The year 2017 was characterised by an abundance of mergers and acquisitions. Competition authorities and courts had their hands full with formal and substantive questions regarding merger control. The increasing number of transactions suggests that this trend will continue in 2018. Not only stricter supervision is expected: like last year, the sanctioning of gun-jumping and misinformation in notifications will also be on the authorities’ radar.
Merger control: European Commission
The European Commission (the “Commission”) demonstrated last year that it is more closely examining concentrations. To name a few examples:
- The prohibition of the merger between Deutsche Börse and London Stock Exchange. The Commission was not convinced by the remedies offered by DB and LSE.
- The Commission conditionally approved the Dow/DuPont merger. In order to be given the go-ahead, the parties disposed of almost the entire worldwide R&D organisation of DuPont. Dow/DuPont had intended to terminate part of its current R&D activities immediately after the merger. The effects of the merger would have had an impact on both the industry and in "innovation spaces", i.e. potential markets that may arise in the (distant) future. The Commission was therefore critical of the merger plans and demonstrated this in an extensive prospective analysis of the effects of the merger.
- The Commission conditionally approved the acquisition of NXP by Qualcomm. Qualcomm offered remedies regarding inter alia its licencing practices. This approval may have a negative impact on the feasibility of the proposed hostile takeover of Qualcomm by Broadcom.
In light of the above, it is remarkable that Massimo Motta, the Commission’s former Chief Competition Economist, stated that the Commission should not shy away from prohibiting certain mergers. According to Mr Motta, the Commission had been overly optimistic in the past when (conditionally) approving certain mergers. It will become apparent this year whether the Commission has taken his opinion to heart. The Commission will soon reveal its position regarding several challenging concentrations:
- Bayer is hoping that the Commission will approve its proposed acquisition of Monsanto in Phase II (see also this blog). After ChemChina/Syngenta and Dow/DuPont, this is the third large transaction in a consolidating agrochemical industry on which the Commission will have to decide.
- The Commission is performing a Phase II investigation into the acquisition of Cristal by Tronox, which in the Commission’s opinion, may reduce competition on the dyes and pigments market.
Gun-jumping in the Netherlands and abroad on the agenda
The Commission has launched an investigation into merger control violations (“gun-jumping”) by Altice and Canon. The Commission was previously given a leg-up in this field by the General Court, which upheld a fine of EUR 20 million that the Commission had imposed on Marine Harvest. Gun-jumping cases were also present in the Netherlands. The Netherlands Healthcare Authority (“NZa”) for instance imposed a fine for late notification of a healthcare merger to the NZa. The focus on gun-jumping will continue both in the Netherlands and abroad. The European Court of Justice (“ECJ”) will be answering an interesting question in this field in 2018 in a case involving EY and KPMG, which agreed to merge their Danish divisions. KPMG Denmark therefore terminated its cooperation agreement with KPMG’s international branch. The question currently before the ECJ is whether the parties should have awaited approval of the merger by the Danish competition authorities before terminating the agreement with KPMG’s international branch. Advocate-General Wahl recently concluded that this was not necessary.
Misinformation also fined
In 2017, the Commission fined Facebook EUR 110 million for misinforming it on the acquisition of WhatsApp, and that was not the end of the matter. The Commission also launched an investigation as to whether General Electric and Merck en Sigma had misinformed the Commission in a notification procedure. The Commission is expected to rule in those cases in 2018.
Joint venture notification requirement
Last year, the ECJ ruled in the Austria Asphalt case on the question in what instances the transition from sole control to joint control of an undertaking (a joint venture) qualifies as a concentration. In the ECJ’s opinion such a concentration exists if the transaction gives rise to a joint venture which is “full-function”. The ECJ ruled a joint venture is not full-function if the joint venture does not have independent access to the market.
Merger control: the Netherlands
In 2017, most of the interesting merger cases of the Netherlands Authority for Consumers & Markets (“ACM”) related to the healthcare sector. In one of those cases ACM granted mental healthcare institution Parnassia a licence to merge with mental healthcare institution Stichting Antes. ACM stipulated in that regard the condition that clinics, treatment centres and patients be transferred to GGZ Delfland. ACM furthermore unconditionally approved the phase II merger between two academic hospitals VUmc and AMC. This does not mean that all mergers in the Dutch healthcare sector will be given the green light. Two hospitas St. Anna Zorggroep and Catharina Ziekenhuis, for instance, have announced that they have abandoned their merger plans after ACM reported that the merger required a licence. ACM announced that hospital mergers are more likely to be prohibited in the future. The reason for ACM to announce this is a study which showed that hospital mergers give rise to a relative increase in prices. Despite ACM’s signal regarding critical assessment of hospital mergers, healthcare mergers involving large market shares may nevertheless be given the go-ahead this year (see also this blog). It was decided in late 2017 to extend the lower turnover thresholds for ACM's merger control in the healthcare sector until 2023. It is therefore unavoidable that in 2018 a great deal of ACM’s capacity will again (unnecessarily) be devoted to the assessment of healthcare mergers.