On 16 August 2019 the Competition Appeal Tribunal (CAT) ruled that a public interest intervention notice (PIIN) issued by the then Secretary of State for digital, culture, medial and sport (DCMS) into two newspaper mergers was issued in time, but that the time limit for the Secretary of State to make a reference for an in-depth phase 2 investigation had expired on 1 July 2019.  The PIIN was issued on 27 June 2019, but set a date of 23 August 2019 for the Competition and Markets Authority (CMA) and Ofcom to prepare their reports, so any phase 2 reference made by the Secretary of State following receipt of those reports would have been out of time.

The provisions in the Enterprise Act relating to public interest cases are complex, with numerous cross references to the general provisions on merger control, and the CAT described the relevant statutory provisions as “labyrinthine and convoluted”.  Its ruling in this case provides some clarity over the timing aspects of these complex provisions, confirming that the Secretary of State has one four-month period during which to issue both the PIIN and make a reference to the CMA.  The Government has until 18 September to apply for permission to appeal the CAT’s ruling.

Background to the case

The Evening Standard is published by Evening Standard Ltd, a company in which the majority shareholding is held by Lebedev Holdings Ltd (LHL). Prior to the relevant transactions, LHL was 100% owned by Mr Lebedev.

In July 2017, 30% of the shares in Independent Digital News and Media Ltd (IDNM), of which Mr Lebedev was a majority shareholder, was acquired by Scalable Inc, a company incorporated in the Cayman Islands. Scalable has two issued shares, one owned by Sultan Mohammed Abuljadayel and one by Wondrous Investment Holdings LP.

Between December 2018 and February 2019, 30% of the shares in Lebedev Holdings Limited was acquired by International Media Company (IMC), also a Cayman Island company with the same shareholdings as Scalable. The transactions were part of the same transaction, as control over both LHL and IDNM was obtained in stages, as defined in section 29 of the Enterprise Act, by the same parties or interests or group of persons. As a result of both transactions, Mr Abuljadayel and Wondrous together hold 30% of both LHL and IDNM.

The transactions were not notified to the CMA.

The legal framework

Under Section 42 of the Enterprise Act the Secretary of State for DCMS has the power to intervene in relevant merger situations involving newspaper companies where he considers that there are public interest grounds for doing so.  The relevant public interest grounds are: the need for accurate presentation of news and free expression of opinion in newspapers, and sufficient plurality of views in each market for newspapers in the UK. Where a PIIN is issued, the Secretary of State will then take the final decision on whether to refer the merger for an in-depth phase 2 investigation (which may consider competition issues as well as public interest issues), and the ultimate decision to prohibit or clear the merger, provided the public interest concerns remain an issue.

The Enterprise Act does not expressly specify a timeframe within which the Secretary of State must decide whether to intervene on public interest grounds, but does provide that a PIIN may not be issued after the CMA has already reached a phase 1 decision or in circumstances where the usual four-month deadline for the CMA to make a reference for a phase 2 investigation has expired (calculated from the date on which material facts about the transaction have been given to the CMA or the material facts have been made public). Once a PIIN has been issued, the CMA must provide a report to the Secretary of State on the question of whether it believes that there are grounds for making a phase 2 reference on competition grounds. In media public interest cases, Ofcom must also carry out an investigation into the specified public interest consideration(s), and prepare a report for the Secretary of State advising on whether a reference should be made on those grounds.  Following receipt of these reports, the Secretary of State may refer the merger for a phase 2 investigation by the CMA if he believes that the merger operates or may be expected to operate against the public interest.

The concept of ‘relevant merger situation’ for this purpose is defined largely in the same way as for merger control more generally, such that two or more enterprises must ‘cease to be distinct’, and either a turnover or share of supply threshold must be met. However, the general provisions relating to the question of the point in time at which to determine whether a ‘relevant merger situation’ has arisen (usually the date on which a phase 2 reference is made) are adjusted by way of a number of complex and poorly drafted inter-related provisions, such that the parties in this case disagreed over the correct deadline within which the Secretary of State must make any phase 2 reference decision.

The CAT’s ruling on the time limits for reference by the Secretary of State

The Secretary of State issued the PIIN on 27 June 2019 and required the CMA and Ofcom to investigate and report by midnight on 23 August 2019. The applicants, Lebedev Holdings Limited and IDNM Limited, brought an appeal before the CAT arguing that:

  • The PIIN was issued outside the four-month time limit set out in Section 24 Enterprise Act and/or
  • The four-month time limit also applies to the Secretary of State’s power to make a reference to the CMA (under Section 45 Enterprise Act). His deadline in the PIIN for the CMA and OFCOM to submit their reports by midnight 23 August was well after the time in which the Secretary of State could make a reference. That time had already expired and a reference could no longer be made.

The CAT held that material facts about the transaction were brought into the public domain on 1 March 2019, when the CMA received a letter from Lebedev identifying Abuljadayel and Wondrous Investment as the purchasers of Lebedev’s stakes in the newspapers.  Previous newspaper articles reporting on the transactions contained insufficient information to amount to material facts.  On that basis, the CAT held that the four month period expired on 1 July 2019 and the PIIN was therefore not issued out of time.

As noted above, the provisions on timing for the Secretary of State’s phase 2 reference decision are complex. The Secretary of State argued that the Enterprise Act does not impose a time limit for making a reference in a public interest case. If the same four month time period were to apply both to the issue of the PIIN and to the subsequent making of the reference, the Secretary of State would never have the full four months available for the issue of a PIIN, as it would not allow time for the CMA and Ofcom to report and for a reference to be made.

The CAT concluded that, on the basis of Section 23(9)(b) Enterprise Act, the question of whether a relevant merger situation exists, including the four month temporal element, is to be determined at the time the reference is made. This is also consistent with statutory guidance issued by the Secretary of State for Trade and Industry at the time of the changes to the legislation in 2004, which states that:

“the power to refer a completed merger media merger to the CC on competition or public interest grounds is subject to the standard longstop on reference of four months”.

The CAT recognised that the fact that the same deadline applies to the issue of the PIIN and the making of a reference is unusual and results from unfortunate drafting, but concluded that it does not make the regime unworkable. Other public interest cases have been investigated and made subject to a reference by the Secretary of State on that basis without any problems. The UK merger control regime sets out clear time limits for the various stages in the process, with very prescriptive provisions on the circumstances in which these can be extended, and for how long. Leaving the making of a reference in public interest cases without any time limit would adversely affect business certainty for potentially major transactions.


Stephen Wisking
Stephen Wisking
Global Head of Practice, London
+44 20 7466 2825
Kristien Geeurickx
Kristien Geeurickx
Professional Support Lawyer, London
+44 20 7466 2544