GLOBAL UPDATE – International Cooperation in Merger Control
Executive Summary: Despite formal agreements for and increased emphasis on international cooperation, there are still significant areas of divergence in how different competition authorities review mergers. This article discusses recent examples of mergers requiring review in multiple jurisdictions and the key practical messages arising therefrom.
Execution of a global deal can involve a challenging web of merger control regimes, as demonstrated by several high profile cases reviewed by multiple competition authorities across the world over the past year.
The key authorities are often the European Commission (“EC”), the Federal Trade Commission (“FTC”) or Department of Justice (“DOJ”) in the US’ and the Anti-Monopoly Bureau of the Ministry of Commerce (“MOFCOM”) in China. However, authorities in other jurisdictions (for example, Brazil, Russia, India, South Africa, Japan, South Korea and Australia) may also play a significant role in investigating international deals and their reviews can have an impact on deal timetables.
LEGISLATIVE FRAMEWORK FOR INTERNATIONAL COOPERATION IN MERGER CONTROL
Cooperation on merger control between the EC and the US agencies is particularly well established. The 1991 US-EU Competition Laws Cooperation Agreement provides for cooperation and coordination of enforcement activities between the EC and the FTC/DOJ and the avoidance of conflicts by accommodating competing interests. The Best Practices on Cooperation in Merger Investigations agreed between the EU and the US in 2011 provide a practical framework for cooperation, indicating specific points in the review process where contact between the EC and the FTC/DOJ can be useful.
While international cooperation with MOFCOM in China is less developed than that between the EU and the US, it is growing. Cooperation between the EC and MOFCOM is based on the EU-China Competition Policy Dialogue reached in 2004, which provides for a structured dialogue to take place at least once a year between the EC and MOFCOM on the subject of competition policy and legislation. In 2011, the US and China signed a Memorandum of Understanding on Antitrust and Antimonopoly Cooperation. Guidance for Case Cooperation between MOFCOM and the DOJ and FTC on Concentration of Undertakings (Merger) Cases has also been agreed between the two jurisdictions.
While these agreements provide formal mechanisms for international cooperation, competition authorities also interact on an informal basis. Highlighting international convergence on merger control analysis and process as an important policy objective, the EU Competition Commissioner Joaquin Almunia recently stated that international competition authorities “must learn to work together” to develop a “common understanding of the principles that must guide merger control reviews.”
RECENT EXAMPLES OF MERGERS REQUIRING MULTIPLE NOTIFICATIONS
Despite increased emphasis on international cooperation, there are still significant areas of divergence in how different competition authorities review mergers. Practical differences in the review timetable were particularly evident in Glencore/Xstrata. Glencore’s acquisition of Xstrata, forming the world’s largest commodities trader and fourth-largest mining company, was cleared unconditionally in the US in July 2012, followed by conditional clearance in the EU in November 2012. Clearance was also obtained in Australia and South Africa. However, the parties were not able to close the deal until MOFCOM had cleared it in April 2013 – three months after all other merger clearances had been granted.
Substantive differences can also arise in relation to the remedies imposed, as in Marubeni Corporation/Gavilon Holdings LLC. The $5 billion acquisition of US-based grain trader Gavilon Holdings by Japanese trading house Marubeni was cleared unconditionally in the EU in August 2012 and the US in November 2012. By contrast, the MOFCOM approval was subject to conditions, and was not granted until several months later, in April 2013.
A more complementary alignment of decisions by the EC and MOFCOM was seen in relation to US healthcare company Baxter International’s acquisition of Swedish dialysis equipment manufacturer Gambro for $4 billion. The EC conditionally cleared the Baxter International Inc./Gambro AB transaction in July 2013, followed soon after by MOFCOM in August 2013. Both the EC and MOFCOM required Baxter to divest its global CRRT business, in addition to other structural and behavioural remedies imposed. The deal did not need to be notified in the US but was subject to review inter alia in Australia and New Zealand.
The $11 billion merger between US Airways and American Airlines’ holding company AMR Corporation, which was closed in December 2013, was reviewed in both the EU and the US. While the deal was conditionally cleared by the EC in August 2013, the DOJ filed a lawsuit to block the merger the same month, and only reached a settlement with the parties on divestments in November 2013.
Thermo Fisher Scientific’s acquisition of Life Technologies for $13.6 billion has recently been cited as a “good example of international cooperation” by the EC. The EC conditionally cleared the deal on 26 November 2013. Unconditional clearances were obtained in Russia (8 October 2013), Canada (5 December 2013), Japan (19 December 2013) and Korea (7 January 2014). Conditional clearances — broadly in line with the commitments developed with the EC and the FTC — were also obtained in Australia (19 December 2013), New Zealand (19 December 2013) and China (14 January 2014). The final FTC clearance was issued on 31 January 2014.
The EC has highlighted the “mutual exchange of evidence, consisting mainly of internal documents of the Parties” as being central to its cooperation with international competition authorities in Thermo Fisher Scientific/Life Technologies. Similarly, the FTC has emphasised that it worked closely with staff at the EC and MOFCOM, among other authorities, “on the analysis of the proposed transaction and potential remedies” and acknowledged the “exemplary work done by all agencies, which led to compatible approaches on a global scale”. The continued development of this type of international cooperation between competition authorities would be to the benefit of the timely execution of global deals.
The key practical messages arising from these recent experiences of mergers requiring review in multiple jurisdictions are:
- a longer time frame may be involved where multiple notifications are required – in most cases, the process in China typically takes at least six to nine months;
- different approaches to the review by competition authorities are possible, as are divergent remedies;
- agreeing to give confidentiality waivers in order to facilitate the exchange of confidential information between competition authorities is likely to facilitate cooperation; and
in order to mitigate the uncertainty about timing and outcome of reviews, contractual protections can be used to share the risks inherent in obtaining international merger control approvals between the parties.