Blog: Please sir, can we have some more (information)?
The UK Competition and Markets Authority (CMA) has fined (for the first time ever) a merging party for a failure to provide information during a merger investigation, write David Flint and Rebecca Ferguson.
Hungryhouse have been fined a £20,000 fixed penalty for failing to supply information to the CMA during its investigation into the proposed merger between Hungryhouse and JustEat – which was given the green light in late November.
The CMA announced an investigation into the proposed merger between JustEat and Hungryhouse in March 2017, due to concerns that such a merger might foreclose the market and damage competition in the online food ordering market.
The CMA then announced an in-depth investigation into the merger and its impact on competition (a Phase 2 investigation) on 19th May 2017.
The merger was ultimately cleared by the CMA on 16th November 2017 for the following reasons:
- Hungryhouse did not have a significant market share and therefore was not a major competitor of JustEat as it was much smaller in size and had fewer customers than JustEat;
- The market for online food ordering platforms has increased exponentially over the last few years and both companies faced competition from rival companies offering the same service to customers; and
- The CMA also took into account that there were many ways in which customers can order food – online, by phoning the store themselves, by walking in etc.
After the merger was ultimately cleared by the CMA, Hungryhouse then came under fire for failing to provide the CMA with information requested during the merger investigation.
The decision was taken under Section 110 of the Enterprise Act 2002 for Hungryhouse’s failure to comply, without reasonable excuse, with requirements the CMA issued in a notice pursuant to section 109 of the Enterprise Act 2002 dated 31 May 2017.
As part of the merger investigation, both parties were compelled to produce certain documents and information to the CMA. Hungryhouse failed to provide the CMA with “all emails between the groups covering strategic options (e.g. sale, closure, investment) for Hungryhouse.” Such material that was provided was inconsistent with previous material submitted in the course of the investigation.
The CMA therefore fined Hungryhouse £20,000 (which is lower than the statutory maximum penalty of £30,000) for failing to provide information and impacting adversely on the investigation. The CMA argued that the failure to provide information resulted in increased cost and delay with the investigation.
This decision serves as a reminder to companies that during any CMA investigation, they must be open and respond timeously to all information or document requests by the CMA.
- David Flint is a partner and Rebecca Ferguson a trainee at MacRoberts