Merger Control 2020 features 28 jurisdictions. This edition provides guidance on the impact of COVID-19, legislation and enforcement, regulatory bodies, procedure, review, ancillary restraints, jurisdiction, third-party rights, appeal and judicial review.
Last Updated: July 13, 2020
The year 2020 appears likely to be a somewhat uncertain time in the world of M&A and, by extension, merger control. With much of the world in lockdown for several months due to the COVID-19 pandemic, and the significant economic toll such lockdowns have caused, it may take some time for the number of transactions, and hence the number of deals requiring regulatory approval, to rebound to the levels witnessed prior to the pandemic. However, a rebound is almost certainly inevitable.
Certain firms will be tempted by opportunistic acquisitions, while others will feel a sense of urgency to consolidate in order to survive. It is not a matter of whether transactions will return to pre-pandemic levels, but simply a matter of when. Indeed, even in the midst of a global crisis, new deals continue to be notified to the relevant authorities and, as of this writing, deals that were notified before the pandemic continue to be reviewed.
Therefore, the typical challenge remains: how to move a transaction through the regulatory process as quickly and efficiently as possible in order to allow closing to take place? There is little evidence that this challenge will be significantly diminished by COVID-19. Indeed, recent statements by various regulators suggest that firms should not expect to get a “free pass” due to the pandemic.
In fact, there may be more of a spotlight, at least in some jurisdictions, on foreign firms trying to take advantage of the current climate to acquire local rivals. And, at least in Europe, we are seeing an ongoing political struggle between certain Member States that favour a more permissive approach to merger clearance in order to allow the creation of “European champions” and the European Commission, which has shown little inclination thus far to embrace this approach.
Ultimately, although the number of deals requiring merger control approval may prove to be lower than in recent years (although this remains to be seen), the same kinds of issues that have always faced internal and external counsel will remain as relevant as ever before.
For starters, where does the deal need to be filed? This is a crucial question, as there are potentially serious consequences for failing to make a required merger control filing, including the imposition of heavy fines. Unfortunately, it can be tricky to determine where filings are required in a given case. Although an ever-increasing number of countries have some form of merger control law, there remains very little standardisation, with each merger control regime continuing to have its own test to determine which transactions amount to a notifiable event. Some jurisdictions catch only changes in control, while others also cover certain acquisitions of non-controlling minority stakes. Moreover, every jurisdiction has its own filing thresholds based on various factors such as the parties’ turnover, asset value, market share and the size of the transaction.
Given this, determining where to file requires a careful country-by-country analysis. And post-Brexit, the possibility will soon exist that a transaction may need to be notified both to the European Commission and the UK Competition and Markets Authority, a scenario that did not arise when the UK was part of the EU. In this connection, the UK Competition and Markets Authority has recently demonstrated an appetite for active merger control enforcement of which companies filing in the EU and the UK should be fully aware.
Other leading merger control authorities include those in China, Japan, Korea, Canada, Brazil, Mexico, Russia, Ukraine and Australia, to name but a few. Sorting out where filings are required can, in itself, be a very significant task.
Once it has been determined where merger filings need to be made, the next question is what the regulatory reviews will entail and what needs to be done in order to obtain approval in each jurisdiction. Again, each merger control regime has its own test for determining whether a given transaction will be approved, and while the approach may be broadly similar across jurisdictions, there are nuances in each that will be important to understand.
For example, is the legal test for assessing mergers based on maintaining effective competition, avoiding dominance or some other standard? Are vertical mergers subject to the same level of scrutiny as horizontal mergers? How are efficiencies considered by the regulator in its assessment? Is the agency’s analysis based purely on competition law principles or are there other (eg, public interest) considerations at play? What kinds of arguments are most likely to be persuasive to each authority, and how does one ensure a consistent approach across jurisdictions at a time when international co-operation between regulators is more common than ever?
Of course, another key issue will be how the regulatory process affects timing. After all, there is no such thing as a deal that is not time-sensitive. In every transaction, there is a sense of urgency to close as soon as possible, ideally the day before yesterday.
This urgency needs to be reconciled with the fact that, with some notable exceptions, most merger control jurisdictions require closing to be suspended until regulatory approval has been granted. Taking into account the time needed to prepare the filing(s), which in challenging cases can easily be hundreds of pages long (excluding annexes), the time spent in “pre-notification consultations” with the relevant authorities before formal filing occurs (an increasingly common practice in many jurisdictions), and the time it takes for the review process(es) to play out, closing can easily be delayed, for a couple of months in simple cases to well over a year in more challenging ones.
Reasonable timelines need to be set for the parties and expectations must be carefully managed. Once again, every jurisdiction has its own procedural rules and deadlines, so co-ordinating the reviews across the world can be a significant challenge. This is even more the case where remedies are required in order to obtain approval in one or more jurisdictions.
For the above reasons – and many more – navigating a global merger control filing and approval process is a complex business, and it is only getting more complex every year. This book aims to cut through some of that complexity by providing the reader with a practical guide that covers 33 of the world’s leading merger control jurisdictions in a user-friendly question and answer format.
The questions in this guide cover the key rules relevant for a merger control filing assessment, including: what kind of transactions have to be notified, what are the filing thresholds, what is the procedure and timeline for notification and approval, what are the substantive considerations of the authorities and what kind of enforcement record do the authorities have? However, the questions also go beyond the letter of the law and probe for useful answers on how these rules are applied in practice. For instance, the questions on applicable fines for failure to file not only ask whether such penalties exist and what their legal maximum is, but, more importantly, whether these penalties are applied in practice and what penalties have been imposed recently.
Although by no means a substitute for seeking advice from experienced merger control counsel, this book provides clear and practical answers to most of the fundamental questions faced by any company involved in a transaction that requires merger control filings. The reader will find this book to be a very useful tool for finding their way through the increasingly complex labyrinth of global merger control.
As with any work of this nature, compiling this book has been a team effort. With this in mind, we would like to thank all the authors for their contributions, as well as the Chambers team for their diligence and professionalism.