Merger Control 2024

Deal Activity Down, but Regulatory Challenges Abound

Global M&A activity remained sluggish in 2023, with total deal value registering at approximately half of what it was in 2021. Deal volume also declined, although less dramatically, as smaller, mid-market transactions filled some of the gap left by fewer megadeals.

Unsurprisingly, this led to a decrease in the number of transactions subject to merger control approval in 2023. For example, the number of transactions notified to the European Commission (the “Commission”) hit an eight-year low.

The good news for most who are reading this is that many market analysts have forecast a significant rebound in M&A activity starting in 2024. Given this, it remains critical that companies and their advisers stay up to date on the most recent developments and trends in global merger control – of which there are many.

Indeed, despite the recent downtick in notifiable transactions, merger control enforcers have been anything but quiet, and getting deals approved is as challenging as ever.

International challenges

European Union

In the EU, the Commission continues its efforts to expand its jurisdiction to review transactions it considers to be anticompetitive, including those that are too small to meet either the EU filing thresholds or indeed the filing thresholds of any EU member state. Whereas it used to be straightforward to determine where merger control filings would need to be made in the EU, this is no longer the case. 

When an EU filing is not required, jurisdictions such as Austria and Germany maintain low filing thresholds that are often met, and Portugal and Spain have market share thresholds that may be difficult to assess. Robust enforcement continues to be seen in other EU member states as well, with some embracing theories of harm that go beyond those typically considered by the Commission.

United States of America

In the US, regulators continue to push more adventurous theories of harm and make it increasingly difficult for merging parties to address concerns through remedies. Plans are also underway to replace the relatively straightforward Hart-Scott-Rodino (HSR) merger filing form with a much more detailed version, similar in complexity to the one used in EU filings. Although the new HSR form has not yet been released, it is expected to include questions aimed at less traditional merger control considerations, such as the negative effects of mergers on labour markets.

United Kingdom

The UK’s voluntary notification regime remains “voluntary” in name only, as the UK Competition and Markets Authority (CMA) continues to be keen to thoroughly investigate transactions it considers as meriting review, even when doing so requires stretching the relevant “share-of-supply” jurisdictional threshold. The CMA is also not shy to sometimes take a different substantive view compared to other jurisdictions, including the EU, when reviewing the same transaction. 

Australia

Meanwhile, another long-time voluntary notification jurisdiction is overhauling its rules, with Australia announcing that it plans to introduce a mandatory merger control regime starting in January 2026. There are rumours that the Australian thresholds – while not yet publicly released – may be set quite low, such that a significant number of global deals would need to be notified.

Other jurisdictions

Of course, these are only some of the merger control jurisdictions that companies must bear in mind when seeking regulatory approval of their mergers. It is not unusual for global deals also to require notification and approval in countries such as Brazil, Canada, China, Japan, South Korea and Turkey, to name just a few.

Clearly, the challenges that both in-house and external counsel face on how to obtain merger control approvals as quickly and efficiently as possible remain acute. This makes having a clear guide such as this one all the more essential. Indeed, the Chambers Merger Control 2024 guide provides answers to all the most pressing questions companies and their lawyers face with every notifiable transaction.

Filing location

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’ revenues, asset value, market share, and the size of the transaction.

Given this, determining where to file requires a careful country-by-country analysis.

A new challenge faced by merging parties is the possibility of having to make separate, potentially very onerous filings under the EU Foreign Subsidies Regulation (FSR), distinct from any merger control filing that may also be required. The FSR requires, inter alia, notification to and prior approval by the Commission of certain transactions where one party is established in the EU and the other (typically the acquirer, but also possibly a merging party or joint venture partner) benefits from “financial contributions” meeting certain monetary thresholds. Although it is still early days for FSR filings, this is clearly proving to be a major additional challenge for companies to overcome before they can close their deal.

An increasing number of countries also have foreign direct investment (FDI) legislation that may also require additional filings and approvals. Although neither FDI nor subsidies fall within what one traditionally has in mind when speaking of “merger control”, they represent significant further hurdles merging companies now have to face. As such, the 2024 edition of the Chambers Merger Control guide covers FDI/subsidies review for each jurisdiction.

Substantive reviews

Once it has been determined where merger control 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 (which are garnering more attention in the United States, in particular) 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?

Timing

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) in certain jurisdictions, the time spent in “pre-notification consultations” with the relevant authorities before formal filing occurs (an increasingly common practice), 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 applies even more so where remedies are required in order to obtain approval in one or more jurisdictions.

Conclusion

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. The Chambers Merger Control 2024 guide aims to cut through some of that complexity by providing the reader with a practical guide, in a user-friendly format, that covers many of the world’s leading merger control jurisdictions.

The sections in this guide cover the key rules relevant for a merger control filing assessment, including:

• what kinds of transactions have to be notified (or are subject to review);
• what the filing thresholds are;
• the procedure and timeline for notification and approval;
• the substantive considerations of the authorities; and
• what kind of enforcement record 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 (while also addressing FDI and subsidies filings and approvals). The reader will find this guide to be a very useful tool for navigating 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.