National security: Public interest intervention notice in digital radio merger

UK Business Secretary Greg Clark has issued a public interest intervention notice relating to China-headquartered Hytera’s proposed acquisition of digital radio manufacturer Sepura.  This is the first public interest intervention on national security grounds in over a decade and the sixth time the government has issued an intervention notice on national security grounds to the CMA or its predecessors.

Under section 58(1) of the Enterprise Act 2002, "the interests of national security" is a specified ground for the Secretary of State to intervene in a merger.  Once an intervention notice has been issued, the CMA must report to the Secretary of State. The CMA has 15 working days, until midnight on Thursday 4 May 2017, to complete and submit its report to the Secretary of State.  The CMA reports on the competition issues and whether, if it were not a public interest case, it would refer it to Phase 2 or accept undertakings in lieu of a reference. The CMA may also give its views and recommendations on the public interest consideration. 

The Secretary of State may make a reference for a Phase 2 investigation by the CMA if he believes that the merger may be expected to operate against the public interest as a result of either both the public interest consideration and a substantial lessening of competition, or solely on the basis of the public interest consideration.  In exercising his discretion as to whether to make a reference or not, the Secretary of State is required to accept the CMA’s findings on competition issues (section 46(2), Enterprise Act) but not on any views expressed about the public interest consideration.

In the past, defence mergers including General Dynamics/ Alvis, Finmeccanica/ AgustaWestland, Finmeccanica/ BAE Systems, Lockheed Martin/ Insys and General Electric/ Smiths Aerospace were the subject of interventions on national security grounds. Those transactions were ultimately cleared by the Office of Fair Trading after the parties offered remedies.

Proposed acquisition of Sepura plc by Hytera Communications Corporation Ltd: public interest intervention, BEIS intervention 10 April 2017