Merger review – international insightsComparison between the US, EU, UK, NZ and AU
Dr Martyn Taylor
Andrew Willekes
Louie Liu
April 2016
Overview
Differences in…
– institutional frameworks
– merger notification processes
– substantive analysis
– decision-making and remedies
…and some interesting conclusions
Our key question: Does Australia have the best merger regime?
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Differences in institutional frameworks
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United States
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• Multiple regulators (including State and
sectoral), with overlapping jurisdictions
primarily the Federal Trade Commission
(FTC) and Department of Justice (DOJ).
• FTC has a 5 member board that is
politically appointed, but no more than 3
Commissioners from the same party.
FTC operates as an agent of Congress
and is oriented to competition policy.
• Antitrust Division of the DOJ is a federal
agency supporting the Attorney General,
as a member of the President’s cabinet.
DOJ is oriented to enforcement.
• FTC and DOJ have joint authority over
enforcement of the Clayton Act and will
informally discuss which takes the lead.
• FTC and DOJ follow a prosecutorial
model, with court enforcement required.
• Single regulator, being the European
Commission (Directorate General for
Competition - DG COMP).
• Current DG COMP Commissioner is
Margrethe Vestager, a Danish politician
and previously Denmark’s Deputy PM.
• Mergers with a ‘Community Dimension’
are subject to DG COMP’s exclusive
jurisdiction, otherwise relevant national
competition regulators have jurisdiction.
• Notifications under EU Merger Control
Regulation (EUMR) are reviewed by
sector-specific units within DG COMP.
• Member States of the EU express their
views on a merger via representatives in
Advisory Committee on Concentrations.
• DG COMP follows an administrative
model, can impose fines and remedies.
European Union
United Kingdom
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• Competition & Markets Authority (CMA) is
a non-ministerial government department
that started operation on 1 April 2014.
• CMA created by merger of Competition
Commission with Office of Fair Trading.
CMA is accountable to Parliament.
• The CMA has a Board (for governance)
and a Panel (for reviews and inquiries).
Alex Chisholm is Chief Executive.
• The Markets & Mergers Directorate
(currently led by Andrea Coscelli) is
responsible for merger reviews.
• CMA has jurisdiction over mergers which
do not fall within the exclusive jurisdiction
of the European Commission and which
satisfy the UK jurisdictional thresholds.
• Secretary of State has right to intervene.
• CMA follows an administrative model, can
impose orders, fines and remedies.
• New Zealand Commerce Commission
(ComCom) is an independent statutory
commission created under the Commerce
Act 1986.
• Commission comprises Chair (Mark
Berry), Deputy Chair, Telecoms
Commissioner, 3 x Commissioners, 2 x
Associate Commissioners, and 2 x Cease
& Desist Commissioners.
• ACCC and ComCom have a jointly
appointed Commissioner
• Commission is supported by staff.
Mergers are reviewed by the Competition
Branch under GM Kate Morrison.
• ComCom follows a prosecutorial model,
with court enforcement is required.
• The New Zealand institutional framework
is very similar to Australia.
New Zealand
How does Australia compare?
• We avoid the jurisdictional complexity of multiple
overlapping regulators (US), or a hierarchy of regulators
(EU/UK), preferring a single consolidated regulator.
• We avoid the pitfalls of politicised regulators (US/EU/UK)
by having an independent Commission comprised of
appointees with bipartisan Federal and State support.
• As with US/EU/UK regulators, mergers are reviewed by an
experienced and highly qualified staff, supported by legal
and economic teams. Decisions are made by the
Commissioners.
• EU merger review process is highly formalised and rule-
based, given the administrative model adopted and
institutional edifice. The Australian regime is more flexible.
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Chairman
Rod Sims
Deputy Chair
Delia Rickard
Deputy Chair
Michael Schaper
Commissioner
Christina Cifuentes
Commissioner
Sarah Court
Commissioner
Roger Featherston
Commissioner
Mick Keogh
and Four Associate Members
Differences in merger notification processes
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United States
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• Mandatory filing regime under the Hart-
Scott-Rodino Antitrust Improvements Act
of 1976 (HSR).
• Pre-notification required if turnover
thresholds met. Notification applies to any
party engaging in US commerce (or
activity affecting it).
• Filing based on prescribed form with fee
and requires specified documents. Filling
commences formal review.
