U.K. Regulator Warns on Public-Interest Test in Mergers

Introducing public-interest tests into U.K. merger reviews may undermine confidence in the regulatory process, the U.K.’s top antitrust regulator said, citing the possible “adverse implications” of political involvement in approving transactions.

Alex Chisholm, the chief executive of the U.K.’s Competition and Markets Authority, made the comments after U.K. Business Secretary Vince Cable suggested in July that the U.K. would take measures to ensure foreign-owned firms preserve jobs or plants after acquiring U.K. companies.

“Reintroducing political involvement in the assessment of mergers may encourage a belief that decisions on mergers are open to influence by interested parties,” Chisholm said today in a speech at the Fordham Competition Law Institute Annual Conference in New York.

Cable proposed tightening U.K. takeover rules last summer after New York-based Pfizer Inc.’s failed bid for rival drugmaker AstraZeneca Plc. with lawmakers questioning Pfizer’s assurances on retaining jobs and drug research in the U.K.

Lawmakers have to weigh whether a “new political approach” would bring benefits that would outweigh potential adverse side-effects, Chisholm said.

Pfizer’s attempted takeover of AstraZeneca and General Electric Co.’s proposed acquisition this year of Alstom SA’s power business spurred debate about widening public-interest tests in merger control.

“It is vital to consider carefully the potential adverse implications if the U.K. or other jurisdictions were to reverse policy developments over the past decades by prescribing a reintroduction of broad public interest tests, and to measure these against any benefits from doing so,” the regulator said.

The CMA, which was formed earlier this year, uses an economics-based competition assessment of mergers, Chisholm said. The government may intervene when national security, media plurality and stability of the financial system is at stake. Weakening that could damage confidence in business, he said.

In the case of Pfizer and AstraZeneca, he said it was wrong to assume that the proposed merger’s implications for development and scientific research wouldn’t be considered in an economics-based competition assessment.

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