“Emerging Antitrust”: One size doesn’t fit all?

Pro rem publicam

At the Concurrences “Antitrust & Developing and Emerging Economies” conference held at NYU Law last Friday — and aptly sub-titled “Coping with nationalism, building inclusive growth” — the audience was treated to a (rather iconoclastic, yet fascinating) keynote speech by Nobel laureate economics professor Joe Stiglitz, which highlighted what would become a theme woven throughout the four panels of the day: One size does not fit all when it comes to competition-law regimes, according to a majority of the speakers; imposing a pure U.S. or EU-derived methodology without regard to local economic and/or political differences is doomed to fail.  However, as we outline further below, there were also countervailing voices…

Nobel Laureate Joseph Stiglitz: “Revisit all of antitrust!”

In the words of Professor Stiglitz, his advice to developing nations was (perhaps to the chagrin of U.S. government representatives, such as the FTC’s international director, Randy Tritell): “don’t copy the US antitrust laws and presumptions!”  Smaller markets in developing countries are even more susceptible to market power by few large firms.  Competition law can be used in developing countries to advance the public interest, as there are fewer “tools in the toolkit” in those nations, and in his view, all available tools should thus be used.  He referred to the WalMart/Massmart transaction in South Africa in this regard, noting the public-interest conditions imposed there.

On the day’s Mega Mergers panel, SACC Commissioner Tembinkosi Bonakele noted how the outcomes of truly global “mega mergers” all having been positive, “there has been no outright prohibition, there really is no problem that’s too big which could not be remedied by the authorities and the parties.”

Andreas Stargard and Commissioner Tembinkosi Bonakele (South Africa)

Observes Andreas Stargard: “Commissioner Bonakele also pointed to the importance of international merger enforcers cooperating on remedies, in order to allow these positive outcomes to be maintained.  Taking up Professor Harry First’s hypothetical of a joint or ‘merged’ antitrust enforcement agency, Mr. Bonakele considered a combined merger authority for the African continent a possibility, especially in light of the many small jurisdictions which individually lack resources to police cross-border M&A activity.”  Mr. Bonakele expressed the concern that “the smaller, national enforcers certainly feel as if they cannot block a mega deal on their own, so they largely defer” to the established agencies, such as the EC and DOJ / FTC.

In response to Frederic Jenny’s critical introduction of the South African Competition Amendment Act, Commissioner Bonakele commented that the current legal regime lacked the ability to tackle concentration as a market feature in itself, whilst the SACC had a comparatively positive track record on unilateral enforcement issues.  Overall, he disagreed with the moderator that most of the Bill’s changes were drastic, stating simply that it would in fact bring South Africa more in line with other international regimes.

As to the ministerial intervention powers, he identified two concerns, namely the use of the agency’s resources as well as the possible risk of abuse by a minister who could employ the new law to pursue ulterior motives against a firm or a sector.

Counterpoint: public interest or politicization?

Prof. Ioannis Lianos characterized the “slightly fuzzy public interest test” as largely a scheme to enhance the bargaining power of the competition agencies that do apply such a test.

Canadian attorney and former enforcer Lawson Hunter pointed out that the trend of growing political interference in the merger approval process has spread globally, not only in developing nations but also in well-established regimes — often under the guise of national security reviews, which are “obscure, opaque in process, fundamentally political, and without any ‘there there’.”  Merger review has “simply become very broad and less doctrinal.”  “I found it interesting that Mr. Hunter recommended that other antitrust agencies should give more frank input into their sister agencies, if and when those stray from the right path,” said Stargard, who focuses his practice on competition matters across the continent.  “Hunter also pointed to the tendency in emerging antitrust jurisdictions to abuse the remedy process in merger control to address economic issues that lie well outside the actual competition concerns that may have been found — an issue we have also come across, sadly.”

Commissioner Bonakele closed the final panel of the day by addressing the recently ratified South African Competition Amendment Bill: he admitted that there were some “radical” provisions in the law, such as the power to break up companies, as well as the existence of a risk of government using the law’s new national security provision in a protectionist manner. He concluded by stating his personal worry that the law had possibly too much ambition, which could be difficult to implement in reality by the SACC.


The New South African Competition Amendment Bill – What it Means for Business

By Michael-James Currie currie2


On 1 December 2017, the Minister of Economic Development (under whose auspices the South African competition authorities fall), Ebrahim Patel, published draft amendments to the South African Competition Act [PDF], 89 of 1998 (Act) for public comment.

The proposed amendments (Amendments) to the Act, which principally aim to address concentration in the market, go well beyond pure competition issues and bestow a significant public-interest mandate on the competition authorities.

In this regard, Minister Patel has remarked that the old, i.e., current, Act “was focused mainly on the conduct of market participants rather than the structure of markets, and while this was part of industrial policy, there was room for competition legislation as well”.

south_africaPatel’s influence in advancing his industrial-policy objectives through the utilisation of the public-interest provisions in merger control are well documented. AAT contributors have written about the increasing trend by the competition authorities in merger control to impose public-interest conditions that go well beyond merger specificity – often justified on the basis of the Act’s preamble which, inter alia, seeks to promote a more inclusive economy.  The following extracts from the introduction to the Amendments indicate a similar, if not more expansive, role for public interest considerations in competition law enforcement:

“…the explicit reference to these structural and transformative objectives in the Act clearly  indicates that the legislature intended that competition policy should be broadly framed, embracing both traditional competition issues, as well as these explicit transformative public interest goals”.

The draft Bill focuses on creating and enhancing the substantive provisions of the Act aimed at addressing two key structural challenges in the South African economy: concentration and the racially-skewed spread of ownership of firms in the economy.

The role of public interest provisions in merger control have often been criticised, predominantly on the basis that once the agencies move away from competition issues and merger specificity and seek conditions that go beyond that which is strictly necessary to remedy any potential negative effects, one moves away from an objective standard by which to assess mergers. This leads to a negative impact on costs, timing and certainty – essential factors for potential investors considering entering or expanding into a market.

As John Oxenham, director of Pr1merio states, “from a policy perspective it is apparent that consumer-welfare tests have been frustrated by uncertainty”. In this regard, the South African authorities initially adopted a position in terms of which competition law played a primary role, with public-interest considerations taking second place.  Largely owing to Minister Patel’s intervention, the agencies have recently taken a more direct approach to public-interest considerations and have effectively elevated the role of public-interest considerations to the same level as pure competition matters – particularly in relation to merger control (although we have seen a similar influence of public-interest considerations in, inter alia, market inquiries and more recently in the publishing of industry Codes of Conduct, e.g., in the automotive aftermarkets industry).

Minister Patel speaks

Minister Patel speaks

The current amendments, however, risk elevating public-interest provisions above those of competition issues. The broad remedies and powers which the competition agencies may impose absent any evidence of anti-competitive behaviour are indicative of the competition agencies moving into an entirely new ‘world of enforcement’ in what could very likely be a significant ‘over-correction’ on the part of Minister Patel, at the cost of certainty and the likely deleterious impact on investment.

The proposed Amendments, which we unpack below, seem to elevate industrial policies above competition related objectives thereby introducing a significant amount of discretion on behalf of the agencies. Importantly, the Amendments are a clear departure from the general internationally accepted view that that ‘being big isn’t bad’, but competition law is rather about how you conduct yourself in the market place.

The Proposed Amendments

The Amendments identify five key objectives namely:

(i) The provisions of the Competition Act relating to prohibited practices and mergers must be strengthened.

