France and Australia move to improve their processes for competition scrutiny of mergers and acquisitions
The past few months have seen moves by the competition authorities in two significant jurisdictions, France and Australia, to clarify their national merger control procedures – that is, the processes under which their national competition authorities scrutinise mergers and acquisitions to see whether they have anti-competitive effects.
In July 2013, France's Competition Authority published new "Guidelines of Merger Control"44, while in Australia the ACCC (Australian Competition and Consumer Commission) released draft Merger Review Process Guidelines for public comment45.
A common feature of both guidelines – addressing an issue that is encountered in merger control processes across the world – is the possibility for pre-notification (or pre-filing) engagement between the parties and competition authorities to enable both sides to identify, and if possible address, any competition concerns. Pre-notification contacts have two main advantages:
- They open the possibility for any substantive competition difficulties to be dealt with before the parties publicly announce the transaction, so sparing the parties possible public embarrassment.
- They make it easier for transactions to be dealt with by the competition authorities within the prescribed timescales, and, as a result, could help avoid the need for a full "Phase 2" investigation lasting several months.
However, there are also potential disadvantages. The increasing use of pre-notification discussions – not only in France and Australia, but elsewhere – has the effect that the timetable for competition clearance is, in practice, substantially prolonged, and this must be factored in to transaction timetables and planning. Moreover, because pre-notification is an "informal" procedure, and therefore not normally subject to statutory time limits, its increased use introduces a greater element of uncertainty into the planning and timetabling of M&A processes. That said, experienced advisers will normally be able to give parties guidance on the typical length of pre-notification processes in a particular jurisdiction.
Under the French competition regime, it is obligatory to notify M&A transactions to the French Competition Authority, and to obtain the Authority's clearance prior to completing (closing) the transaction, if (a) the parties to the transaction meet the turnover thresholds set out under French competition law and (b) the transaction is not notifiable under the EU Merger Regulation (i.e., normally, because the parties do not meet the (higher) turnover thresholds set out in the EU Merger Regulation). Where a transaction is notifiable to the French Competition Authority, there is a "Phase 1" initial assessment lasting up to 60 working days and, if there are concerns about the transaction's effect on competition in French markets which cannot be resolved by negotiated remedies, there is then a "Phase 2" full investigation lasting a maximum 130 working days.
The main new features introduced by France's July 2013 Guidelines on Merger Control are:
- Greater emphasis on the informal "pre-notification" phase (i.e. before the formal "Phase 1" process is triggered). According to the French Competition Authority, this will enable the parties to discuss with the Competition Authority, prior to notification,
"any potential problems related to the eligibility criteria of the review of the operation or to particularities of the companies or markets involved, even going as far as to anticipate any possible competition problems".
- A simplified examination procedure, enabling transactions that are not likely to raise competition problems to obtain a simplified merger clearance decision within 15 working days after notification (i.e. just one-quarter of the time for "standard" Phase 1 clearance). The simplified examination procedure has been used for two years, but the new Guidelines specify the criteria under which a transaction will be eligible.
- Clarification about market definition analysis: The Guidelines, drawing on experience from recent cases, clarify the approach that the French Competition Authority takes on:
- how relevant markets are defined; and
- the use made of market definition in the competition analysis.
- Disposal remedies: Where the French Competition Authority requires an acquirer to dispose of part of its business, as part of a negotiated remedy for conditional clearance – whether at the end of Phase 1 or of Phase 2 – an independent trustee is normally appointed to supervise the obligatory disposal. The new Guidelines offer two standard models for the disposal of assets and the mandate for the trustee in this situation.
By contrast with France, Australia's competition law does not make it obligatory to notify M&A transactions meeting the country's merger control thresholds. Instead (and similarly to the position in the UK) there is a voluntary notification procedure; if the transaction has significant anti-competitive effects, there is a risk in non-notification in that it is open to the ACCC to investigate the transaction of its own accord and, if the ACCC considers the transaction problematic, ultimately to prohibit the transaction (or, if the transaction has been completed, to order the merged business to be broken up). In practice, the ACCC expects merger parties to notify it where they supply competing or complementary goods or services in Australia and their post-merger market share in Australia exceeds 20 per cent in respect of any of those products or services.
The main new features of the Draft Merger Review Process Guidelines published by the ACCC in July 2013 are:
- "Pre-assessment": This allows the parties to gain valuable insight into any initial competition concerns, and the likely timeframe for informal clearance of a proposed transaction. The initial response from the ACCC is generally fairly quick – often within two weeks of the parties' approach.
- There are two classes of outcome of
- "Informal clearance": The ACCC might, at the pre-assessment phase, grant "informal clearance" of a transaction, although this is not assured. Informal clearance will generally only be granted at the pre-assessment phase where the ACCC takes the view that there is a "low risk" that the transaction will result in a substantial lessening of competition, and the ACCC is familiar with the industry and there is evidence to support the contentions made by the parties. There is no guarantee of confidentiality in the informal clearance process.
- "Confidential review": Where the transaction is highly confidential, and the parties are aware that there might be difficulties in obtaining clearance, it is open to them to approach the ACCC for a confidential review of a proposed transaction, allowing for an assessment of clearance risk without the need for the matter to be made public. The outcome of the confidential review process will only ever be a qualified view from the ACCC.
- New post-notification time limits: The formal merger clearance process is, as is common worldwide, in two phases; the assessment goes into a Phase 2 if there are significant and/or complex competition issues. The ACCC has redefined the timetable and the steps within each phase, indicating that a six to 12 week assessment timetable will be applied to Phase 1, and a further six to 12 weeks to Phase 2.
- It's worse because it's secret: Bid-rigging, why it matters, and what it tells us about the essence of competition law
- Professional rules – how safe from competition law in the EU? Antitrust cases in Portugal, Italy and the Czech Republic show that professional rules can be challenged under EU competition law
- Technology: Mobile telecoms M&A – more cases, and more clarity, in Europe
- Technology: Lessons from the ebooks case
- Transport: US antitrust intervention in American Airlines / US Airways aviation merger continues trend of more active merger control policy
- Mergers and acquisitions: How "foreign-to-foreign" mergers can still be blocked by the UK authorities
- Resale price maintenance: Crackdown in East Asia
- Competition in the market for corporate control
- In brief: Legal changes around the competition world
44French Autorité de la Concurrence,
Lignes Directices de l'Autorité de la concurrence
relatives au contrôle des Concentrations, July 10,
45Australian Competition and Consumer Commission press release, "ACCC seeks comments on updated merger process guidelines", July 1, 2013.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.