Outcome of IBA Health appeal

The Court of Appeal today gave its judgment in the hotly anticipated IBA Health case, which centres on the test to be applied by the Office of Fair Trading ("OFT") when deciding whether it must refer transactions to the Competition Commission ("CC") for further competition review.

The Court of Appeal upheld the substance of the CAT's finding in this specific case but disagreed with the CAT's view of the relevant test to be applied by the OFT.

The Court of Appeal confirmed that the relevant test is "whether the OFT believes that it is or may be the case that the [merger] may be expected to result in a substantial lessening of competition" and continued "the relevant belief is that the merger may be expected to result in a substantial lessening of competition not that the Commission may in due course decide that the merger may be expected to result in a substantial lessening of competition. Further, the body which is to hold that belief is the OFT not the Commission". This belief must be reasonable and based on objectively justified facts.

Today's judgment is the result of an appeal brought by the OFT against the Competition Appeal Tribunal's judgment on 3 December 2003. The CAT's decision has been viewed by some as diminishing the OFT's ability to deal independently with merger cases and thereby causing the OFT to refer more transactions to the CC than it would otherwise have referred. The CAT granted the OFT leave to appeal on 19 December 2003 and the case has been fast-tracked to obtain a speedy resolution, so that the OFT has clear guidance on the test it must apply to mergers.

In its 3 December judgment, the CAT held that when the OFT carries out its duty to refer relevant transactions to the CC, it must carry out a two-part test. First, the OFT must satisfy itself that as far as the OFT is concerned there is not significant prospect of a substantial lessening of competition and second, it must satisfy itself that there is no significant prospect of an alternative view being taken in the context of a fuller investigation by the CC. The Court of Appeal today decided that this two-part test is not correct.

The OFT welcomed the Court of Appeal's judgment and stated that this "provides a good basis for the OFT's role in the UK merger assessment from now on".

The text of the judgment will shortly be available to the public at: http://www.courtservice.gov.uk/judgments/dbdown/oft-v-iba_summary.htm

For further enquiries please contact Richard Taylor, Susan Hankey or David Marks on +44 20 7367 2000; [email protected], [email protected] or [email protected]