Société Coopérative De Production Seafrance S.A. v Competition and Markets Authority & Anor

For merger-control purposes, acquiring a business requires acquiring activities, or part of activities, rather than merely bare assets. A business need not be trading on completion, and a hiatus does not automatically prevent a relevant merger situation. The decision-maker must nevertheless distinguish acquisition of an existing business from reconstruction of a similar business using former assets. Where the target was finally closed and its employees dismissed, later re-employment of former staff, even with vessels, goodwill and incentives, did not rationally establish a transfer of the former activities. On judicial review, the court must not reweigh facts, but may intervene where errors are central to an irrational conclusion.

The SCOP challenged the CMA’s jurisdiction under section 120 of the Enterprise Act 2002 after Groupe Eurotunnel acquired three former SeaFrance vessels and other assets and resumed Dover-Calais ferry services with the SCOP. SeaFrance had entered liquidation, ceased trading, and made most employees redundant. In [2013] CAT 30, CAT 1 remitted the enterprise-versus-bare-assets issue for reconsideration. The CMA concluded that an enterprise had been acquired. CAT 2 dismissed the challenge by order dated 9 January 2015, in the decision under appeal, [2015] CAT 1. The central issue was whether SeaFrance’s activities had come under common control, or whether assets had been acquired and a similar business created.

1. Disposition. The majority, comprising Sir Colin Rimer and Lord Justice Tomlinson, allowed the appeal. Lady Justice Arden dissented and would have dismissed it.
2. Statutory test. The relevant question under sections 23, 26 and 129 of the Enterprise Act 2002 was whether the activities, or part of the activities, of SeaFrance’s business had been brought under common ownership or control. Acquiring bare assets and reconstructing a similar business was insufficient. The inquiry required identification of what was acquired beyond bare assets, consideration of whether the acquirer was placed in a different position from one acquiring the assets on the market, and an assessment of fact and degree. The majority treated CAT 1’s approach in [2013] CAT 30 as binding because it had not been appealed and the CMA was required to comply with the remittal under section 120(5)(b).
3. Hiatus and continuity. A business need not be trading at the date of acquisition. A period of inactivity does not automatically prevent an enterprise from existing. The present case was materially different: SeaFrance had been ordered finally to cease trading, its workforce had been dismissed, and its activities had ended. The acquisition therefore had to be distinguished from the continuation of a seasonal or temporarily inactive business.
4. Workforce. In the absence of a TUPE transfer or equivalent statutory mechanism, a workforce could transfer only through an informal migration supported by a real link between the former and acquired activities. The PSE3 indemnity created an incentive for former employees to seek re-employment, but did not preserve their connection with SeaFrance or transfer them from SeaFrance to the SCOP. The majority considered the CMA’s finding of an effective transfer or migration irrational. The acquisition of other intangible assets did not independently cure that defect.
5. Judicial review and errors. The question was one of fact and degree for the CMA, and the court could not substitute its own assessment merely because it would have weighed the evidence differently. However, the CMA’s descriptions of continuity, safeguarded employment and the liquidator’s sale process were central analytical errors. They were key building blocks in an irrational conclusion. A purposive construction of the legislation did not justify a wider meaning than its fair statutory language.
6. Dissent. Arden LJ considered that the CMA had rationally evaluated the hiatus, hot lay-up, indemnity, SCOP formation and substantial recruitment of former employees. She regarded the identified errors as peripheral because the detailed factual findings would inevitably have led to the same result.

• Court of Appeal (Civil Division) allowed the appeal by majority: [2015] EWCA Civ 487.
• Competition Appeal Tribunal dismissed the SCOP’s challenge to the CMA’s remittal decision by order dated 9 January 2015: [2015] CAT 1.
• Competition Appeal Tribunal previously remitted the jurisdictional issue to the competition authority for reconsideration: [2013] CAT 30.