Meanwhile back in the Uk

It’s a whole new ball game as watchdog kicks deals into touch

Deals such as JD Sports’ tilt at Footasylum have fallen foul of the Competition and Markets Authority

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The boss of JD Sports could not disguise his anger. Peter Cowgill has long dreamt of expanding his sports fashion empire, so when, on Tuesday, the competition watchdog signalled that it might block JD’s takeover of Footasylum, he lambasted its provisional ruling as “fundamentally flawed”, demonstrating “a complete misunderstanding of our market to an alarming extent”.

Mr Cowgill — who now faces the prospect of selling Footasylum, the smaller retailer that JD bought for £90 million last year — is not the only executive to have been angered by the Competition and Markets Authority in recent months. The watchdog has taken an increasingly interventionist approach to mergers and acquisitions, flexing its muscles to an extent rarely seen before, wading into takeover processes that are nearing completion and even trying to unwind deals retrospectively.

According to Linklaters, the law firm, since the start of last year 12 of the 17 takeovers subjected to in-depth anti-trust examination — so-called phase two investigations — did not survive or are set to be prohibited. They were blocked, provisionally blocked or abandoned by the parties involved, resulting in a 71 per cent kill rate by the CMA.

The CMA also rejected the proposed tie up between Sainsbury’s and Asda

CHRIS RATCLIFFE/GETTY IMAGES

Its scalps include the £12 billion merger between Sainsbury’s and Asda that collapsed last April after the regulator rejected the tie-up. “It was like they were working backwards to get the answer they wanted. They wanted to block the deal from the start,” a senior retail industry source said.

The authority was set up in 2013, replacing the Office of Fair Trading and the Competition Commission. Its work includes assessing markets for consumer problems, investigating cartels and scrutinising takeovers.

Within the past three weeks alone it has said that it is minded to block the JD Sports deal and the $360 million acquisition of Farelogix by Sabre Corporation, two American companies that supply software to airlines. Prosafe and Floatel, which provide accommodation for oilrig workers, abandoned their merger after the authority said that it was likely to forbid it.

Last month the regulator surprised the City by starting a last-minute review of Just Eat’s £10 billion merger with Takeaway.com, its Dutch food delivery rival. Amazon’s plan to lead a $575 million investment in Deliveroo, another online food ordering platform, is also being investigated in an inquiry the two businesses have dismissed as “speculative”.

Some City advisers claim that companies are quietly withdrawing deals before they become public because of the uncertainty caused by the regulator’s new, aggressive stance. “I can think of four or five deals in the last two or three months where people have just said the uncertainty involved in CMA clearance is too significant and have binned the deal and gone on to something else,” one said.

The regulator also has become more active at publicising its activity. In October it hired Stuart Hudson from Brunswick, the City PR firm, to fill a new senior director role that includes strategy and communications.

Its muscular approach comes after the arrival of Lord Tyrie as chairman of its board in June 2018. The economist and former Conservative MP made a name for himself as chairman of the Commons Treasury select committee, when he skewered everyone from bankers to the chancellor with his forensic questioning.

He has been no less combative since taking up his role at the CMA. A year ago Lord Tyrie set out bold plans to broaden the watchdog’s powers, including giving it the ability to disqualify company directors for serious breaches of consumer law.

While the government is yet to consult on Lord Tyrie’s proposals, there are signs that his ambitious vision for the regulator is starting to become a reality. This month the government asked the authority to produce regular “state of competition” reports that will involve far-reaching economy-wide surveys of markets. However, decisions on phase two work on mergers falls outside the scope of the CMA board and sources at the watchdog insist that Lord Tyrie does not influence its stance on specific takeovers.

The CMA itself says that reviewing its track record has helped it to fine-tune its approach. A spokeswoman said: “Lessons from previous investigations show that we expected competition to increase in some cases because of new companies entering the market, but this didn’t happen. We use these lessons, alongside the evidence in front of us, before reaching a conclusion.”

Some City onlookers put the change down to wider concerns that regulators worldwide have done too little to tackle the dominance of large corporations, particularly the giants of Silicon Valley.

A book published last autumn called The Great Reversal, by Thomas Philippon, a French economist, assesses the decline of competition in the United States. It has become influential in regulatory circles and is credited by some as being behind the British watchdog’s renewed vigour.

Others believe that the authority is trying to build its influence ahead of Brexit, though this is denied by sources at the watchdog. Once Britain leaves the European Union, the regulator’s workload will increase as it scrutinises big takeovers that previously would have been examined by the European Commission. Its budget has been increased to cope and it has embarked on a hiring spree that has lifted its headcount from about 650 to 850 recently and is expected to surpass 1,000 by December.

“I think it’s fair to say the CMA is not looking to be a junior partner to the European Commission post-Brexit,” Dominic Long, a partner at Allen & Overy, the law firm, said. “The CMA want to maintain a seat at the table of global competition enforcers.”