Clarifying Competition Law: US and EU Merger Control / Antitrust Reforms and Enforcement Trends: Bad for Business or More Efficient Regulation

Transcription

1 Clarifying Competition Law: US and EU Merger Control / Antitrust Reforms and Enforcement Trends: Bad for Business or More Efficient Regulation Robert S. K. Bell Rebecca A. D. Nelson

2 Speakers Robert S. K. Bell Partner Bryan Cave London T: +44 (0) Robert Bell is head of the EU & UK competition team at Bryan Cave. He is a market-leading competition lawyer with over 20 years' experience in advising clients on their EU and UK competition law matters. He acts on a range of complex competition and regulatory matters and has been involved in some of the leading cases before the OFT, European Commission and the UK and European Courts. He is recognised as a leading individual by both Legal 500 and Chambers UK Robert is currently Chair of the City of London Law Society's Competition Law Committee, which liaises with the UK Government and the EU & UK competition regulators in connection with the reform of competition law and practice.

3 Speakers Rebecca A. D. Nelson Partner Bryan Cave Saint Louis and Washington D.C. T: Rebecca Nelson devotes her practice to antitrust and trade regulation, both in the counseling and litigation phases. She regularly advises clients with respect to antitrust issues associated with potential business combinations, as well as a full range of contracts, pricing and sales practices. She has led the defense of dozens of mergers, including through full second request investigations. She has been involved with the litigation and arbitration of monopolization, attempted monopolization, deceptive trade practices, dealer termination and price fixing claims. She has also represented clients under investigation by state Attorneys General and the Federal Trade Commission for antitrust offenses, deceptive advertising and unlawful trade practices.

4 Introduction This webinar will examine: 1. US Developments and Trends - Hart-Scott-Rodino - Investigation and Enforcement in Non-reportable Transaction Investigations - Current DOJ and FTC Non-merger Enforcement Activities 2. EU Developments and Trends - Proposed Regulation of Non-Controlling Minority Shareholdings - Extension of the EUMR Simplified Procedure - Exemption of Non-EU Joint Ventures - Trends

5 US Developments and Trends

6 Hart-Scott-Rodino Thresholds HSR Act Reporting Requirements for 2015: Effective 2/14/15, all parties must make a premerger filing and observe a waiting period if either: the stock/assets/interests held by the acquiring person as result of transaction are valued between $76.3 million and $305.1 million, AND one person has total assets or net sales of $152.5 million or more AND the other person has total assets or net sales of $15.3 million or more; or the stock/assets/interests held by the acquiring person as a result of the transaction exceed $305.1 million, regardless of size of parties Note there are exemptions for certain industries (e.g., real estate, carbon-based mineral reserves, banks) and certain types of acquisitions (e.g., investment by small holder; purchase of current supplies; foreign stock/assets; gifts; irrevocable trusts)

7 Failure to File This is a priority enforcement area for the Agencies. Penalties for failure to file HSR = $16,000 per day of the violation Parties must make a corrective filing and describe in detail the circumstances that led to the failure to file.

8 HSR Enforcement in 2014 Failure to File Example: Berkshire Hathaway and USG Corporation December 2013: Berkshire converted certain notes into voting securities of USG resulting in Berkshire holding USG voting securities valued at over $950 million, well over the HSR threshold. January 2014: Parties make corrective HSR filings February 2014: Waiting period expires Penalty assessed: $896,000 ($16,000 X 56 days violation) Why such a large fine? Same violation in prior year. Similar example: Bill Gates two violations in 2004

9 HSR Enforcement Penalty Factors The Agencies may not seek civil penalties when parties inadvertently and mistakenly fail to file if: 1. The violation was the result of understandable or simple negligence; 2. The parties make corrective filings promptly after discovering the mistake; 3. They did not benefit from the violation; 4. They submit an acceptable explanation for the failure to file and explain what they will do to prevent another violation; and 5. They have not previously violated the HSR Act.

10 HSR Enforcement 2014 Gun-Jumping and Collusion In 2014 DOJ investigated the acquisition by Flakeboard of SierraPine s MDF and particleboard production facilities. Parties made HSR filings but during the waiting period, they agreed SierraPine would close down one plant. Those customers were primarily converted to Flakeboard, the main competitor. DOJ alleged both a gun-jumping violation of HSR Act and violation of Section 1 of Sherman Act. Penalty for HSR violation: $3.8 million Penalty for Section 1 violation: $1.15 million disgorgement of illegal profits Parties abandoned transaction in light of likely substantive challenge

11 HSR Enforcement 2014 Merger Investigations Key Deals Challenged/Settled under HSR in 2014: DOJ: U.S. Airways and American Airlines Remedy: Divest key assets at capacityconstrained airports across the country; will allow low-cost airlines to expand footprint and benefit fliers DOJ: Anheuser-Busch InBev (ABI) and Grupo Modelo Remedy: Divest to Constellation Brands Modelo s entire U.S. business, ensuring Modelo would continue to compete with ABI and MillerCoors FTC: Pinnacle Entertainment and Ameristar Casinos Remedy: Divest casino properties in Missouri and Louisiana to settle concerns that the acquisition would hinder competition there FTC: Jostens and American Achievement Corp. FTC filed complaint alleging deal would harm consumers of class rings; parties abandoned transaction

