Q1 2026 Update – UK Merger Control and National Security/Investment Screening

The CMA’s Continued Reform of the UK Merger Control Regime

During Q4 2025, anchored by its strategic objective to drive economic growth, the UK’s Competition and Markets Authority (CMA) showed little sign of slowing down in its efforts to reform the UK merger control regime. Over the course of just a few months, the CMA published its updated merger remedies guidance, announced plans to revise its approach to efficiencies in merger reviews, indicated a potential softening of the ‘failing firm’ defence and provided another practical example of its ‘wait and see’ approach to reviewing global deals. In November 2025, the CMA also published its three-year strategy for 2026 to 2029, which clearly articulates the CMA’s strategic priorities of driving economic growth and increasing household prosperity. These strategic priorities will undoubtedly underpin the CMA’s approach to merger control policy, reform and enforcement in the coming months and years. Q4 has also seen some major NSIA developments, including two Final Orders and the landmark Court of Appeal compensation judgment.

At the same time, the UK government has pledged to consult on potential reforms to the panel decision-making system for CMA Phase II review processes, as well as proposals aimed at providing greater certainty regarding whether transactions will be subject to CMA review in the first place.

The CMA’s Revised Approach to Remedies and Merger Efficiencies

Recent transactions have demonstrated the CMA’s increasing willingness to adopt a more pragmatic approach to remedies (at least when compared with its historic stance), and the CMA’s three-year strategy is supportive of this shift in approach, noting that “every deal capable of being cleared unconditionally or with effective remedies should be.” ¹ The CMA’s revised guidance on remedies (the Remedies Guidance)—which took effect on 19 December 2025—embodies this approach and brings welcome changes to the remedies framework.² Key changes in the Remedies Guidance include:

• Effectiveness and Scope of Behavioural Remedies: The Remedies Guidance, while maintaining a preference for structural remedies, acknowledges that behavioural remedies that enable competition (e.g. requirements for the post-transaction entity to grant access to key inputs for competitors) can, in certain cases, be a viable alternative to structural remedies where they “work with the grain of competition” and address the cause of the identified substantial lessening of competition. Furthermore, the Remedies Guidance appears to envision greater scope for behavioural remedies being offered during Phase I investigations (provided that, inter alia, remedy discussions are commenced at an early stage in the review process). However, the changes are not a carte blanche for behavioural remedies: the CMA recently rejected Phase I behavioural remedies in the Getty Images/Shutterstock deal for various reasons, including that they did not address the identified substantive concerns at their source.
• Early Engagement: Throughout the Remedies Guidance, the CMA emphasises the need for, and potential benefits of, early engagement on remedies, particularly for remedy proposals that are more complex in nature. Indeed, the CMA’s recent decision to refer the Getty Images/Shutterstock deal to Phase II specifically indicates that “the late stage at which the [behavioural remedies package] … was first raised” limited the CMA’s ability to assess the proposed remedies in detail. Taken together with other changes included in the CMA’s updated guidance on jurisdiction and procedure that also encourage early engagement on remedies (including during pre-notification and Phase I), we expect to see greater consideration given to possible remedy packages earlier on in the process and a growing number of instances where parties decide to engage with the CMA on remedies on a ‘without prejudice basis’ so as to ensure that the CMA has sufficient time and information to fully assess the potential remedy proposal.
• Efficiencies and Relevant Customer Benefits: The Remedies Guidance clarifies that certain behavioural remedies can be used to secure rivalry enhancing efficiencies (such as the infrastructure investment commitments accepted by the CMA in Vodafone/Three). The additional guidance included in the Remedies Guidance on how and when relevant customer benefits arising out of a deal can influence the remedy assessment and selection process is also to be welcomed (although it is clear that a high evidentiary standard remains). As such, for parties that are seeking to rely on a pro-competitive narrative when engaging with the CMA, it is critical to offer up detailed and substantiated argumentation in support of the defined efficiencies and benefits at an early stage in the review process.

The CMA has also committed to a separate review of its substantive assessment of merger efficiencies, which is expected to launch early this year.

