Although the main features of merger control procedures differ among jurisdictions, every system seeks a balance between effective scrutiny of competition and avoiding unnecessary costs for the merging and third parties. Triggering events and thresholds, jurisdiction provisions, notification mechanisms, information requirements, deadlines, burden and standard of proof, rules for access to the file and judicial review are all procedural institutions aimed at achieving that balance.
A first question that a merger control procedure must address is which specific transactions are subject to it. Two or more previously independent undertakings merging into a single one is the most common triggering event (or ‘concentration’), but there are other possible combinations that may be covered by merger control and further criteria may be needed–e.g. joint ventures, acquisition of minority shareholdings or the purchase of securities or assets. These requirements are usually complemented by rules establishing an appropriate nexus between the merger and the jurisdiction. For example, in the European regime these aspects are dealt with in the Commission’s Jurisdictional Notice, which specifies the meaning of ‘concentration’ and provides guidance on when a concentration has a Union dimension following the provisions of the EU Regulation No. 139/2004 (EUMR).
Another key element at the beginning of any merger control procedure is notification. In a mandatory pre-notification regime, undertakings must inform competition agencies of their transaction prior to its completion. However, even when notification is compulsory, thresholds apply as a proxy to filter mergers that are more prone to raise competition concern. These thresholds aim to follow objective and measurable criteria. The most common thresholds are set according to the parties’ turnover, the value of the transaction and/or market shares. For instance, in the United States (US) the thresholds are updated annually and are based on the value of the transaction and the size of the merging parties.
Closely related with mandatory pre-merger notification is the usual standstill obligation which affects notifying parties. As a general rule, after filing the transaction with the authority the parties must not implement the concentration without clearance from the authority. In Europe, the EUMR article 7 (1) establishes that a concentration “shall not be implemented either before its notification or until it has been declared compatible with the common market”. In the case of the US, according to the Hart-Scott-Rodino Act of 1976 (HSR Act) –the first legislation enacting a mandatory regime in the world– the parties should not close their deal until the waiting period has passed, or the agency has granted early termination of the waiting period. In both jurisdictions, relevant and relatively recent case-law has further specified what type of conduct may be deemed as failure to notify and standstill obligation infringements, a subject labelled “ gun jumping” in competition law (See M.7993 Altice/PT Portugal 2018, and U.S. v. Flakeboard and SierraPine, 2014).
While mandatory pre-notification systems have become the standard as competition policy has developed globally, there are still many jurisdictions where notification is voluntary (e.g. Australia, New Zealand, Singapore or the UK).
In mandatory pre-notification regimes, parties may normally notify the authority any time prior to the implementation of the merger, but submitting notifications may be time-consuming and a major hurdle in certain cases. Normally, regulations specify the content for notifications. Especially for systems with strict deadlines, the idea of these initial requirements is to provide the authority with basic and valuable information at initial stages of merger investigations (e.g., a description of the transaction, details of the parties, balance sheets and financial data, supporting documentation, information on market definitions and affected markets). Competition authorities typically provide additional guidelines and encourage early informal contacts between parties and officials or formal pre-notification procedures to solve issues related to the notification process.
In the European system, the notification requirements are set out within the Commission Regulation No. 802/2004 (Implementing Regulation), and its annexes establish how the information should be presented – Form CO and Short Form CO (for simplified merger notifications). In the US, premerger filings under the HSR Act must be submitted to the FTC or the DOJ by completing a “Notification and Report Form for Certain Mergers and Acquisitions” or HSR Form. Following their initial review of this Form, both US authorities may issue a “Request for Additional Information and Documentary” (informally known as “Second Request”) if they have reason to believe that the proposed transaction is likely to raise competition concerns.
One of the most salient differences between merger investigations and other antitrust probes is time. Business dynamics typically require a prompt official response in order to have legal certainty and be able to move forward. Accordingly, after notification, merger control procedures are usually limited by deadlines and authorities find themselves running against the clock. In Europe, for example, a generally rigid timetable applies. Once the notification is declared complete, the Commission must take a decision generally within 25 working days (Phase I Investigation). This period could be extended to 35 working days if parties present commitments. Where the Commission has serious doubts regarding a merger’s compatibility with the internal market, a second period starts, of an additional 90 working days, that may be extended to 105 working days if undertakings offer commitments. Importantly, where the Commission has not taken a decision within these time limits, the concentration “shall be deemed to have been declared compatible with the common market” (See article 10.6 EUMR).
The outcome of a merger control procedure typically may involve three alternatives: the merger is unconditionally cleared, cleared subject to remedies, or prohibited. Systems may differ on how these decisions are taken. For example, in the US, after a review of the premerger filing, authorities may grant early termination or let the initial waiting period expire. This would mean that the merger remains unchallenged. After the parties submit the Second Request, the DOJ or the FTC may still close the investigation and clear the deal, enter into negotiated consent agreements with companies or seek to block the transaction through a preliminary injunction in federal court. In Europe, the Commission may declare the concentration to be compatible with the common market, may accept commitments from the parties as a condition to declare the merger compatible with the common market, or declare it incompatible with the common market.
When conducting investigations, authorities may require information from the notifying parties or third parties. The European Commission has power to impose fines when undertakings intentionally or negligently failing to respond to a request, or supply incorrect or misleading information. For example, in Facebook/Whatsapp (2017), the Commission imposed fines for €110 million for providing misleading information.
Best practice mandates procedural fairness for merging parties (See, for example OECD Recommendation on Merger Review, 2005). This includes the opportunity for merging parties to access the case file and obtain information about competitive concerns, a meaningful opportunity to confront such concerns, and the right to seek review by a separate body. Indeed, a final dimension worthy of mention is judicial review. The US system is based on judicial review and administrative bodies are unable to prohibit a merger without a court ruling. In the case of Europe, the Commission’s decisions may be appealed to the General Court, but the competition agency has the “first say”. As it is well known in competition law, the type of court (administrative courts, general jurisdiction courts or specialized courts) and the scope of revision influence decisions of competition authorities.
Today most of the countries that have competition regimes in place have some form of merger control procedure. Consequently, mergers that involve multinational companies with worldwide activities are usually reviewed by more than one jurisdiction. To be aware of their procedural differences and practical aspects may be challenging for practitioners and authorities and increases the need for intense international communication and collaboration. At the same time, the international trend today of multi-jurisdictional mergers has led to increased harmonization of procedures across systems, fostered by organizations such as the International Competition Network or the OECD.