China’s Ministry of Commerce recently announced that it opened four investigations during 2012 into suspected non-compliance with China’s merger control notification procedures. The outcomes of the investigations are still uncertain, but the actions clearly show increased efforts to ensure compliance through enforcement of the law. Although the number of investigations was fairly low in 2012, the four cases are part of a new, larger trend of enforcement that began with a 2011 announcement to prioritize these investigations and was reinforced by new interim measures aimed at specifying compliance obligations and enforcement procedures. Multinational companies with operations in China are encouraged to increase compliance efforts in this area in order to avoid becoming targets of this new enforcement priority.
Polish legislators have confirmed their commitment to change significantly the provisions of the Polish Competition Act. The proposed amendments will undoubtedly change Polish competition law substantially, by improving and strengthening the position of enterprises and enhancing legal certainty. Furthermore, the intended increase in procedural efficiency will likely translate into a faster and more effective system that will not only speed up the relevant processes, but will also allow the stakeholders to obtain the necessary knowledge about their legal situation, enabling them to adjust their market strategies accordingly.
In oral argument in FTC v. Phoebe Putney Health System, Supreme Court Justices focused on whether the state legislature clearly articulated a state policy to displace competition with regulation, in a case challenging the application of the state action doctrine to a hospital merger to monopoly.
During an American Bar Association (ABA) program on antitrust and health care issues on October 1, 2012, U.S. Federal Trade Commission (FTC) Deputy Director for Health Care and Antitrust, Leemore Dafny, said that the FTC will focus on how patients purportedly react to price increases, as measured by "diversion ratios," when deciding which hospital mergers to investigate further for potential anticompetitive effects.
Dafny stated that the FTC will focus on diversion ratios rather than geographic markets because relying on geographic market overlaps in hospital mergers may do a poor job of identifying the true source of potential competition problems. Instead, the FTC has and will continue to evaluate hospital mergers to look at whether patients would be willing and able to substitute one hospital for the other if one hospital decided to raise prices for services, using the diversion ratio or the proportion of patients who would switch between them in response to a change in prices. Importantly, the diversion ratio does not rely on any one particular geographic market definition to give the FTC what it believes to be an accurate idea of how a hospital merger might affect competition.
To the extent the FTC considers geography, its staff begins by examining the primary service area of the hospitals – the area from which the hospitals draw about 75 percent of their patients – when conducting a preliminary evaluation of a merger to determine whether overlaps exist. According to Dafny, the more significant the overlaps, the higher the likelihood of a potential competition problem.
In relation to foreign companies, only those registered in the Companies Register (Registro delle Imprese) before any of the Italian Chambers of Commerce, will pay the mandatory fee (provided that their revenues exceed €50 million). Foreign companies are subject to registration with the Companies Register if they have an administrative/secondary seat in Italy, or their main business is in Italy.
Companies belonging to a group are subject individually to the mandatory fee, provided that their revenues exceed the €50 million threshold. When several companies which are subject to the mandatory fee, belong to the same group, the maximum amount—equal to €400,000 for the year 2013—refers to the entire group. The payment may be carried out by the parent company, individually for each of the subsidiaries that are subject to the fee. However, if the group’s liability reaches the maximum threshold, a single payment by the parent company is allowed. In this situation, the Authority must be provided with a chart specifying the details of all companies subject to the fee and for which the payment is being made.
For the companies drafting their financial statements in accordance with international accounting standards, the bases for calculating the fee are the revenues corresponding to item A1 on the Income Statement, drafted in accordance with Italian accounting standards. The Authority has not provided any further guidance on this specific issue but it should be possible to determine those revenues by reclassifying the Income Statement’s items on the basis of the criteria set out in Article 2425 of the Italian Civil Code.
From 1 October 2012 until 30 October 2012, public limited companies based in Italy that have total revenues exceeding EUR 50 million must pay to the Italian Competition Authority (ICA) a new mandatory fee, which replaces the current filing fees for merger transactions.
Entities Subject to the Fee
Public limited companies (e.g., S.p.A. or S.r.l.) with total revenues—according to the latest financial statements (item A1 of the income statement)—exceeding EUR 50 million are subject to the fee.
