Merger Review Process Research Articles

M&A advisory and the merger review process

Two firms propose a merger to the antitrust authority. They are uninformed about the efficiencies generated by the merger, but can hire an expert to gather information on their behalf. The authority is also uninformed about the merger’s efficiencies, but can run a costly internal investigation to learn them. We analyze the effect of the disclosure of the expert’s contract on consumer welfare, and show that consumers are not necessarily better off with disclosure. This possibility result hinges on a free-riding problem between expert and authority in the information acquisition game, and is more relevant in highly competitive industries.

Merger regulation in the digital economy and the forgotten goal of innovation

ABSTRACT The pursuit of the consumer welfare goal has not achieved competitive markets but instead resulted in highly concentrated markets in the digital economy with one or two market leaders. Markets that should be dynamic and innovative are controlled by powerful online platforms that thwart innovation and eliminate potential rivals through killer acquisitions. This article argues that safeguarding innovation and in particular disruptive innovation should play a much more explicit part in the European Commission’s merger control especially in digital economy markets, where innovation is key to a healthy dynamic market. This could be achieved by adopting a stricter merger review process that places emphasis on whether innovation and potential competitors are negatively affected by the merger also in the long-run. The article argues that to achieve this a move away from the traditional price-based focus in merger reviews in line with the consumer welfare framework is required towards a structural approach that considers the impact on the market in the long-run and the dynamic aspects of the mergers under review, but this will occasionally require the Commission to say ‘no’ to mergers. The result however, would be the safeguarding of innovation, the key to a healthy economy in the EU.

Prior Notification Process Under Merger Regulation: A Comparative Perspective between Vietnam and Several Countries

A prior notification process significantly contributes to the ex-ante merger review. Being familiar with many legal systems, Vietnam has led to the compulsory notification process since the first version of competition law. The Vietnamese Competition Law 2018 still keeps this legal mechanism and also sets up the new notification requirements, which help the merger review process to be more effective. Therefore, other countries’ experience is helpful for the ongoing Vietnamese progress on merger regulation improvements. In particular, the article suggests that the stage of early consultation that has been popular in Japan and the EU can be lessons for Vietnam.
 
 
 

Anti-monopoly Law of China: A Case Study of Coca Cola’s Proposed Merger with Huiyuan

An attempt is made by this study in order to determine whether AML is for protectionism or a leap forward. For this reason, the first part of this article sheds light on AMLs background along with aims and objectives of it while providing a precise glimpse into proposed merger under the AML. For this reason, the researcher took Coca Cola’s case in China. In addition to this, some concerns raised by scholars over the decision of China with regard to Coca Cola’s merger with Huiyuan are also addressed. The third part of this paper lays out a legal framework in order to create as well as implement AML, with special focus on the process of merger review. It is argued by the researcher that Coca Cola’s proposed merger was blocked by China under AML, which also drew world’s attention along with criticism. The reason is China flexed its antitrust practice muscles at the expense of this since a Coca Cola’s merger was blocked; while there is no doubt that it always attracts international business community. For decades China has been seen as the land of opportunity and growth for foreign investors and only time will determine whether this decision signals a change in that policy. The role of protectionism is explained by part three while investigating concerns with reference to public interests under AML. In this section, underlying rationale to block merger of Coca Cola with Huiyuan is analyzed by proposing that how can improvement be made by China in the merger review process. China made us believe that the decision to block such merger was for lessening and protecting competition, however, clear guidelines are greatly required by enforcement agencies in order to follow as well as increase transparency in the processes of decision making, it would ultimately help china to make better plans for enterprises in the future while showing China as a greatly attractive and fertile ground in order to grow and expand. The paper is concluded in part four along suggesting the adoption of clear merger guidelines which would diminish all the concerns raised by legal scholars; such guidelines would help foreign firms in terms of merger with domestic enterprise in China in the future. Qualitative research methodology has been applied to the following article.

