ANTITRUST ALERT
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
Mergers & Acquisitions
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China Law Alert: Focus on Competition – March 2012

by | Mar 26, 2012 | , ,

by Henry L.T. Chen, Frank Schoneveld, Alex An, Brian Fu and Angel Wang

McDermott Will & Emery has released the latest China Law Alert: Focus on Competition, which provides insight on current issues surrounding cross-border antitrust and transactional issues. 

China’s New Merger Control Regime Makes Major Progress in Its First Three Years

It is now just more than three years since China’s Anti-Monopoly Law (AML) was introduced. Compared with the well-established practices of US antitrust and EU competition authorities, AML enforcement is still in its infancy. However, China’s AML regulators, especially the authority in charge of merger control, the Ministry of Commerce (MOFCOM), has moved quickly to make its mark on international business. Now, most large, cross-border mergers, acquisitions and joint ventures must also successfully pass the rigors of review by MOFCOM as well as the European Commission and the US Department of Justice (DOJ) and/or Federal Trade Commission (FTC).  Read the full article here.

NDRC and SAIC’s Actions in 2011 and Prospects in 2012

China’s National Development and Reform Commission (NDRC) and State Administration for Industry and Commerce (SAIC) are the two authorities in charge of investigation and supervision of “monopoly” agreements and abuses of dominant market position. NDRC focuses on price-related cases while SAIC takes care of non-price related violations of the law. Compared to MOFCOM, which is responsible for merger control, NDRC and SAIC have been relatively quite since China’s AML came into force on 1 August 2008.  Read the full article here.

Civil Litigation under China’s Anti-Monopoly Law

Since the introduction of the China AML in August 2008, Chinese courts have experimented with various methods of civil dispute adjudication based on breach of the AML. In general, China’s courts have very limited judicial experience with such cases. A number of civil cases have been brought before the courts, but very few, if any, have resulted in a successful judgment for breach of the AML.  Read the full article here.

Might the Ministry of Industry and Information Technology (MIIT) Become A New Enforcement Authority for China’s Competition Laws?

In addition to MOFCOM, SAIC and NDRC, the three major enforcement authorities for the anti-unfair competition and anti-monopoly laws, it seems the MIIT might also become a regulator of competition in the telecommunications sector. In addition to a Draft Regulation on Internet Information Services, published for consultation in January 2012, MIIT released an “Opinion on Regulating the Business Activities of Basic Telecommunications Carriers on Campuses” (the Opinion) on 30 June 2011.  Read the full article here.



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Acting Assistant Attorney General Sees Increasing Barriers to Entry in Health Insurance

by | Mar 26, 2012 | , ,

by Hillary Webber

Last week, Sharis Pozen, Acting Assistant Attorney General for the Antitrust Division of the U.S. Department of Justice, spoke at the World Annual Leadership Summit on Mergers and Acquisitions in Health Care, where she affirmed that protection of competition in the health care industry is a top priority of the Division.  Pozen highlighted the Division’s recent enforcement activities in insurance and provider markets, including challenges to insurance company mergers and contracting practices used by dominant insurers or providers such as Most Favored Nation (MFN) provisions and exclusivity agreements. 

Of note, Pozen remarked that the Division undertook a comprehensive evaluation of health insurance markets, the results of which have caused the Division to regard with increasing skepticism the ability of new entry to constrain a merged health insurance firm.  Pozen explained that new entrants face obstacles because they need provider discounts to attract enrollees but have difficulty obtaining them without a large number of enrollees.  Pozen stated that the Division will focus more attention on entry analysis to protect markets from harmful consolidation, especially markets dominated by one or two plans.  Regarding provider markets, Pozen described the Division as "on the lookout for agreements or arrangements purported to improve quality but where the real goal is simply to raise prices."  This is especially relevant given the Affordable Care Act’s encouragement of provider collaboration in the form of Accountable Care Organizations (ACOs).

Pozen’s remarks are available at: https://www.justice.gov/atr/public/speeches/281236.pdf.

Pozen’s comments highlight the need for health care companies considering collaborative arrangements with competitors or contracting arrangements such as MFNs or exclusivity agreements to consult counsel and articulate a clear pro-competitive basis for such conduct. 



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China Conditionally Clears Western Digital’s Acquisition of Hitachi’s Hard Disk Drive Business

by | Mar 15, 2012 | , ,

by Henry L.T. Chen, Frank Schoneveld and James Jiang

Recently China’s Ministry of Commerce (MOFCOM) approved Western Digital’s proposed acquisition of Hitachi’s hard disk drive business on a conditional basis.  Containing the most comprehensive clearance conditions ever imposed by MOFCOM, this decision mirrors previous guidance issued by the European Commission and illustrates that at least two authorities in two of the world’s major economies are working toward imposing similar clearance conditions in their respective jurisdictions.

Read more here.



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FERC Reaffirms Merger Policy; Does Not Adopt DOJ/FTC 2010 Horizontal Merger Guidelines

by | Feb 27, 2012 | , , ,

by Jon Dubrow and Cerissa Cafasso

Public utilities could face different levels of scrutiny in merger reviews before the U.S. Federal Energy Regulatory Commission, and the Department of Justice and the Federal Trade Commission (the Antitrust Agencies).