(ii) Special attention must be given to the impact of anti-competitive conduct on small businesses and firms owned by historically disadvantaged persons.

(iii) The provisions relating to market inquiries must be strengthened so that their remedial actions effectively address market features and conduct that prevents, restricts or distorts competition in the relevant markets.

(iv) It is necessary to promote the alignment of competition-related processes and decisions with other public policies, programmes and interests.

(v) The administrative efficacy of the competition regulatory authorities and their processes must be enhanced.

At the outset, it may be worth noting that the Amendments now cater for the imposition of an administrative penalty for all contraventions of the Act (previously, only cartel conduct, resale price maintenance and certain abuse of dominance conduct attracted an administrative penalty for a first-time offence).

Secondly, the Amendments envisage that an administrative penalty may be imposed on any firm which forms part of a single economic entity (in an effort to preclude firms from setting up corporate structures to avoid liability).

We summarise below the key proposed Amendments to the Competition Act.

Abuse-of-Dominance Provisions

Excessive pricing

  • The evidentiary onus will now be on the respondent to counter the Competition Commission’s (Commission) prima facie case of excessive pricing against it.
  • The removal of the current requirement that an “excessive price” must be shown to be to the “detriment of consumers” in order to sustain a complaint.
  • An obligation on the Commission to publish guidelines to determine what constitutes an “excessive price”.

Predatory Pricing

  • The introduction of a standard which benchmarks against the respondents own “cost benchmarking” as opposed to the utilisation of more objective standards tests.
  • The benchmarking now includes reference to “average avoidable costs” or “long run average incremental costs” (previously the Act’s only tests were marginal costs and average variable costs).

General Exclusionary Conduct

  • The current general exclusionary conduct provision, Section 8(c), will be replaced by an open list of commonly accepted forms of exclusionary conduct as identified in Section 8(d).
  • The definition of exclusionary conduct will include not only “barriers to entry and expansion within a market, but also to participation in a market”.
  • The additional forms of abusive conduct will be added to Section 8(d):
    • prevent unreasonable conditions unrelated to the object of a contract being placed on the seller of goods or services”;
    • Section 8(1)(d)(vii) is inserted to include the practice of engaging in a margin squeeze as a possible abuse of dominance;
    • Section (1)(d)(viii) is introduced to protect suppliers to dominant firms from being required, through the abuse of dominance, to sell their goods or services at excessively low prices. This addresses the problem of monopsonies, namely when a customer enjoys significant buyer power over its suppliers”.

Price Discrimination

  • The Amendment will look to expand Section 9 of the Act to prohibit price discrimination by a dominant firm against its suppliers.
  • An onus of proof has been shifted on to the respondent to demonstrate that any price discrimination does not result in a substantial lessening of competition.

Merger-Control Provisions

  • Introduction of certain mandatory disclosures relating, in particular, to that of cross-shareholding or directorship between the merging parties and other third parties.
  • Introduction of provisions which essentially allow the competition authorities to treat a number of smaller transactions (which fell below the merger thresholds), which took place within three years, as a single merger on the date of the latest transaction.
  • Introduction of additional public-interest grounds which must be taken into account when assessing the effects of a merger. These relate to “ownership, control and the support of small businesses and firms owned or controlled by historically disadvantaged persons”.

Market Inquiries

  • Granting the Commission powers to make orders or impose remedies (including forced divestiture recommendations which must be approved by the Tribunal) following the conclusion of a market inquiry (previously the Commission was only empowered to make recommendations to Parliament).
  • The introduction of a new competition test for market inquiries, namely whether any feature or combination of features in a market that prevents, restricts or distorts competition in that market constitutes an “adverse effect” (a significant departure from the traditional “substantial lessening of competition” test).
  • Focussed market inquiries are envisaged to replace the “Complex Monopoly” provisions which were promulgated in 2009 but not yet brought into effect.

Additional Amendments

  • Empowering the Commission to grant leniency to any firm.
  • This is a departure from the current leniency policy, under which the Commission is only permitted to grant leniency to the ‘first through the door’.

What does this all mean going forward?

The above proposed amendments are not exhaustive. In addition to above, it is apparent that Minister Patel envisages utilising the competition agencies and Act as a “one-stop-shop” in order to address not only competition issues but facilitate increased transformation within the industry and to promote a number of additional socio-economic objectives (i.e., to bring industrial policies within the remit of the competition agencies).

In a move which would may undermine the independence and impartiality of the competition agencies, the Amendment also intends providing the responsible “Minister with more effective means of participating in competition-related inquiries, investigations and adjudicative processes”.

The amendments also strengthen the available interventions that will be undertaken to redress the specific challenges posed by concentration and untransformed ownership”.

Competition-law observers interviewed by AAT point out that the principle of separation of powers is a fundamental cornerstone of the South African constitutional democracy and is paramount in ensuring that there is an appropriate ‘checks and balances’ system in place. It is for this reason that the judiciary (which in this context includes the competition agencies) must remain independent, impartial and act without fear or favour (as mandated in terms of the Act).

The increased interventionist role which the executive is envisaged to play, by way of the Amendments, in the context of competition law enforcement raises particular concerns in this regard.  Furthermore, the increased role of public-interest considerations effectively confers on the competition agencies the responsibility of determining the relevant ambit, scope and enforcement of socio-economic objectives. These are broad, subjective and may be vastly different depending on whether one is assessing these non-competition objectives in the short or long term.

Any uncertainty regarding the relevant factors which the competition authorities ought to take into account or whose views the authorities will be prepared to afford the most weight too, risks trust being lost in the objectivity and impartiality of the enforcement agencies. This will have a direct negative impact on the Government’s objective in selling South Africa as an investor friendly environment.

In addition, as Primerio attorney and competition counsel Andreas Stargard notes, the “future role played by the SACC’s market inquiries” is arguably open to significant abuse, as “the Competition Commission has broad discretion to impose robust remedies, even absent any evidence of a substantial lessening of competition.”

  • Mr. Stargard notes that the draft Amendment Bill, in its own words in section 43D (clause 21) “places a duty on the Commission to remedy structural features identified as having an adverse effect on competition in a market, including the use of divestiture orders. It also requires the Commission to record its reasons for the identified remedy. … These amendments empower the Commission to tailor new remedies demanded by the findings of the market inquiry. These remedies can be creative and flexible, constrained only by the requirements that they address the adverse effect on competition established by the market inquiry, and are reasonable and practicable.”
Andreas Stargard

Andreas Stargard

Although the Amendments recognise that concentration in of itself is not in all circumstances to be construed as an a priori negative, the lack of a clear and objective set of criteria together with the lower threshold (i.e., “adverse effect”) which must be met before the competition authorities may impose far-reaching remedies, coupled with the interventionist role which the executive may play (particularly in relation to market inquiries), may have a number of deterrent effects on both competition and investment.

Mr. Stargard notes in this regard that the “approach taken by the new draft legislation may in fact stifle innovation, growth, and an appetite for commercial expansion, thereby counteracting the express goals listed in its preamble:  Firms that are currently sitting at a market share of around 30% for instance may not be incentivised to obtain any greater accretive share for fear of being construed as holding a dominant market position, once the 35% threshold is crossed“.

