Image: YNAP

One of the biggest deals of 2022 has gotten the regulatory greenlight. In a statement on Wednesday, the United Kingdom’s Competition and Markets Authority revealed that it will not open an in-depth investigation into the Richemont’s sale of a 47.5 percent “non-controlling” stake in Yoox Net-a-Porter (“YNAP”) to Farfetch. In furtherance of the much-awaited transaction, which was announced in August, Richemont get a 10 to 11 percent stake in London-headquartered Farfetch and a write-down of 2.7 billion euros ($2.7 billion at the time), and both Richemont and YNAP will “leverage Farfetch’s technology platform to advance their Luxury New Retail program.” In lieu of a full-scale probe, the deal is expected to close later this year, according to MarketWatch

In a statement on March 29, the Competition and Markets Authority (“CMA”) said that it “has decided, on the information currently available to it, not to refer the anticipated acquisition by Farfetch Limited of interest in, and governance rights over, YOOX Net-a-Porter Group S.p.A from Compagnie Financière Richemont S.A., in consideration for the acquisition by Compagnie Financière Richemont S.A. of interest in Farfetch Limited to an in-depth Phase 2 investigation under the provisions of the Enterprise Act 2002.” The regulator noted that the full text of its decision will be made available “as soon as is reasonably practicable.” 

The news follows from the CMA Board confirming on January 31 that it had begun Phase 1 of its review of the merger, complete with an invitation for competition-centric comment on the deal from any interested parties. In the initial review phase, the CMA considers whether the proposed merger raises prima facie competition concerns, namely, “whether the merger results in a realistic prospect of a substantial lessening of competition.” If so, it then has a duty to launch an in-depth assessment (Phase 2). 

Not YNAP’s only recent dealing with regulators: Italy’s antitrust agency fined the online fashion retailer 5.25 million euros ($5.69 million) early this year for allegedly implementing a “misleading pricing and its returns policy” between 2019 and 2022. “The retailer advertised reductions on products on which the final sale price was ‘substantially the same’ as the pre-discount price and blocked orders from customers who had previously returned more than a certain amount of purchases,” the regulator said in a statement, reported by Reuters in January. YNAP denied the allegations, saying that it has “always followed the highest standards of commercial conduct,” and would appeal.

THE BIGGER PICTURE: The CMA’s go-ahead for the YNAP-Farfetch deal comes amid a proposed overhaul of UK competition and consumer law policy, with the government stating in April 2022 that it would move forward with some amendments aimed at updating and strengthening the CMA’s competition enforcement powers. “Some of the most significant changes [will] apply to the UK’s merger control regime,” Pinsent Masons stated in a note at the time, with the proposal slated to impact the merger control thresholds (i.e., the thresholds at which merging parties must report a transaction to the government) in three main ways … 

– The “turnover test” will increase from £70 million to £100 million, meaning that deals involving target companies with annual UK turnover that is less than £100m will generally fall outside the CMA’s jurisdiction, unless the “share of supply” threshold is met. (The increased turnover threshold is “unlikely to have much impact,” according to a May 2022 Shearman & Sterling note, “given the flexibility already afforded to the CMA through the share of supply test.”)

– A safe harbor will be created in the event that each party’s turnover is less than £10 million in the UK, even if the share of supply test is met; and

– A new threshold will be created, where the acquirer has an existing share of supply of goods or services of 33 percent in the UK, or a substantial part of the UK, and has UK turnover of at least £350 million. (This new threshold – which endeavors to enable the CMA’s review of so-called “killer acquisitions” and other mergers that do not involve direct competitors – is expected to “significantly expand the CMA’s jurisdiction,” Cooley stated in an alert at the time, and will require “significant market players with UK turnover to consider whether the new thresholds apply to their transactions, even where the target has a very small presence in the UK or where it has no competitive overlaps with the acquirer.”)

In addition to these reforms, the UK governmenthas also promised that a new Digital Markets, Competition and Consumer Bill will be unveiled, which is expected tohavea significant impact on how competition law is enforced in the digital space.