Anti-monopoly Law of China: A Case Study of Coca Cola’s Proposed Merger with Huiyuan

An attempt is made by this study in order to determine whether AML is for protectionism or a leap forward. For this reason, the first part of this article sheds light on AMLs background along with aims and objectives of it while providing a precise glimpse into proposed merger under the AML. For this reason, the researcher took Coca Cola’s case in China. In addition to this, some concerns raised by scholars over the decision of China with regard to Coca Cola’s merger with Huiyuan are also addressed. The third part of this paper lays out a legal framework in order to create as well as implement AML, with special focus on the process of merger review. It is argued by the researcher that Coca Cola’s proposed merger was blocked by China under AML, which also drew world’s attention along with criticism. The reason is China flexed its antitrust practice muscles at the expense of this since a Coca Cola’s merger was blocked; while there is no doubt that it always attracts international business community. For decades China has been seen as the land of opportunity and growth for foreign investors and only time will determine whether this decision signals a change in that policy. The role of protectionism is explained by part three while investigating concerns with reference to public interests under AML. In this section, underlying rationale to block merger of Coca Cola with Huiyuan is analyzed by proposing that how can improvement be made by China in the merger review process. China made us believe that the decision to block such merger was for lessening and protecting competition, however, clear guidelines are greatly required by enforcement agencies in order to follow as well as increase transparency in the processes of decision making, it would ultimately help china to make better plans for enterprises in the future while showing China as a greatly attractive and fertile ground in order to grow and expand. The paper is concluded in part four along suggesting the adoption of clear merger guidelines which would diminish all the concerns raised by legal scholars; such guidelines would help foreign firms in terms of merger with domestic enterprise in China in the future. Qualitative research methodology has been applied to the following article.

Reforming EU merger control to capture ‘killer acquisitions’ – the case for caution

This article examines whether EU merger control rules should be recalibrated to address concerns said to arise from acquisitions of innovative start-ups by established digital platforms – commonly referred to as ‘killer’ or ‘nascent’ acquisitions. It assesses various proposals designed to remedy two failings: a perceived failure to review anti-competitive transactions due to inadequate jurisdictional thresholds and a perceived failure to detect competition problems during the merger review process. It argues that, given the large number of transactions already subject to merger control, any expansion of existing rules should occur only where there is clear evidence of a significant enforcement gap. In the view of the authors, there is no persuasive evidence that a material number of anti-competitive digital acquisitions are escaping antitrust scrutiny, that the analytical framework applied by the European Commission should be significantly changed, or that the methodological tools employed to review concentrations are unfit for purpose. The authors therefore disfavour wide-ranging changes to the EU's rules and instead propose a series of incremental improvements to ensure that EU merger enforcement is tailored to the digital age.

Public Interest in Mergers: South Africa

In the pursuit of national policy objectives aimed at social and economic welfare for all South Africans, South African competition authorities have to use competition policy to achieve industrial policy goals through the implementation of public interest provisions in the Competition Act No. 89 of 1998. The recent amendments to the legislation further bolster these broader policy objectives. This issue of the Antitrust Bulletin examines the history, development, and impact of public interest considerations in merger proceedings through an analysis of seminal cases and key legislative reforms. Public interest considerations constitute a significant component to the merger review process and may involve interests represented by the competition authorities, government and employees, trade unions, and other affected third parties.

The Google-DoubleClick Merger: Lessons From the Federal Trade Commission's Limitations on Protecting Privacy

In the wake of Big Tech’s growing power, much attention has been directed to the Federal Trade Commission as the regulatory force for monitoring the technology industry. But scholars are largely divided on the issue of whether privacy exists within the scope of antitrust law. Using the 2008 acquisition of DoubleClick by Google as a case study, this article argues that privacy is an antitrust issue and should have been considered in the FTC’s merger review process for the ways it affected both competition and consumer welfare. The article examines the role of consumer data in fortifying Google’s barriers to entry, squashing innovation, and reducing choice in the marketplace, and considers the invasion of data privacy as an issue of consumer protection. The article argues that the foundation for evaluating privacy within the merger review already exists, as Section 5 of the FTC Act gives the Commission special responsibility to uphold these values and interpret its review process in order to keep up with a changing market structure. More than a decade later, these lessons remain relevant, as antitrust law experiences a resurgence in the United States.