12 U.S. Enforcement: Non-Reportable Transactions Section 7 of the Clayton Act allows the Agencies to challenge a transaction before or after consummation, regardless of whether the transaction is reportable under HSR Act The standard of review for non-reportable transactions is the same as for reportable transactions whether the effect of a transaction may be substantially to lessen competition, or to tend to create a monopoly in any line of commerce Between 2009 and 2013, the Antitrust Division initiated 73 preliminary inquiries into non-reportable transactions and 22 of these approx. 30% resulted in a challenge Between March 2009 and March 2012, the FTC challenged 9 consummated transactions 20% of mergers challenged

13 U.S. Enforcement: Non-Reportable Transactions Some Recent Examples: FTC and State of Idaho v. St. Luke s Health System, Ltd. (2013) FTC and Idaho challenged transaction claiming the transaction would give it the market power to demand higher rates for health care services provided by primary care physicians (PCPs) District court permanently enjoined transaction in January 2014 U.S. v. Bazaarvoice, Inc. (2013) In January 2013, the DOJ challenged Bazaarvoice s June 2012 acquisition of PowerReviews alleged that transaction eliminated the company s only significant competitor for providing internet product rating and review platforms District court ruled that the deal violated Section 7 of the Clayton Act Remedy required Bazaarvoice to divest the PowerReviews assets

14 Other U.S. Antitrust Enforcement DOJ Criminal Enforcement: Sheer number of cases filed has decreased over the last few years, but resulting penalties remain high

15 Other U.S. Antitrust Enforcement DOJ Criminal Enforcement: Criminal penalties for individuals is trending upward Continued work in particular industries e.g., conspiracies related to auto parts, real estate auctions, LIBOR rates

16 Other U.S. Antitrust Enforcement FTC current antitrust enforcement hot topics : Healthcare Pharmaceutical Reverse Settlement Payments IP & Antitrust FTC s traditional enforcement efforts continue Trade association activities Collusion/Information exchange among competitors

17 EU Developments and Trends

18 Our Focus The White Paper The European Commission's White Paper Towards More Effective EU Merger Control Published 9 July No EU power to regulate acquisition on non-controlling shareholdings Germany, UK and Austria have national merger control regimes which regulate noncontrolling shareholdings.

19 Minority Shareholders A Need for The Ryanair/Aer Lingus case Regulation? Proposals for extension of the EU Merger Regulation (EUMR) to cover non-controlling minority interests. Economic evidence behind this reform?

20 Minority Shareholders The Proposals Targeted Transparency System The proposed method of assessing minority shareholdings: Publication of a transparency notice. Transactions to be suspended for 15 working days. Within this time Member States can claim jurisdiction. Commission has up to 4-6 months following the investment to call the case in. Parties would self-assess whether their acquisition posed a competitively significant link. The White Paper proposes that such a link would exist where:- A minority shareholding is acquired in a competitor or vertically related company. There would need to be a competitive relationship between the acquirer and the target; and The competitive link will be considered significant if the acquired shareholding is 20% or more or between 5-20% if accompanied by further enhanced rights such as a de facto blocking minority, a seat on the Board of directors or access to confidential information of the target company.

21 Minority Shareholders The Problems 1. Definition of non-controlling minority shareholder 2. Published Notice What s going to be necessary and how similar this will be to a Form CO 3. Likely number of notices Commission say but potentially 100s 4. Time Periods 15 working day window only for Member State request for jurisdiction vs 4-6 month long stop date 5. Commercial Impact Chilling effect on investment

22 Other Developments in the White Paper and Elsewhere The EU Commission adopted measures on 5 December 2013 to simplify its merger notification process under the EU Merger Regulation, Council Regulation EC No. 139/2004. Measures taken to widen the scope of the Commission s Simplified Procedure Horizontal mergers below 20% combined market share Vertical mergers below 30% combined market share Reduction in the amount of information required No pre-notification in straightforward cases In the White Paper: Joint Ventures: The proposal to remove joint ventures with no effect in the EEA from the jurisdictional scope of the EU Merger Regulation. Application for EU Jurisdiction: The proposal to allow Article 22 referral requests to be made only by Member States with jurisdiction to review a transaction under their national merger control laws. Transparency Notices: The EC's willingness to explore options to further minimise the filing burden for transactions involving no reportable markets. (further use of Transparency notices )

23 Trends and Statistics Over the last 25 years: Around 5700 mergers have been notified to the Commission Over 5000 have been declared compatible (with no commitments at stage 1) 242 compatible with commitments at stage compatible with commitments at stage 2 Only around 30 ever out rightly prohibited Streamlining measures a priority for the Commission with an enlarged EU with limited resources (28 Member States instead of 10).

24 eu-competitionlaw.com

25 CPD Points CPD points and CLE credit are available for this webinar. CPD points and CLE credit may be collected by ing:

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