Antitrust authorities frustrated deals worth EUR46.3 billion in 2018 creating challenges for transformative deals
13 February 2019
Antitrust authorities maintained their appetite to intervene in 2018, with 29 transactions with a value of over EUR46.3 billion prohibited or abandoned due to antitrust concerns, as revealed in A&O’s Global Trends in Merger Control Enforcement Report. Of these deals, 7 mergers were prohibited and 22 abandoned as a result of antitrust concerns.
The report analyses 26 jurisdictions globally and reveals a record number of merger notifications in 2018 as global M&A volumes soared in the first half of the year.
Antonio Bavasso, global co-head of antitrust at A&O comments: "Against rising political concerns about levels of concentration in some industries, antitrust authorities have responded strongly to the global appetite for strategic deals which bring about further industry consolidation. They have been unflinching in their merger control scrutiny and robust in their measures for those that do not comply with the rules.
"As we look to 2019, we expect to hear more from voices calling for reforms in political circles, fuelled by geo-political considerations and continued vigour in enforcement. Throw into the mix the personnel changes at the helm of DG Comp in Brussels and we are set for a fascinating year."
Antitrust authorities cleared 139 transactions subject to remedies, down from 155 in 2017, but put emphasis on getting the ‘right’ package. The U.S. saw a drop in remedies cases, from 23 to 17 which stands out after remaining steady year-on-year, something that the reports ties to an overall trend of decreased enforcement by U.S. antitrust agencies. China saw a similar drop and the UK’s CMA only cleared three cases with remedies at phase 1, a big drop on 2017 in which it saw 13. However, the report notes that when combined with an uptick in referrals to in-depth investigation, it could suggest a more interventionist approach.
Throughout 2018, behavioural remedies have been increasingly characterised as a sign of regulatory failure and authorities pledged to focus on structural divestments instead. However, the report reveals that data belies this, with 48% of all remedies cases in 2018 involving a behavioural element, either on its own or with divestments, only slightly down on 53% in 2017.
The Industrial & Manufacturing, Energy and Transport sectors experienced a higher share of antitrust intervention when compared to global M&A activity in 2018. In the EU and U.S. almost half of all remedies cases in these regions fell within the Industrial and Manufacturing sector.
By contrast, the rate of intervention in the digital and TMT sector is below the level of general M&A activity. This fits with the concerns raised by an increasing body of commentators who claim a large number of digital and tech mergers are not detected, or that enforcement has been too lax.
Across all sectors, and carrying on a trend from 2017, antitrust authorities have looked closely at the potential impact of a deal on innovation. The EU continued to set the pace in this vein and innovation has been a key theme in China too.
Antitrust authorities continued to break records when imposing fines for breaches of procedural merger rules, such as gun-jumping or providing incorrect information, in 2018. Fines of over EUR148 million were imposed across the globe in 46 separate cases, up 30% from the number of cases in 2017.
In the UK this included the CMA’s first enforcement action for gun-jumping, imposing two fines for breaches of initial enforcement orders, both relating to completed transactions. These decisions show that even in the context of a voluntary merger control regime, there is a risk of fines for jumping the gun.
For further information, please contact Elizabeth Randall, Elizabeth.Randall@allenovery.com on +44 (0)20 3088 2989