The effects of global leniency programs on margins and mergers

AbstractIn a cross‐country study, we investigate how staggered passage of national leniency programs from 1990–2012 has affected firms’ margins and merger activity. We find that these programs, which give amnesty to cartel conspirators that cooperate with antitrust authorities, reduced the gross margins of the affected firms. However, firms reacted to new regulations by engaging in more mergers that had negative effects on downstream firms. Our results imply that although these programs were generally effective, their full potential was mitigated by mergers that substitute for cartels, and that a strong merger review process might be a prerequisite for strengthening anti‐collusion enforcement.

Three Key Issues for Managing Discovery in Global Merger Investigations. Coordinating Multijurisdictional Antitrust Reviews in Light of New Developments in UK and EU Merger Control Investigations

For counsel charged with securing antitrust clearances in multijurisdictional transactions, the conventional wisdom long has held that US, UK, and European regulators follow different paths for investigating the same M&A deal. In the US, the Department of Justice’s Antitrust Division (‘DOJ’) and the Federal Trade Commission (‘FTC’) rely heavily on gathering ordinary-course internal documents and data from the transaction parties and other industry participants, often amassing millions of pages of records in ‘Second Request’ investigations of strategic transactions. The UK and European Union processes, in contrast, historically have placed greater emphasis on detailed written submissions from the parties and other industry participants, while issuing comparatively few requests for ordinary-course company documents. These conventions are changing. In recent years, both the Competition and Markets Authority of the UK (‘CMA’) and the Directorate General for Competition of the European Commission (‘EC’) have placed greater emphasis on evaluating internal documents and data to aid their analysis of strategic transactions. Both Agencies have called on transaction parties (and third parties) to provide more of these materials during the merger review process. In certain complex cases, the CMA and EC have made ‘Second Request-like’ requests for information, requiring the merger parties to apply agreed-upon search terms against the parties’ email and other electronic data systems, capturing hundreds of thousands, even millions of documents in the process.1

Interagency Merger Review in Labor Markets

As empirical evidence of labor market concentration mounts, academics and policymakers have put forward a range of proposals to challenge or reverse its effects on workers’ wages and labor market options. Prominent among these is more aggressive review of the labor market effects of mergers as part of the Department of Justice (DOJ) and the Federal Trade Commission (FTC)’s broader merger review and approval process. This Essay argues for a novel intervention in the labor antitrust debates: because the consumer welfare focus of the antitrust agencies will prioritize consumers over workers when and if they conflict, and because the antitrust agencies lack expertise in labor markets, labor agencies should have concurrent jurisdiction to review and approve mergers that increase employer monopsony power under a “public interest” standard. The Essay makes three original contributions. First, it outlines the limitations of existing proposals for integrating labor market effects into the antitrust agencies’ merger review as a doctrinal and methodological matter. Second, it provides the first overview and evaluation of the range of interagency coordination and policy-sharing between the DOJ/FTC and outside agencies on merger review, including but not limited to the antitrust agencies’ concurrent jurisdiction with the Federal Communications Commission. This overview reveals a more complex picture of antitrust merger review that incorporates a range of standards—including a “public interest” standard—depending on the regulated industry, showing a broader administrative default of mandated expertise in industry-specific antitrust regulation. That default both contextualizes and supports the proposed extension of concurrent jurisdiction to labor agencies in merger reviews with labor market concentration effects. Finally, it provides detailed recommendations for how the labor agencies’ concurrent jurisdiction would operate to integrate their expertise into the evaluation of post-merger labor market effects.

European Union Competition Law Developments in the Aviation Sector: January–June 2018

The first half of 2018 has seen a significant increase in the application of competition law across the EU aviation sector, particularly in respect of abuse of dominance claims. This article summarizes the main developments over the past six months and provides the reader with greater detail of each of these developments. The first six months of 2018 have seen no less than six authorities being involved in potential abuse of dominance cases (two authorities opening cases and four authorities closing cases – with all but one of the cases involving access conditions to airport infrastructure) and two court judgments being handed down. This highlights the increasing use of competition law arguments by authorities and unhappy current or former airport users and the challenges faced by airport operators when dealing with the managed infrastructure. The European Commission (‘Commission’) is understood to have initiated an internal review of its own policy when slot divestiture commitments are offered during the EU merger review process. This appears to have arisen as a result of slot congestion at certain airports and the apparent low uptake of slots subject to such commitments. State aid continues to feature in the aviation sector, but it appears that aid is now being more frequently or successfully deployed by Member States to airports in the form of operating or infrastructure aid.

