British Salt/New Cheshire Salt Works (UK Competition Commission)
Advisory Services
The Situation
In 2005, New Cheshire Salt Works agreed to merge with British Salt. In May 2005, the UK Office of Fair Trading used its power under the Enterprise Act 2002 to refer the merger to the Competition Commission (CC), which was charged with assessing whether the merger had led, or was likely to lead to, a Substantial Lessening of Competition (SLC). The CC process typically lasts around six months, in which the CC reaches a Provisional Finding after three months, followed by a final ruling at the end of the period.
The sale agreement implied that New Cheshire was sold to British Salt before the referral to the CC. However, the financial payments to the shareholders of New Cheshire were substantially dependent on the CC finding that the merger would not lead to an SLC and/or would not require a substantial divestiture of the New Cheshire business.
NERA's Role
NERA was instructed by law firm Addleshaw Goddard to advise the Former Shareholders of New Cheshire Salt Works on economic aspects of the CC investigation of the British Salt-New Cheshire merger. NERA provided economic analysis of a wide range of complex economic issues that arose in the course of the inquiry, including questions as to the relevant counterfactual (i.e., what would likely have occurred absent the merger). After the provisional finding by the CC that the merger constituted an SLC, NERA provided detailed commentary of the CC's analysis and on the impact of ongoing market developments including rising energy prices. NERA also provided extensive economic analysis of potential remedies to the alleged SLC that fell short of substantial divestiture of the New Cheshire business. In addition to the written submissions, NERA provided extensive testimony during the CC hearings.
The Result
In its final decision, the CC reversed its Provisional Finding that the merger would lead to an SLC and cleared the merger unconditionally. This was the first occasion on which the CC had reversed an adverse Provisional Finding fully to clear a merger.
On 27 June 2006, Addleshaw Goddard was awarded the first prize for Competition and Regulatory Team of the Year, sponsored by Practical Law Company, at the annual awards ceremony of The Lawyer in London. The Lawyer reported that Addleshaw Goddard's and NERA's work on the British Salt/New Cheshire Salt case set a major precedent, as it was the first time the UK Competition Commission had ever reversed a provisional decision against a merger and instead allowed the merger to proceed unconditionally.
