UK defence sector: invitation to comment on proposed variation of undertakings

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Summary: The Competition and Markets Authority has invited comments on a request made by BAE Systems plc asking the CMA to review and release it from legally binding undertakings given to the Secretary of State to remedy competition and other public interest concerns regarding BAE’s merger with Marconi Electronic Systems in 2000.

The Competition and Markets Authority (“CMA”) has invited comments on a request made by BAE Systems plc (“BAE”) to the CMA. BAE has asked the CMA to review and release it from legally binding undertakings given to the Secretary of State to remedy competition and other public interest concerns regarding BAE’s merger with Marconi Electronic Systems in 2000.

In 2007, the Department of Trade and Industry released BAE from most of the undertakings given in 2000, because there had been a change of circumstances in the defence sector since then.

However, in exchange for the release of the undertakings given in 2000, BAE agreed to different undertakings (the “2007 Undertakings”). The 2007 Undertakings essentially require BAE not to refuse (without objective justification) to make its resources available to another actual or potential prime contractor which that contractor requires to bid for or perform contracts for the Ministry of Defence (“MoD”), unless all BAE’s available capacity has been booked by another contractor (who may, with the CMA’s consent, be a BAE group company). Where BAE makes its resources available, it must do so on fair, reasonable and non-discriminatory terms.

BAE has told the CMA that changes in the MoD’s procurement strategy have opened up the UK defence sector to suppliers from across Europe and worldwide to the extent that the 2007 Undertakings are no longer required. It also says that there have been changes to MoD equipment requirements and its own business.

The CMA has asked for comments on whether there has been a change in circumstances since the acceptance of the original undertakings on 28 March 2000 which means that the 2007 Undertakings are no longer required. Whether the CMA decides to review the 2007 Undertakings will depend, in part, on responses to its invitation for comments.

If you wish to submit comments to the CMA, responses should be provided to the CMA by either post or email at the following addresses:

Bob MacDowall

Manager, Market and Mergers Remedies Monitoring

Competition and Markets Authority

Victoria House

Southampton Row

London WC1B 4AD

bob.macdowall@cma.gsi.gov.uk

Read a copy of the CMA’s invitation for comment. Please contact us if you have any questions or comments, or if we can be of any assistance in relation to this or any other matter.

 

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