Working with Multiple Competition Agencies in a Merger Review
| Pages | 155-205 |
155
CHAPTER IV
WORKING WITH MULTIPLE COMPETITION
AGENCIES IN A MERGER REVIEW
Merger control is a global phenomenon. Reviews of a proposed
merger are typically focused on whether the transaction affects
competition in markets within the jurisdiction where the notification is
submitted, and more than 130 countries now have some form of review
for mergers and acquisitions. The level of enforcement has increased
substantially, and ever larger numbers of authorities are scrutinizing
mergers. They are also increasingly imposing fines for failure to file
proper notifications and for closing transactions in breach of their laws.
It is crucial, therefore, to identify the jurisdictions in which a
transaction will trigger a filing requirement. Once these have been
identified, attention should be focused on how the merger filing process
will be managed and streamlined. Developing a “keystone” narrative
with a central theme can be a useful tool to ensure that the transaction is
consistently presented to reviewing agencies. This narrative will need to
be adjusted to reflect local considerations. For example, a number of
countries take into account matters unrelated to competition, such as job
preservation, and the merger narrative may need to respond to such
matters.
Mergers and acquisitions are invariably time-critical, as companies
seek to close the deal as quickly as possible. This aim needs to be
aligned, however, with potentially time-consuming merger reviews. This
chapter will consider issues and procedures that arise in the course of a
multi-jurisdiction merger review and what options counsel may have to
achieve swift merger clearances.
A. Merger Control Rules and How to Determine Where to File:
Basic Considerations
The following subsections will (1) provide an overview of
international merger control and what it is and how it works and (2)
explain the importance of certain considerations that counsel should take
into account prior to filing, such as risk assessment.
156 International Investigations and Merger Reviews
1.
Merger Control: What It Is and How It Works
The failure to obtain merger clearance for notifiable transactions can
be avoided if proper procedures are followed, and one of the first
questions companies should ask external counsel is where the transaction
will need to be notified. The answer is not always straightforward.
Typically, it involves a two-step analysis.
First, the deal has to constitute a “concentration,” that is, the
transaction needs to be of a type and form that falls within the scope of
merger control rules. Second, the concentration needs to trigger the filing
thresholds (often based on revenues, occasionally coupled with or
replaced by other criteria, such as assets, market shares, or transaction
value). In practice, the steps often follow the order above, but, if the first
test is difficult under the circumstances and information for the second
step is at hand, it may be advisable to evaluate whether notification may
be excluded on the basis of the latter criterion.
a. Does the Transaction Constitute a Concentration?
In some cases, this first step can be straightforward, as when a
company acquires all of the target’s shares. However, there are scenarios
where the analysis is less straightforward and where there is ample scope
for getting it wrong. With approximately 130 active merger control
regimes, many of which apply varying rules, even commercially
insignificant transactions can require a complex analysis.
The cost of getting it wrong can be high. At the European Union
level, there are two prominent cases on this issue: Electrabel and Marine
Harvest.1 In both cases, the notifying parties were fined €20 million.
Fines are also imposed for failure to notify at the Member State level,
recently, for example, in France,2 the Netherlands,3 and Portugal. 4
1. Case COMP/M.4994, Electrabel/Compagnie Nationale du Rhone,
Comm’n Decision, 2009 E.C.R. 4064/89; and Case COMP/M.7184,
Marine Harvest/Morpol, Comm’n Decision, 2014 E.C.R. 139/2004.
2. The French competition authority, L’Autorité de la concurrence, imposed
a fine of €80 million on French telecommunications operator Altice for
implementing two transactions before approval. Autorité de la
concurrence [AC] [Competition Authority] Nov. 8, 2016, No. 16-D-24
(Fr.), available at
http://www.autoritedelaconcurrence.fr/pdf/avis/16d24.pdf.
3. The Netherlands Authority for Consumers and Markets imposed a fine of
EUR 500,000 on a national car dealer for failure to notify an acquisition.
Motorhuis 28 maart 2013, NMa 7491 (Neth.).
Multiple Agencies in a Merger Investigation 157
Authorities outside the European Union are increasingly active in this
area as well, not the least of which is the Ministry of Commerce in
China. By way of example, in January 2017, the Chinese regulator fined
Canon for its failure to notify of the acquisition of Toshiba, the first
foreign-to-foreign transaction to be sanctioned in China (with a limited
fine of approximately €40,000).5 Similarly, in the United States,
ValueAct was fined US$ 11 million for violation of filing requirements
in 2016.6
Under most merger control regimes, only those operations where a
change of control in parties occurs on a lasting basis trigger a
notification. “Control” is defined in the EU Merger Regulation7 and its
supporting guidance, as the ability to exercise “decisive influence” over
an undertaking, in particular through the ownership or right to use all or
4. The Portuguese competition authority, Autoridade da Concorrência,
imposed a fine of EUR 40,000 on a private equity firm for failure to
notify an acquisition. Decisão de Não Oposição da Autoridade da
Concorrência, SC Indus./Adira, Processo Ccent. 22/2017 (July 13, 2017),
available at www.concorrencia.pt/FILES_TMP/2017_22_final_net.pdf.
5. Ujpiý" d́" zpi¦jflpi" ej堰hƒ" lwfif·pi" uj" *僭貆躡㊍斧荿塘)
[Administrative Punishment Decision of the Ministry of Commerce]
http://fldj.mofcom.gov.cn/article/ztxx/201701/20170102495433.shtml
(China).
6. Following Baker Hughes’ and Halliburton’s 2014 announcement of their
plan to merge in a deal valued at US$ 35 billion, ValueAct, an activist
investment firm, purchased over US$ 2.5 billion of Halliburton and Baker
Hughes voting shares without complying with the Hart-Scott-Rodino Act
(15 U.S.C. §18a) notification requirements. The DOJ brought an
enforcement action against ValueAct, alleging that ValueAct purchased
the relevant shares with the intent to influence the companies’ business
decisions – including decisions related to the merger – and therefore
could not rely on the limited “investment-only” exemption to the
notification requirements. According to DOJ, ValueAct used its access to
senior executives of both Halliburton and Baker Hughes to attempt to
influence the companies’ proposed merger and other aspects of their
businesses. See Press Release, U.S. Dep’t of Justice, Justice Department
Obtains Record Fine and Injunctive Relief Against Activist Investor for
Violating Premerger Notification Requirements (July 12, 2016), available
at https://www.justice.gov/opa/pr/justice-department-obtains-record-fine-
and-injunctive-relief-against-activist-investor.
7. Council Regulation (EC) No. 139/2004 of Jan. 20, 2004 on the Control of
Concentrations between Undertakings, 2004 O.J. (L 24) 1 [hereinafter EC
MERGER REGULATION].
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