Government-Led Reforms to Phase II Decision-Making and Merger Control Certainty

In parallel with the CMA-led reforms outlined above, the UK government has announced its own proposed overhauls to the UK merger review process in order to “re-energise the regulatory system”.³ 

The UK government’s October 2025 update on the Regulation Action Plan (the Action Plan) includes proposed reforms to the CMA’s independent panel model for decision-making at Phase II.⁴ 

The reforms would effectively bring Phase II decision-making in-house, and replace the panel with a sub-committee comprised of CMA Board non-executive directors, executives and experts (replicating the Digital Markets Board Committee model which exists in the context of the UK’s digital markets competition regime). While the proposed changes arguably mean that Phase II reviews will not benefit from the ‘fresh pair of eyes’ that independent experts offer, having decisionmakers beholden to the CMA’s 4Ps⁵ could ultimately be beneficial for merging parties undergoing Phase II reviews (with the CMA then being directly accountable for Phase II approvals and vetoes, for example). The proposed reforms also raise the question of whether Phase II decisions could become subject to a ‘full merits’ standard of review to ensure there is at least the opportunity for a substantive external review of the decision.⁶

Alongside the proposed changes to the panel model, in the Action Plan the UK government also reaffirmed its commitment to consult on proposals aimed at introducing greater certainty with respect to whether transactions will be subject to CMA merger control jurisdiction in the first place, including potential legislative reforms to the “share of supply” and “material influence” tests. As noted in our last Quarterly Update, the CMA has previously stretched the broad jurisdictional discretion afforded to it by the “share of supply” test to review transactions with very limited UK nexus. The slightly amorphous nature of the “material influence” test has also led to criticisms being levelled at the CMA regarding overreaching and can give rise to uncertainty, particularly for minority investors. Whilst the CMA’s updated guidance on jurisdiction and procedure does provide a certain degree of additional guidance on these jurisdictional concepts, legislative tweaks aimed at further reducing jurisdictional uncertainty would be welcomed and many would argue are long overdue.

Softening of the ‘Failing Firm’ Defence?

Historically the CMA has adopted a very conservative approach when it comes to accepting the ‘failing firm’ defence, only rarely allowing supposedly anti-competitive deals to proceed on the grounds that the target would otherwise have exited the market (through failure or otherwise) and there would not have been an alternative, less anti-competitive purchaser than the acquirer in question. However, the CMA’s unconditional Phase I approval of Sportradar/IMG Arena shows glimpses of a potential softening of the CMA’s stance towards the defence. In its Phase I decision, the CMA rejected the parties’ arguments that IMG Arena would have exited the market on the basis of financial failure (owing to the presence of a parental guarantee). However, the CMA was more sympathetic towards—and ultimately accepted—the parties’ arguments that IMG Arena would have been sold or shut down for strategic reasons, including that it did not fit within the seller’s future strategy. It is also noteworthy that the parties were able to evidence that following a “robust and broadly industry-standard sales process” there was not a realistic prospect that the target would have been sold to any other less anti-competitive bidder. While the evidentiary standard for successfully making out the ‘failing firm’ defence clearly remains high, it was encouraging to see the CMA give due consideration to the commercial realities of the parties when determining the appropriate counterfactual.

What ‘Wait and See’ Means in Global Deals – Getty Images/Shutterstock and Warner Bros. Discovery

While the CMA has in a number of recent cases (e.g. Kellanova/Mars and Universal Music Group/Downtown Music) demonstrated a willingness to take a backseat when it comes to reviewing global transactions that are under review by competition authorities in the United States and the European Union (EU) (effectively adopting a ‘wait and see’ approach here), the outcome of its Phase I review process in Getty Images/Shutterstock indicates that there are limits to its willingness to adopt such an approach when faced with UK centric complainants and/or issues.

