Unreasonable timetable set by regulator quashed for unfairness

The proposed merger of Asda and Sainsbury's was announced on 30 April 2018 when the Applicants began to engage with the CMA in what is known as the 'pre-notification' stage of merger control procedure. Following the pre-notification stage the CMA is formally notified of a merger and must complete its investigation within set statutory deadlines. Phase 1 (initial investigation) must be completed in 40 working days and Phase 2 (more detailed investigation) must be completed within 24 weeks.

From 30 April 2018 through to June 2018 the Applicants repeatedly requested that the CMA extend their pre-notification period to enable them to gather as much evidence as possible and avoid undue pressure on the parties during Phases 1 and 2 of the investigation once the statutory time periods applied. The CMA refused this request and began its Phase 1 investigation on 23 August 2018, referring the proposed merger for Phase 2 investigation on 19 September 2018. The CMA set a deadline of 7 December 2018 for the Applicants to submit responses to Working Papers disclosed by the CMA and the main party hearing was fixed for 4 December 2018.

The Applicants were concerned that this timetable was too tight and on 25 October 2018 asked the CMA to exercise its discretion to extend the timetable in the interests of fairness and due process as permitted under the Enterprise Act 2002.

On 29 October 2018 the CMA indicated that while it would keep the situation under review it would not extend the timetable at this stage; it went on to disclose the first of its Working Papers to the Applicants on 9 November 2018. It disclosed the last nine Working Papers from 27-28 November 2018 accompanied by a large amount of underlying data. On 30 November 2018 the Applicants asked again for an extension to the timetable.

The day before the hearing was scheduled, the CMA published material relating to key complainants. The Applicants immediately said that they were unable to properly prepare for the main party hearing and asked for this too to be postponed. The CMA refused both requests.

After extensive further communication between the Applicants and the CMA, the CMA agreed to extend the deadline for responses to the Working Papers to 9am on 17 December 2018 and for the main party hearing to be held by 14 December 2018. The Applicants considered this "plainly unreasonable" and challenged both deadlines in their application to the CAT.

The same principles that are applied by a court on an application for judicial review should be applied on review of a CMA decision in connection with a merger reference. The CAT, one of whose members was a High Court judge, therefore had to consider whether the CMA's procedure met the standards of fairness required by law.

It found that fairness does not require that the parties to a merger are given as much time as they believe to be necessary from their own perspective. Instead, the CAT will look at a range of factors to determine what is fair in the circumstances of the case. It was accepted by both sides that this was a question for the CAT to determine for itself rather than simply reviewing the regulator's decision for rationality.

There was no statutory right for the Applicants to see or make representations on the Working Papers. However once the decision was made to disclose them, a fair process needed to be followed. The purpose of disclosing the Working Papers was to enable the Applicants to submit representations on the CMA's emerging thinking and on the methodology that would form the "building blocks" of its Provisional Findings. Enabling the Applicants to make adequate representations at this stage was essential as the methodology disclosed by the CMA was unlikely to be revised at a later stage in its investigation. Fairness required therefore that the Applicants had sufficient time to digest the detail of the Working Papers and to submit considered responses to the analysis presented in the Papers whilst it was still possible for their representations to have a substantive impact. In the context of this case, the deadlines would not permit these purposes to be met and were therefore unfair.

It was particularly relevant that the Applicants had expressed concern about the pressures of the timetable throughout the investigation. The CMA had reassured the Applicants that the Working Papers would be disclosed on a "staggered basis" so that they did not end up "with 6 Working Papers dumped on them 2 weeks before the hearing". However in fact nine of the Working Papers were disclosed to the Applicants just a week before the hearing.

Just as the CMA's disclosure of the Working Papers was delayed because the volume and complexity of the Working Papers was "striking", "exceptional" and would give rise to "particularly intensive work" these same factors should have influenced the CMA to grant an extension to the deadline for the Applicants to respond to the Papers.

It was relevant that the Applicants were well resourced with large teams of advisors working on the case. Nonetheless, the requirement to prepare for the hearing at the same time as respond to the unreasonable deadline for commenting on the Working Papers would impose an unreasonable burden on the Applicants and meant that the date set for the hearing, as well as the deadline for responses was (exceptionally in this case) unfair.

Although this case was decided by the CAT in a competition context rather than in a court, the principles are equally applicable to all regulators undertaking investigative or decision making processes which have a significant impact on commercial entities.

The case highlights the difficult balance regulators must strike between guaranteeing procedural fairness at each stage of an investigation, whilst completing the investigation within applicable deadlines. It also demonstrates that persistent concerns about process should be raised at the time by claimants and must be taken seriously by regulators.