Merger Review Research Articles

Merger and acquisition research in the Asia-Pacific region: A review of the evidence and future directions

This paper provides a comprehensive review of Mergers & Acquisitions (M&As) research conducted in the Asia-Pacific region over the last decade. We also identify gaps in the literature and highlight some important research issues that provide directions for future research.

Market Power Absent Merger Review: Brewing in Perú

We examine the extent of market power in the brewing market of Peru, where the absence of preventive merger review eased consolidation into a single industrial brewer. We use a standard oligopoly model and exploit both seasonality in demand and atypically large and frequent variations in the structure and level of excise taxes to identify variations in market power. Our results provide evidence of the ineffectiveness of competition policy as uncontested mergers resulted in a degree of market power that decreased only with the entry of new firms.

Stealth Consolidation: Evidence from an Amendment to the Hart-Scott-Rodino Act

Prospective merger review is the most frequent application of antitrust law. It exempts transactions on the basis of size, though small deals can have large anticompetitive effects in segmented industries. I examine its impact on antitrust enforcement and merger activity in the context of an abrupt increase in the US exemption threshold. I find that among newly-exempt deals, antitrust investigations fall to almost zero while mergers between competitors rise sharply. Effectively all of the rise reflects an endogenous response of firms to reduced premerger scrutiny, consistent with large deterrent effects of antitrust enforcement. (JEL G34, G38, K21, L41)

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.

Reviewing Mergers: Assessing Performance and Strategic Issues

Based on secondary data and interviews of executives, this paper reviews mergers during last decade in India. Based on this review of mergers of companies in India, the author finds that there is a positive impact of mergers on earning per share and therefore there is a tendency on the part of companies to go for merger with the ultimate objectives of gaining synergies and better performance. Secondary data revealed the due to merger, there was decline in return on assets, but the Earning per share improved, which resulted in better valuation and better market appreciation. Primary data revealed that executives found that merger improved overall performance. However, the author also finds that there is lack of proper information among employees. The executives reported experiencing heightened level of stress and anxiety due to the event of merger. There is a need of proper orientation and information sharing and training to the employees. Mergers generate positive outcomes, but companies must also focus on building better culture and create proper motivation and training among employees.

Losing the ‘One-Stop-Shop’: The Real Cost of a Dual UK/EU Merger Process Post Brexit

Following Brexit, if the UK is no longer a member of the European Economic Area, then there will be no ‘one stop shop’ for mergers at the EU level and a separate merger review may need to be carried out in the UK. This means merger notifications may be required in both the EU and the UK. This would result in a significant increase in transaction costs, time and administration, in addition to the risk of potential uncertainty as companies face possibly divergent or inconsistent decisions.

Capacity Constraints and Horizontal Merger Effects

This article examines how capacity constraints affect horizontal mergers. Binding capacity constraints for merging firms may mitigate merger price effects, but capacity constraints for nonmerging firms may either amplify or mitigate such effects. The presence of capacity constraints for both the merging and nonmerging firms in a market further complicates the analysis of merger price effects. Capacity constraints may also confound the relationship between market concentration and merger price effects. In addition, capacity constraints affect market definition analysis and analytical tools such as merger simulation and upward pricing pressure indexes. Analyzing the effects of capacity constraints on mergers continues to be a challenge for merger reviews.

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 State’s Invisible Hand: Chinese SOEs Facing EU Antitrust Law

We argue that the European Commission (EC) case law on mergers involving Chinese state-owned enterprises (SOEs) suffers from several flaws. First, it is inconsistent with the set of criteria initially set out in the EC case law for SOEs. Secondly, the EC’s assessment is based on an ownership bias that ignores the institutional environment in which Chinese SOEs operate. Third, it violates the basic legal rationale to maintain and ensure competitive neutrality between private and public companies in merger review. We argue in favour of a more systematic application of the single entity theory to restore the consistency of the case law. This appears a necessity in the case of Chinese investments in the EU. Indeed, due to its broad influence over its economy and its financial system, Chinese SOEs may enjoy an exorbitant privilege that could jeopardize the principle of competitive neutrality at the core of EU competition law. One should recognize that the antitrust law is a point of tension between the Western understanding of corporate law and the Chinese state capitalism based on a radically different institutional environment. A more consequential implementation of the principle of competitive neutrality is necessary to take into account this institutional environment.

