The Italian Competition Authority has updated its merger control turnover thresholds. Effective today, 16 March 2015, Section 16(1) of Law no. 287 of 10 October 1990 requires prior notification of all mergers and acquisitions where both the following conditions are fulfilled:
Aggregate turnover in Italy of all undertakings involved is above EUR 492 million (revised under the terms of the same Section 16(1)); AND
Aggregate turnover in Italy of the target company is above EUR 49 million (as revised)
Italy’s merger control thresholds are adjusted annually to take into account increases in the GDP deflator index. The updated thresholds are published in the Competition Authority’s Bulletin once this increase in index is announced officially.
The Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Department of Justice (DOJ) held a public workshop on February 24–25, 2015, to examine recent trends and developments in health care provider organization and payment models, and their potential effects on competition in the provision of health care services. A main message from FTC and DOJ leadership at the workshop is that the agencies evaluate new provider and payment models for their adherence to competition principles, effect on cost of care, access and quality, and avoidance of market power.
The Federal Trade Commission (FTC or the Commission), along with the U.S. Department of Justice, can challenge mergers it believes will result in a substantial lessening of competition – for example through higher prices, lower quality or reduced rates of innovation. Although the analysis of whether a transaction may be anticompetitive typically focuses on price, privacy is increasingly regarded as a kind of non-price competition, like quality or innovation. During a recent symposium on the parameters and enforcement reach of Section 5 of the FTC Act, Deborah Feinstein, the director of the FTC’s Bureau of Competition, noted that privacy concerns are becoming more important in the agency’s merger reviews. Specifically she stated, “Privacy could be a form of non-price competition important to customers that could be actionable if two kinds of companies competed on privacy commitments on technologies they came up with.”
At this same symposium, Jessica Rich, director of the FTC’s Bureau of Consumer Protection, remarked on the agency’s increasing expectations that companies protect the consumer data they collect and be more transparent about what they collect, how they store and protect it, and about third parties with whom they share the data.
The FTC’s Bureaus of Competition and Consumer Protection fulfill the agency’s dual mission to promote competition and protect consumers, in part, through the enforcement of Section 5 of the FTC Act. With two areas of expertise and a supporting Bureau of Economics under one roof, the Commission is uniquely positioned to analyze whether a potential merger may substantially lessen privacy-related competition.
The concept that privacy is a form of non-price competition is not new to the FTC. In its 2007 statement upon closing its investigation into the merger of Google, Inc. and DoubleClick Inc., the Commission recognized that mergers can “adversely affect non-price attributes of competition, such as consumer privacy.” Commissioner Pamela Jones Harbour’s dissent in the Google/DoubleClick matter outlined a number of forward-looking competition and privacy-related considerations for analyzing mergers of data-rich companies. The FTC ultimately concluded that the evidence in that case “did not support the theories of potential competitive harm” and thus declined to challenge the deal. The matter laid the groundwork, however, for the agency’s future consideration of these issues.
While the FTC has yet to challenge a transaction on the basis that privacy competition would be substantially lessened, parties can expect staff from both the Bureau of Competition and the Bureau of Consumer Protection to be working closely together to analyze a proposed transaction’s impact on privacy. The FTC’s review of mergers between entities with large databases of consumer information may focus on: (1) whether the transaction will result in decreased privacy protections,i.e., lower quality of privacy; and (2) whether the combined parties achieve market power as a result of combining their consumer data.
This concept is not unique to the United States. The European Commission’s 2008 decision inTomTom/Tele Atlas examined whether there would be a decrease in privacy-based competition [...]
Head U.S. Department of Justice (DOJ) antitrust enforcer, Bill Baer, believes the Federal Trade Commission and DOJ are law enforcement agencies, not regulators. In his recent speech at the Global Competition Review Fourth Annual Antitrust Leaders Forum, Baer stressed that antitrust regulation “is not what we do. And it is not how we ought to think about what we do.” He added that the antitrust agencies “do not aspire to be regulators or to pick winners and losers. Instead antitrust enforcement, done right, focuses on removing impediments to competitive markets and protecting market structures that facilitate competition.” Baer’s enforcement-minded approach likely explains one reason why the federal antitrust agencies do not typically accept conduct remedies to resolve antitrust concerns. Conduct remedies require an entity to take, or refrain from, certain business conduct (e.g., price maintenance commitments). The federal antitrust agencies disfavor conduct remedies in part because they often require significant monitoring (i.e., regulation) to fully protect competition. As enforcers, Baer believes the agencies should use the antitrust laws to preserve competition with little regulatory involvement. He noted in his recent speech that effective antitrust remedies “minimize the need for ongoing regulatory involvement in decisions better left to the market.”
