CMA phase 1 clearance: Aviva’s acquisition of DLG poses no SLC risk
September 2025On 7 August 2025, the Competition and Markets Authority (CMA) published the full text of its Phase 1 clearance decision regarding the anticipated acquisition of Direct Line Insurance Group Plc (DLG) by Aviva. The CMA concluded that while the acquisition constituted a relevant merger situation under the Enterprise Act 2002[1], it did not give rise to a realistic prospect of a substantial lessening of competition (SLC). As such, the merger was cleared without being referred for a Phase-2 investigation under section 33(1) of the Enterprise Act 2002.
The CMA’s decision provides important guidance on the CMA’s interpretation of the insurance market, especially the role of multiple competing underwriters, Price Comparison Websites (PCWs), and when a market will be considered fragmented.
The decision also provides an effective reminder of the CMA assessment process, in particular:
- the role of the counterfactual in a CMA investigation; and
- how the CMA will assess the relevant market, both geographically and market share.
The parties
Aviva supplies insurance, savings and investment products and services in the UK and other countries. They act as underwriter and distributor of non-life insurance products.
DLG is a UK listed underwriter and distributor of non-life insurance products and provides general insurance products in the UK.
In its decision, the CMA looked at whether the merger could lead to an SLC as a result of horizontal unilateral effects in the market of personal car and home insurance in the UK.
The counterfactual: what would competition have looked at without the merger?
A key part of a merger review is the counterfactual analysis: the CMA looks at the merger’s impact relative to the situation that would prevail absent the merger. This gives an idea of the harm that will be caused to competition by the two firms merging.
In this case, the decision reaffirmed the CMA’s position that they will focus on alternative prevailing conditions of competition only where there is sufficient evidence to show that those changes would make a material difference to the competitive assessment. As a general rule, mergers will be assessed against the current competitive situation, rather than theoretical changes.
The role of PCWs
PCWs were a decisive factor in the CMA’s finding that there was no realistic prospect of a SLC.
PCWs provide aggregate quotations and different options for policies, terms and prices from a range of underwriters and intermediaries.
This provides for price transparency and ease of comparison, allowing customers to easily change between competitors. Price transparency and ease of comparison promotes competition and equality between brands. In order to increase consumer reach, competitors will need to remain competitive in terms of price, cover, and level of service.
The CMA found that PCWs enhance competition by enabling consumers to switch providers easily, thereby limiting the potential for any one firm to exercise market power—even post-merger.
Market definition
When making an SLC finding, the CMA will look at how the competition within any market or markets in the UK are affected. Assessing the market involves identifying the most significant competitive alternatives available to the merging parties’ customers.
Party submissions
The Parties submitted that the narrowest plausible markets are the underwriting of personal (i) motor insurance and (ii) home insurance. They submitted that competitive dynamics, participants, pricing methodologies, regulatory requirements and distribution models across general insurance products are broadly similar, and do not warrant segmentation by product.
CMA assessment
As a starting point, the CMA looked at the overlap between the services provided by the Parties, in this case the underwriting and distribution of personal car and home insurance. The CMA considered whether it was appropriate to separately assess underwriting and distribution services as different areas for consideration.
In its conclusion, the CMA did not deem it necessary to conclude whether underwriting and distribution were two separate markets. This is because: a) there was no plausible competition concerns on either basis, b) underwriters are generally also active in personal insurance distribution, and c) the CMA considered that competitive assessment in underwriting would have revealed issues in distribution.
Product market
The CMA considered that the relevant product markets were the supply of a) personal car insurance and b) personal home insurance.
Geographic market
The CMA has previously decided that the market for insurance and insurance sub-segments is national[2]. Therefore, the CMA assess the geographic market as the entirety of the UK.
CMA investigation
The assessment focused on whether the merger may result in an SLC due to horizontal unilateral effects in personal (i) car and (ii) home insurance in the UK. Horizontal unilateral effects may arise when one firm merges with a competitor. This may allow the merged entity to raise prices or degrade product quality without the need to coordinate with rivals.