The role of big data and digital privacy in merger review

ABSTRACTThe article examines the implications of big data for competition law, with a focus on personal data and the concerns that data may give rise to in merger review. One of the biggest challenges for competition authorities in the digital age is how to deal with data and privacy issues in their competitive analysis. An emerging issue is the role of competition in protecting consumers from potential privacy risks flowing from the increasing number of mergers in digital markets. The article considers how personal data in the digital economy are considered a currency in exchange for online offerings, and how a loss of privacy can be factored into quality competition. It concludes by addressing some of the challenges with incorporating privacy as a non-price parameter in competition analysis.

How Fcc Transaction Reviews Threaten Rule of Law and the First Amendment

Since its creation in 1934, the Federal Communications Commission has had broad discretion to approve or deny the consummation of major transactions by wireless and wired communications firms under a public interest standard. Despite the passage of decades, neither the FCC nor the courts have put meaningful limits on what the FCC can pursue under this authority. Today, regulated companies--including broadcast TV and radio, satellite TV and radio, cable TV, and Internet service providers--are the primary producers and distributors of mass media and publications. We model the FCC’s decisions to extract concessions from firms under the empire building model. The FCC’s ad hoc determinations of the public interest and the impracticability of timely judicial review has pernicious effects on modern media and the rule of law. Consistent with the model, the FCC increasingly extracts nominally voluntary concessions from firms--including programming decisions, hiring practices, and “net neutrality” compliance--in the transaction approvals that the agency is legally barred from or unwilling to pursue through the normal regulatory process. We argue that the FCC’s unpredictable and coercive transaction reviews violate rule of law norms and pose significant First Amendment problems. We question the necessity of the FCC’s powerful merger review authority and suggest that if Congress does not revoke the agency’s authority, the agency should at least promulgate guidelines for what its public interest standard requires.

Consolidation in Provider and Insurer Markets: Enforcement Issues and Priorities

Consolidation in Provider and Insurer Markets: Enforcement Issues and Priorities

Antitrust merger review costs and acquirer lobbying

Documenting the US antitrust review process for M&As in rich detail, we unveil that regulatory costs and risks are significant and that mitigating these risks via lobbying by acquirers may benefit shareholders. Our results show that an adverse antitrust review outcome leads to a decline of 2.8% in acquirer firm value. Further, we show that lobbying before deal announcements is associated with more favorable review outcomes. Finally, higher pre-announcement lobbying is valued by shareholders, especially in horizontal deals and deals with a larger expected change in market concentration, which have higher antitrust concerns. However, this positive value effect of lobbying applies only in firms with strong corporate governance. Our results highlight the role of political connections and lobbying for corporate investments when facing regulatory costs and risks.

Norway ∙ Alarm Case Signals Increased Risk of Post-Closing Merger Review

Norway ∙ Alarm Case Signals Increased Risk of Post-Closing Merger Review

COMPETITION MERGER REVIEW FOR CROSS-BORDER MERGERS AND ACQUISITIONS IN INDONESIA

This article aimed at expressing ideas on a legal construction of competition merger review (CMR) on Cross-border Mergers and Acquisitions (CBMA ii) Hybrid Test Two; iii) Hybrid Test Three; and Hybrid Test Four). Out of these seven methods of CMR, I consider to choose the SLC Test as the method for reviewing CBMA 2) the substantive norms for constructing CMR in the methods of SLC Test for CBM&A transactions in Indonesia should take into account the national law regime: company law, merger law, investment law including the existing public interest. In addition to that, the principles of certainty, efficiency, transparency, and proportionality should also be considered. Thus, I recommend to enact a SLC Test Guideline in order to strengthen the legal review of CBM&A proposals for supporting FSBC, to maintain dynamic, secure, and stable national economy and development.

Antitrust Merger Review Costs and Acquirer Lobbying

Documenting the US antitrust review process for M&As in detail, we unveil that regulatory costs and risks are significant and that mitigating these risks via lobbying by acquirers may benefit shareholders. Our results show that an adverse antitrust review outcome leads to a decline of 2.8 percent in acquirer firm value. We also show that lobbying before deal announcements is associated with more favorable review outcomes. At the same time, higher pre-announcement lobbying is valued by shareholders, especially in horizontal deals and deals with a larger expected change in market concentration, which have higher antitrust concerns. However, this positive value effect of lobbying applies only in firms with strong corporate governance. Post-announcement lobbying, concurrent with the antitrust review process, increases with adverse review outcomes. Our results highlight the role of political connections in corporate investments when facing regulatory costs and risks.