• Merger is suspended until waiting periods
have expired.
• Phase I (30 days unless extended) and
Phase II (30 days). Phase II starts only
once ‘Certificate of Compliance’ is issued.
• Filing is a very document-intensive
process, supplemented with formal
interviews.
• Mandatory filing regime (EU Merger
Regulation). New Simplified Procedure
introduced for some transactions.
• Pre-notification required if geographic
turnover thresholds met. Notification
applies to mergers with a ‘Community
Dimension’ (multiple EU States).
• In-depth pre-notification consultation
including submissions and documents is
encouraged
• Filing based on prescribed form. Fee
payable. Filing commences formal review.
• Merger is suspended until waiting periods
have expired.
• Phase I (25 days unless extended) and
Phase II (90 days unless extended).
• Filing is extensive and detailed
submissions and documents provided.
European Union
United Kingdom
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• Voluntary notification under the Enterprise
Act 2002, administered by CMA.
• If UK turnover thresholds are exceeded or
the share of UK supply exceeds 25%, the
CMA may investigate on own initiative
within 4 months after completion/public
(ultimate risk: potential divestiture).
• Pre-notification discussions encouraged.
• Phase 1 decisions are made by the Board
within 40 days. If the CMA considers that
a merger may result in an SLC, it refers to
Phase 2. Undertakings in lieu (UIL) can
be offered after Phase 1 to avoid Phase 2
• Phase 2 decisions are made by a Panel
or ‘Inquiry Group’ within 24-32 weeks in
a more detailed review involving
consideration of remedies. The Panel is
comprised of at least 3 members (who
may not have a competition background).
• Voluntary filing regime / formal review
• No informal clearance regime. Choice
between a courtesy / formal clearance
notification or merger authorisation.
• Filing does not suspend the merger, but
ComCom can seek interim injunction.
• Pre-notification discussions encouraged
to identify information required and plan
for formal clearance.
• Filing based on prescribed form. Fee
payable. Filing commences formal review
• Formal clearances takes 40 – 60 days
(10 day statutory period extended by
agreement or risk of a deemed decline).
Authorisation 6 – 12 months.
• De-facto Phase I / Phase II regime with a
letter of concerns and potentially a letter
of unresolved issues.
New Zealand
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How does Australia compare?
• Australia has a voluntary filing regime, similar to the UK and NZ.
However, neither Australia nor NZ have “hard” merger thresholds,
instead parties identify whether there are competition issues (with
indicative filing guidance from the respective merger guidelines).
• Australia’s reliance on the informal clearance regime is also fairly
unique given the informal regime is not established under the CCA,
but is a policy adopted by the ACCC. Under this approach, the
ACCC provides no formal statutory comfort.
• There are however substantial differences in the filing requirements,
from detailed document intensive filing forms (US), to detailed
submissions (EU), to courtesy letters (AUD)
• Substantial difference in approach to pre-notification process, from a
heads-up (NZ) to a detailed substantive submission process (EU).
All regimes broadly adopt a Phase I / Phase II approach to allow a
greater focus on those mergers that raise real competition concerns.
• Australia’s informal process is flexible allowing for continual
refinement over time.
Differences in substantive analysis
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United States
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• Section 7 of the Clayton Act prohibits
acquisitions where the effect “may be
substantially to lessen competition or to
tend to create a monopoly”.
• Merger Guidelines (but now market
definition has been de-emphasised).
• Focus on whether merger would create or
enhance market power or facilitate its
exercise. Is a merger “likely to encourage
one or more firms to raise price, reduce
output, diminish innovation, or otherwise
harm customers as a result of diminished
competitive constraints or incentives” ?
• Vertical and conglomerate theories of
harm less common.
• Market concentration assessed via HHI.
• Agency may consider merger efficiencies,
but will not non-competition factors.
• The EUMR prohibits concentrations that
significantly impede effective competition
in the EEA, or a substantial part of it, in
particular as a result of the creation or
strengthening of a dominant position.
• Merger Guidelines.
• Focus on unilateral (does the merger
remove competitive constraints to the
extent the merger creates / strengthens a
dominant position) and coordinated
(mergers giving rise to collective
dominance) anti-competitive effects
• Market concentration assessed via HHI.
• The EC must (formally) consider merger
efficiencies (if substantiated) but in
practice these are less influential.
• Non-competition factors, eg industrial
policy, may feed into decision making.
