Centres of Competition

The two big M&A deals announced in the past week (Hammerson/Intu; Unibail Rodamco/Westfield) have got the market talking. However, the former likely remains subject to enquiry by the Competition & Markets Authority (CMA). What might this look like? As markets such as real estate consolidate, so competition decreases and the opportunity to sustain high profits increases. The CMA is tasked with considering cases where there is a substantial lessening of competition due to the merger of large enterprises. The geographic test is relatively broad (typically the effect must be substantial at no less than at city level); hence most real estate deals fall outside. However, the exception is shopping centres, where just a few large assets can be regionally dominant. In making their assessment, the CMA will look at substitutability (do the merged assets genuinely act in competition with each other), and in the past, they have considered the impact on both tenants and shoppers. Remedies might include the forced sale of some assets where common ownership is deemed anti-competitive.