The 2024 edition of Getting the Deal Through: Merger Control has been published. This annual overview of global merger control has been led by Freshfields in partnership with Law Business Research for the past 28 years. The current edition covers the basic principles of merger control regulation in 59 jurisdictions worldwide. In this blog, we introduce the opening chapter which considers the key developments in the recent global shift towards tougher merger control enforcement—a trend that looks set to continue into 2024.
Over the past year, competition authorities globally have continued to make a move towards more stringent merger control enforcement. This follows an increasingly shared view among authorities and politicians across multiple jurisdictions that excessive consolidation in certain industries has been exacerbated in the past by a lenient approach to merger control enforcement. This overall trend has manifested itself in an increasing number of transactions being blocked, requiring remedies, or being abandoned by the merging parties.
Although a global trend, the toughest enforcement has come from the United States, the United Kingdom, and the European Union. The United States stands out as a key jurisdiction in this regard, with the Biden administration continuing to encourage greater intervention by the Federal Trade Commission and the Department of Justice.
Accompanying this focus on greater intervention has been an uptick in parallel reviews by regulatory authorities leading to divergent outcomes. A prominent example of this is Microsoft/Activision. While this transaction was unconditionally cleared by the State Administration for Market Regulation (SAMR) in China, it was only cleared by the European Commission subject to commitments from Microsoft. Meanwhile, the Federal Trade Commission (FTC) in the United States sued to block the transaction. With the FTC’s request for a preliminary injunction being denied, including a subsequent appeal by the FTC, the FTC withdrew its suit at the end of July 2023. It is in the UK, however, where the most uncertainty has arisen. Having issued a final order prohibiting the deal, the UK Competition and Markets Authority (CMA) took the unprecedented step of allowing Microsoft to submit a restructured deal for review. This development has raised a number of questions, including whether the restructured deal will impact Microsoft’s clearance in other jurisdictions, namely the EU. Overall, Microsoft/Activision demonstrates the need for a global strategy fused with local expertise, as regulators are increasingly less concerned about reaching divergent outcomes.
In addition, regulators have been adopting an expansionist interpretation of their jurisdictional reach. This includes the introduction of additional thresholds to call in transactions for review that do not meet the applicable thresholds for mandatory notification. For instance, China’s Antimonopoly Law came into force in 2022 allowing SAMR to now call-in transactions falling below merger thresholds. Meanwhile, India’s Competition (Amendment) Bill has expanded the thresholds requiring notification of a merger to the Competition Commission of India.
With regard to the substance of the interventions, there has been a heightened interest by regulators in non-traditional theories of harms, coupled with a distrust of non-structural or complex remedies. For instance, when reviewing AMD’s acquisition of Xilinx, SAMR raised conglomerate concerns finding that the merged entity would leverage Xilinx’s significant market power in the FPGA (semi-conductor devices) market to restrict competition in related (neighbouring) markets, requiring remedies to resolve this concern. In addition, there has been increased scrutiny on interoperability and data access considerations, particularly by the European Commission and the CMA, in cases such as Amazon/iRobot and Broadcom/VMware.
This tougher approach to merger control has been compounded by the introduction of new digital regulation in the EU (notably the Digital Markets Act), as well as upcoming or contemplated new digital regulations in the UK (as part of the Digital Markets, Competition and Consumers Bill), the US and across Asia. These new regulatory frameworks are intended to act as a backstop where existing competition law is perceived to have failed. Some of these new regimes will impose additional transparency requirements and require designated companies to inform authorities about a much broader range of transactions.
Finally, the global uptick in foreign investment regulation and the introduction of the EU’s Foreign Subsidies Regulation have added a further layer of complexity to obtaining regulatory clearance for transactions. Successful mergers and acquisitions, therefore, require careful navigation of multiple layers of regulatory review and strategic planning on a global scale to minimise the risk of divergent outcomes.
Overall, despite this prevailing global trend of tougher merger control enforcement, complex deals still get cleared; however, concerns remain that unfavourable outcomes may occur in key jurisdictions, with an adverse finding in one key jurisdiction having the potential to unravel the entire global transaction. Increasingly, this requires careful planning and a globally coordinated approach combined with local expertise. Such an approach will allow for the navigation of multiple merger control regimes with differing timelines, standards of proof, and remedy approaches.
In ‘Tougher merger control enforcement – a trend here to stay?’ we consider these global trends in more detail. In particular, we provide insights from Freshfields lawyers across Europe, the US, and Asia. You can read it here.
Please get in touch to request access to the 2024 edition of Getting the Deal Through: Merger Control.