More than 90 countries have merger control regimes – and that number is rising. Transactions are now more likely to attract merger control scrutiny and in 2010 some competition authorities imposed heavy fines on parties that implemented their transactions without clearance. Authorities are increasingly co-operating in their reviews of international transactions, on both exchange of investigative information and action on remedies. Overall, this means that multi-jurisdictional co-ordination of both the procedural and the substantive aspects of the case is more important than ever for the parties.
- On 22 January 2010, in the first such case in the US since 2006, the US Department of Justice (DOJ) fined Smithfield Foods $900,000 for violating the pre-merger waiting period requirements of the Hart-Scott-Rodino (HSR) Act.
- European authorities took similar enforcement action last year – for example, the Irish competition authority recently declared a transaction between two ferry operators void for failure to obtain approval before completion. The Irish authority is currently reviewing the transaction, and has decided to carry out a full (Phase II) investigation. National competition authorities that have imposed fines for gun-jumping in recent years include Germany, the Netherlands, Spain, Norway, Slovakia and Romania.
- The European Commission imposed a €20m fine on Electrabel in 2009 for acquiring a stake in a target that the Commission considered amounted to control without prior approval. Electrabel has appealed the finding.
- Both the US antitrust agencies were active in scrutinising mergers that did not trigger the reporting requirements under the HSR Act. For example, the DOJ filed suit against dairy processor Dean Foods in relation to its 2009 acquisition of two dairy processing plants in Wisconsin. The DOJ is seeking to unwind the 2009 transaction and an order requiring Dean Foods to notify the DOJ at least 30 days before any future acquisition involving a milk processing operation. The case is pending for 2011.
- Parties to a potential transaction should also be aware that the European Commission may take jurisdiction even though the transaction does not meet the EU or national merger notification thresholds in Europe. A member state may ask the Commission to review a transaction under Article 22 of the EU Merger Regulation where it affects trade between member states and threatens to affect competition significantly within the territory of the relevant member state. The case is then notified to all member states and other member states may ask the Commission to review the transaction in respect of their jurisdiction, even if the transaction is not notifiable there. For example, in the SC Johnson/Sara Lee Insecticides transaction, five countries that reportedly did not have jurisdiction to review the deal joined the Article 22 request. Article 22 was used in three cases reviewed by the European Commission last year, two of which resulted in a Phase II investigation. Close co-operation between European competition authorities may lead to more of these cases in 2011.
- Last year also saw close co-operation between the European Commission and the US authorities – for example, the authorities’ parallel clearances of Cisco’s acquisition of Tandberg, a vendor of videoconferencing products. Although the European Commission required the parties to offer remedies but the DOJ did not, the DOJ noted specifically that one of the factors in its decision to clear the transaction was the remedy package agreed with the European Commission.
The vast majority of notified transactions do not require the parties to offer remedies. For transactions that do raise substantive issues, authorities may seek additional safeguards to ensure the viability of the remedies. There is an increasing tendency for the European Commission to insist on suitable purchaser conditions and/or an upfront buyer in remedies cases. If an upfront buyer is required, this has significant timing implications because it means that merging parties need to have entered into a legally binding agreement for the on-sale of a divestment business to a buyer approved by the Commission before they can close the main transaction.
Parties also need to take into account that, in the current economic climate, competition authorities will be concerned to ensure that the proposed divestment creates a viable business, which may mean the parties need to offer additional concessions. For example, in relation to the acquisition by Syngenta of Monsanto’s global sunflower seed business, the remedies agreed with the European Commission included rights to commercialise some sunflower hybrids not only for the EU but also in Russia, the Ukraine and Turkey, to ensure the long-term viability of the divested business. The DOJ has indicated that it will seek behavioural as well as structural remedies where appropriate, as it did in relation to the Ticketmaster/Live Nation merger. The behavioural remedies include a prohibition on retaliating against any venue owner that chooses to use another company’s ticketing or promotional services and a requirement to notify any future acquisitions involving a ticketing company. The behavioural commitments will be in place for 10 years and the DOJ has set up a compliance committee to monitor them.