OFT fees hike 'threatens merger regulation'
The Office of Fair Trading has quietly increased fees to investigate small mergers by one-third, which critics argue could result in fewer anti-competitive deals being referred to competition regulators.
The hike from £30,000 to £40,000 for purchases of companies with a UK turnover of up to £20m will come into force from October, but notification of the change was only squirrelled away on the OFT website earlier this month.
When an acquisition is announced, the parties can voluntarily refer the deal to the OFT if they believe that there is a potential competition issue that needs to be examined and possibly resolved. A voluntary, rather than mandatory, regime means that mergers where there are no crossovers between the two parties do not waste OFT time by being automatically referred for investigation.
However, if the parties are struggling so have made the deal in order to cut costs and it is borderline whether their activities really do substantially crossover that rise might put them off referring the deal to the OFT.
Rona Bar-Isaac, a competition expert at the legal firm Addleshaw Goddard, said: "High merger fee levels, particularly under a voluntary regime, weigh heavily on the parties involved and can be a disincentive to notification. We are aware of cases, particularly where the merger concerned was small, where the level of merger fee influenced the decision whether or not to notify the OFT."
This would mean that mergers where there might be competition issues are discovered later, involving a complicated unscrambling of a newly merged entity, or never spotted by the OFT at all.
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