As litigation expenses continue to rise, it is often prudent for parties under antitrust investigation to resolve the antitrust agencies’ concerns through a consent agreement. The nature of the parties’ proposed remedy is highly important. With federal antitrust agencies unlikely to accept conduct remedies to resolve antitrust concerns, parties must be ready to present structural remedies—i.e., asset divestitures to ready, willing and able buyers—that fully preserve competition. The antitrust agencies will carefully scrutinize any proposed remedy. If the reviewing agency believes the remedy falls short of fully preserving competition, then it likely will be rejected. Indeed, Baer messaged in his speech that “[s]ound antitrust enforcement requires careful attention to remedies.” He praised DOJ’s recent efforts to reject inadequate remedy proposals in favor of pursuing law enforcement actions to obtain the relief DOJ deemed necessary to preserve competition. In short, parties must be ready to fully address the antitrust agencies concerns or do battle in court.
On January 30, 2015, the Federal Trade Commission (FTC) announced a settlement of its investigation into Sun Pharmaceutical Industries Ltd.’s (Sun) acquisition of Ranbaxy Laboratories Ltd. (Ranbaxy) from Daiichi Sankyo Co., Ltd. Sun and Ranbaxy are both multinational pharmaceutical companies that produce a range of generic and branded drugs.
In its complaint, the FTC alleges the relevant product market to be “the development, license, manufacture, marketing, distribution, and sale of generic minocycline hydrochloride 50 mg, 75 mg, and 100 mg tablets (‘minocycline tablets’).” Ranbaxy is currently one of only three U.S. suppliers of the relevant doses of minocycline tablets, with Sun being one of a limited number of firms likely to enter the alleged market in the near future. The complaint further alleges that the acquisition would eliminate a potential future competitor and therefore tend to substantially lessen competition by foregoing or delaying Sun’s entry into the relevant market and increase the likelihood that the combined entity would reduce price competition.
To resolve the competitive concern, the FTC is requiring divestiture not only of the minocycline tablets but also a product outside of the alleged relevant market—minocycline capsules. In its aid to public comment, the FTC states that this out-of-market divestiture is necessary to ensure that the divestiture buyer “achieves regulatory approval to qualify a new [active pharmaceutical ingredient] supplier for its minocycline tablets as quickly as Ranbaxy would have.”
Once the FTC or U.S. Department of Justice determines that a competitive problem exists, the agency will seek potential remedies, including divestiture. A cornerstone principle the agencies apply in evaluating a proposed remedy is that the remedy must restore competition to the level that would have existed had the underlying merger or acquisition not proceeded. This case illustrates an application of that principle, where the FTC required the divestiture of the out-of-market assets because, in its view, if those assets were not included the remedy would have left the relevant product market less competitive than it would have been if Sun and Ranbaxy remained independent competitors.
Although not a common outcome, firms considering a transaction involving products subject to regulatory approval should take note of the potential for out-of-market divestitures when assessing a potential deal.
The FTC’s complaint and related documents can be found here.
Because national and regional merger control regimes in Africa often overlap, investors should take careful note of the scope and powers of key regional organizations vested with merger control oversight.
The U.S. Federal Trade Commission (FTC) recently announced increased thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) and 2015 thresholds for determining whether parties trigger the prohibition against interlocking directors under Section 8 of the Clayton Act.
Notification Threshold Adjustments
Pursuant to the amendments passed by the U.S. Congress in 2000, the FTC published revised thresholds for HSR pre-merger notifications in the Federal Register on January 21, 2015. These increased thresholds will become effective on February 20, 2015. These new thresholds apply to any transaction completed and any HSR pre-merger notifications filed on or after February 20, 2015.
As required, the FTC adjusted the notification thresholds based on the change in the gross national product (GNP) for the fiscal year ending September 30, 2014. Most notably, the base filing threshold of $50 million, which frequently determines whether a transaction requires filing of an HSR notification, will increase from $75.9 million to $76.3 million. The changes also will affect other dollar-amount thresholds:
The alternative statutory size-of-transaction test, which captures all transactions valued above $200 million regardless of the “size-of-persons,” will be adjusted to $305.1 million.
The statutory size-of-person thresholds (applicable to transactions valued at more than $76.3 million, but less than $305.1 million) will increase slightly from $15.2 million to $15.3 million and from $151.7 million to $152.5 million.
The adjustments will affect parties contemplating HSR notifications in various ways. Parties may be relieved from the obligation to file a notification for transactions closed on or after February 20, 2015, that result in holdings below the adjusted base threshold. For example, a transaction resulting in the acquiring person holding voting securities, a controlling interest in a non-corporate entity, or assets valued at less than $76.3 million would not be reportable on or after the effective date. The adjustments will also affect various exemptions under the HSR rules. For example, acquisitions by U.S. persons of foreign assets and voting securities of foreign issuers will now be exempt unless they generated U.S. sales in excess of $76.3 million or, in the case of foreign voting securities, the issuer has assets in the United States valued in excess of $76.3 million.
