What are the recent trends in the approach of the relevant authority to enforcement, procedure and substantive assessment?
Merger Control (2nd Edition)
Following the introduction in 2014 of binding first-phase deadlines, new information-gathering powers and a revised filing form with substantial information requirements, the CMA has spent the past few years refining its procedures with a view to reducing the duration of its first-phase investigations and the (typically high) volume of its information requests, and imposing 'hold-separate' obligations that create fewer unnecessary burdens for merging parties. It has also introduced mechanisms that allow parties to seek some informal, non-binding comfort that the CMA will not 'call in' a merger for review.
The jurisdictional thresholds in force from 2013 until August 2017 substantially reduced the ICA’s merger control activity. Notably, in 2016, only 54 notifications were filed with the ICA, whereas, from January to August 2017, the notifications were just above 30.
The substantial approach vis-à-vis concentrations has been rather innovative in relation to sectors or companies in financial difficulties. In particular, merger filings in the banking sector were assessed taking into account the crisis (or post-crisis) situation and the financial viability of the companies involved (see, e.g., ICA’s decisions of April 12, 2017, Case C12087 – Unione di Banche Italiane/Nuova Cassa di Risparmio di Chieti-Nuova Banca delle Marche-Nuova Banca dell’Etruria e del Lazio; and of July 5, 2017, Case C12103 – Intesa Sanpaolo/Rami di azienda di Banca Popolare Vicenza-Veneto Banca). In such cases, unconditional clearance was granted in Phase I, even though, in certain local markets, the post-merger shares were well above the 30% threshold, which traditionally triggered a Phase II scrutiny.
Along this line, in an exceptional situation, a clearance decision was adopted just a few days after the submission of the notification (see the above Case C12103 – Intesa Sanpaolo/Rami di azienda di Banca Popolare Vicenza-Veneto Banca), with a view to preserving the economic viability of the targets’ activities and preventing negative effects on the Italian banking sector.
Conversely, in recent Phase II cases, the ICA confirmed its strong preference for structural remedies (see, e.g., ICA’s decisions of July 27, 2016, Case C12044 – A2A/Linea Group Holding; and of March 23, 2016, Case C12023 – Arnoldo Mondadori/RCS Libri), also imposing measures going beyond the scope of the undertakings voluntarily offered by the parties (see, e.g., ICA’s decision of April 13, 2016, Case C12017 – Reti Televisive Italiane/Gruppo Finelco).
During the last few years of the Obama Administration, the FTC and DOJ employed an aggressive approach to merger enforcement, challenging a number of mergers in court. Recently, for example, the FTC challenged several hospital mergers, prevailing on appeal, and the DOJ successfully challenged two large health plan mergers. Thus far, the first year of the Trump Administration has been marked with uncertainty about enforcement priorities with vacancies throughout much of the year for the top appointments at the DOJ and at the FTC. The officials who have been appointed to the top positions, including those on an interim basis, are practitioners with significant antitrust expertise at high levels at the FTC or DOJ under previous Republican administrations. This suggests that the antitrust agencies under the current administration will likely follow a similar approach to antitrust enforcement as practiced by recent Republican administrations.
The FCO has very recently refused to clear a merger between two food retailers. The merger was then cleared by the minister of economy. The decision of the FCO followed an intense investigation into the abuse of dominant market position in the food retail market.
The FCO also recently published its final report about the sector inquiry dealing with ready-mixed concrete and cement. While the sector inquiry mainly focused on horizontal and vertical coordination, it is likely that there will be significant consequences for the industry. The FCO has indicated that it will not shy back from unbundling joint ventures where undertakings won’t take sufficient steps to reduce concentration and overlaps.
The 9th amendment to the ARC has, amongst numerous other changes, introduced the concept of transaction-value into German competition law to catch mergers in new and evolving markets. According to the considerations of the government, it was specifically intended to include mergers of low turnover companies in digital markets into merger control. While not decisions based on merger control, some recent decisions dealing with internet-platforms have further proven that the FCO has a set a priority in controlling activities in digital markets.
The FCO and the courts will have to interpret the numerous additions and changes to the ARC introduced by the 9th amendment, among them the new transaction-value mechanism. A focus of developments in German competition law will, therefore, likely lie in the interpretation and application of the law. It is also very likely that the FCO will further intensify its recent efforts to further develop the application of competition law on digital markets.
The JFTC often attempts to conduct an economic analysis using its own economic experts. Accordingly, the JFTC tends to request the parties to submit more detailed information than before. To obtain the JFTC’s clearance safely and swiftly for a non-straightforward transaction (such as the cases in which the case team of the JFTC includes economic experts), it is advisable for the parties to employ their own economic experts.
