The European Commission recently published a policy brief on international enforcement cooperation in mergers (the "EC Policy Brief").
The EC Policy Brief presents the key principles for effective cooperation between antitrust agencies in merger enforcement which were set out in the Practical Guide to International Enforcement Cooperation in Mergers (the "ICN Cooperation Guide") issued by the International Competition Network ("ICN"), and explains how those principles have been applied in recent transactions reviewed by the European Commission. The ICN Cooperation Guide was adopted by the ICN at its Annual Meeting in Sydney in April 2015. The ICN is a network that brings together over 130 antitrust agencies from around 120 jurisdictions around the world. The European Commission took a leading role in formulating the ICN Cooperation Guide, and is actively promoting it.
The EC Policy Brief emphasises that cooperation between antitrust agencies is not just a matter for the agencies themselves, and that merging parties and third parties also have key roles in facilitating cooperation between different agencies.
In April 2016, the ICN adopted the ICN Merger Working Group's Merger Remedies Guide at the Annual Meeting in Singapore (the "ICN Merger Remedies Guide"). This latter guide builds on the ICN Cooperation Guide of 2015.
Together these documents provide an important reminder for merging parties of the need to devise and execute a coordinated global strategy for seeking merger control clearances, including in terms of the timing of filings and preparing remedies.
A mass of merger control regimes
There has been an explosion in the growth of merger control regimes around the world in the past decade.
Along with the growth in merger control regimes has come a significant increase in the extent of cooperation between antitrust agencies. There are a number of bilateral agreements between antitrust agencies, and there is also increasing dialogue on a multilateral basis within international organisations, such as the Organisation for Economic Cooperation and Development (OECD) and the ICN. It was against this background that the ICN adopted in 2015 the ICN Cooperation Guide and in 2016 the ICN Merger Remedies Guide, in order to provide guidance on merger enforcement cooperation for antitrust agencies seeking to engage in such cooperation, as well as for merging parties and third parties seeking to facilitate cooperation.
Mergers are increasingly subject to review by multiple antitrust agencies across the world. The EC Policy Brief highlights that "multi-jurisdictional mergers, with their potential risk of increased costs, burdens and divergent outcomes for the merging parties, have become a frequent reality." The EC Policy Brief recognises that effective cooperation between antitrust agencies is part of the answer to these challenges. It states that cooperation facilitates consistent outcomes, and may increase investigative efficiency by reducing duplication of work, delays and burdens for the merging parties, third parties and the antitrust agencies. It notes that merging parties also have the ability to facilitate cooperation between antitrust agencies for their own benefit, including by granting waivers to enable antitrust agencies to discuss confidential information.
The overarching principles of cooperation
The EC Policy Brief comments on the following principles of merger enforcement cooperation.
Voluntary nature of cooperation and flexibility. The EC Policy Brief highlights that merger enforcement cooperation is voluntary and does not limit antitrust agencies' ability to take their own enforcement decisions independently. It points out that in a specific merger case there is significant flexibility in the way that agencies can cooperate with each other, and that this may differ from one case to another.
Need for and utility of cooperation. The EC Policy Brief comments that the need for and utility of cooperation varies from case to case depending on the facts and the issues raised by a particular merger. It states that cooperation between agencies is especially beneficial in cases that raise competitive issues of common concern. It notes that this is particularly the case for mergers affecting global or cross-border regional markets, but that it may also be relevant "where the geographic scope of the markets is confined to the respective jurisdictions if, for instance, competition problems in different national or regional markets are remedied through the divestiture of a global business".
Role of the merging parties. The EC Policy Brief notes that merging parties have a key role to play in facilitating cooperation between antitrust agencies, "in particular when cooperation requires aligning the timing of the review processes or the exchange of confidential information". It notes the importance of "early and constructive engagement of merging parties".
Putting cooperation principles into practice
The EC Policy Brief recommends careful planning and a coordinated approach to filing obligations around the world, in particular in the following respects.
