Société Coopérative de Production SeaFrance SA v The Competition and Markets Authority and another

A business need not be trading at the time of acquisition to remain an “enterprise” under the Enterprise Act 2002. It is sufficient that the capacity remains to carry on its activities as part of the same business.

Assets constitute an enterprise where they provide more than separately acquired factors of production, and that additional value is attributable to their previous use in combination. This requires an assessment of economic continuity, including the duration and effects of any trading hiatus.

Construction of the statutory jurisdiction is a question of law. Its application may require expert economic evaluation, which a reviewing court should overturn only if irrational.

SeaFrance ceased operating a Dover–Calais ferry service before entering liquidation. Groupe Eurotunnel SE later acquired substantially all its assets under an arrangement with a workers’ cooperative, SCOP. The service resumed using the same principal vessels and predominantly former SeaFrance employees.

The Competition and Markets Authority decided that an enterprise had been acquired and imposed competition remedies. The Competition Appeal Tribunal upheld that conclusion after an earlier remittal. By a majority, the Court of Appeal allowed SCOP’s appeal in [2015] EWCA Civ 487, holding that the Authority had irrationally characterised the re-employment of former workers as an effective transfer.

The central issue was whether the acquired combination amounted to an enterprise under the Enterprise Act 2002, or merely the assets of a defunct enterprise.

1. Appeal allowed unanimously. Lord Sumption delivered the judgment, with which Lord Neuberger, Lord Clarke, Lord Reed and Lord Hodge agreed. The Authority was entitled to conclude that GET and SCOP acquired an enterprise rather than bare assets. The Court of Appeal’s order was reversed.

2. Whether the statutory jurisdictional condition is capable of being satisfied is a question of law arising from construction of the Enterprise Act 2002. The Authority has no special power to determine the limits of its own jurisdiction. Once the legal test has been identified, however, its application may call for expert economic judgment.

3. An enterprise is not confined to a business trading as a going concern at the moment of acquisition. Business activities may remain characteristic of an enterprise during a hiatus if the capacity still exists to carry them on as part of the same business. Treating every suspension as decisive would impair the merger-control scheme and make its operation depend upon adventitious timing or legal form.

4. The distinction between an enterprise and bare assets turns on economic substance. The acquired assets must give the acquirer more than could have been obtained by separately purchasing factors of production in the market. That additional benefit must be attributable to the assets’ previous employment in combination in the target enterprise. The ultimate inquiry is one of economic continuity, assessed from all relevant circumstances; no single factor or universally governing test supplies the answer.

5. The Authority rationally found such continuity. The route-specific ships had been kept operationally coherent in hot lay-up, permitting a faster and less risky restart. SCOP supplied substantially the same trained personnel, while the employment plan financially linked re-employment to the acquired vessels and their former service. The formal termination of the employment contracts did not sever the employees’ economic connection with a business capable of acquisition.

6. Reviewing courts must exercise caution before overturning complex economic judgments of specialist competition bodies. The Court of Appeal had reduced a multifactor economic assessment to the legal effect of the redundancies and thereby adopted an unduly formal approach. The Authority’s finding that the “embers” of an enterprise remained was unimpeachable.

1. United Kingdom Supreme Court: Allowed the Competition and Markets Authority’s appeal unanimously and restored the conclusion that a relevant merger situation existed: [2015] UKSC 75.
2. Court of Appeal: By a majority, allowed SCOP’s appeal and held that the Authority’s conclusion was irrational; Arden LJ dissented: [2015] EWCA Civ 487.
3. Competition Appeal Tribunal: In Eurotunnel II, upheld the Authority’s decision following remittal: [2015] CAT 1.
4. Competition and Markets Authority: On remittal, reaffirmed that an enterprise had been acquired and that a relevant merger situation existed.
5. Competition Appeal Tribunal: In Eurotunnel I, remitted the matter for fuller examination of employee continuity and the maintenance of the vessels: [2013] CAT 30.