The Merger Review Process at the Federal Trade Commission from 1989 to 2016

The modern Merger Guidelines have controlled merger policy for over three decades. Economic theory has evolved (and continues to evolve) and revisions of the Merger Guidelines have integrated some of these considerations into the merger review methodology. This paper tabulates and evaluates information from Federal Trade Commission (FTC) merger reviews using data for 1989 to 2016. The FTC’s workload focuses on horizontal mergers, with particular interest in health care, consumer goods, retailing, and a specific group of intermediary product industries. The evidence suggests that a shift away from coordinated interaction (collusion) cases occurred after the release of the 1992 Merger Guidelines, with a further shift focused on differentiated products after the 2010 revision in the Guidelines. Abstracting from mergers to monopoly, the structural characteristics of investigations reviewed with unilateral effects or collusion theories appear similar, but not identical. Most three-to-two and many four-to-three mergers end up as challenged, while other transactions often pass through the review process. Evidence suggests that the probability of ease of entry and cognizable efficiency findings has declined in recent years, as merger analysis seems to have focused on modeling competitive concerns.

Promoting Innovation and Efficiency by Streamlining Competition Reviews

March 2, 2017, Promoting Innovation and Efficiency by Streamlining Competition Reviews. It is time for Ottawa to reform its merger review process to ensure that Canada is actively promoting efficiencies and innovation, according to a new C.D. Howe Institute report. In “Promoting Innovation and Efficiency by Streamlining Competition Reviews,” authors Brian Facey and Joshua Krane argue that merger review should support and encourage mergers that generate innovation and economic efficiencies in Canada.

Innovation in EU Merger Review

The European Commission has recently focused its attention on the effect of mergers on innovation. The Dow/DuPont, Halliburton/Baker Hughes and Bayer/Monsanto transactions are only some examples where this effect has been a key consideration in the Commission’s analysis. These cases show that a new factor has indeed emerged in the EU merger review process, and from the looks of it, it’s here to stay. In this article I review EU regulatory developments, case law and economic studies to explain the Commission's recent focus on innovation in its merger review process. The views expressed here are mine alone and do not reflect the views of my employer.

Merger Policy at the Federal Trade Commission: What, If Anything, Has Changed?

The modern Merger Guidelines have controlled merger enforcement decisions for the last thirty years. Economic theory has evolved (and continues to evolve) and revisions of the Guidelines have integrated some of these thoughts into the merger review methodology. This paper tabulates and evaluates information from Federal Trade Commission (FTC) merger analyses using data for 1989 to 2014. The FTC’s workload focuses on horizontal mergers, with particular interest in health care, consumer goods, and a specific group of intermediary product industries. The evidence suggests that a shift away from coordinated interaction (collusion) cases occurred after the introduction of the 1992 Merger Guidelines, with a further shift focused on differentiated products after the 2010 revision in the Guidelines. Abstracting from a large number of mergers to monopoly studied, the structural characteristics of investigations reviewed with unilateral effects or collusion theories appear similar, but not identical. Most three-to-two and four-to-three mergers end up challenged, while other transactions often pass through the review process. Evidence suggests that the 2010 Merger Guidelines may have led to some convergence of staff analyses on entry and efficiency issues. Statistical analysis of the merger review process detects a little populism, but no evidence of partisan political influence on the enforcement decision. Merger challenge decisions appear fact driven, with the choice of theory not influencing the weights given to the specific structural factors. Weak evidence suggests the 2010 revisions might have had an effect on policy, but more information is needed before any strong conclusions can be drawn. Overall, it is the fact-based staff findings that appear to drive the merger review process.