Common Ownership by Institutional Investors and its Impact on Competition: OECD Background Paper

The simultaneous ownership of shares in competing firms by institutional investors, a phenomenon referred to as “common ownership”, is becoming increasingly common in some markets. This is in part due to the increasing popularity of passively managed investment funds, which allow investors to diversify their holdings and therefore reduce their exposure to individual firm risks. Recent studies have linked common ownership with competition concerns. In particular, it has been theorized that institutional investors with holdings in multiple competing firms may have the incentive to dampen competition, either by facilitating collusion or by encouraging unilateral business decisions that may benefit some portfolio firms at the expense of others. There are a range of mechanisms that provide institutional investors with the ability to influence firm management in accordance with these incentives. Since it involves the acquisition of minority shares, however, common ownership may in many cases not be captured by merger control legislation. Several proposals have been made to bring common ownership under merger review, which are the subject of substantial debate. This paper will describe the theoretical and empirical foundations for the competition concerns associated with common ownership, the proposed policy responses, and associated critiques. Given the developing nature of the debate on common ownership, this paper identifies several tools available to competition authorities to analyse the phenomenon in their jurisdiction, as well as some alternative policy perspectives to bear in mind when doing so.

Competition Law for the Digital Economy: The Role of Big Data and Privacy in Merger Review

Big data is the hot buzzword across industries and data is playing an increasingly important role in how businesses compete on the markets. In the digital economy, big data represents a core economic asset that can create significant competitive advantage for companies. Although the collection and analysis of data by companies is not limited to consumer data, many aspects of big data are targeted specifically at consumers, their preferences and behavior. This collection and use of personal information raises privacy issues. To keep pace with these developments, competition authorities have started to make data and its implications for competition law a key focus. Competition issues associated with big data are an emerging agenda for the regulators around the world. Last year, French and German competition authorities published a joint study examining the interplay between data and competition law. The Organization for Economic Cooperation and Development (OECD) issued a paper in November 2016 on big data’s implications for competition enforcement. The European Commission has also confirmed its interest in big data, in particular with regard to privacy issues and data as an asset. Most recently, the Commission’s interest in data is reflected in the authority currently weighing possible changes to merger rules to better capture data-focused mergers.

Antitrust Risks and Big Data

The explosive growth in companies’ exploitation of big data is drawing intense scrutiny from European antitrust authorities. EU Competition Commissioner Margrethe Vestager has promised to “keep a close eye on how companies use data” and a number of European antitrust authorities have conducted full-blown studies on big data issues, including an especially comprehensive May 2016 Franco/German study on “Competition Law and data”. Antitrust authorities fear that big data can create barriers to entry and market power, especially where companies hold unique datasets that cannot be replicated by competitors. However, a closer look at big data-related theories of harm suggests that the focus on uniqueness may be misplaced. Many companies collect voluminous datasets that are unique and non-replicable, as well as, being valuable and competitively significant, without raising exclusionary concerns of the types highlighted by antitrust authorities. The perception that limited access to big data may create barriers to entry and stifle the growth of the digital economy risks provoking an overbroad legislative reaction. In January 2017, the EU Commission consulted on a wide range of data-related issues, proposing among other things that companies be required to share non-personal, machine-generated data with third parties, including competitors, whether or not the data-holder holds a dominant position or engages in abusive conduct. As such, it would go far beyond any access remedy recognized in the antitrust context. This article discusses European antitrust authorities’ concerns about the foreclosure risks of big data from the perspective of the different types and uses of big data. This approach reveals that exclusionary concerns arise in a relatively small segment of big data uses, and those situations can be assessed using traditional antitrust tools. Some important big data issues not addressed in this article include the mirror image of these exclusionary concerns – i.e., that ubiquitous big data can make markets so transparent that competition may be impaired by competitors using pricing algorithms – the role of big data in merger review, and the relationship between antitrust enforcement and data protection. Big data are a big topic, and a complex one.