Foreign Merger Control

• Pages: 133-194

133

FOREIGN MERGER CONTROL

A. Introduction

In addition to the Hart-Scott-Rodino Antitrust Improvements Act of

1976 (HSR Act), private equity firms must consider whether a

transaction implicates premerger regimes outside the United States.

Many such jurisdictions impose longer waiting periods, require more

time to prepare, and involve increased disclosures and data production.

Filings in multiple jurisdictions can significantly impact the transaction

timeline, and the more filings that are required, the greater the risk of

antitrust scrutiny delaying closing. It is possible too for private equity

firms to experience incongruous results (e.g., a number of jurisdictions

clear an acquisition while one jurisdiction expressly prohibits its

implementation or imposes conditions to such implementation).

More than one hundred and sixty jurisdictions have premerger

regimes; most of them are mandatory and suspensory, meaning that if an

acquisition satisfies jurisdictional thresholds, the parties cannot close

without obtaining clearance (or, in some cases, without filing and

allowing a statutory waiting period to expire). Filings are sometimes

procedural in nature (i.e., trigger ed by a combinati on of turnover, a ssets,

and/or market share of the parties to the transaction) or may involve a

substantive component (e.g., an accretion in market shares potentially

lessening competition). It is for these reasons that private equity firms

must familiarize themselves with the basic filing thresholds and timelines

outside the United States and for each acquisition must devise a

clearance strategy that will enable them to take that acquisition to the

finish line. The size of any given private equity firm, especially in light

of more inclusive aggregation rules outside the United States that

typically look to the sponsor’s economic group, including “controlled”

portfolio companies (using a more amorphous test than the bright lines

under the HSR Act), can potentially trigger multiple mandatory and

suspensory foreign filing obligations in any given transaction. Foreign

premerger analysis is further complicated when there are two or more

private equity firms, each with sizeable worldwide or localized turnover,

acquiring joint control of a target.

This chapter deals specifically with premerger reporting obligations

and procedures in the European Union (EU), Canada, the United

Kingdom, Brazil, China, and India—some of the most frequently

134 Private Equity Antitrust Handbook

encountered jurisdictions. The substantive antitrust laws of these

jurisdictions are not discussed but, like substantive merger analysis in the

United States, must also be considered.

B. European Union

The primary legislation regarding merger control in the European

Union is the EU Merger Regulation contained in Council Regulation

(EC) No 139/2004 (EUMR). 1 The EUMR applies to large-scale

transactions with a nexus to the European Union and is enforced by the

Directorate General for Competition of the European Commission (EU

Commission or Commission) in Brussels.

EU merger control rules create a “one-stop-shop,” which means that

the EU Commission has exclusive jurisdiction once the EU merger

control thresholds are exceeded and national merger control rules in the

European Economic Area (EEA) may not be applied. For large-scale

transactions, this is often an advantage since the parties to the transaction

only have to deal with one authority in the EEA as opposed to various

national authorities. For certain other transactions, however, this can

1. 2004 O.J. (L 24) 1 [hereinafter EUMR]. Further procedural rules

including the notification forms (Form CO, Short Form CO, and Form

RS) are set out in Commission Regulation (EC) No 802/2004, 2004 O.J.

(L 133) 1 (implementing regulation), as amended Commission Regulation

(EC) No 1033/2008, 2008 O.J. (L279), 3 and by Commission

Implementing Regulation (EU) No 1269/2013, 2013 O.J. (L336), 1. In

addition, the EU Commission has published a series of guidelines and

notices that are highly relevant: Commission Consolidated Jurisdictional

Notice Under Council Regulation (EC) No 139/2004 (2008 O.J. (C 95) 1)

[hereinafter Jurisdictional Notice], Commission Notice on a Simplified

Procedure for Treatment of Certain Concentrations Under Council

Regulation (EC) No 139/2004 (2005 O.J. (C 56) 32), Best Practice

Guidelines on Merger Proceedings, available at http://ec.europa.eu/

competition/mergers/legislation/proceedings.pdf, Guidelines on the

Assessment of Horizontal Mergers Under the Council Regulation on the

Control of Concentrations Between Undertakings (2004 O.J. (C 31) 5),

Guidelines on the Assessment of Non-Horizontal Mergers Under the

Council Regulation on the Control of Concentrations Between

Undertakings (2008 O.J. (C 265) 6), Commission Notice on Restrictions

Directly Related and Necessary to Concentrations (2005 O.J. (C 56) 24),

Commission Notice on Remedies Acceptable Under Council Regulation

(EC) No 139/2004 and Under Commission Regulation (EC) No 802/2004

(2008 O.J. (C 267) 1), and some others.

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Foreign Merger Control

pose a disadvantage since the Commission requests a substantial amount

of information even in unproblematic cases, and a filing with the EU

Commission can take more time than national filings.2

The EU merger control regime covers the EU member states

(Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic,

Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland,

Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland,

Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United

Kingdom) as well as three members of the European Free Trade

Association (Iceland, Liechtenstein, and Norway).

1. Reportable Transactions

The EUMR applies to all “concentrations” with a “community

dimension” (an EU dimension)3 regardless of the location and nationality

of the parties involved or whether the implementation of the transaction

will result in substantive competitive issues (e.g., horizontal overlaps or

vertical problems). If the jurisdictional thresholds are met, a notification

to the EU Commission is mandatory.

a. Concentration

A concentration is defined in EUMR art. 3(1) as a change of control

on a lasting basis that results from either:

(1) the merger of two or more previously independent undertakings

or parts of undertakings, or

(2) the acquisition, by one or more persons already controlling at

least one undertaking, or by one or more undertakings, of direct

or indirect control of the whole or parts of one or more other

undertakings. Control over an undertaking can be acquired by

purchase of securities or assets, by contract, or by other means.

2. The EUMR also establishes a system of referrals. A national competition

authority may, under certain circumstances, request that it be the one to

review a particular transaction even though the EUMR thresholds are

exceeded. In certain cases, the parties to a concentration can also request

a referral from the EU to member states. In addition, a referral from a

member state to the EU Commission is also possible under certain

circumstances. The guiding principle of the referral system is that the

most appropriate competition authority should review the concentration.

3. EUMR, supra note 1, art. 1(1).