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Mergers & Acquisitions

Withdrawal of Clearance Decision and EUR 30 million Fine Against Canal Plus for Unfulfilled Merger Clearance Commitments

by Emily Townsend | Sep 21, 2011 | French Developments, Joint Ventures/Competitor Collaboration, Mergers & Acquisitions, Monopolization/Abuse of Dominance

by Louise-Astrid Aberg and Lionel Lesur

The French Competition Authority has taken a hard stance by withdrawing its authorization of French broadcaster Canal Plus’ purchase of rival commercial television company TPS, formerly the two most powerful players on the pay TV market. This decision reasserts the importance of respecting imposed remedies. In this case, Canal Plus was sanctioned with a fine of EUR 30 million for failing to fulfill the 59 remedies imposed by the Authority in 2006, and has been given one month to re-notify the transaction to the Authority.

While Canal Plus had "only" failed with respect to 10 of the 59 remedies, the Authority did not consider this to be an attenuating circumstance because several of these remedies were "essential" and that the entire "package" of commitments should have been implemented due to the likely impact of the concentration on competition in the market. In particular, Canal Plus was blamed for being too slow in providing downstream distribution companies (principally represented by internet access providers) access to channels and content. The downstream distributors needed this content to be able to offer competitive packages of pay TV. The Authority considered this obligation essential and at the heart of the commitments necessary for the maintenance of competition.

In France, the Competition Authority can act on its own to take action against companies that fail to respect commitments entered into in the context of an antitrust investigation. In the past, fines have been imposed on companies, but the amounts were quite symbolic (i.e., EUR 200,000 for two companies active in the postage sector). This recent decision will force companies submitting to remedies to resolve a planned concentration to be certain it can accept/effectuate those constraints, as the ultimate failure to respect them could lead to disastrous outcomes. Indeed, not only could companies risk a withdrawal of the Authority’s authorization and the imposition of very high fines, such as in the present case, but also, the parties could be ordered to reverse the concentration if the commitments would prove impossible to honor. Canal Plus, which has one month to renotify the concentration, will therefore be forced to undergo a new investigation by the Authority which could in theory end with an obligation to demerge.

It still remains unclear which type of remedies are considered essential by the Authority and, consequently, which breach could lead the Authority to impose the obligation to renotify and fines as significant as in the present case. More specific details from the Authority about which remedies are considered essential are necessary so that companies can be informed during their considerations of whether or not to accept certain types of remedies. This case is, however, very specific as the conditional authorization granted by the French Competition Authority in 2006 led to the creation of a monopoly. Moreover, many authors and practitioners highly criticized this decision, particularly several remedies which appeared to be impractical to implement immediately.

The decision (in French) and the press release (in English) can be read respectively at https://www.autoritedelaconcurrence.fr/pdf/avis/11d12.pdf and https://www.autoritedelaconcurrence.fr/user/standard.php?id_rub=389&id_article=1697.

China Formalises National Security Review System for M&A Transactions by Foreign Investors

by Emily Townsend | Sep 16, 2011 | Chinese Developments, Mergers & Acquisitions

by Henry L.T. Chen, Frank Schoneveld and Brian Fu

On 3 February 2011, the State Council promulgated the “Notice of the General Office of the State Council on Launching the Security Review Mechanism for Mergers and Acquisition of Domestic Enterprise by Foreign Investors,” which established the national security review system for merger and acquisition (M&A) transactions by foreign investors in China. On 25 August 2011, after a trial implementation period of about six months of an interim regulation on the security review system, the Ministry of Commerce finalised and issued the “Regulation on Implementing of the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors,” which came into effect 1 September 2011. The national security review system as established and specified under the notice and the regulation may have a broad impact on prospective M&A transactions by foreign investors in China.

To read the full article, click here.

China Implements New Evaluating Competitive Influence Rules

by Emily Townsend | Sep 13, 2011 | Chinese Developments, Mergers & Acquisitions, Monopolization/Abuse of Dominance

by Henry L.T. Chen, Frank Schoneveld and Brian Fu

To evaluate the competitive impact of an anti-monopoly review on the mergers and acquisitions market (or concentration) and to guide business operators when notifying a concentration, the Ministry of Commerce of China introduced new measures for evaluating competitive influence. The new rules have been in effect since 5 September 2011.

To read the full article, click here.

German Federal Cartel Office Consults on Substantive Merger Control – Draft Guidance Focuses on Market Dominance

by Emily Townsend | Jul 27, 2011 | German Developments, Mergers & Acquisitions

by Philipp Werner, Martina Maier and David Henry

On 21 July 2011, the German Federal Cartel Office (FCO) published a consultation paper on substantive merger control called “Draft Guidance on Substantive Merger Control” (Draft Guidance). This is the first time the FCO has consulted on a guidance paper. Comments on the draft guidance can be submitted until 21 September 2011.

Against the fact that the German merger control regime catches a large number of mergers (around 1000 mergers a year) and that the FCO has a strong enforcement record (15 Phase II- proceedings in 2010), the Draft Guidance provides detailed insight in the approach taken by the FCO in assessing mergers.