The objectives to facilitate a spread of ownership is not a novel objective of the post-Apartheid government and a number of pieces of legislation and policies have been introduced in order to facilitate the entry of small previously disadvantaged players into the market through agencies generally better equipped to deal with this. These policies, in general, have arguably not led to the government’s envisaged benefits. There may be a number of reasons for this, but the new Amendments do not seek to address the previous failures or identify why various other initiatives and pieces of legislation such as the Black Economic Empowerment (BEE) legislation has not worked (to the extent envisaged by Government). Furthermore, the Tribunal summed up this potential conflict neatly in the following extract in the Distillers case:

Thus the public interest asserted pulls us in opposing directions. Where there are other appropriate legislative instruments to redress the public interest, we must be cognisant of them in determining what is left for us to do before we can consider whether the residual public interest, that is that part of the public interest not susceptible to or better able to be dealt with under another law, is substantial.”

Perhaps directing the substantial amount of tax payers’ money away from a certain dominant state-owned Airline – which has been plagued with maladministration – and rather use those funds to invest in small businesses will be a better solution to grow the economy and spread ownership to previously disadvantaged groups than potentially prejudicing dominant firms which are in fact efficient.

Furthermore, ordering divestitures requires that there be a suitable third party who could effectively take up the divested business and impose a competitive constraint on the dominant entity. It seems inevitable that based on the proposed Amendments the competition authorities will be placed in the invidious position of considering a divestiture to an entity which may not yet have proven any successful track record. The Amendments do not provide guidance for this and although the competition authorities have the necessary skills and resources to assess whether conduct has an anti-competitive effect on the market, it is less clear whether the authorities have the necessary skills to properly identify a suitable third party acquirer of a divested business.

In addition and importantly, promoting competition within the market achieves public interest objectives. Likewise, anything which undermines competition in the market will have a negative impact on the public interest considerations.

John Oxenham

John Oxenham

As John Oxenham and Patrick Smith have argued elsewhere, “competition drives a more efficient allocation of resources, resulting in lower prices and better quality products for customers. Lower prices typically result in an expansion of output. Output expansion, combined with the effect of lower prices in respect of one good or service frees up resources to be spent in other areas of the economy. The result is likely to be higher output and, most importantly for emerging economies, employment”.

While it is true that ordinarily, a decrease in concentration and market power should result in an increase in employment we have not seen a comprehensive assessment of the negative costs associated with pursuing public interest objectives. Any weakening of a pure competition test must imply some costs in terms of lost efficiency, or less competitive outcome, which is justified based on a party’s perspective of a particular public interest factor. That loss in efficiency and less competitive outcome is very likely to have negative consequences for consumers, growth, and employment. Accordingly, the pursuit of “public-interest factors” might have some component of a loss to the public interest itself. We have not seen that loss in efficiency (and resultant harm to the public interest, as comprehensively understood) meaningfully acknowledged in the proposed Amendments.

A further risk to the broad and open ended role which public interest considerations are likely to play in competition law matters should the Amendments be passed is a significant risk of interventionism by third parties (in particular, competitors, Trade Unions and Government) who may look to utilise the Act to simply to harass competitors rather than pursue legitimate pro-competition objectives. The competition authorities will need to be extra mindful of the delays, costs and uncertainty which opportunistic intervention may lead to.

Although there are certain aspects of the Amendments which are welcomed, such as limiting the timeline of market inquiries, from a policy perspective the Amendments appear to go far beyond consumer protection issues in an effort to address certain socio-economic disparities in the South African economy, and may, in fact very likely hinder the development of the economy.

Based on the objectives which underpin the Amendments, it appears as if the Department of Economic Development is focused on dividing the existing ‘economic pie’ rather than on growing it for the benefit of all South Africans.

From a competition law enforcement perspective, however, firms conducting business in South Africa are likely to see a significant shake-up should the Amendments be brought into effect as a number of markets have been identified as highly concentrated (including, Communication Energy, Financial Services, Food and agro-processing, Infrastructure and construction, Intermediate industrial products, Mining, Pharmaceuticals and Transport).

[To contact any of the contributors to this article, or should you require any further information regarding the Amendment Bill, you are welcome to contact the AAT editors at editor@africanantitrust.com]

EAC expands to accept 6th member in accession of S. Sudan

Landlocked and Oil-Rich South Sudan Joins Free-Trade Zone

As South Sudan was officially admitted to the East African Community (EAC) as its sixth member in Arusha (Tanzania), on Wednesday, March 2, the beleaguered nation joined a free-trade zone that will allow it to benefit from more open labour movement, less restrictions on capital flows and other increased economic integration.  The other member states are Tanzania, Kenya, Uganda, Burundi, and Rwanda.  After integration with S. Sudan — the youngest nation on Earth — the region will have a population of an estimated 163 million.

John Oxenham, of Pr1merio Africa advisors, says: “South Sudan’s former institutional weaknesses were (apparently, despite the ongoing civil strife in the country) sufficiently remedied that the EAC governing body saw fit to grant the application for admission that had been pending since 2011.  Basic governance principles must be met for EAC membership, and we are not even talking competition-law here…”

As the EAC charter provides, all members must demonstrate and strive to achieve “good governance including adherence to the principles of democracy, the rule of law, accountability, transparency, social justice, equal opportunities, gender equality, as well as the recognition, promotion and protection of human and peoples’ rights in accordance with the provisions of the African Charter on Human and Peoples’ Rights.”  (EAC Treaty, Chapter 2 Article 6 (d)).


Setting aside civil-rights concerns or worries about political instability, the integration of an oil-rich nation may ultimately benefit its neighbouring fellow EAC members, such as Kenya and Uganda.  It remains to be seen whether integrating a less-than-stable country into the EAC zone will harm the competition legislation the region enacted in 2006.  As AAT author Elizabeth Sisenda pointed out recently, the organisation “has been setting up the mechanisms for its enforcement to-date through capacity building and mobilizing resources. In 2010, the EAC subsequently enacted competition regulations to assist in implementing the Act. One of the main challenges that has been encountered in the EAC with regards to the implementation of competition law and policy has been the unique economic and market structure of the member states.  The majority of the EAC member states are economies that are transitioning from state-regulation to liberalization.”

We note that S. Sudan’s northern neighbour, the Republic of [the] Sudan, is currently a COMESA member state and thereby subject to the COMESA competition-law regulations and related merger-notification regime.  South Sudan has, since at least the 2012 talks in Uganda, likewise been in negotiations with the COMESA governing bodies to discuss accession to that free-trade zone.

ECONAfrica: African Corporate Debt — Reality, Regulation and Risks

By Peter O’Brien

In our new AAT series, ECONAfrica, Pr1merio economist Peter O’Brien discusses corporate debt issues on the continent.

Debt debates on Africa nearly always talk about sovereign debt. But in economies which are growing, even if with plenty of ups and downs, firms need to finance expansion. Banks can help, yet this is often not so easy to organize. Another option is to issue corporate bonds (‘CB’). Since rating agencies generally assess clients on a three letter basis (sometimes with a + or – at the end), we will make our 3R assessment of African CB. What’s the reality, what’s the regulatory situation, and what are the risks and rewards?


First, a thumbnail sketch (admittedly based on limited evidence) of the stylized facts:

  • So far, all African countries (including the Middle East) account for less than 5% of the value of all CB issued by Emerging Market Economies (EME).
  • Within that, South Africa, Mauritius and Egypt add up to around two thirds, with South Africa alone as one third.
  • Most CB in Africa have maturities no more than 10 years
  • Over half of the bonds are fixed interest
  • Roughly 30% of the CB are considered high yield (another way of saying that investors reckon the risks are substantial)
  • It seems as if there is more or less an even split between CB issued in local currency (hence with local currency coupon rates) and those in foreign currency (nearly all $ or euro)
  • The investors are in the main a group of 50-60 funds
  • In South Africa, as of October 2015, foreign holdings of local CB were 35% of the total
  • In a number of African countries, the leading corporate borrowers are parastatal firms
  • Corporate debt, measured as a percentage of GDP, is far lower in African countries than in most others. While many other places, especially some of the big EME, are vulnerable to macroeconomic damage stemming from corporate debt, Africa (including South Africa, where this percentage has remained remarkably stable) should be fairly safe
Economist corporate debt in South Africa has remained the same as percentage of GDP

Corporate debt in South Africa has remained the same as percentage of GDP (Source: The Economist)

Lessons Learned?

