The new Merger Control 2021 guide features 27 jurisdictions. The guide provides the latest legal information on enforcement authorities; notification requirements; foreign-to-foreign transactions; joint ventures; third-party rights, confidentiality and cross-border co-operation; appeals and judicial review; and the authorities’ current competition concerns.
Last Updated: July 07, 2021
A Rebound in Merger Control
2020 was unlike any year in recent memory. In addition to the tremendous human toll brought about by COVID-19, the pandemic also resulted in the largest economic contraction since the Great Depression.
From one day to the next, in-person meetings and conferences were cancelled, flights were grounded, and busy offices across the globe became modern-day ghost towns. Those fortunate enough to be able to work from home had to adjust quickly as technologies many of us had never heard of suddenly became indispensable.
At the time we wrote the Introduction to the 2020 edition of the Chambers Merger Control guide, M&A activity had slowed down considerably. It seemed that most companies were in a wait-and-see mode, unsure how long the pandemic would last and how serious it would get. In our Introduction, we predicted that “a rebound is almost certainly inevitable”, but we did not realise how quick or robust this rebound would be.
As it turns out, just over a year since the pandemic started, M&A has come back with a vengeance, and with it we have seen a corresponding increase in the volume of deals subject to merger control scrutiny. In the EU alone, the number of transactions notified to the European Commission is on pace to reach 480 by the end of 2021. Not only would this far surpass last year’s 361 notified transactions, but it would also shatter the all-time record of 414 notifications in 2018. Other jurisdictions are also seeing large increases in merger control activity.
As a result, the challenges that both in-house and external counsel face on how to obtain merger control approvals as quickly and efficiently as possible have never been more relevant. This is especially true considering that, far from taking a more lenient approach during the pandemic, competition regulators around the world are only getting tougher on mergers, and the road to deal approval is only getting longer and even more replete with pitfalls. This makes having a clear guide such as this one all the more essential. Indeed, the 2021 Chambers Merger Control guide provides answers to all of the most pressing questions companies and their lawyers face with every notifiable transaction.
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 set of 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.
As from 1 January 2021, this can mean having to notify a transaction not only to the US Federal Trade Commission and the Japan Fair Trade Commission, for example, but also to both the European Commission and the UK Competition and Markets Authority (CMA), a scenario that did not arise when the UK was still part of the EU. In fact, the CMA has demonstrated such an appetite for active merger control enforcement that it is fair to ask whether the UK merger control regime is in fact “voluntary” in name only.
Other leading merger control authorities include those in Australia, Brazil, Canada, China, Mexico, Russia, South Korea and Ukraine, to name but a few. Sorting out where filings are required can 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 are important to understand.
For example, is the legal test for assessing mergers based on maintaining effective competition, avoiding the creation or strengthening of a dominant position, 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 and a desire 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. Merger Control 2021 aims to cut through some of that complexity by providing the reader with a practical guide that covers 26 of the world’s leading merger control jurisdictions in a user-friendly format.
The sections 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 for the authorities and what kind of enforcement record do the authorities have? However, the chapters also go beyond the letter of the law and provide useful information on how these rules are applied in practice. For instance, the sections on applicable fines for failure to file not only cover 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 guide 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 guide 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 guide 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.