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Freshfields Transactions

| 4 minutes read

Impact of COVID-19 – merger review and deal timelines

COVID-19 is impacting all sectors of the economy and society, and merger review is no exception. Competition authorities are struggling to balance the need for business continuity and compliance with administrative deadlines on the one hand, with a variety of practical challenges on the other. 

There are concerns that competition authorities conducting market investigations may not get (sufficient) responses from market participants within tight statutory deadlines. Moreover, the IT infrastructure of many competition authorities does not support remote access to certain types of case information, and we have heard of serious IT issues as an unprecedented number of officials are forced to work from home. 

This has led to a range of approaches across jurisdictions with some regions – and, indeed, countries – seemingly more impacted than others.

In the EU and North America, disruption has been most pronounced so far. Yet even then, competition authorities’ responses have been far from uniform. 

Overall, we are seeing:

  • a reduced prospect of early clearance in ‘no issues’ cases under review. Many competition authorities are struggling with caseloads, forcing them to prioritise complex reviews over ‘no issues’ cases. In the US, the Federal Trade Commission (FTC) has publicly stated that early termination of the Hart-Scott-Rodino Act (HSR) waiting period will not be granted on any filing. (The FTC press release also states that the Department of Justice will implement the same procedures.) In Italy, we have already seen a slowdown of clearances within the relevant deadlines although no suspension of timelines so far. Expect competition authorities to use (near to) the statutory timing maximum for merger reviews for the foreseeable future.
  • increased risk of ‘stop the clock’ in complex cases. In Spain, all applicable deadlines in administrative proceedings (including merger review) have been suspended altogether. Such a move is not currently contemplated at EU level, but we understand that the EU Commission may stop the clock on a case-by-case basis where necessary (by sending requests for information which the parties cannot, or have informally agreed with the Commission not to, answer within the deadline). Expect similar approaches from other competition authorities as they seek to ensure compliance with administrative deadlines.
  • challenges for parties getting ‘on the clock’ in cases not yet filed. Certain competition authorities are seeking to dissuade parties from filing. The Commission has issued a press release in which it has 'encouraged' parties not to file until further notice where possible. Expect competition authorities to raise issues of ‘completeness’ with notifications that are submitted prematurely in the coming months; with extensive information requests potentially being used as a mechanism to prolong prenotification.
  • but more drastic measures remain the exception for now. Most competition authorities remain open and, in many cases, extraordinary measures are being adopted to minimise disruption. The Commission is accepting electronic rather hard copy submissions, and the US authorities have moved to an e-filing system. Outside the EU and North America, disruption seems to be more limited for now. However, the situation is evolving rapidly – just today, the Philippine competition authority suspended its merger review process. It will be important to monitor closely the containment measures in jurisdictions relevant to a transaction and be prepared for any potential impact in advance.

Perhaps surprisingly, no major disruptions have been experienced so far in our interactions with Asian authorities most heavily affected by COVID-19, including China, Japan and South Korea. 

Indeed, the Chinese authority, the State Administration for Market Regulation, resumed normal operations in February following the extended Chinese New Year public holiday and is currently clearing approximately two cases per day (although face-to-face meetings are impossible for the moment).

Practical tips

During the current period of stress and uncertainty, a few predictions and practical tips are as follows:

  • parties who have already filed: may encounter some delays in their merger review, particularly in the EU and US but potentially also in China for complicated cases where market testing is involved. There are reduced prospects of early clearance in ‘no issues’ cases. In more complex cases, competition authorities may have no choice but to stop the clock to delay deadlines. Parties should communicate clearly with competition authorities any hard deadlines in their deal timetable, and in some circumstances may need to discuss revision of long stop dates.
  • parties who have not yet filed: may encounter delays in their merger review, particularly in the EU and US. The competition authorities who are particularly affected will be eager to prolong prenotification wherever possible. Parties should ensure that where this occurs, prenotification is still used to push the substantive review forward. Encouraging early market testing may be advisable in certain circumstances, where feasible given the practical challenges above.
  • parties negotiating future deals: should factor in extended timelines in certain jurisdictions when determining long stop dates (including accounting for the fact that early termination of the HSR waiting period will not be granted in the US for the foreseeable future), and/or may wish to consider specific clauses in deal agreements to ensure that the clock does not keep running on a long stop date where authorities are in full or partial shut-down due to COVID-19. Even in the most optimistic scenario where COVID-19 is contained relatively quickly, there is a risk of delays due to competition authorities having to deal with a backlog of cases.

You can find our latest updates on our coronavirus alert hub.

For further information on these or related topics, please contact your usual Freshfields lawyer or a member of our antitrust team.


global, mergers and acquisitions, covid-19, coronavirus, merger control