European Union
United Kingdom
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• The substantive test is whether a merger
has resulted, or may be expected to
result in a substantial lessening of
competition (SLC) within a market or
markets in the UK for goods or services.
• Merger Assessment Guidelines 2010 set
out analytical approach. CMA considers
unilateral effects and co-ordinated effects,
and any vertical or conglomerate effects.
• CMA applies a ‘with and without’
counterfactual analysis. Approach is
similar to Australia.
• CMA also considers efficiencies, market
entry and expansion, and countervailing
buyer power, as with US and EU,
consistent with global best practice.
• CMA uses HHI, but also considers a
range of other market share metrics (eg
number of firms, concentration ratios).
• Section 46 of the Commerce Act 1986
(substantial lessening test).
• Merger Guidelines 2013
• Focus on market definition, concentration,
unilateral and co-ordinated effects,
contestability, countervailing power,
vertical foreclosure.
• ComCom adopts a ‘with and without’
counterfactual analysis and applies a very
similar approach to the ACCC.
• ComCom does not use HHI but refers to
indicative market concentration based on
CR3 (top 3 > 70%, merged entity > 20%;
or top 3<70%, merged entity > 40%),
hence more permissive of concentration.
• Authorisation is based on public benefits
outweighing anti-competitive detriments
New Zealand
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How does Australia compare?
• Australia’s “effects” test and concentration assessment is
essentially the same as that applied in the US/EU/UK and
consistent with international best practice.
• All regulators set out their analytical framework in merger
guidelines. Australia’s Merger Guidelines (2008) are consistent with
international best practice and other key jurisdictions.
• The US Merger Guidelines de-emphasise market definition as a
building block and focus on metrics such as upward pricing
pressure (UPP). Refinements to the ACCC’s guidelines, such as
UPP or dealing with evolving technology markets (eg network
effects) could be considered.
• Australia’s (and New Zealand’s) substantive approach takes into
account unique features of the Australian economy, including more
concentrated markets and a higher reliance on import competition.
• Differences arise in the consideration of merger efficiencies.
Australia’s authorisation process enables efficiencies (and wider
benefits) to be expressly considered, but in practice it is rarely
used. The Harper Reforms could change this.
Differences in decision-making and remedies
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United States
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• ‘Back-loaded’ review process.
• Staff recommendations with decisions by the
majority of Commissioners (FTC) or the
Assistant Attorney-General for Antitrust
(DOJ)
• Independent recommendations from Office
of General Counsel.
• HSR does not result in affirmative ‘clearance’
or ‘approval’, rather the parties are free to
close their transaction on the waiting period
expiry (and hence risk an injunction)
• Parties can offer a consent decree
(divestment remedy). Structural remedies
preferred. Behavioural remedies are less
common, but may be used for vertical
foreclosure issues.
• Less transparent processes and decisions
are not normally published.
• FTC/DOJ proceedings to block acquisitions
(3 - 6 months). Can take action at any stage.
• ‘Front-loaded’ review process.
• Staff recommendations with a Phase I
decision by Competition Commissioner, and
Phase II decisions by College of
Commissioners.
• Independent panel review and
recommendations of Phase II decisions
• Greater focus on procedural rights during
process, including third party submission
and joint EC/merger party/third party
meetings. Phase 2 access to non-
confidential file.
• Parties can offer undertakings using ‘Form
RM’. Structural remedies preferred but may
accept behavioural in limited circumstances.
• More transparent processes. Decisions are
routinely published.
• EC prohibits merger. Appeal to the General
Court on procedural and substantive
grounds, but 1-2 year delay.
European Union
United Kingdom
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• Increasingly ‘front-loaded’ review process
(due to set statutory review time-frames).
• Undertakings may be offered to remedy
any identified adverse competition
concerns at both Phase 1 (to prevent a
reference) and Phase 2 (to remedy any
adverse findings the CMA identifies
following a reference).
• Undertakings can be structural or
behavioural, but structural undertakings
are preferred if offered in Phase 1. The
CMA will also assess the cost of
remedies and proportionality.
• Decisions are made either by the Board
(Phase 1) or a Panel (Phase 2).
• Transparent process / decision published
• The CMA may make an interim order to
prevent or unwind transactions (at any
time), with penalties for non-compliance.
• ‘Back-loaded’ review process.