What does this picture tell us? Its principal message is surely that this is an area certain to experience major changes, and quite possibly major expansion (not only in volume but also in the players involved).

Now to regulation, both internal and external. The country that seems to have explicitly made provision for corporate debt, and its restructuring, is South Africa. In Companies Act 71 of 2008, enacted in 2011, there are clauses that set out possibilities for Corporate Debt restructuring.  Since enactment, over 400 companies have applied for these methods of handling the problems, and there are upwards of 80 entities offering specialized advice in the field. This prudent approach no doubt stems in part from the size and significance of corporate borrowing in that country. Elsewhere, legal and regulatory issues seem, on balance, to hold back greater reliance on CB. In part there are accounting and corporate governance standards which local companies may not yet meet. In part, it appears that the disclosure requirements that must be met before recourse to CB can be made may constrain the actions of companies (bank borrowing generally requires less disclosure). On the external side, the Basel 111 stipulations matter, in particular because they limit the possibilities for underpricing of CB (a practice that has been fairly frequent till now).

What is missing in the regulatory environment, however, is any overall examination of what might be done to stimulate the prudent use of CB. If this were to be done, such regulation would need to assess financial, economic and anti-trust issues.

The risks and rewards of the CB approach to corporate funding, and indeed the opportunities to use it, are very different across Africa. From economies such as Kenya and Botswana, where the phenomenon is on the rise, to those of the Maghreb, where political uncertainties in very recent years seem to have stunted what was a promising growth, to many parts of West Africa, where to date there is seemingly little activity in this area, each country has its own environment. However, the ever greater integration in the various regions means that there may well be prospects for making better use of private regional funds and of sovereign funds. Either way, African companies should look forward with optimism to utilizing more local capital. It is the job of regulators to ensure this is done in a sound way financially, and that these markets operate competitively.


Which economy is growing 2-3% above global average…?

… Africa’s

AAT the big picture

According to a recent article in Polity, “Africa’s economy is projected to continue growing at between 2% and 3% above the global average over the next five years, helping it retain its position as one of the key emerging markets for 2015.

It quotes a GIBS (Gordon Institute of Business Science) study showing that sub-Saharan Africa’s growth “outstripped global growth for the past 15 years,” which has “slowed down somewhat, owing to a number of challenges, including the drop in commodity prices.”  The GIBS study is the result of an assessment of countries’ institutional evolution, measuring how countries were performing in terms of developing competitive business and living environments across political, social and economic spheres.

Kenya was highlighted, with the authors noting that “Kenya, in terms of perceptions, is a very important country on the continent; it has, since 2007, put in place a number of reforms to build competitiveness. However, it doesn’t come out very well when you look at the data behind industry and comes out poorly in [the DMI], but what you find on the ground is that there is [an entirely] different sentiment.”

Meet the Enforcers: Companies Tribunal’s Prof. Kasturi Moodaliyar

meet the enforcers

Interview with Professor Moodaliyar marks second in AAT interview series highlighting African enforcers

In the second instalment of our Meet the Enforcers series, we speak with Prof. Kasturi Moodaliyar. An Associate Professor of Competition Law, she is part-time member at the Companies Tribunal; ICASA’s Complaints and Compliance Committee; and the Film and Publication Board Appeal Tribunal. She holds a B.Proc. LLB.LLM.(Natal), M.Phil (Cambridge), and Prog. Economics and Public Finance (UNISA)

As an academic in South Africa, focussing on competition law, how do you perceive the major differences and challenges that developing or younger antitrust-law jurisdictions are faced with, compared to more established ones? Specifically with regards to the Competition Commission, what is your assessment of its strengths and weaknesses?

The Commission has established a credible reputation in the area of anti-cartel enforcement and merger regulation. However, it has been less effective in addressing abuse of dominance. This is a risk as there is increasingly an expectation that the Commission address problems of single firm dominance in concentrated markets in the South African economy. If performance continues to lag in this area it will impact negatively on the perceived effectiveness of the Commission. While under-deterence of abuse of dominance reflects some limitations in the legislation it also highlights the challenge of resource constraints faced by the Commission. Such cases demand extensive legal and economic expertise – a shift of priorities to this area may impact performance of the Commission in areas in which it has traditionally had more success (cartel busting, mergers). The use of complementary tools like market inquiries and advocacy will be important and can asset the Commission – but also places a burden on resources.

Regarding staff turnover: Do you see the personnel turnover in recent history to be of sufficient magnitude to have an impact on the performance of the enforcement agency?

It is a worrying development although there are signs that it is starting to stabilise. Although key executives were lost there are still a number of highly experienced staff at the middle management level within the institution that must be nurtured and developed. Some have moved into executive level positions. This is a positive development but also points to a level go juniority in the executive which may impact on effectiveness. Will watch this space.

On Leadership: Do you consider it a benefit or a hindrance if leadership want to introduce their own philosophy of what competition law should seek to achieve on the agency’s activities during their tenure, or do you think that the law is sufficiently clear, such that leadership should focus on efficient and effective delivery of the service, and leave the interpretation to the Tribunal/courts.

It is natural that any leader will bring their own perspective to the role – this cannot be avoided. However, it will be important for the leadership to ensure that such perspectives do not undermine their objectives in giving effect to the mandate of the Commission – which is set down in the Competition Act. Fortunately there are checks and balances in the adjudicative process (Tribunal, rights of appeal) to ensure that these objectives are not contradicted.

Prioritisation: Every agency has budgetary constraints. What are the factors that you think should be most important in how cases are prioritised, should this be based on the developmental needs to society, particular sectors, or even particular areas of the law. What do you think of the prioritisation of recent Section 8 cases, SAB (10 years on an issue that has been extensively sanitised by foreign agencies), Gold Reef News (de minimis), and Sasol Polymers (niche, with limited potential for downstream beneficiation)?

The Commission’s stated prioritisation principles seem reasonable (as they appear in annual reports). However, there is somewhat of a disjuncture between the principles and the outcomes – particularly with respect to abuse of dominance cases. In fact, the outcomes in respect of anti-cartel enforcement have been largely consistent with the application of the Commission’s prioritisation principles – so credit is deserved here. However, new thinking around prioritisation is needed for abuse of dominance cases. In this regard there needs to be a better integration between the Commissions’s policy and research activity, the use of market inquiries and its advocacy with its planning and actions around enforcement against abuse of dominance.

Do you believe that the Competition Tribunal has a role in relation to broader competition advocacy initiatives in South Africa by way of the decisions made?

Advocacy is primarily a function of the Competition Commission, not the Tribunal. The Tribunal must first and foremost safeguard the integrity of its adjudicative function by ensuring impartiality in its decision making processes. There is no harm done though if the Tribunal makes a contribution to the such initiatives as a bi-product of good decisions.

How important, in your view, is the political independence of competition enforcers?

It is very important if the integrity and effectiveness of the agency is to be upheld.

