In the United States, the US Department of Justice (DOJ) and the Federal Trade Commission (FTC) lost four merger challenges (Illumina/GRAIL, UnitedHealth/Change Healthcare, U.S. Sugar/Imperial Sugar and Booz Allen/EverWatch) in September. The losses demonstrate that parties willing to litigate can have success in court. The absence of “smoking gun” documents and lack of a presumption of anticompetitive effects (based on market shares and concentration) made these cases very difficult for the government. The judges in these cases tended to credit structural and behavioral remedies that the government felt were insufficient and were persuaded by real-world testimony from executives and third parties contradicting the government’s theories of changed economic incentives from the transactions.
In July 2022, the European Parliament published the final text of the European Union’s upcoming instrument to address distortive foreign subsidies, following a provisional political agreement reached between the EU lawmakers in June (Foreign Subsidies Regulation). The Foreign Subsidies Regulation introduces a new mandatory screening mechanism including notification obligations and the European Commission’s right of ex officio investigations, which will have a considerable impact on M&A transactions and procurement procedures.
The Foreign Subsidies Regulation will enter into force once it is formally adopted by EU lawmakers and published in the Official Journal. It will become directly applicable across the European Union six months after entry into force. The notification obligations will start to apply nine months after entry into force. The Commission also is currently drafting procedural rules on how to notify transactions, how to calculate time limits, and the process for preliminary reviews and in-depth probes when there is a suspicion of distortive foreign subsidies.