To view the full article, please click here. 



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China’s MOFCOM to Review Merger in Gas Market

by | Feb 23, 2012 | ,

by Henry L.T. Chen, Frank Schoneveld and Alex An

Recently, ENN Energy Holdings Limited and China Petroleum & Chemical Corporation jointly announced the acquisition of all outstanding shares in China Gas Holdings Limited.  This acquisition triggers a requirement to notify and obtain clearance from China’s Ministry of Commerce (MOFCOM).  Therefore, MOFCOM’s approval will be one of the preconditions for ENN Energy and Sinopec to close the transaction.

To read the full article, please click here. 



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Notification Threshold Under the Hart-Scott-Rodino Act Increased to $68.2 million

by | Jan 27, 2012 |

by Jon B. Dubrow, Joseph F. Winterscheid and Carla A. R. Hine

The U.S. Federal Trade Commission (FTC) recently announced revised thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) and 2012 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 27, 2012.  These revised thresholds will become effective on February 27, 2012.  Any transaction completed and any HSR pre-merger notifications filed on or after February 27, 2012, must comply with these new thresholds.

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, 2011.   Most notably, the base filing threshold of $50 million, which frequently determines whether a transaction requires filing of an HSR notification, will increase from $66.0 million to $68.2 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 $272.8 million.
  • The statutory size-of-person thresholds (applicable to transactions valued at less than $272.8 million, but more than $68.2 million) will increase from $13.2 million to $13.6 million and from $126.9 million to $131.9 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 27, 2012, that result in holdings below the adjusted base threshold.  For example, a transaction resulting in the acquiring person holding voting securities or assets valued at less than $68.2 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 of foreign assets and voting securities of foreign issuers will now be exempt unless they generated U.S. sales in excess of $68.2 million or, in the case of foreign voting securities, the issuer has assets in the United States valued in excess of $68.2 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 for now (although the FTC is pursuing filing fee increases).  However, the applicable filing fee tiers will shift upward as a result of the GNP-indexing adjustments:

  • Transactions valued at or in excess of $68.2 million, but less than $136.4 million require a $45,000 filing fee.
  • Transactions valued at or in excess of $136.4 million, but less than $682.1 million require a $125,000 filing fee.
  • Transactions valued at or above $682.1 million require a $280,000 filing fee.

Interlocking Directorate Thresholds Adjustment

On January 27, 2012, the FTC published [...]

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Revised HSR Thresholds for 2012

by | Jan 24, 2012 |

by Carla A. R. Hine

Today, the Federal Trade Commission (FTC) announced revised, higher Hart-Scott-Rodino (HSR) pre-merger notification filing thresholds.  The FTC adjusts the HSR thresholds annually to represent the increase or decrease in gross national product (GNP).  These revised thresholds will become effective 30 days from the date on which notice is published in the Federal Register, which should occur within the next week.  As such, we expect that these new thresholds will become effective near the end of February.  

Most notably, the size-of-transaction threshold, which frequently determines whether a transaction requires an HSR notification, will increase from $66.0 million to $68.2 million.  Other thresholds will increase as well, including thresholds for the size-of-person test, filing fees and certain exemptions.  The revised thresholds are as follows:

Original Threshold 2012 Adjusted Threshold $10 million $13.6 million $50 million $68.2 million $100 million $136.4 million $110 million $150.1 million $200 million $272.8 million $500 million $682.1 million

Generally, a transaction requires an HSR notification if it meets the applicable size-of-transaction and/or the size-of-person tests, described briefly below, and does not fall within any exemptions.

A transaction meets the size-of-transaction test if as a result of the transaction the acquiring party holds assets, voting securities or a controlling interest in a non-corporate entity valued in excess of

  • $50 million, as adjusted ($68.2 million upon the effective date of these revised thresholds), assuming the size-of-person test is met, or
  • $200 million, as adjusted ($272.8 million upon the effective date of these revised thresholds) — this threshold applies to transactions even if the size-of-person test below is not met.

For the size-of-person test, upon the effective date of these revised thresholds, a transaction resulting in the acquiring party holding assets, voting securities or a controlling interest in a non-corporate entity valued at $68.2 million or more, but less than $272.8 million is generally reportable if one party has assets or sales of at least $10 million, as adjusted ($13.6 million upon the effective date of these revised thresholds), and the other party has assets or sales of at least $100 million, as adjusted ($136.4 million upon the effective date of these revised thresholds).

Although the filing fees for HSR notifications will not change at this time (although this is something currently under review), the thresholds (based upon the size-of-transaction) that determine the correct filing fee will also adjust:

Filing Fee Size-of-Transaction $45,000 $68.2 million, but less than $136.4 million $125,000 $136.4 million, but less than $682.1 million $280,000 $682.1 million or more

Again, these revised thresholds will become effective 30 days after publication of notice in the Federal Register.



