Recent months have seen some significant changes, and proposed changes, to merger control rules across the world – the rules governing the scrutiny by competition authorities of mergers, acquisitions and joint ventures.
Merger rules apply to joint ventures: Two cases before the Antimonopoly Bureau of MOFCOM, China’s Ministry of Commerce – General Electric/China Shenhua in November 2011, and Henkel/Tiande Chemical in February 2012 – have made clear that the merger control provisions in China’s Antimonopoly Law, in force since 2008, apply to the creation of joint ventures. This is in spite of the fact that the legislation itself does not expressly specify this.
- Chinese State-owned enterprises: In addition, General Electric/China Shenhua, where clearance was made subject to conditions, is the first merger control decision involving a state-owned enterprise directly controlled by the central government, and appears to show that the rules are being applied equally stringently to state-owned enterprises as to foreign companies.
The criterion of assessment will change: In March 2012, the German Government proposed a number of changes to Germany’s competition law on merger control. The most significant is that the criterion for prohibiting a transaction will change from “dominance” to “significant impediment to efficient competition”. This will bring the German regime more closely into line with other major competition systems, such as the European Union, the United States and the United Kingdom. In principle, it will make it easier for the authorities to challenge transactions that, even though they do not create an entity with a high market share, nevertheless significantly lessen competition, eg, “oligopolistic” mergers (those where there is already a small number of significant competitors on the market, and the merger reduces that small number further).
The proposed changes in Germany are expected to enter into force on 1 January 2013.
Proposals published in March 2012 by the UK Government to reform Britain’s competition law system include a couple of significant measures on UK merger control:
- Time limits: The initial “Phase 1” examination of mergers will be subject to a statutory maximum time limit of 40 working days, or eight weeks plus public holidays. Currently there is no statutory maximum, although parties notifying using a special “merger notice” form have been entitled to a Phase 1 decision within a maximum 30 working days from notification; the “merger notice” system is to be abolished.
- No compulsory merger notification: Contrary to earlier suggestions, the UK Government has decided to retain the voluntary notification system, rather than introducing compulsory notification (although most major competition systems in the world, including under the EU Merger Regulation, have mandatory notification). This means that parties are free to complete or close a transaction without first obtaining clearance from the competition authorities or even notifying the competition authorities – although, if the transaction raises any material competition concerns, this carries the risk of the transaction being subsequently investigated and even prohibited.
If the UK Government proceeds with legislation on this, it is likely to come into effect in 2014.
In March 2012, the Canadian Competition Bureau issued drafts of new guidelines for the merger notification process1. One of these deals with calculating the assets and revenues of parties to see whether they meet the merger notification thresholds, specifically as regards intra-group sales revenues.