For banks and financial institutions, the amount of revenue for the purposes of calculating the fee is one-tenth of the institution’s assets on its balance sheet.
The revenues of insurance companies are equal to the amount of premiums collected. Subsidiaries and associate companies belonging to a group must each pay the fee separately on the basis of the revenues set out in their financial statements.
Contribution Amount
The amount of the fee is equal to 0.08 ‰ of the revenues set out in the latest financial statements. The fee cannot exceed EUR 400,000.
Terms of Payment
For 2013, the fee must be paid in advance to the ICA from 1 October 2012 until 30 October 2012, and the payment must be communicated to the ICA by 30 November 2012.
There is a general presumption that the grant of public access to documents relating to merger control proceedings would undermine the purpose of those proceedings. The Commission does not therefore have to carry out an individual examination of each document before deciding to refuse access under EU transparency legislation.
The Ministry of Commerce of China (MOFCOM) recently promulgated a new amended merger notification form along with instructions for completing the form. In doing so, MOFCOM aims to further regulate the procedures regarding antitrust review of large mergers, acquisitions and joint ventures; to promote transparency in the notification procedure; and to improve the efficiency of antitrust review.
In addition to the federal antitrust enforcement agencies, state attorneys general continue to take an active role in antitrust enforcement, especially in the health care industry. Last week, the Pennsylvania Attorney General announced that it had entered into a settlement agreement with two merging hospitals requiring the hospitals to contract separately with payors post-closing. Early on in transaction planning, hospitals and health systems considering transactions with potential competitive implications should identify the rationale for and benefits of the transaction, in preparation for both state and federal antitrust agency review.
The EU Commission was notified of the Seagate/Samsung transaction and the Western Digital/Hitachi transactions – both mergers involving hard drive disk businesses – within days of each other. In its decision on the Seagate/Samsung transaction (published on May 10, 2012), the EU Commission explains its different treatment of the two mergers.
The EU Commission explains that the ‘priority principle’ requires them to review a deal’s impact on competition according to the date the deal was notified. Therefore, because Seagate/Samsung was notified first, the EU Commission examined the deal based upon the competitive conditions existing at the time of notification and without considering the potential impact of a second deal which was notified only one day later.
Reminder of the facts
Seagate Technology had prenotification contacts with the Commission March 14, 2011 and publicly announced and notified its acquisition of Samsung’s hard disk drive business on April 19, 2011. After a Phase II investigation, the EU Commission unconditionally cleared the transaction on October 19, 2011, concluding that it would not significantly impede effective competition in the hard disk drive market because four competitors would remain.
Western Digital proposed to acquire Hitachi’s hard drive business and notified this transaction on April 20, 2011, after Seagate/Samung. Western Digital and Hitachi publicly announced the deal on March 7, 2011 and had prenotification contacts with the Commission on March 10, 2011 – both dates earlier than the same events for Seagate and Samsung. The Western Digital/Hitachi transaction was also cleared by the EU Commission after a Phase II investigation on November 23, 2011, but was subject to several significant remedies (and application of the ”up-front buyer" system) unlike Seagate/Samsung because the EU Commission carried out its competitive analysis on the basis that only three hard disk drive competitors would remain.
Explanation of the ‘priority principle’ applied by the EU Commission
In its decision concerning the Seagate/Samsung transaction, the EU Commission recognizes having assessed the transaction according to a “priority principle” ("first come, first served" approach), based on the date of notification. The EU Commission defended the application of this “priority principle” and noted that it had already been applied in several previous cases (most recently in TomTom/Tele Atlas, Commission Decision of May 14, 2008) but the EU Commission had not expressly explained its approach as they have in the present case.
According to the EU Commission, the relevant framework to evaluate the effects of a transaction is the competitive conditions existing at the time of notification ("It is neither necessary nor appropriate to take into account future changes to the market conditions resulting from subsequently notified transactions that require approval from the Commission."). The EU Commission states that the date of notification is a clear and objective criterion for applying the priority principle. It "takes the view that the priority principle, based on the date of notification, is the only one that ensures sufficient legal certainty, transparency and objectivity and respect the other provisions and aims of the Merger Regulation."
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