The UK Supreme Court has unanimously upheld the UK Competition and Markets Authority's (CMA) interpretation of “undertaking” for the purposes of the Enterprise Act 2002 (EA02), emphasising that an undertaking does not need to be a going concern. The judgment is the latest (and final) in a string of cases revolving around the acquisition of the assets of SeaFrance SA (SeaFrance) by Groupe Eurotunnel SA (Eurotunnel) and Société Coopérative De Production SeaFrance SA (SCOP).
The cases revolve around whether the acquisition amounts to a “relevant merger situation” for the purposes of the EA02 and therefore whether the CMA had jurisdiction to review the acquisition. Whether such a relevant merger situation exists in turn depends on whether the assets acquired by Eurotunnel and SCOP were an “enterprise” for the purposes of the EA02 or merely a collection of assets. As detailed in our May update, Eurotunnel and SCOP successfully overturned the CAT’s decision to uphold the CMA’s initial findings.
The Supreme Court allowed the appeal, thereby reinstating the CAT’s decision and upholding the CMA’s jurisdiction over the acquisition. The test for whether a collection of assets of an undertaking which is no longer a going concern is an “enterprise” for the purposes of EA02, is one of economic continuity. The first question to ask is whether the buyer in acquiring the assets in question is obtaining more than might have been acquired by going to the market to buy factors of production. The second question is whether this advantage is due to the fact that the assets were previously part of the target enterprise. In this case, the capacity for the liquidated enterprise to perform the same activities as part of the same business continues to subsist. The court stated that the period of time between cessation of trading and the merger would not be completely determinative, but might be relevant.
Importantly, the court held that the question of economic continuity cannot simply be narrowed to the legal effect of the French court's decision in January 2012 to terminate the employment contracts of the employees of SeaFrance. The CMA’s broader economic analysis was relevant to the question of economic continuity. The Court of Appeal had failed to take this into account.