In the context of its Phase I review in Getty Images/Shutterstock (a global deal that the US Department of Justice is also currently investigating), the CMA identified concerns with respect to the supply of editorial content in the UK and reduced competition in the supply of stock content globally (including in the UK). Importantly, across both markets, the CMA received widespread complaints from UK customers and competitors, countering the merging parties’ narrative that generative artificial intelligence (AI) tools are reshaping demand for licensed imagery, with almost half of the customers that responded expressing concerns regarding the impact of the deal on the global market for the supply of stock content. This shows that, even against the backdrop of a less interventionist CMA, parties still need to think carefully about whether their deal may give rise to complaints from UK customers and/or competitors. If so, then it may not be wise to assume that the CMA will limit itself to a watching brief, even where global markets are involved.

This year one of the key deals on the CMA’s radar will be the potential acquisition of Warner Bros. Discovery by Netflix. This is a global deal that will face intensive scrutiny from many competition authorities across the globe, including the US agencies and the European Commission. However, with film and TV identified as a frontier industry under the UK government’s Industrial Strategy, and with expected negative market feedback (inc. from Paramount which has in parallel submitted a competing bid that has been rejected by Warner Bros. Discovery’s Board), it is the type of ‘global deal’ the CMA may still be earmarking for a formal review. Should the CMA investigate this transaction, which also has a potential media plurality/public interest dynamic, we would expect it to closely coordinate its analysis, including on relevant market definition relating to subscription video on demand (SVOD), with other competition authorities in order to avoid a repeat of Microsoft/Activision, where the CMA was an international outlier.

UK National Security and Investment Act Developments

Final Orders and the Government’s Pragmatic Approach to Remedies

It is noteworthy that, notwithstanding intensified geopolitical risk, neither of the two Final Orders issued during Q4 2025 (see below for further details) involved a veto. Rather, both demonstrated the UK government’s increasingly pragmatic approach to the substantive assessment and remedies under the National Security and Investment Act 2021 (NSIA). Indeed, there is a growing understanding on the part of the UK government that if they want to ensure that the UK remains an attractive destination for both greenfield and brownfield foreign investment in sensitive sectors,⁷ it is critical that the UK government maintains a proportionate, commercially minded approach to its assessment and, ultimately, any Final Orders imposed under the NSIA. The two Final Orders issued during Q4 2025 brought the total number of Final Orders issued in 2025 to 12, with only one of these (the Final Order issued in the context of the proposed joint venture between UK-based Versarien Plc and a Chinese company, Anhui Boundary Innovative Materials Technology) involving a veto.

The two Final Orders issued during Q4 2025 related to:

• Acquisition of Oxford Instruments’ NanoScience business by Quantum Design: This transaction involved the sale of UK-based Oxford Instruments’ quantum-focused business—which develops advanced cooling systems that are required to keep quantum computers at correct temperatures—to US-based Quantum Design. Given that quantum technology is a sensitive sector under the NSIA and has been identified as a frontier technology relevant to the UK government’s Industrial Strategy, it is not surprising that the Final Order imposed conditions to ensure continuity of supply for, and maintenance of the necessary capabilities to meet the demands of, UK government projects and programmes (even though the acquirer was from a ‘friendly’ nation).⁸
• Acquisition of Interests in Investigo by Career International: This transaction involved the acquisition of an additional 37.5% shareholding in Investigo Limited—a UK-based recruitment consultancy with global presence—by Career International, a Chinese-based recruitment consultancy. The transaction resulted in Career International’s total shareholding in Investigo exceeding 75%. The Final Order addressed the national security risk related to the collection of, and access to, personally identifiable information by imposing a “comprehensive package of security and handling requirements” designed to protect data and information. While recruitment companies may not be perceived as immediately relevant to national security in the traditional sense, the perceived risk associated with large volumes of personal data being accessible by a Chinese acquirer was deemed to necessitate the imposition of relatively light conditions under the Final Order.⁹

The picture that is emerging from the Final Orders issued since the NSIA came into force in January 2022 is that the UK government is seeking to deploy the NSIA as a tactical tool to support broader national security and industrial strategy ambitions. Where the target is active in sectors that are strategically significant, such as quantum technologies, the UK government will not shy away from imposing conditions focused on keeping the target (and the relevant expertise) on UK soil and/or maintaining continuity of supply to key government projects, for example.¹⁰

The UK government has also generally demonstrated a pragmatic and proportionate approach to weighing up various factors, including acquirer and target risk, when determining the appropriate course of action to pursue. As the Investigo case shows, a potentially lower target risk is not enough to avoid a call-in where perceived acquirer risk may be heightened. Likewise, the Oxford Instruments deal demonstrates that even investors from ‘friendly’ nations (and, in other instances, UK acquirers) can have conditions imposed where target risk is high. As a result, it remains important that due consideration is given to the relevant NSIA risk factors when structuring deals, including an assessment of whether a voluntary notification may be prudent.