Unilateral Effects Analysis in Merger Review: Limits and Opportunities

Many economists believe that unilateral effects analysis should dominate the merger review process for differentiated products. However, it is far from clear if these theoretical models are broadly applicable, as they impose monopoly-style entry assumptions that constrain the competitive process. By abstracting from the complexities of the market process, the standard unilateral effects analysis gives rise to tractable mathematical equilibriums. Of course, the equilibriums may not offer insights if the key assumptions are not valid. This paper will explore the limits to and opportunities for unilateral effects analysis, using the Landes-Posner model of a dominant firm as an initial example, before expanding the discussion to Nash-Bertrand models of competition. These Lerner-based modeling structures are problematic, especially when the entry-related assumptions are not credible. Because economic models may remain applicable even when their assumptions are not valid, the discussion addresses various types of effects evidence that could confirm the predictions of a specific unilateral effects model. Court precedent is reviewed, with an emphasis on a current understanding of the structural presumption, along with the applicability of effects evidence to litigation. By focusing the analysis on facts, unilateral effects analysis serves to aid the merger review process.

Unilateral Effects Analysis in Merger Review: Limits and Opportunities

Many economists believe that unilateral effects analysis should dominate the merger review process for differentiated products. However, it is far from clear if these theoretical models are broadly applicable, as they impose monopoly-style entry assumptions that constrain the competitive process. By abstracting from the complexities of the market process, the standard unilateral effects analysis gives rise to tractable mathematical equilibriums. Of course, the equilibriums may not offer insights if the key assumptions are not valid. This paper will explore the limits to and opportunities for unilateral effects analysis, using the Landes-Posner model of a dominant firm as an initial example, before expanding the discussion to Nash-Bertrand models of competition. These Lerner-based modeling structures are problematic, especially when the entry-related assumptions are not credible. Because economic models may remain applicable even when their assumptions are not valid, the discussion addresses various types of effects evidence that could confirm the predictions of a specific unilateral effects model. Court precedent is reviewed, with an emphasis on a current understanding of the structural presumption, along with the applicability of effects evidence to litigation. By focusing the analysis on facts, unilateral effects analysis serves to aid the merger review process.

Market Definition Is Not Alchemy

Harvard Professor Louis Kaplow, a well-known critic of market definition in antitrust, has recently suggested that market definition is a form of alchemy. As a pure proposition of logic, he claims that anticompetitive effects must be modeled directly. This analytical approach assumes the result by concluding quantitative analysis is always possible and thus dismissing qualitative analyses as unnecessary approximations of reality. However, Lerner analysis, at the core of Kaplow’s approach, is, at its core, a monopoly model and it is far from clear that the model can be broadly applied to competitive situations. Entry may control the competitive process and by construction, entry is excluded from a Lerner-style evaluation. Likewise, Lerner analysis excludes various collusion models. The Merger Guidelines, developed in light of the relevant court precedents, set out a two-stage merger review process, with market definition considered first to define the “playing field” for the analysis and then competitive effects studied through a review of a wide range of relevant facts. Quantitative analysis of competitive effects, while possibly relevant in some special case situations, does not address all the relevant possibilities in a manageable way. Thus, market definition remains an important tool for antitrust policy. It is not alchemy.

Merger Policy at the Federal Trade Commission: What Changes, What Stays the Same?

The Hart Scott Rodino program, coupled with the modern Merger Guidelines, has controlled merger enforcement for the last twenty years. Economists have offered numerous commentaries, some supportive of the status quo, others suggestive of change. This paper tabulates and evaluates information from Federal Trade Commission (FTC) merger reviews. The FTC’s workload focuses on horizontal mergers, with particular interest in health care, consumer goods, and a specific group of intermediary product industries. The evidence suggests that a shift away from coordinated interaction cases occurred after the introduction of the 1992 Merger Guidelines; since then, theoretical choices appear relatively stable. Abstracting from a large number of mergers to monopoly studied and almost always blocked by the Agency, coordinated interaction matters generally exceed unilateral concerns, although the 2011-2012 period may be an anomaly. Statistical analysis of the merger review process detects a little populism, but no evidence of partisan political influence on enforcement. Merger challenge decisions appear fact driven, with theory influencing which considerations are important, but not the weight given to the specific factors. Of particular interest are the findings of a more aggressive policy in homogeneous goods industries, with this impact offset by a finding of buyer power. Overall, it is the fact-based staff findings that appear to drive the merger review process.