Comparing merger review in an African jurisdiction (any jurisdiction) with that of other competition enforcement agencies worldwide, where do you see the key differences?

A significant difference does appear to be the elevated status of public interest issues in merger proceedings.

What is your view about the elevation of non-competition assessments above those of pure competition tests in merger review? Is it good for the adjudication of competition matters generally?

It is not a problem in and of itself, and is to be expected given various developmental challenges. However, public interest considerations should not trump core competition concerns. In other words, agencies should strive to achieve consistency between the ‘pure’ competition policy objectives (competitive market structures, efficient outcomes etc) and public interest considerations. However, significant dangers arise when public interest objectives conflict with competition policy objectives. Where there are conflicts, alternative policy mechanisms should be considered so that agencies can focus on core non-conflicting objectives. Otherwise they may end up achieving nothing by trying to please everyone. This also means that the public interest considerations that do fall within the mandate of competition agencies should be carefully circumscribed.

What skills would you encourage regional African practitioners focus in on for purposes of developing antitrust advocacy in the region?

They should build a technocratic and professional staff with strong legal and economic skills. These core functions should also be supported by strong policy research and analysis skills – also of the technocratic professional (rather than political) variety. As an academic in this field I would also encourage ongoing training to strengthen those research, investigative and analytical skills.

Thank you, Professor Moodaliyar.

Government-mandated sharing of trade secrets: anticompetitive interference


Ms. Zulu proposes foreign competitors share trade secrets with SA counterparts

Perhaps it is time for increased advocacy initiatives within the South African government, or at a minimum a basic educational program in competition law for all its sitting ministers.
In what can only be described as startling (and likely positively anticompetitive), Lindiwe Zulu, the S.A. Minister of Small Business, has demanded foreign business owners to reveal their trade secrets to their smaller rivals.
The South African Competition Commission, and perhaps one of the Minister’s own fellow Cabinet members, minister Ebrahim Patel, who is de facto in charge of the competition authorities, can see fit to remind Ms. Zulu that fundamental antitrust law principles (and in particular section 4 of the South African Competition Act), preclude firms in a horizontal relationship from sharing trade secrets that are competitively sensitive – i.e., precisely those types of information Ms. Zulu now proposes to be shared mandatorily amongst competitors.
While SACC has utilized this provision with much success against big business in South Africa, it would be remiss not enforce the provisions of the Act without fear or favor should the traders act out on the instruction of the Minister.  It is also time that the Cabinet seeks to enforce business practices which comply with South African legislation.
BDLive‘s Khulekani Magubane reports in today’s edition (“Reveal trade secrets, minister tells foreigners“) that “foreign business owners in SA’s townships cannot expect to co-exist peacefully with local business owners unless they share their trade secrets, says Small Business Development Minister Lindiwe Zulu.”

Lindiwe Zulu. Picture: PUXLEY MAKGATHO

Lindiwe Zulu. Picture: PUXLEY MAKGATHO

“In an interview on Monday she said foreign business owners had an advantage over South African business owners in townships. This was because local business owners had been marginalised and been offered poor education and a lack of opportunities under apartheid.

“Foreigners need to understand that they are here as a courtesy and our priority is to the people of this country first and foremost. A platform is needed for business owners to communicate and share ideas. They cannot barricade themselves in and not share their practices with local business owners,” Ms Zulu said.”

Research fellow at the SA Institute for International Affairs Peter Draper said Ms Zulu’s remarks, underscored government’s mistrust of foreign investors which was also reflected in business regulations. “If you connect this to the broader picture, essentially this is part of a thrust to single out foreign business, which is contrary to the political message President Jacob Zuma went to portray in Davos. We are at a tipping point and we are going beyond it. You can only push foreign business so far before they disengage,” he said.Mr Draper agreed with Ms Zulu’s remarks on the effect of apartheid on local business owners in townships but said foreign business owners had to confront their own challenges with little state support.

“Apartheid did disadvantage black people and over generations it inhibited social capital. Many foreigners have trading entrenched in their blood. Wherever they go they bring social capital, networks and extended family. Is that unfair? I don’t think so. That’s life,” he said.

Ms Zulu’s comments show the about-turn in the African National Congress’ (ANC’s) ideology of Pan Africanism and in line with remarks by party leaders.

After a week of looting in Soweto last week, ANC secretary-general Gwede Mantashe told residents in Doornkop that immigration laws needed to be strengthened to protect the country from terror.

Patel not mincing words, diluting competition-law factors in mergers


Economic Development Minister of South Africa, Ebrahim Patel, recently stated that the Competition Commission (“Commission”), South Africa’s key competition authority, will be asked to focus on jobs, industrialisation and small business development in lieu of ‘pure’ antitrust-law issues.

Patel stated that government would require the Industrial Development Corporation to focus on supporting black industrialists, and on the competition authorities to promote economic transformation “not as a by-product of but an explicit objective of competition policy.” According to Patel, competition bodies are in a position to contribute directly to the state’s objective of creating a more equal economy, where workers shared in the benefits of growth. His department is allegedly already in talks with the construction industry on a restitution package to redress collusion and price fixing. The end result, he stated, would be that larger companies will provide funds to support small producers and local suppliers.

Patel’s controversial views have already influenced Commission merger decisions and can clearly be seen in the recent Afgri/AgriGoupe case, where the authority entered into an agreement with the foreign buyer of the local grain and poultry company Afgri, requiring the new owners to contribute R90 million ($9m) to a fund to support small-hold farmers with training and loans.

Based on Mr. Patel’s latest pronouncements, South Africa is on a path to politicizing antitrust law and making pure competition considerations a secondary objective to public-interest considerations.

Investment in Africa: Changing landscape, new hurdles

Questioning African antitrust growth prospects: Slowdown in economic investment (both organic and outside investment) may affect functioning of competition law on the continent

Recent developments in Africa have many scratching their heads and wondering whether the formerly wondrous economic-growth engine of the vastly resource-rich and otherwise economically still undervalued continent will soon experience a slowdown, if not come to a halt altogether.

For one, in April 2014, Nigeria surpassed South Africa as the continent’s largest economy (see Economist Apr. 12, 2014: “Africa’s New Number One“).  This is a significant milestone for the former, and a setback for the latter — an economy that was 8 times the size of the Nigerian economy only 20 years ago, yet is now suffering from stagnating GDP, reeling from corruption allegations amongst its current leadership, undergoing a closely-watched presidential election process, and whose ruling ANC party is facing a heretofore unprecedented backlash and torrent of criticism.

Source: The Economist

Not only South Africa has weakened, politically and economically, however.  Events such as the Northern Nigerian wave of violence – with sectarian Boko Haram forcefully displaying the impotence of the central Nigerian government of a weakened president Goodluck Jonathan – fuel the fire of outside investors’ mistrust of African stability and their concomitant reluctance to make good on prior investment promises.  As The Economist notes in the article quoted above: “it is not a place for the faint-hearted” to invest, even though it highlights the successful Nigerian business ventures of outsiders such as Shoprite, SABMiller, and Nestlé.  Bloomberg BusinessWeek quotes Thabo Dloti, chief executive officer of South Africa’s fourth-largest insurer Liberty Holdings Ltd. (LBH), as saying: “It does slow down the plans that we have, it does put out the projections that we have by a year or two.”


