LEGAL PRACTICE: MERGERS - COVID-19 - FINANCIAL CRISIS - FAILING FIRM DEFENCE

Failing firm defence – a tool in crisis?

The failing firm defence, although a well-established principle of EU and numerous national merger control rules worldwide, is only very rarely successful because of the strict interpretation and high evidentiary burden imposed by competition authorities. The current Covid-19 crisis has plunged a number of companies across various sectors into financial difficulties and in doing so has renewed interest in this defence. Therefore, it is worth reexamining the criteria used by competition authorities.

1. Under the failing firm defence (“FFD”), competition authorities may declare an otherwise problematic merger to be nevertheless compatible with competition rules if one of the merging parties is a failing firm. As a result of the current Covid-19 crisis, a number of companies, even ones that were financially sound and successful before, may face financial difficulties and may even be threatened to exit the market. Therefore, it is anticipated that the FFD will be increasingly relied upon by companies to obtain merger control clearance. 2. As of today, the FFD has only been sparingly admitted by competition authorities in merger control proceedings worldwide and invoking it has been an uphill battle for the merging firms. Indeed, where this exception is admitted, it replaces any

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Authors

  • Darrois Villey Maillot Brochier (Paris)
  • Darrois Villey Maillot Brochier (Paris)

Quotation

Didier Theophile, Anne Faber, Failing firm defence – a tool in crisis?, September 2020, Concurrences N° 3-2020, Art. N° 95465, www.concurrences.com

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