German merger control is applicable if the following three cumulative turnover thresholds are met: the aggregate worldwider turnover of all undertakings concerned exceeds € 500m, the turnover in Germany of one undertaking concerned exceeds € 25m and the turnover in Germany of another undertaking concerned exceeds € 5m. In addition, German merger control catches the acquisition of control as well as the acquisition of a minority shareholding of 25 percent or – in cases of “competitively significant influence” even shareholdings below 25 percent. The Draft Guidance does not deal with the question under which conditions German merger control is applicable, it only concerns the substantive analysis of mergers which fall under German merger control.

The Draft Guidance reflects the existing approach of the FCO rather than proposing an new way of thinking. While it also encorporates economic considerations, it largely provides a agency friendly interpretation of the FCO’s decision practice and relevant case-law. Still, it shows a move towards more economic analysis and a deviation from the FCO’s traditional, more market structure oriented approach. But it seems unlikely that the strict enforcement policy of the FCO will change as a result of the new guidance paper.

The Draft Guidance focuses on the question whether a merger will lead to the creation or strengthening of dominance. Unlike in other jurisdictions, such as the US and EU, the creation or strengthening of a dominant position is the criterion for the prohibition of a merger in German merger control. While discussions are under way about the introduction of the SIEC test (“significant impediment to competition”) in an effort to harmonize German with EU merger control rules, the FCO makes it clear that it anticipates that the Draft Guidance will remain relevant even if the underlying test changes.

In terms of substance, the Draft Guidance distinguishes between horizontal, vertical and conglomerate mergers and between single firm dominance and collective dominance. The definition of dominance and the substantive assessment relies on standard theories of harm and recognised economic theories that are also used by other competition authorities such as the European Commission.

Some elements of the Draft Guidance reflect a traditional German understanding of merger control which may differ from the approach in other jurisdictions. Thus, the Draft Guidance suggests that the purpose of merger control is to protect competition as [...]

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Major Changes to HSR Disclosure Requirements Effective August 18, 2011

by Emily Townsend | Jul 19, 2011 | Mergers & Acquisitions

by Jon B. Dubrow, Carla A. R. Hine and Carrie G. Amezcua

Revisions to the Hart-Scott-Rodino (HSR) notification rules and form (as detailed here) will become effective August 18, 2011. Parties planning to file an HSR premerger notification on or after August 18 must comply with the new disclosure requirements and use the newly revised HSR form.

FTC Announces Major Changes to Disclosure Requirements for Hart-Scott-Rodino Notification Rules and Form

by Emily Townsend | Jul 7, 2011 | DOJ Developments, FTC Developments, Mergers & Acquisitions

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

Companies should begin regularly collecting required data—in particular revenues by North American Industry Classification System code and information about “associates”—in advance of need to file Hart-Scott-Rodino notification.

To read the full article, click here.

How to Watch Your EU Deals from an Antitrust Perspective

by Emily Townsend | Jun 30, 2011 | EC Developments, Mergers & Acquisitions

by Veronica Pinotti, Riccardo Franceschi and Martino Sforza

Compliance with EU and national antitrust merger control rules can significantly impact the feasibility, timing and costs of M&A transactions. Parties to a proposed transaction in the EU should assess the merger control issues early in the process and evaluate and comply with any procedural antitrust requirements to avoid unnecessary delay, or even civil or criminal penalties, in any EU transactions.

To read the full article, click here.

German Antitrust Regulator Steps Up the Fight Against Gun-Jumping

by Emily Townsend | Jun 30, 2011 | German Developments, Mergers & Acquisitions

by Martina Maier and Philipp Werner

More than 100 countries worldwide have merger control regimes. In the majority of these regimes, including the U.S., EU and most EU Member States, parties to a transaction may not close a deal without approval from the competition antitrust regulator. An infringement of this obligation, or "gun-jumping", carries risks that are generally well understood. But companies should be aware that the German Federal Cartel Office (FCO) has recently taken a more aggressive approach in its enforcement of gun-jumping, in particular concerning the fining policy for gun-jumping.

To read the full article, click here.

DOJ Releases New Merger Remedy Guide

by Emily Townsend | Jun 20, 2011 | DOJ Developments, Mergers & Acquisitions, Monopolization/Abuse of Dominance

by Joel R. Grosberg and Megan Morley

The DOJ has released an updated merger remedies guide that provides an overview on how the DOJ Antitrust Division staff will analyze proposed remedies in merger matters. The revised guide places an increased emphasis on behavioral or conduct remedies to address issues raised by vertical transactions.

To view the full article, click here.

China’s MOFCOM Gets Tough on Merger Control?

by Emily Townsend | Jun 20, 2011 | Chinese Developments, Mergers & Acquisitions, Monopolization/Abuse of Dominance

by Henry L.T. Chen and Frank Schoneveld

There is considerable speculation in China that many large transactions that should have been notified for clearance by China’s Ministry of Commerce (MOFCOM) have not been properly notified, and Chinese government is going to go after the concerned concentrating parties. Recently, the speculation came into being and all public comments must be filed before 23 June 2011. New Draft Regulations, “Preliminary Regulations on the Investigation & Treatment of Failure to Report Concentration of Undertakings (Opinion Solicitation Draft),” clarify and provide MOFCOM with the power to investigate, fine and order divestiture of mergers and acquisitions that should have been, but have failed to be, notified and cleared by MOFCOM.

To read the full article, please visit: https://www.mwechinalaw.com/news/2011/chinalawalert0611b.htm.