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Italian Competition Authority Updates Merger Control Turnover Thresholds

by | Nov 21, 2011 | ,

by Martino Sforza

The Italian Competition Authority has updated its merger control turnover thresholds.  Effective as of today, November 21, 2011, Section 16(1) of Law no. 287 of October 10, 1990, requires prior notification of all mergers and acquisitions where either of the following conditions is fulfilled:

  • Aggregate turnover in Italy of all undertakings involved is above EUR 468 million
  • Aggregate turnover in Italy of the target company is above EUR 47 million

No notification is required if the target is a foreign company which did not generate any turnover in Italy in the last three years and is not expected to do so as a result of the transaction.

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.



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Merger Control Notifications in Several EU Member States – Best Practices on Cooperation Between Competition Authorities

by | Nov 10, 2011 | ,

by Martina Maier and Philipp Werner

The European Union’s (EU) national competition authorities (NCA) and the European Commission have agreed upon best practices on cooperation in cross-border mergers.  The best practices’ stated aim is to enhance cooperation in merger cases where the European Commission Merger Regulation does not apply and the merger needs to be notified in more than one EU Member State.The best practices follow a public consultation on draft best practices started earlier this year.

The best practices do not make cooperation between NCAs compulsory. The merging parties will not be able to insist that NCAs should cooperate in a multi-jurisdictional filing. Rather, NCAs will apply them in cases where they think cooperation could be beneficial for the NCAs, the merging parties and third parties, in particular where the merger raises similar comparable jurisdictional or substantive questions and concerns similar or the same product markets.

The best practices discuss a number of areas and instruments for facilitating a multi-jurisdictional merger review process, such as:

  • Exchange of certain basic non-confidential information
  • Aligning timelines in the review process and with regard to remedies
  • Regular contacts and updates between NCAs with regard to timing and with regard to decisions to open in-depth investigations
  • Dicussions of substantive analysis such as market definitions or possible anti-competitive effects of the merger

Merging parties are encouraged to contact each NCA where the merger will be filed and provide them with basic information, such as the jurisdiction where the merger will be filed, the date of the proposed filing and the sectors involved, to facilitate cooperation among the agencies. Also, the best practices support joint pre-notification contacts where useful. The best practices further highlight, that it will be for the merging parties to coordinate the timing and also the substance of possible remedies, e.g. where a remedy accepted in one Member State has an impact on the effectiveness of the remedy in another Member State.

Most important, the best practices clearly point out that it is fully within the merging parties’ respectively third parties’ discretion to provide waivers to the NCAs to exchange confidential information, that such information will be protected under national law in all Member States and that it will not be used for any purpose other than the review of the relevant merger. To this end a model waiver form can be found in the annex to the best practises. However, it should be noted that the best practice paper states that once a waiver has been provided, the parties will not be informed about the actual scope and timing of the exchange of the confidential information.

The best practices and its annex can be accessed here.



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Competition Law Reform in Brazil: Implications for Merger Control

by | Oct 13, 2011 |

by Andrea L. Hamilton, David Henry, Martina Maier and Joseph F. Winterscheid

Brazil’s House of Representatives passed a long-awaited competition bill (the Competition Bill) on 5 October 2011, making significant changes to Brazilian competition law. The Competition Bill has yet to be signed into law by the Brazilian President and will take effect 180 days after signing. Once in force, it will have wide-reaching implications across a number of areas, but from the perspective of international companies, some of the most important changes relate to merger control.

At the moment, Brazil’s competition authority (CADE), requires notification by companies that reach relatively low thresholds—which are based currently on revenues or market share—within 15 working days of the signing of the first documents relating to the deal. Once the parties have notified CADE, they are free to complete the deal; there is no obligation to suspend the deal pending clearance.

This will change substantially once the Competition Bill takes effect, and will have major implications for the strategy and timing of transactions that must be notified in Brazil.

  • Notification threshold. The Competition Bill requires CADE to be notified of a merger when one of the parties has achieved group-wide revenues of at least R$400 million (approximately €160 million/US$210.5 million) in Brazil in the previous financial year, and another party to the transaction has achieved group-wide revenues in Brazil of R$30 million (approximately €12.5 million/US$15.8 million). Significantly, this removes the market share threshold, which is likely to be welcomed by companies.
  • Suspension of the transaction. Parties will no longer be able to close the deal simply after notifying CADE. Instead, parties will need to wait to receive clearance from CADE before closing, which can mean potential delays. Closing a deal without clearance will expose parties to substantial penalties for “gun-jumping” and risk having the transaction deemed void. The fines that can be imposed range from R$60,000 to R$60 million (approximately €24,000-€24 million/ US$32,000-US$32 million).
  • Timing. As parties cannot close a deal notified in Brazil until CADE clears it, timing is critical. The Competition Bill envisages a two-phase merger procedure similar to those used in the United States and the European Union. In total, CADE will have a maximum of 240 days to complete its review of a proposed merger. This is subject to a 60 day extension (if requested by the applicant) or 90 days if required by CADE for a justifiable reason. It is expected, however, that CADE will endeavour to complete its review in a much shorter time period in most cases, to align itself with international practice.

International companies with interests or potential interests in Brazil are urged to be aware of these important changes and to consider the implications of the new rules on their business objectives.



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