Nigerian vs. RSA GDP
Source: http://www.stanlib.com

Likewise, multi-national organisations such as COMESA and its competition enforcement body, are undergoing significant changes (such as, currently, an opaque process of raising the heretofore insufficient merger-filing thresholds), shockingly successful web attacks on their data, and a resulting dearth of transactions being notified.  Elsewhere in developing economies, recent political turmoil has likewise led observes to comment on the negative spillover effect from political & social spheres into the economy (e.g., Financial Times, May 8, 2014: “Political crisis further dents prospects for Thai economy“).

Impact on antitrust practice

The upshot for competition-law practitioners and enforcers alike is rather straightforward, AAT predicts: more hesitation around African deals being done means fewer notifications, less enforcement, and overall lower billings for firms.

The flip side of the coin – as is usually the case in the economic sine curve of growth and slowdowns – is the commonly-observed inverse relationship of M&A and criminal antitrust: while we may see fewer transactions in the short term, the incidence of cartel behaviour and commercial bribery & government-contract fraud cases will likely increase.

Continental Divide: Revisiting the GE/Honeywell merger saga

A Merger Denied, 13 years later: The GE/Honeywell Saga

Through COMESA, a regional organization on which this resource has published extensively, African countries have made a significant foray into cross-border merger control.

As the world’s competition regimes continue to proliferate, a global understanding and international cooperation are becoming increasingly essential to a coherent worldwide merger-control scheme and parties’ concomitant legal strategy.

(Originally published by Thomson Reuters Limited in: Sophia A. Vandergrift and Josselin J. Lucas, “The GE/ Honeywell Saga? Ehh, What’s Up Doc? A comparative approach between US and EU merger control proceedings almost 15 years after”, [2014] 35 E.C.L.R. 172 – reproduced with permission [1])

By Sophia A. Vandergrift (FTC) & Josselin J. Lucas (Paul Hastings LLP) [2]


Almost 15 years ago, on the eve of Independence Day, on July 3, 2001, the EU Commission decided to prohibit the acquisition of Honeywell by General Electric.[3] The EU Commission’s decision to block this transaction was subject to a firestorm of criticism as the U.S. Department of Justice previously decided not to challenge the transaction. As noted at that time by Ms. Deborah Platt Majoras,[4] then Deputy Assistant Attorney General, Antitrust Division, U.S. Department of Justice:

“The U.S./EU divergence on the GE-Honeywell decision underscores the need to continue working cooperatively and constructively (…). The Antitrust Division has been open, both in private discussions with our counterparts at the European Commission and in appropriate public fora, in our disagreement with the EU’s decision and the bases for it. Indeed, we have been criticized by some as being overly critical. We respectfully disagree. In our view, for cooperation to be meaningful, i.e., for it to contribute significantly to effective global antitrust enforcement, it must include honest discussion of areas of agreement and disagreement, and careful dissection of divergent decisions”.[5]

In a recent speech delivered in Washington, D.C., Joaquin Almunia, Vice-President of the European Commission responsible for Competition Policy stated:

“I believe that, almost 15 years after the GE/ Honeywell saga, a lot has been made to ensure that our respective authorities understand each other’s concerns when they arise”.[6]

In this regard, 2013 was a distinct year for the EU and U.S. Agencies. Several cases provoked strong cooperation between them, notably in the aviation industry (General Electric/Avio[7]and American Airlines/US Airways[8]) and in advertising activities (Publicis/Omnicom[9]). Mr. Almunia also pointed out that cooperation does not mean identical decisions “because of the different features of our respective markets” (e.g., see the EU Commission’s prohibition decision in NYSE Euronext/ Deutsche Börse in February 2012, a transaction that was previously cleared by the U.S. DOJ).

Almost 15 years after the “GE/Honeywell Saga”, the purpose of this article is to analyze the similarities and differences between EU and U.S. merger control proceedings. Several aspects are dealt with, including the legal framework (I.), the preliminary analysis (II.), the notification process (III.) and the procedural aspects (IV.). The funding principles of the cooperation between the EU and U.S. agencies are also detailed (V.).

I.        Legal Framework

Applicable Rules

The first EU Merger Control Regulation was adopted in December 1989 and entered into force in September 1990.[10] The current EU Merger Control Regulation n°139/2004 became effective on May 1, 2004.[11] In the United States, two primary statutes govern the merger control review process, namely: (i) §. 7A of the Clayton Act of 1914; and (ii) the Hart-Scott-Rodino Improvements Act of 1976.

Enforcement Agencies

Merger control review is divided in Europe between two types of agencies, depending upon whether applicable thresholds are met. At the EU level, the Directorate General for Competition of the EU Commission (DG Comp) has jurisdiction over EU-dimension cases. At the national level (i.e., where EU thresholds are not met but local thresholds are met), National Competition Authorities have jurisdiction to review the transactions.

In the United States, merger review is divided between two agencies: the Department of Justice (DOJ) and the Federal Trade Commission (FTC). Parties proposing a deal submit pre-merger notification filings to both agencies.[12] Pursuant to a pre-merger notification and clearance process, the deal is assigned to the agency with the greatest historical experience in the relevant commercial sector. Allocating mergers between the agencies by industry ensures that any given merger is reviewed by the enforcers with the greatest resources and depth of expertise concerning the relevant industry. Moreover, this process is efficient in that it allows the agencies to avoid duplication of expertise and promotes consistent outcomes.

Judicial Review

The EU Commission has powers of decision.[13] In practical terms, it can block any transaction that would seriously restrict competition within the EU (e.g. UPS/TNT Express in January 2013,[14] NYSE Euronext/ Deutsche Börse in February 2012,[15] General Electric/Honeywell in July 2001[16]). When the EU Commission issues a decision prohibiting a transaction that has already been implemented, the EU Commission may require the Parties in question to take steps to restore conditions for effective competition, including divestiture. Parties can file an application for annulment against the EU Commission’s administrative decision to the General Court of the EU.

In the United States, only Federal Courts have ultimate authority regarding whether to block a transaction. But before a merger reaches such ultimate disposition, the agencies’ processes for pursuing a remedy meaningfully diverge according to the agencies’ differing statuses and authorizing statutes. For instance, the FTC is an independent agency led by five politically-appointed commissioners who must authorize enforcement action. In contrast, the DoJ is an executive branch agency lead by an Assistant Attorney General. The agencies face slightly different standards when seeking preliminary relief from a federal district court.[17] Further, Congress vested the FTC with authority to conduct a full agency merits trial in the first instance, only after which the merging parties can appeal to the commission and then to a federal court. Based on the diverging processes, parties pursuing a merger against agency efforts to block the transaction face different time and resource requirements depending on which agency is reviewing the deal.

Is the Requirement to Comply With Local Merger Control Rules Limited to “Change Of Control”

As for EU merger control and at this stage, the answer is clearly positive. Basically, the EU Merger Control Regulation applies to “concentrations”, a concept which is widely defined to cover various operations that bring about a “change of control on a lasting basis”.[18] Two kinds of change of control, either on a de jure or on a de facto basis, may be subject to merger control proceedings: sole control[19] or joint control.[20] Sole control is usually acquired as a result of the acquisition of the majority of the voting rights in a company (de jure control). A substantial minority shareholder may be regarded as having de facto control, if for example, it is highly likely that the shareholder will achieve a majority of the votes cast at shareholders’ meetings (de facto sole control). Joint control exists where several entities have the ability to exercise decisive influence over another entity.

