End of the line for Eurotunnel ferry service as CAT scuppers appeal

Eurotunnel began its cross-Channel ferry service in August 2012 using assets acquired from Sea France after its liquidation in 2011.  The transaction was blocked by the Competition Commission in 2013 because it gave Eurotunnel too strong a presence in the cross-channel transportation market.  In its 9 January 2015 judgment the Competition Appeal Tribunal dismissed Eurotunnel’s appeal against the decision by the CMA to prohibit the deal for a second time. The judgment is significant when viewed against a background of trades in distressed assets in Europe and internationally.  It merits a careful reading for parties seeking to realise value from company liquidations.   

The CAT has confirmed that a bare acquisition of assets can be subject to UK merger control and even when such assets are purchased from a liquidated company.  There is no necessity for the transfer of a customer base in order for a transaction to be considered as an “enterprise” under UK merger control. 

The outcome is in marked contrast to a decision of the French Competition Council which cleared the transaction subject to commitments in 2012. 

While the CAT’s judgment has been hailed as a victory for the CMA it is not an unequivocal support for an “expansive” approach to UK merger control jurisdiction.  The CAT saw no reason to overturn the decision of the CMA to take jurisdiction over the case and block the merger outright.  However, it made a point of saying that the CMA’s belief that the term “enterprise” should be given an expansive meaning was “misplaced”.  The CMA will want to be cautious before asserting jurisdiction over asset purchases in future cases.  This does not mean that merging parties and insolvency practitioners should assume that an acquisition of distressed assets will escape merger control scrutiny.  It does require them to consider carefully when the acquisition of assets that are subject to an insolvency procedure properly represent an enterprise for UK merger control purposes.  In most instances, there will still be value and goodwill attached to the assets as a trading enterprise and which would support the transaction being classified as a merger under the UK rules.  However, the CAT has made it clear that this will not be the conclusion in every case.  

Groupe Eurotunnel S.A. and SCOP v Competition and Markets Authority [2015] CAT 1, judgment of 9 January 2015