UK Competition Appeal Tribunal reverses CMA decision on ICE-Trayport deal

Maria Nikolova

The Competition Appeal Tribunal said “the reasons for the CMA’s decision in this respect were too cursory and too conclusory to meet the standards of intelligibility and adequacy”.

Intercontinental Exchange Inc (NYSE:ICE), an international network of exchanges and clearing houses, formally completed its acquisition of Trayport from BGC Partners and GFI for approximately $650 million in December 2015 and subsequently got involved in a prolonged process of seeking regulatory approvals for the deal.

The biggest hit on the merger came in the fall of 2016, when the UK Competition and Markets Authority (CMA) ordered ICE to sell Trayport referring to findings that ICE could use its ownership of Trayport’s platform to curb competition between itself and its rivals which could lead to increased fees for execution and clearing, and worse terms offered to traders. The CMA also found that the merger would likely lead to a loss of competition between ICE and its rivals to launch new products, find innovative trading solutions and enter markets with new offerings.

The CMA provisionally ruled in August 2016 that the merger could result in a substantial lessening of competition (SLC), with third party submissions supported the CMA’s provisional findings and the majority agreeing that the sale of the Trayport business was the only effective remedy in response.

ICE then filed an appeal against the CMA report dated October 17, 2016 in which it found that ICE’s purchase of the entire issued share capital of Trayport Inc and GFI TP Ltd and their subsidiaries was poised to lead to a substantial lessening of competition and the Direction issued by the CMA on November 10, 2016 directing ICE and Trayport to cease implementation of an agreement between the Merging Parties dated May 11, 2016.

On Monday, March 6, 2017, the UK Competition Appeal Tribunal (CAT) ruled that the CMA Report “provided no articulation as to why the requirement to unwind the New Agreement would help ensure the effectiveness of the divestiture remedy”. It also stated that “the reasons for the CMA’s decision in this respect were too cursory and too conclusory to meet the standards of intelligibility and adequacy.”

As a result, the Tribunal quashed the Report to the degree that it required the unwinding of the New Agreement and remitted it to the CMA to reconsider whether or not to require the New Agreement to be unwound.

But the Tribunal did not quash the Direction. The CAT invites the CMA and ICE to agree a form of Order to address the position pending the remittal.

In a comment, following the judgment, ICE greeted the ruling by the CAT reversing the CMA’s decision that the agreement between ICE and Trayport should be terminated. However, ICE noted its disappointment with the CAT’s ruling on the other aspects of the appeal. The company is planning to review the CAT’s judgment and consider its options.

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