Global trends in competition law regulation of mergers and acquisitions

There is no doubt that the international competition law landscape is changing. While calls for increased regulation of ‘big tech’ frequently make headlines, there is a broader shift in competition regulation occurring, which will affect companies across all industries. Regulators worldwide have intensified scrutiny of proposed mergers and acquisitions, and Australian businesses are unlikely to be an exception to this. It is increasingly important that businesses are aware of changes to the global, and local competition law landscape, and how these may affect global and local acquisitions.

Global trends

Globally, the way in which regulators perceive and assess mergers and acquisitions is shifting. There is a growing focus on increases in market power and regulators across jurisdictions are moving towards broad jurisdictional tests and ‘over-regulation’ rather than under. In addition, information sharing and coordination of approaches and investigations across jurisdictions is increasing, meaning even local deals are impacted by international developments. Some notable developments in the international landscape are;

USA

• The Biden administration is focused on remedying ‘under-enforcement’ of antitrust laws and has appointed a number of progressive enforcers in order to achieve this. The administration has increased funding to regulators and issued an executive order calling for merger control regulations to be ‘rigorously enforced’ (even in relation to completed mergers).
• There have been a number of significant proposed changes to the US merger control rules, including the introduction of a presumption against transactions resulting in market share above a predefined level, shifting the burden of proof from the regulator to the merging parties, and introducing a presumption against acquisitions of start-ups by dominant firms.

EU

• The EU has re-enlivened rules allowing member states to refer mergers to the EU Commission, even if they do not meet the established merger thresholds and would previously not have been reviewed under EU merger law. The EU Commission has subsequently investigated mergers in which neither party carried on business in the EU.
• The EU is considering reversing the burden of proof, putting the onus on the merging parties to show the merger does not cause competitive harm.

UK

• The UK has increased its focus on all things digital and international, launching enquiries into music streaming, teaming up with other regulators through its Digital Regulation Cooperation Forum and issuing a joint statement on merger control (with the ACCC and Bundeskartellamt).   
• The UK Competition and Markets Authority (CMA) has expanded its jurisdictional reach (via the share of supply test), bringing mergers involving entirely offshore entities within its remit. This is coupled with rigorous pro-active information gathering via the CMA’s Mergers Intelligence Unit.

Australia is riding the global wave

In this environment, even wholly domestic businesses may be impacted by changing global trends in competition regulation. Particularly as the ACCC becomes more enmeshed in the international landscape, both in its policies and its enforcement actions. The influence of international trends on Australian regulation can be seen, for example, in the ACCC’s recent statement on reforms to Australia’s merger laws. In this statement, the ACCC called for strengthening of Australia’s laws, noting they would then be brought into line with those of the UK, Japan and other jurisdictions.

Broadly speaking, the ACCC has indicated that it considers Australian merger laws are no longer fit for purpose, and are skewed in favour of clearance. In order to address this, the ACCC has proposed the establishment of a compulsory merger regime (based on pre-determined thresholds), changes to the merger factors, stricter rules for firms with substantial market power and a bespoke regime for digital platforms.

In addition to this, in its Digital Platforms Report, AdTech Inquiry and report into internet search the ACCC has taken a robust, internationally facing approach to digital markets. This increasingly international approach is likely to be strengthened overtime given the Chair of the ACCC was recently appointed as the new Vice Chair Digital Co-ordination and Asia-Pacific Liaison within the International Competition Network. The ACCC is no doubt moving with the international trends in competition law, and its enforcement and regulatory activities will increasingly be influenced by what is happening on the world stage.

What this means for deal-making

In this environment, complex and even non-complex transactions will have the best chance of success if they are conducted with a strategic and practical eye to the way in which these international trends may play out. Global or online businesses seeking to merge or acquire another business will need to be aware of changes to the international regulatory environment. However, local, Australian based businesses will also be impacted by these global trends.

Some of the biggest changes to deal-making that you can expect are;

• The mergers assessment criteria are changing – regulators are no longer primarily concerned with pre and post-merger market share and lessening of competition, but also whether structural remedies can replicate the pre-merger competitive environment.
• Jurisdictional lines are blurring – regulators are increasingly comfortable addressing mergers with a centre of gravity outside their own jurisdiction.
• Global perspectives are now impacting even local deals as authorities continue to cooperate globally – be prepared as soon as you enter a deal to answer questions about your global operations. Cross border and cross discipline teams will be important in this context.
• As regulators grapple with novel industries and the role of data, expect increasingly novel and challenging theories of competitive harm to be raised during review. This is inherently less predictable and more difficult to understand. It may be important to involve competition specialists early and plan ahead.
• Regulatory action is likely to come with increased scrutiny of a company’s role in the global landscape. Regulators will increasingly define markets, assess competition issues and make strategic decisions with reference to work being carried out by other regulators.   
• There is far less predictability over time periods for review. Deals may take longer and require a more coordinated approach, particularly in jurisdictions which have recently reformed or are developing their competition regulations. Parties need to make sure they are aligned on reasonable expectations and timelines for the deal.
• There is an increased risk of the regulatory environment changing between deal signing and closing (make sure this is provided for in your contracts). Ensure your legal and corporate teams are methodically future-gazing about what may be coming down the track and taking this into account in your deal terms and investment thesis.
• There is likely to be an increase in informal information sharing and coordination of approaches and investigations across jurisdictions, particularly in relation to online or multinational companies. Actions taken and information obtained in one jurisdiction are likely to directly impact regulation and investigations in other jurisdictions. Make sure you have a unified, international approach across all businesses (both in document management and legal/tactical approach).
• Expect increased litigation and deal disputes, not just between regulators but also between merging parties and from third parties in the form of objections.