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

by | Sep 21, 2011 | , , ,

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.



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

by | Sep 16, 2011 | ,

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.



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China Implements New Evaluating Competitive Influence Rules

by | Sep 13, 2011 | , ,

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.



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German Federal Cartel Office Consults on Substantive Merger Control – Draft Guidance Focuses on Market Dominance

by | Jul 27, 2011 | ,

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 | Jul 19, 2011 |

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.



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

by | Jul 7, 2011 | , ,

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.



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