Worldwide, the number of mergers and acquisitions in 2015 broke all records. This had an impact on the number of merger filings received by the competition authorities. It is expected that 2016 will match 2015 in this respect. What is to be expected from the competition authorities in this respect?
The European Commission reached a milestone in 2015: European merger control had been in existence for 25 years. However, 2015 did not become the year in which merger control was drastically reformed, although this had been expected in 2014. In this year the Commission presented its ‘White Paper towards more effective merger control’. In March 2015, European Commissioner Vestager still alluded to these reforms of merger control such as an obligation to notify concentrations with a high transaction value even when the thresholds are not met and an increased convergence between European and national merger control procedures. However, proposals for realization of concrete reforms did not materialize in 2015.
In 2015 the Commission was busy dealing with merger control cases even without reforms that would increase the Commissions jurisdiction regarding merger control. As we had predicted in 2015 the Commission unconditionally cleared the acquisition of TNT Express by FedEx. This took place following a extensive phase II investigation. These very invasive investigations are no longer an exception. For example, the Commission did only grant its conditional approval for the acquisition of the British producer of soft drink cans Rexam by US Ball Corporation during the second phase. The Commission is currently conducting a phase II investigation in the following three cases:
the intended acquisition of Telefónica UK by Hutchison 3G UK with 22 April 2016 as a provisional decision deadline;
the intended acquisition of oil services provider Baker Hughes by competitor Halliburton with 26 May 2016 as a provisional decision deadline; and
the intended acquisition of the Greek gas transmission company DESFA by the Azerbeidzjanian state-owned oil company SOCAR.
And yet, it remains possible to obtain clearance for a merger or acquisition during phase I despite the fact that the parties involved will as a result of the transaction have high market shares. For example, Pfizer was able to obtain conditional approval from the Commission for the acquisition of Hospira in August 2015 during the first phase. It is clear, however, that the Commission does not shy away from an intensive assessment of mergers and acquisitions by means of a phase II investigation.
The Netherlands Authority for Consumers and Markets and the Dutch Healthcare Authority
In the Netherlands, as well, an increase in the number of mergers and acquisitions occurred in 2015. TheSEC reported an increase of 11 percent in 2015 in comparison with the number of mergers and acquisitions in 2014. In 2015, the Netherlands Authority for Consumers and Markets (“ACM”) had a great deal more work to do regarding merger control than in 2014. In October 2015 the chairman of ACM, Chris Fonteijn, reported that up to and including September 2015 ACM had already assessed 61 merger filings, in contrast with 71 merger filings in the calendar year of 2014. Two cases stood out in 2015: ACM’s unconditional approval of the acquisition of De Lotto by De Staatsloterij, and ACM’s prohibition of the merger of two hospitals in Dordrecht. What lessons can we learn from these cases for 2016?
ACM decided on 3 July 2015 within two and a half months after receiving the notification for the acquisition of De Lotto by De Staatsloterij that this concentration could not be cleared during phase I. Subsequently, on 7 December 2015 ACM decided to approve the acquisition unconditionally during phase II. This was three and a half months after receipt of the merger licence application. ACM found that De Staatsloterij and De Lotto hardly compete with each other in practice, inter alia as result of the strong regulations surrounding games of chance. ACM in this respect used an external investigation on consumer preferences as regards games of chance and lotteries. ACM also used a regression analysis which it commented on in a separate document. The fact that the online market for games of chance will likely become legal in the Netherlands in 2017 also played a role in ACM's prospective decision. For this reason, ACM also performed an investigation into the competitive position of De Staatsloterij-De Lotto in that market. According to ACM, De Staatsloterij-De Lotto would also experience sufficient competitive pressure in the online market for games of chance. The case of De Staatsloterij-De Lotto demonstrates that ACM is willing to perform a prospective analysis and is open to quantitative research. Interesting in this context is the ruling of the Trade and Industry Appeals Tribunal (College van Beroep voor het bedrijfsleven) (“CBb”) of 11 February 2016 on ACM's ban on the acquisition by Continental Bakeries of A.A. Ter Beek BV (known from the Bolletje brand). The CBb ruled against the decision of the Rotterdam District Court which upheld the decision of ACM. The CBb found that the ACM did not sufficiently substantiate that branded and private label rusks belong to the same wholesale market (i.e. the upstream market) and therefore annulled the decision of ACM (for more information seehere).
In April 2015, the Dutch Healthcare Authority (“NZa”) strongly criticized the ACM. The NZa indicated that ACM had approved thirteen hospital mergers since 2011, while the NZa had notified ACM that these mergers could trigger significant price increases. Subsequenty, ACM prohibited the merger of Albert Schweitzer Ziekenhuis and Rivas Zorggroep on 15 July 2015. We commented on this development in the Dutch Financial newspaper FD. ACM chairman Fonteijn made it clear in October 2015 that the prohibition should not be regarded as a response to political opinions from The Hague concerning an undesirable ‘merger wave’ in the Dutch healthcare sector. According to Chris Fonteijn, ACM’s decision was a consequence of its autonomous considerations in this specific case. It is therefore quite doubtful whether ACM will prohibit healthcare mergers more often in 2016. As for the hospitals in Dordrecht they lodged an appeal against the prohibition decision. It is expected that the Rotterdam District Court will render a judgment on this matter in 2016.
Regardless, the healthcare sector will also in 2016 be responsible for a considerable part of ACM’s merger control workload. ACM at the end of 2015 created a Healthcare Task Force. According to ACM, the purpose of this task force was to respond to the possible transfer of supervisory tasks from the NZa to ACM (such as the healthcare-specific merger control). The legislative proposal that should make this possible (click here for our response), still has to be sent to the House of Representatives. Minister Edith Schippers aims to do so during the first quarter of 2016.
The NZa acknowledges in the meantime that pursuant to the healthcare-specific merger control it has to assess many more mergers than was expected initially (the NZa received 170 notifications in a two-year period while the legislator had anticipated approximately 25 notifications per year). This finding does not constitute a reason for the NZa to argue for abolition of this assessment or for an immediate increase of the relevant thresholds. The NZa reports that the healthcare-specific merger control regime will apply in full in 2016. The NZa also sends out a warning that not filing a concentration that should be notified with the NZa could be fined by the NZa. The NZa states that it will be monitoring reports in the media and other channels concerning mergers and aquisitions and will contact the parties involved if necessary. In short, as regards the assessment of healthcare mergers also in 2016 the ball is in the court of both the NZa and ACM.