The Austrian competition authorities and particularly the BWB are kept quite busy with merger control. In 2016, 420 concentrations were notified, of which 91.9%, more precisely 386, were already cleared in Phase I and with regard to 31 concentrations Phase I has not been completed in 2016. Only in 3 cases (0.7%), the BWB applied for Phase II proceedings. Further, 327 EU mergers were examined by the BWB, which means that, in 2016, the BWB has examined 747 concentrations in total.
In 2016, one case concerned a violation of the standstill obligation. The fine imposed amounted to EUR 750,000. In 2015, the BWB had five “gun jumping” cases.
As mentioned, particularly in complex cases it can be advisable to hold pre-notification talks with the official parties. In 2016, 28 such talks are reported.
With regard to recent enforcement trends, one decision of the Austrian Cartel Court of Appeals – as regards anti-trust public enforcement and merger control, the second and last instance in Austria – should be mentioned, namely the Novomatic case (case no. 16 Ok 11/16b). Although the case concerned an highly regulated industry, the first prohibition decision (by the Cartel Court) has been confirmed.
Cross-border collaboration between the Bureau and the U.S. DOJ/FTC is becoming more common and more extensive (Agrium/PCS, Dow/DuPont, Sherwin-Williams/Valspar, ChemChina/Syngenta, Superior/Canexus). Despite this, the Bureau continues to enforce its own Canadian legislation and may reach a different result than the relevant U.S. authority, particularly where the unique Canadian efficiencies defence is engaged (Superior/Canexus).
As the new mandatory merger control regime only recently entered into force, there are no specific trends that could be mentioned in this regard.
In a number of cases over the past year, the CPC has demonstrated a particular concern as regards the ability of undertakings controlling a joint venture to acquire business secrets held by the joint venture in a manner which could distort competition in the markets in which the controlling undertakings operate.
There has been a trend towards a more economic approach in merger cases, and recent merger decisions from the DCCA illustrate an increasing use of economic evidence, especially in cases concerning consumer-related markets.
Furthermore, there is an increasing tendency among merging parties to withdraw notifications in cases where it seems highly likely that the merger will otherwise be prohibit-ed. Thus, even though the DCCA has only prohibited one merger to date, this tendency may indicate that the DCCA’s approach to assessing mergers is becoming stricter.
The majority of mergers notified to the Commission are cleared in Phase I without commitments. However, in 2016 the Commission lodged in-depth investigations in eight cases, which is a relatively high number but still only 3% of the mergers that were notified to the Commission in that year. These eight in-depth investigations resulted in one prohibition (Hutchison 3G UK / Telefonica UK) and one abandonment of the transaction (Halliburton / Baker Hughes).
From a substantive point of view, it can be noted that the Commission increasingly focusses on the impact that proposed concentrations may have on investments and innovation. This was a key concern of the Commission in Novartis / GlaxoSmithKline oncology business, Halliburton / Baker Hughes and Dow / DuPont.
From a procedural standpoint, it is noteworthy that, since the entry into force of the Commission’s merger simplification package on 1 January 2014 and up to the end of June of 2017, the average number of cases reviewed under the simplified procedure increased substantially to 67%, compared to 59% over the period 2004-2013.
Finally, the Commission is increasingly active in enforcing the EUMR in cases where allegedly incorrect or misleading information was provided by the notifying parties. The Commission has several cases in the pipeline examining this issue (see question 8.2). Recently, the Commission also opened a formal investigation into an alleged breach of the “standstill obligation” by Canon when acquiring Toshiba Medical Systems.
In 2016, the FCA issued 230 merger decisions, among which 224 unconditional clearance decisions and 6 clearance decisions subject to the implementation of remedies (1 in Phase II, 5 in Phase I).
The main notable trend in the FCA's practice is the use of its wide powers of investigation and sanction for gun jumping practices and compliance with remedies undertaken. Altice and SFR have been severely fined in 2016 for gun jumping. In late 2017, the FCA opened an investigation to check whether Fnac Darty complies with the divestment remedies undertaken.
Approach has remained consistent. It is determined on a case-by-case basis. The OFC encourages a transparent approach and is proactive in guiding undertakings towards positively achieving their desired outcomes, provided that the market is not distorted and competition not lessened.
The NCA has shown a consistent tendency to clear non-complex transactions in a swift manner. More than 90% of all notifications are closed during Phase 1. On average, the NCA prohibits (including conditional clearances) 2-4 concentrations each year.
As regards the merger procedure, use of pre-notification contacts is increasing, although still developing. As a consequence, the NCA has not yet cleared a transaction subject to remedies in phase 1. We expect that pre-notification contacts will be increasingly employed by the NCA in the immediate future, and that this may increase the use of remedies also in phase 1 clearance decisions.