From a European perspective, the answer to this question has always been crystal clear. In this regard, minority shareholdings that do not lead to a change of control are currently not subject to EU Merger Control Regulation. However, the EU Commission would want to extend the scope of the EU Merger Control Regulation and have jurisdiction over those non-controlling minority shareholdings,[21] which would imply a significant modification of the above founding principles. Mr. Almunia recently stated that Europe is “looking at the experience of some EU countries and of other jurisdictions such as the U.S., where merger-control rules already cover this type of acquisition”.[22]

In the United States, the requirement to comply with the HSR Act is not limited to transactions that involve a “change of control”. Any acquisitions that results in the acquiring person holding more than US$75.9 million worth of voting securities of another company may require a filing, even if the amount represents a very small percentage of the total outstanding stock of the Target company. However, acquisitions of less than 50% of a non-corporate entity are not reportable. The agencies have authority to, and indeed, sometimes do, challenge non-reportable transactions that raise competitive concerns.[23]

II.     Preliminary Analysis

Notification Thresholds

In both the European Union and the United States, transactions are reviewed by the local agencies if local thresholds are met.

At the EU level, only turnover/revenues threshold exist and have not been modified since May 1, 2004. More precisely, there are two series of alternative thresholds: primary thresholds or secondary thresholds. Primary thresholds[24] are met where: (i) the combined aggregate worldwide turnover/revenues of all the undertakings concerned exceed €5 billion; (ii) the aggregate EU-wide turnover/revenues of all the undertakings concerned exceeds €250 million. Alternatively, secondary thresholds[25] are met where: (i) worldwide turnover/revenues of the undertakings concerned exceed €2.5 billion; (ii) the aggregate EU-wide turnover/revenues of each of at least two of the undertakings concerned exceed €100 million; and (iii) in each of at least three Member States of the EU (a) the combined aggregate turnover/revenues of all the undertakings concerned is more than €100 million and (b) each of at least two of the undertakings concerned achieves a turnover of more than €25 million (in each of the same three Member States identified). However, even if the above alternative primary or secondary thresholds are met, a concentration does not have a EU dimension if each of the undertakings concerned achieves more than two-thirds of its aggregate EU-wide turnover within one and the same Member State of the EU.

In the United States, three different types of thresholds, which are updated annually in order to take into account inflation, exist. These thresholds are not only based on local revenues. In order to be subject to U.S. Merger Control Rules, a transaction has to meet the commerce test (i.e. either the acquiring or acquired person is engaged in U.S. commerce or in any activity affecting U.S. commerce) and the size-of-the-transaction test (i.e., transactions over US$75.9 million) and the size-of-the-parties test. One party must have worldwide assets or sales over US $151.7 million and the other party must have worldwide assets or sales over US$15.2 million. Where the size-of-the-party test is not satisfied, the size-of-the-transaction threshold is US$303.4 million.

Specificities as for Foreign-to-Foreign Transactions

In the European Union, there are no specific thresholds for Foreign-to-Foreign Transactions.

On the contrary, in the United States, the basic test is whether the acquired person or assets generated at least US$75.9 million in sales in the United States in the last year. A limited additional exemption for certain transactions with values under US$303.4 million also exists.


In the European Union, if there is a change of control (or a change in the quality of control) and applicable thresholds are met by the undertakings concerned, a notification is required. There is no exemption.

In the United States, an important step at the very beginning of the process is to determine whether the contemplated transaction qualifies for any of the exemptions set forth in the HSR Act or the Rules. There are lots exemptions (e.g., the acquisition of goods or realty in the ordinary course of business; certain acquisition of voting securities “solely for the purpose of investment”).

III.   Notification Process

Deadline to File

In both jurisdictions, notification is mandatory for transactions meeting applicable thresholds and there is no specific deadline to file. However, transactions cannot be closed until approval is obtained.

Who Must Notify

In any cases, the EU Commission only receives one filing for each transaction. However, two scenarios can be distinguished. In case of acquisition of sole control, only the Acquirer has to fill out a Form. In case of acquisition of joint control, the joint controllers have to fill out one and the same Form.

In the United States, in most cases, two filings are received by the U.S. Agencies – one from the Acquiring Person and one from the Acquired Person. In 2012, a total of 1,429 transactions were reported to the U.S. Agencies representing 2,829 filings received.[26]

Language of the Notification

The EU Commission must receive a notification in one of the 24 official languages of the EU, which becomes the language of the proceedings or all notifying Parties.[27] Other parties, including the Target Company, as well as Third Parties involved in the proceedings may use another official language of the EU if they wish. In the United States, the notification is in English only.

Filing Fee

At the EU level, there is no filing fee. In some Member States of the EU, National Competition Authorities may receive a fee (e.g., Austria, Germany, Italy).

In the United States, the filing fee depends upon the size of the transactions. The filing amounts is US$45,000 for transactions valued in excess of US$75.9 million but less that US$151.7 million. For transactions up to US$758.6 million, the filing fee is US$125,000. For transactions over US$758.6 million, the filing fee is US$280.000.

Voluntary Notification

In both jurisdictions, there is no procedure for “voluntary” filing for transactions that do not meet thresholds that are exempt. In the EU, if a transaction meets local thresholds in three Member States of the EU, Parties can ask the EU Commission to review the case instead (“the one-stop-shop principle”). Likewise, in both jurisdictions, transactions that are not notified can be investigated even after they are closed.

As for transactions for which a notification is not required, the U.S. Agencies can and do investigate. It is also possible in the EU but not on the basis of EU Merger Control Rules and would be probably conducted on the basis of antitrust regulations.

Penalties for Failure to File

The EU Commission may impose fines of up to 10% of the worldwide revenues of the Parties. Electrabel was fined €20 million in June 2009 by the EU Commission for failure to file and observe the waiting period for the period from 23 December 2003 to 9 August 2007.[28] Electrabel brought an action for annulment before the General Court of the EU, which confirmed the fine in December 2012.[29]

The HSR Act aims to preserve the pre-merger competitive status quo until the agencies investigate the potential effects of a merger. In the U.S., only Federal Courts may impose fines up to US $16,000 a day for violation of the HRS Act, either for complete failure to file, or for premature integration known informally as “gun jumping.” In short, the HRS Act prohibits merging parties from transferring beneficial ownership of assets, or otherwise effectively consolidating operations pending termination of the HSR waiting period. In May 2013, Biglari Holdings was ordered by the U.S. District Court for the District of Columbia to pay an US$850,000 civil penalty to settle the charge (the complaint alleged that Biglari failed to file and observe the waiting period prior to closing as for certain acquisitions of shares of Cracker Barrel in June 2011).[30]

What Goes in the Notification

In both jurisdictions, information to be furnished in the Notification Form is similar: description of the contemplated transaction, corporate information on the Ultimate Parent Entity, owners, affiliates, and subsidiaries, prior acquisitions, production, and sales data by product or service category.

Likewise, the documents to be submitted at the same time as the Notification Form are also of the same nature. It includes: transaction documents (e.g., copy of the merger or acquisition agreement), government/ financial documents (last annual reports and annual audit reports), analytic documents (i.e., documents prepared for management to analyze the transaction, including documents discussing synergies or efficiencies, which include those prepared by third-party advisors like investment bankers, consultants, etc.).

IV.    Procedural Aspects

Timeline for Most Investigations

Most merger control investigations handled by the EU Commission are closed within « Phase I » (i.e., within 25 working days which could be extended to 35 working days). In the United States, most investigations are closed within the first 30 day period. In both jurisdictions, when the waiting period has expired and the agencies have taken no action (U.S.) or no formal decision (EU), the transaction may be consummated.

Procedural Aspects During the Initial Waiting Period/Phase I

After filing, the antitrust agencies have to review the transaction. In both jurisdictions, the Parties may request that the Agencies terminate the waiting period before it has run its full course. The agencies may, at their discretion, grant such requests.

