Global antitrust authorities maintain merger control focus in 2020 despite pandemic
04 March 2021
Allen & Overy’s latest Global Trends in Merger Control Enforcement report, launched today, reveals that antitrust authorities continued to frustrate deals at a significant level in 2020 with 29 transactions either prohibited or abandoned in the year. While this represents a decrease on 2019, this is due to a general decline in M&A activity in the wake of Covid-19 rather than signalling a more relaxed approach from antitrust authorities.
The report analyses data on merger control activity from 26 jurisdictions around the world in 2020.
Key report findings:
- The UK had another record year, frustrating nine deals, up from eight in 2019, and was the standout enforcer once again.
- A peak in challenges by U.S. antitrust agencies resulted in a record ten deals abandoned plus one prohibited.
- In China, merger control enforcement stayed steady and the average duration of merger reviews fell, despite the disruption caused by the pandemic.
- Antitrust intervention targeted life sciences and transport sectors in 2020 but digital also remained a key focus as authorities set out plans to tighten scrutiny of deals in the sector.
- Establishing or strengthening foreign investment controls was at the top of the agenda across the globe: 17 of the 26 jurisdictions surveyed introduced new or tougher foreign investment controls in 2020.
- Antitrust authorities continued their strict enforcement of breaches of procedural merger control rules, with 33 cases in total.
- 137 deals were cleared subject to remedies as authorities worked together to coordinate outcomes in multi-jurisdictional cases.
At a jurisdictional level, authorities’ appetite for merger control enforcement can be seen starkly. The UK saw another record year for merger control enforcement with nine deals frustrated, up from eight in 2019, with four prohibited and five abandoned. The report also outlines how the Competition and Markets Authority (CMA) increased intervention in the form of remedies in the year. 2020 saw eight phase 1 remedies cases and a further four at phase 2, up from four and one respectively in 2019.
Commenting on this trend, Brussels and London-based A&O partner Dominic Long said:
The CMA has continued ramping up merger control efforts in 2020 with its record-breaking levels unaffected by a drop in M&A due to the pandemic. From what we’ve seen so far in 2021 it remains committed to this path, at a time when the UK Government is considering calls to further strengthen the CMA’s powers.
The U.S. also saw a peak with ten deals abandoned in 2020 due to antitrust agency concerns, double the tally in 2019. All of these followed complaints or concerns raised by the DOJ or FTC and reflect the agencies’ increased appetite to challenge deals last year.
New York partner and Global Antitrust Co-Head Elaine Johnston commented: “The U.S. antitrust agencies have had an extremely busy year for merger control enforcement. With President Biden now in office, we may see an even greater appetite to scrutinise and challenge deals, especially in consumer-facing, digital and pharma sectors. Enforcement priorities and approaches should start to take shape over the coming months.”
EU-level data shows a very different story, with no prohibitions in 2020 and only one abandoned deal. Looking ahead to 2021, the report notes that the EC has a number of ongoing in-depth reviews on its books but many of these appear to be good candidates for a remedies decision rather than a prohibition.
From a sector perspective, cross-border life sciences mergers were in the spotlight, with deals in the sector representing 22% of total deals subject to antitrust intervention despite accounting for only 8% of global M&A. Transport was also a focus, accounting for 9% of antitrust intervention but only 2% of global M&A, with remedy cases across a number of jurisdictions accounting for all this intervention.
The report highlights the ongoing focus of antitrust authorities around the world on the digital sector and that this shows no sign of abating in 2021. It names the three major categories of likely change to come as new separate merger control rules for digital firms, catching ‘killer acquisitions’ with deal value thresholds and reframing the assessment of digital mergers.
Looking at procedural merger control enforcement, overall fines reached an enormous EUR6.65 billion but excluding the EUR6.6 bn fine from the Polish UOKiK on six energy companies for alleged gun-jumping by entering into financing arrangements to construct the Nord Stream 2 gas pipeline, fines of EUR53 million in the year are significantly down on the EUR145 million imposed in 2019. The number of procedural enforcement cases was also lower at 33 in 2020 (excluding the Polish outlier), compared to 40 in 2019. However, the report warns that this should not be taken as a sign to relax merger control compliance as authorities around the world continue to actively pursue suspected infringements.
Despite a drop in the number of frustrated transactions in 2020 due to the decline in M&A across the year, there is not a corresponding fall in the number of remedies cases, with a total of 137. Of these, 44 were agreed at phase 1, 63 put in place after an in-depth review and 30 relate to South Africa. The report notes a number of instances in 2020 of antitrust authorities coordinating on the design of mutually compatible remedy packages.