Court of Appeal on Compensation Rights Under the National Security and Investment Act 2021

On 28 November 2025, the Court of Appeal handed down its first appellate judgment related to the NSIA,¹¹ which established that investors are not automatically entitled to full compensation at “fair market value” where there is a forced divestment required by an NSIA Final Order and that “the important public interest purposes which lie behind the scheme of the NSIA” must be considered.

Following the High Court’s November 2024 judicial review judgment,¹² LetterOne successfully obtained leave to appeal to the Court of Appeal on the grounds that the forced sale of Upp at material undervalue, pursuant to an NSIA Final Order issued in December 2022, interfered with its property rights under Article 1 of the First Protocol of the European Convention on Human Rights (A1P1) and thus required compensation beyond the deficient amount obtained from the sale. The Court of Appeal held that, whilst deprivation of property under A1P1 does entail a compensation right, and while there was “some force” in LetterOne’s arguments, there must be a “reasonable relationship of proportionality” between the value of the property and the compensation received. Furthermore, assessing fair market value is “likely to be a complicated and lengthy process” which could impede the government’s ability to achieve the “important public interest purposes which lie behind the scheme of the NSIA.” Thus, the fact that the appellants may not have received the “fair market value” from the sale did not mean additional compensation from the UK government was required.

This latest appeal judgment emphasises the very wide margin of discretion afforded to the UK government in the national security context, including in relation to compensation, which is consistent with the identifiable trend of judicial deference that emerges from the NSIA cases to date. The key takeaways being that while judicial reviews of NSIA decisions are possible, and are an important means of constraining government decision-making under the NSIA, and while LetterOne succeeded in obtaining disclosure and judicial support for some of its arguments, it would take a very courageous judge to call out the executive in an NSIA case. As such, it is imperative that dealmakers conduct a holistic UK NSIA assessment at the outset of every transaction that potentially falls within the scope of the UK NSIA regime, including in the higher risk cases, engaging in geopolitical risk analysis, government stakeholder mapping and early outreach, and giving due consideration to upfront refinements to transaction structure as well as possible remedies that could be offered if faced with government resistance.

1 See the CMA Strategy 2026 to 2029 here.

2 See the Remedies Guidance here.

3 See the update on the Regulation Action Plan here.

4 Currently, Phase II decisions are made by an inquiry group drawn from a panel of independent experts.

5 Through pace, predictability, proportionality and process, the CMA aims to promote business trust and confidence, encourage investment and innovation and deliver positive outcomes for UK businesses and consumers.

6 Phase II decisions can currently only be challenged on judicial review grounds (i.e. illegality, irrationality/unreasonableness, or procedural impropriety). A wider ‘full merits’ review would allow Phase II decisions to be reconsidered on their substance.

7 For example, the UK government recently reported that the UK ranked second globally (behind only the US) for greenfield foreign direct investment (FDI) capital expenditure in the mandatory NSIA sectors it had analysed, with the UK receiving £297.1 billion in total investment over the last ten years. See the UK government’s report on greenfield FDI here.

8 See the relevant Final Order here.

9 See the relevant Final Order here.

10 See also, inter alia, the acquisition of Oxford Ionics Limited by IonQ which also concerned the quantum technologies sector (see the Final Order here).

11 See R (L1T FM Holdings UK Limited) v Chancellor of the Duchy of Lancaster [2025] EWCA Civ 1528 (judgment available here).

12 See R (on the application of L1T FM Holdings UK Limited) v Chancellor of the Duchy of Lancaster in the Cabinet Office [2024] EWHC 2963 (judgment available here).