Increase in UK merger fees from October 2009

01 October 2009

Katharine Wilson

UK merger fees have doubled as of 1 October 2009, in the second part of a two-stage increase to reflect the costs associated with merger control, which began in 2006.

Merger fees were originally introduced in the UK in 1990. The fees remained at the same level until 2006, when the Government increased them substantially as part of its plan to recover the full costs of merger control. The level of fees is based on the value of the UK turnover of the enterprises being acquired and is split into three bands. As of 6 April 2006, the relevant fees were:

  • Band 1 (turnover of £20 million or less): £15,000 fee

  • Band 2 (turnover of £20 million - £70 million): £30,000 fee

  • Band 3 (turnover of £70 million or more): £45,000 fee

The Government’s original plan was for a second fee increase, doubling the fees for each band, to take place in April 2009. However, this increase was delayed and came into effect on 1 October 2009. The new fee levels, which apply to mergers where the parties cease to be distinct enterprises after 1 October 2009, are therefore:

  • Band 1 (turnover of £20 million or less): £30,000 fee

  • Band 2 (turnover of £20 million - £70 million): £60,000 fee

  • Band 3 (turnover of £70 million or more): £90,000 fee

The 2009 increase was carried out by way of statutory instrument. The Explanatory Memorandum to this statutory instrument reiterates the Government’s policy that fees for statutory services should generally be set at a level which enables full cost recovery. The 2006 increase accounted for approximately half of the level of full cost recovery; carrying out the increase in two stages over three years was intended to limit the impact of the increase and give businesses time to adjust. The original Regulatory Impact Assessment from 2006 (which estimated the costs of UK merger control to be approximately £9 million per year) is stated to remain valid. No further consultation was carried out in relation to the 2009 increase.

The Explanatory Memorandum also notes that the increased fee levels which will apply from October 2009 will not in fact cover the costs of the UK merger control regime. The Government intends to implement cost reductions where possible, in order to reduce the gap between total costs and revenues from merger fees; it also proposes to review the level of merger fees every three years, starting in 2012.

It therefore seems possible that UK merger fees will be increased further in the future. Such an increase would take the UK even further out of line from the majority of EU countries, some of which do not charge any merger filing fees. Although the UK merger control system is voluntary, the Office of Fair Trading (OFT) has powers to review mergers regardless of whether they are notified. The merger fee is payable in all cases (with some limited exceptions) where the OFT takes a decision on whether or not to refer a qualifying merger to the Competition Commission, including cases investigated by the OFT on its own initiative.

Source:

Enterprise Act 2002 (Merger Fees) (Amendment) Order 2009