With respect to analytical approaches, the NCA has increasingly focused on the closeness of competition between the parties to the transaction, including price pressure analysis, at the expense of the traditional focus on market definitions as basis for the competition assessment in markets with differentiated products/goods. Consequently, competition economists representing the parties are more common than just a few years ago. Furthermore, in more complex matters, the NCA will regularly request internal decision-making documents, internal correspondence regarding the transaction, market analysis, etc.
In 2016, the Competition Council cleared 62 notified economic concentrations and 3 concentrations which had not been notified (and in relation to which the authority applied sanctions for failure to notify).
Thus, the number of economic concentrations increased by 68% in comparison to 2015 (37 notified concentrations were cleared by the Competition Council in 2015).
KN: In February 2016, the new Merger Control Regulation, governing the content and the manner of submitting merger filings to the Competition Commission, entered into force. The Merger Regulation introduced a new abbreviated merger notification form (i.e. Short Form) which made the Serbian merger control regime even more aligned with the EU rules and the merger control procedure disburdened especially for Phase I filings. In accordance with that, the Competition Commission is increasingly becoming more lenient towards formalities such as translations or legalisations of documents (especially in no-issue cases) and is increasingly more focused on substantive analysis. Its industry specialisation and economic analysis of complex merger has also increased.
Furthermore, the Competition Commission has increased its capacity and, as a result, handles cases in a fairly efficient manner even though merger control cases occupy significant amount of its time and resources. The transparency of its work has increased in the past couple of years and is to a large extent possible to predict specifics which makes the whole process of review reasonably straightforward. Finally, its fining efforts and practice has so far been focused on transaction with local nexus even though the merger control regime covers foreign-to-foreign transactions as well.
The vast majority of mergers are approved in the ordinary course. During the year ending March 2017, the Commission finalised 393 merger investigations, of which only five were prohibited.
The Commission’s mergers and acquisitions division is distinct from its enforcement and exemptions division which deals with prohibited practices. The Commission’s identified areas of priority affect both of these divisions.
The Commission is very active in its investigations of prohibited practices and, in order to focus its resources efficiently, has identified priority markets and sectors, which it considers to be most significant to consumers and the economy. Mergers in these sectors can also be expected to attract closer scrutiny. Some of the Commission’s current priority sectors include food and agro-processing; construction and infrastructure; and intermediate industrial products. These are regarded as sectors that have an impact on consumers; on the cost of doing business; and on economic growth and development, or reflect competition concerns (such as featuring cartel conduct).
The Commission has also recently raised concerns about the increasing number of cases of prior implementation of mergers and/or implementation of mergers contrary to the merger control provisions of the Act.
Until 2013, the Competition Board dealt with a significant number of merger control cases. Since the notification threshold was increased by Communiqué 2012/3 on the Amendment of Communique 2010/4 on the Mergers and Acquisitions Subject to the Approval of the Competition Board, this trend has changed and the number of transactions reviewed by the Competition Authority has gradually decreased. As expected, the board shifted its focus from merger control cases to concentrate on the fight against cartels and abuse of dominance.
The board finalised 303 merger control cases in 2012 – this number fell to 215 in 2014 and 158 in 2015. However, in 2016 the decreasing trend of merger control cases reviewed by the Board has shifted. While the number of reviewed cases was 158 in 2015, it dramatically increased to 209 in 2016 (an increase of approximately 32%).
According to the 18th Annual Activity Report of the Competition Authority for 2016, the board finalised 209 merger control cases. Among these 209 transactions, 85% were granted unconditional approval and 15% were decided to be either outside of the scope of Article 7 of Law No. 4054 or not notifiable.
The 209 overall transactions included seven mergers, 161 acquisitions, 32 joint ventures and nine privatisations.
2015-2017 was a very fruitful period for the Ukrainian competition law and its regulatory framework. The Ukrainian Parliament and the AMC addressed the long-expected requests of the European Union, Ukrainian business community and foreign investors and introduced essential legislative changes, which are aimed at the overall improvement of the domestic competition law. In particular, a new system of the financial thresholds was introduced (as described in our answers to section 3). The previous financial thresholds were much lower.
On 15 September 2015 the AMC adopted guidelines on the calculation of fines for competition law violations.
On 27 December 2016 the AMC adopted the guidelines on the assessment of horizontal mergers, which provide for general rules and the procedure for the appraisal of concentrations, where the parties are actual or potential competitors.
The trend in merger cases in Brazil seems to be in favor of approving the agreements, provided that mergers and acquisitions have positive aspects in the economy and the market itself and CADE is whiling to leave the free market dictate its ways. In order to counter-balance the negative aspects of major mergers, the antitrust authority effectively makes use of different remedies that mitigate possible negative outcomes. As a recent example, in the recent Dow/Dupont merger, CADE has approved the operation based in a deal presented by the parties, which foresees the disinvestment in assets related to seed corns.