Personal car insurance
The CMA found that the market for personal car insurance is relatively fragmented. There are many competitors in the industry and they will provide competition to constrain the merged entity. The CMA found that while the parties compete closely, they also compete with other underwriters, which will provide the necessary constraints on the merged entity.
Most third parties that submitted to the investigation considered that the supply of personal car insurance would remain competitive post merger. A small number of third parties did submit that the merger may reduce competition or give rise to brand stacking (the top spots on the price comparison websites may be stacked with the merged entity’s policy offerings). However, the CMA considered that the overall evidence did not indicate that competition would be materially weakened due to the merger.
Underwriting of personal home insurance
The CMA found that although the merged entity would be the largest underwriter, the market for personal home insurance would remain fragmented post-merger. The remaining competitors would continue to exert strong constraints on the merged entity, and the CMA considered that the evidence did not indicate that competitors would be materially weakened or consumers negatively impacted. The CMA found that alternative options to the merged entity would remain.
Conclusion
The CMA’s decision to clear Aviva’s acquisition of DLG underscores the robustness of competition in the UK personal insurance markets. The presence of numerous active competitors, combined with the competitive influence of PCWs, played a central role in the CMA’s conclusion that the merger would not materially reduce competition.
This case also provides helpful insight into the CMA’s approach to:
- Market definition in regulated, consumer-facing sectors;
- The weight given to real-world market dynamics over theoretical market changes; and
- The significance of consumer choice mechanisms, such as PCWs, in mitigating potential anticompetitive effects.
This decision sets an important precedent for how future transactions in the industry may be assessed. It is helpful because insurance tends to be an acquisitive sector. Recent years have seen major transactions such as Aviva’s £460m purchase of AIG Life UK in 2024 and Axa’s €12.4bn acquisition of XL Group, which created a new global leader in property and casualty insurance. In the intermediary sphere, consolidation has been equally pronounced: Marsh & McLennan’s $5.6bn takeover of Jardine Lloyd Thompson, and Gallagher’s continuing roll-up strategy in the UK and US, demonstrate the relentless pace of M&A. These developments illustrate that consolidation is not only ongoing but accelerating, meaning regulators worldwide will increasingly be called upon to scrutinise deals for competition concerns, market concentration, and consumer impact.
The decision is also an important latest word on how competition watchdogs view PCWs. They tend to view price comparison sites as a mixed bag: bringing both consumer benefits and concern about potential anti-competitive practices.
On the one hand, authorities such as the UK’s Competition and Markets Authority (CMA) and the European Commission have acknowledged that comparison sites can enhance transparency, promote competition, and help consumers find better deals by reducing search costs. On the other hand, investigations in sectors like insurance, energy, and financial services have highlighted risks where comparison sites impose “most favoured nation” (MFN) clauses (preventing suppliers from offering lower prices elsewhere), obscure ranking criteria, or mislead users about coverage and costs. For example, the CMA’s investigation into online hotel booking platforms found that wide MFN clauses restricted competition and were harmful to consumers, leading to commitments to limit their use.
Similarly, the FCA and CMA have scrutinised energy and insurance comparison tools for conflicts of interest where commissions or advertising influenced rankings. The consistent theme is that while authorities support the pro-competitive role of these platforms, they closely monitor conduct that distorts consumer choice or forecloses rival distribution channels.
CMA market investigations are incredibly complex processes with many considerations to be made. Those planning a significant merger in the insurance industry should be particularly mindful of market concentration, the rule of PCWs, and the rule of the counterfactual in CMA market analysis. If you are planning a merger or need advice in relation to merger notifications and CMA investigations, please contact Paul Henty or your usual Beale & Co contact.
[1] The turnover test was met as DLG’s annual turnover in 2024 exceeded £100m.
[2] Completed acquisition by QBE International Holdings (UK) plc of MBP Holdings Ltd; Completed acquisition by Ardonagh Group Limited of Bennetts Motorcycling Services Limited.
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