- Initial contacts. Merging parties are recommended to provide to agencies as early as possible sufficient information about a merger and the filing obligations in other jurisdictions so that contacts between reviewing antitrust agencies can start "if only to touch base on status and timing of a transaction".
- Information sharing. Merging parties can facilitate information sharing by giving waivers of confidentiality. The EC Policy Brief emphasises that the European Commission will ask for and make use of waivers "in a responsible manner". It notes that waivers are not needed in every case, as there are types of information that can be exchanged between antitrust agencies without a waiver. The EC Policy Brief states that this includes:
- Publicly available information regarding the industry/sector or the merging parties or third parties
- Non-confidential aspects of prior relevant investigations or decisions
- Information regarding an antitrust agency's process (such as timing)
- Aggregated results of a market investigation without the identification of the individual views of customers or competitors
- Antitrust agency views on market definition, theory of harm, and competitive effects.
- Timing alignment. The EC Policy Brief notes that merging parties can help agencies cooperate at key decision making stages by timing their filings appropriately. This does not necessarily mean that filings in the various jurisdictions need to be made at the same point in time. The EC Policy Brief also notes that it can be helpful if merging parties avoid provisions in their merger documents that require notifications to be made within a specified period of time.
- Substance. The EC Policy Brief notes that discussion between the reviewing antitrust agencies which compares the different antitrust agencies' investigative approaches, in particular on investigative planning, the approach to gathering of evidence, analytical methods and economic models, can help avoid divergent outcomes. It states that merging parties can help by ensuring consistency in their substantive submissions to the various reviewing agencies.
- Remedies. The EC Policy Brief acknowledges that cooperation between antitrust agencies in remedy design increases the likelihood of non-conflicting remedies being accepted by antitrust agencies and minimises the risks of subsequent difficulties in their implementation. It notes that remedies accepted in one jurisdiction may have an impact on another including in cases in which the product or geographic markets or competitive effects of the merger are not identical.
The EC Policy Brief suggests that the remedy design process is more effective and efficient when merging parties have facilitated cooperation between reviewing antitrust agencies, "particularly through timing alignment and/or waivers of confidentiality". The EC Policy Brief refers to paragraph 40 of the ICN Cooperation Guide, which states that facilitation can be achieved, for example, "by helping to align timing of the substantive reviews, providing consistent information, providing waivers and coordinating remedy proposals, where appropriate".
The EC Policy Brief recommends continued cooperation between antitrust agencies throughout the remedy implementation stage, and notes that such cooperation may include the appointment of common trustees, and common approval of the same purchaser for divested businesses.
The ICN Merger Remedies Guide also emphasises the importance of merging parties taking an active role in assisting cooperation between antitrust agencies with respect to remedies. The ICN Merger Remedies Guide sets out detailed guidance for considering key aspects of remedies, including remedy design, implementation, considerations regarding timing, and international cooperation. It builds on the principles set out in the ICN Cooperation Guide. The ICN Merger Remedies Guide emphasises the importance of merging parties assisting in the alignment of respective remedy procedures, for example, by helping to align "key decision-making stages, including remedy decision-making, through timing of their notifications or responses to information requests, providing confidentiality waivers, and requesting or agreeing to timing extensions."
Key take-away – a coordinated global strategy
For any significant global merger, it is now common for the merging parties to file for approval in 20 or more different merger control regimes around the world. Formulating a global strategy for coordinated multiple antitrust agency reviews is critical. Taking account of the increasing cooperation between the antitrust agencies reviewing the same merger is a key part of such a strategy. Components of such a global strategy for merging parties include:
- Early determination for where filings are required, bearing in mind that jurisdictional tests vary across the world (turnover, market share, asset based tests, etc);
- Consideration of differing review timetables in different jurisdictions;
- The formulation and presentation of consistent substantive cases to the antitrust agencies;
- The granting of confidentiality waivers, where appropriate; and
- The formulation and presentation of consistent remedy proposals.
Effective implementation of a coordinated global merger control strategy can have clear benefits for all concerned, avoiding inconsistent outcomes, and the reduction of review burdens and costs.