• Process involves staff recommendations
with a decisions by the Commission.
• Clearance and authorisation confer
statutory immunity.
• Commerce Act only allows the ComCom
to accept structural undertakings
involving divestitures of assets or shares
(typically 6-12 months).
• Merger party can proceed to close
regardless of ComCom decision, but
ComCom may take proceedings.
• More transparent processes / decision
published
• Clearance and authorisation decisions
may be appealed to the High Court by
way of rehearing. Lay member (economic
expert) appointed to assist Judge.
New Zealand
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How does Australia compare?
• The Australian merger review process enables parties to choose
whether to front or back load the process, allowing a greater
degree of flexibility.
• Each agency adopts similar internal processes with staff
investigations and recommendations supported by economic /
legal teams, with decisions by Commissioners.
• Unlike the EU/US, in Australia merger parties cannot appeal the
ACCC’s informal clearance decision. However, parties can seek a
court declaration or contest any ACCC injunction. Either option
may require the ACCC to defend its decision in Court, hence the
ACCC’s decisions are subject to checks and balances.
• The Australian informal clearance process provides significant
flexibility for remedies (either upfront or during Phase II). There is
however a difference in the tolerance for behavioural remedies (but
not NZ given statutory restrictions).
• The ACCC’s decision-making processes are world class and the
ACCC is regularly ranked as a leading competition regulator.
… and some interesting conclusions
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Do we have the best merger regime?
• From an institutional perspective, we benefit from a single consolidated and politically-
independent regulator, avoiding jurisdictional tensions between regulators.
• The ACCC’s decision making processes, substantive test, merger thresholds and
guidelines are world class and consistent with international best practice, but bespoke
to the unique features of Australia’s economy. The Guidelines could benefit from
ongoing refinement.
• The ACCC’s voluntary and informal processes create a high degree of flexibility for
merger parties, including in relation to proposed remedies. Australia could however
benefit from a greater tolerance for behavioural remedies in certain circumstances?
We avoid the complications that arise in
many of the other regimes, but that is
no excuse for complacency…
… the effectiveness of the merger
regime depends heavily on the actual
timeliness and quality of decisions.
Appendices
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Increasing complexity of global merger review
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Institutional frameworks – a useful snapshot
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Detail AUS (ACCC) US (DOJ and FTC) EU (EC) UK (MCA)
Structure of
Governing Body
Multi-Member Board Multi-Member Board (FTC)
Unitary executive (DOJ)
Unitary executive (EU) Multi-Member Board
Appointment of the
head of the authority
Appointment subject to
parliamentary approval
Appointment subject to
parliamentary approval
Presidential / Ministerial
appointment
Presidential / Ministerial
appointment
Status of the agency Stand-alone agency Stand-alone agency (TC)
Subsidiary (DOJ)
Subsidiary Stand-alone agency
Number of
competition
agencies
One enforcement agency Multiple agencies One enforcement agency One enforcement agency
Objectives
(competition, con-
sumer protection,
state aid...)
Multi-purpose Single-purpose (DOJ)
Multi-purpose (FTC)
Multi-purpose Multi-purpose
Scope of the agency Competition Policy Law Enforcement (DOJ)
Competition Policy (FTC)
Competition Policy Competition Policy
Civil or Criminal
competition law
Criminal sanction available Criminal sanction available Administrative remedies only Criminal sanction available
Integration of
functions
Prosecutorial model Prosecutorial model Integration of functions in
one entity
Integration of functions in
one entity
Review timelines (Assuming non-complex merger review)
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U.S.
EU
UK
NZ
AU
File
Formalised EC process that runs for 1-4
months depending on the complexity of the
deal
At least 2 weeks before
filing, can seek informal
advice
0-4 weeks, can
seek confidential
review
Encouraged
Encouraged
Phase I Phase II
25-35 days
40 days
25 days -
Letter of
issues
35-60 days for
public review
30 days
35-60 days (+)
weeks for post-
SOI review
15-20 days -Letter of
unresolved issues
120 days
90-125 days (3-4 months)
Extension
120 days
10
days
Pre-notification
30 daysPrepare response 1-6
months
Extension
40 days
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Merger review frameworks – a useful snapshot
Our global footprint
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0
Contact us
Dr Martyn Taylor
Partner
Norton Rose Fulbright Australia
+61 2 9330 8056
nortonrosefulbright.com
2185357227
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