Parties may also realize a benefit of lower notification filing fees for transactions that just cross current thresholds. Under the rules, the acquiring person must pay a filing fee, although the parties may allocate that fee amongst themselves. Filing fees for HSR-reportable transactions will remain unchanged; however, the applicable filing fee tiers will shift upward as a result of the GNP-indexing adjustments:
Transactions valued at or in excess of $76.3 million, but less than $152.5 million, require a $45,000 filing fee.
Transactions valued at or in excess of $152.5 million, but less than $762.7 million, require a $125,000 filing fee.
Transactions valued at or above $762.7 million require a $280,000 filing fee.
Interlocking Directorate Thresholds Adjustment
On January 21, 2015, the FTC also published revised thresholds for interlocking directorates that are effective immediately. The FTC revises these [...]
Aerospace and defense contractors engage in a wide range of mergers, acquisitions and joint venture transactions, which are often subject to heightened antitrust scrutiny. This article highlights some of the leading antitrust factors that contractors should consider when contemplating M&A transactions in their unique industry.
It is a general tenet that competition serves customers well, enabling them to acquire better products at lower prices. Of course, this premise underlies the antitrust laws. In the aerospace and defense industry, the customers are often government agencies that are monopsonists with significant purchasing leverage. Government customers often have contracting mechanisms that are not generally available in the commercial marketplace, such as the ability to receive certified cost and pricing data from contractors. From time to time, contractors have attempted to rely on arguments that the government’s buyer power and contracting rights ensure that contractors cannot impose unreasonable pricing on the government, even if there is no or limited competition. The antitrust regulators and the U.S. Department of Defense (DoD) have long rejected that notion, stressing that regulation is not a substitute for competition. A recent DoD study supports that general proposition, and provides data the DoD interprets as showing that the presence of competition improves contracting outcomes for the government. See DoD 2014 Annual Report on the Performance of the Defense Acquisition System. This report provides some interesting thoughts and data that may impact future antitrust agency reviews.
On 9 July 2014, the EU Commission (Commission) published a White Paper (White Paper) entitled Towards more effective EU merger control. The White Paper sets out the Commission’s current thinking on the application of merger control rules to the acquisition of non-controlling minority shareholdings. The Commission’s proposals concerning the application of merger controls to the acquisition of non-controlling minority shareholdings are, however, problematic and may lead to a dampening of investments in Europe. Interested parties, which include companies, industry associations and national competition authorities, have until 3 October 2014 to comment on the White Paper.
Under the current Council Regulation (EC) No 139/2004 (the Merger Regulation), the Commission is only able to review transactions that lead to a change of control. The Commission also has the power to review existing minority shareholdings held by the parties to a notifiable transaction, i.e., one resulting in a change of control. Acquisitions of non-controlling minority shareholdings (also referred to as structural links) by themselves, however, can only be carried out retrospectively under Articles 101 or 102 of the Treaty on the Functioning of the European Union (TFEU). In other words, under the Merger Regulation, acquisitions of non-controlling minority shareholdings are not subject to prior review by the Commission unless they result in a change of control, and are only subject to after-the-fact enforcement under Articles 101 and/or 102 TFEU. This leads to what the Commission perceives as an “enforcement gap” at EU level, which results in the Merger Regulation not being applied to non-controlling minority shareholdings that have the potential to harm competition, as exemplified by the recent Ryanair/Aer Lingus case.
In contrast, some EU Member States, such as Germany, and some major non-European jurisdictions (including the United States and Japan) are empowered to review some non-controlling minority shareholdings under their national merger control rules. In these jurisdictions, the Commission would contend that no enforcement gap exists, since non-controlling minority shareholdings can be subjected to prior review.
In view of concerns about the enforcement gap, in 2011, the Commission organised studies on the importance of minority shareholdings in the European Union. Subsequently, in June 2013, the Commission launched a public consultation (the consultation paper) on possible modifications to the Merger Regulation, including the expansion of merger controls to capture certain non-controlling minority shareholdings. The consultation paper also considered different models for reviewing non-controlling minority shareholdings. The responses to the consultation paper generally revealed a lack of consensus about the existence and extent of an enforcement gap. Equally, the responses demonstrated that the need to change the Merger Regulation to address a perceived enforcement gap remained a hotly disputed topic.
The 9 July White Paper contains the Commission’s proposed actions in response to the consultation paper. It covers the issue of minority shareholdings and also looks at other areas where the Commission sees the need for a revision of merger control rules, including mechanisms for referring cases between the Commission and the EU Member States. The White Paper was published together with the Commission [...]
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