose judgment of 1 September 2023 is here), Cérélia appealed to the Court of Appeal on five grounds.
By its first two grounds, Cérélia alleged that the CMA had acted irrationally and unfairly in concluding that the merged entity would not be kept in competitive check by two alternative suppliers of dough-to-bake products. In dismissing that complaint, the Court of Appeal conducted a valuable review of the scope of judicial review by the CAT in merger cases. It emphasised that the CAT was required to conduct a deep dive into the evidence, to enable it to make an informed decision as to the adequacy of the evidential underpinning of the CMA’s decision, and hence as to the legitimacy of its determination and evaluation of the facts. The Court of Appeal made clear that because of the CAT’s expertise, it was quite possible that the CAT would be critical of relatively complex evaluations by the decision maker, even where a non-specialist court might not be. In the present case, however, the CMA’s approach had been logical and rational, and there had been sufficient material before the CMA for it to find as it did. Further, the CMA’s consultation of the parties through the provision of its Provisional Findings had been fair.
Cérélia’s third ground concerned the CMA’s decision to extend time for completing its investigation for “special reasons”, under section 39(3) of the Enterprise Act 2002. The Court of Appeal held that the CAT had not erred in concluding that the CMA had been entitled to extend time on the facts of this case. It declined to lay down any canonical definition of “special”, given the fact and context specific nature of the test. It rejected Cérélia’s submission that such reasons were required to be “exceptional” in nature. The requirements of fairness were a relevant consideration which could inform the “special reasons”. Whether the reasons given by the CMA were in fact “special” was ultimately a matter of legal classification, and hence one for the CAT, but the CAT would take into account that Parliament had accorded a relatively broad discretion on the CMA.
Lastly, Cérélia’s fourth and fifth grounds concerned the question of the effect of any unlawful decision by the CAT to extend time. Since Ground 3 had been dismissed, these grounds had become academic. However, the Court of Appeal addressed them in any event. Cérélia had argued that the result of an unlawful extension was that the CMA’s final decision would have been made out of time – and that the consequence was that the merger should be treated as having been cleared. The Court of Appeal rejected that submission, holding that such a result would be inconsistent with the intention of Parliament. Instead, the CAT had a discretion as to whether to quash an unlawful decision to extend time and it would have been a rational exercise of that discretion to uphold the final decision in this case.
The Court of Appeal’s judgment is here.
Alison Berridge appeared for Cérélia.
Robert Palmer KC led for the CMA. Michael Armitage also appeared for the CMA in the CAT.