Outcomes of Initial Waiting period/Phase I

In the European Union and the United States, there are basically three possible outcomes. The investigation may expire, in which case the Parties are free to close. It may be early-terminated by the U.S./ EU agencies in which case the Parties are free to close. It may alternatively be extended by a request for additional information (commonly referred to as a “Second Request” in the U.S. and “Article 6.1(c)” decision in the EU, opening an in-depth investigation “Phase II”).

In-Depth Investigation

If they think that the contemplated transaction presents serious antitrust concerns, the U.S. and EU agencies can issue a Second Request and an art.6(1)(c) decision, respectively.

In 2012, 10 transactions were subject to Phase II investigation by the European Commission out of a total of 283 transactions that were notified to the EU Commission.[31] Meanwhile, 49 transactions were subject to a Second Request by the U.S. Agencies out of a total of 1,429 reported transactions that were reported to the U.S. Agencies (representing 2,829 filings received).

Timetable of In-Depth Investigation

The EU timetable of the in-depth investigation is extremely different from the U.S. timetable.

As for European Merger Control Rules,[32] the EU Commission has 90 working days (after the date on which the in-depth investigation was initiated), which can be extended to 105 working days where commitments are offered by parties within 55 working days of the commencement of Phase II. An extension of the Phase II time limit is also possible at the request of the parties, for a period of up to 20 further working days. Several detailed questionnaires are usually sent by the EU Commission. Economic analysis is required very early in the process. The volume of requested documents is usually much smaller than in the United States.

In the United States, the waiting period clock is stopped until both Parties certify compliance with the Second Request. After certification of compliance, the agency has another 30 days of review, unless the agency negotiates a timing agreement that alters this timeline. Second Requests typically demand ordinary-course-of-business documents, data, and interrogatory answers. Second Requests may require extensive production of party materials, sometimes requiring that the Parties produce hundreds of thousands or even millions of documents from numerous company employees and from their operations all over the world. If the requested documents are not in English, the Parties must prepare and submit translations. The parties and the agencies negotiate regarding the necessary number of document custodians, investigational hearings, or investigatory depositions. In many cases, compliance takes months to achieve.

Fundamental Differences in the In-Depth Investigation Approach

The EU Commission can block any transactions (e.g. UPS/ TNT Express in January 2013; NYSE Euronext/ Deutsche Börse in February 2012; Olympic Airways/Aegean Airlines in 2011; and Ryanair/Aer Lingus in 2007). The EU Commission will not have to sue in EU Courts and demand an injunction to block the transaction. For procedural infringements, the EU Commission can itself impose periodic penalty payments or fines (up to 1% of the aggregate worldwide revenues of the Parties) where Parties, intentionally or negligently:[33] (i) supply incorrect or misleading information in a submission, certification, or notification or in response to a RFI, or product incomplete books or records during an inspection or refuse to submit to an inspection, or (ii) do not supply information within the required time limit, (iii) fail to rectify within a time limit set by the EU Commission an incorrect, incomplete, or misleading answer, or (iv) break seals affixed by the EU Commission or other authorized persons in the course of inspections. Where the Parties have subsequently satisfied the obligation that the periodic penalty payment intended to enforce, the EU Commission may fix itself the definite amount of the periodic penalty payments at a figure lower than that which would arise under the original decision.

V.       Cooperation Between EU Commission and U.S. Agencies

The list of cases in which the EU Commission and U.S. Agencies have closely cooperated in the past 10 years is long and includes: Oracle/PeopleSoft (2004); Sony/BMG (2004); Johnson & Johnson/Guidant (2005); Panasonic/Sanyo (2009); Cisco/Tandberg (2010); Intel/McAfee (2011); Western Digital/Hitachi (2011); NYSE Euronext/Deutsche Börse (2012); and UTC/Goodrich (2012)[34]. In 2013 specifically, several cases were subject to significant discussions between the EU and U.S. Agencies, e.g., General Electric/Avio, American Airlines/US Airways and Omnicom Publicis. The U.S. /EU Merger Working Group’s ongoing policy dialogue, together with regular informal contacts, allows the EU and U.S. agencies to advance inter-agency cooperation and consistency.

Two documents provide directives and parameters for cooperation between the EU and U.S. regimes.

First, the U.S.-EU Competition Laws Cooperation Agreement (adopted in 1991 and subject to periodic amendment) “promote[s] cooperation and coordination and lessen[s] the possibility or impact of differences between the [U.S./ EU] in the application of their competition laws”.

The Agreement requires each jurisdiction to notify the other when its enforcement activities may affect “important interests” of the other jurisdiction.

As for merger control proceedings, the EU Commission shall give such notifications to the U.S. Agencies once notice of the Phase I investigation is published in the EU Official Journal and if it decides to initiate Phase II proceedings. This enables the views of the U.S. Agencies to be taken into account before a decision is adopted. Conversely, the U.S. Agencies shall notify the Commission if a Second Request is issued and if they decide to file a complaint challenging the transaction. This enables the views of the EU Commission to be taken into account before the entry of a consent decree.

Second, the U.S.-EU Best Practices On Cooperation In Merger Investigations (published in October 2011)[35] aims to enhance coordination on the timing of reviews (e.g., joint conferences and joint interviews with party executives), collection and evaluation of evidence (e.g., discussions about their respective analyses regarding tentative market definitions, assessment of competitive effects, efficiencies, theories of competitive harm, economic theories, and empirical evidence), and communication between the reviewing agencies (especially regarding remedy offers). The Best Practices are a useful framework for cooperation, particularly by indicating critical points in the process where contacts between the respective Agencies could be productive.

Basically, consultations between the U.S./EU Agencies occur: (a) before the U.S. closes its investigation without taking action; (b) before the U.S. issues a Second Request; (c) no later than three weeks following the initiation of a Phase I investigation in the EU; (d) before the EU opens a Phase II investigation or clears the merger without going to Phase II; (e) before the EU closes a Phase II investigation without issuing a Statement of Objections or approximately two weeks before the EU anticipates issuing its SO; (f) before the relevant U.S. DOJ/ FTC section/division investigating the merger makes its case recommendation to the relevant director; and (g) at the commencement of remedies negotiations with the merging parties. Consultations between senior competition officials can also be set up.

U.S. and EU officials may attend certain key events in the other’s investigative process (e.g., the EU’s Oral Hearing and the merging parties’ presentations to the Assistant Attorney General/Director of the Competition Bureau at which the Parties present their arguments prior to the agency’s decision as to whether to take enforcement action). In practical terms, waivers of confidentiality executed by merging Parties are necessary. In this regard, the Best Practices are also of great importance in order to clarify the application of the attorney privilege, which is significantly different in the EU and the U.S. It is accepted that the Parties can exclude from the scope of their waiver evidence given to the EU Commission that is properly identified by them as, and qualifies for, the in-house counsel privilege under U.S. law.[36]


The U.S. Agencies’ role has shifted in the last 10 years. Prior to the “GE/Honeywell Saga”, the U.S. Agencies tended to be the world’s primary antitrust regulator. After GE/Honeywell, the EU Commission became much more active. In practical terms, massive analysis required for EU Form CO at a very early stage now tends to drive initial process.

The landscape is still in flux. Future merger practice will have an even greater global focus, and multinational merging parties will need to be proactive in multiple jurisdictions outside the U.S. and the EU.

The Chinese MOFCOM is taking an increasingly active role. In Baxter Inc./Gambro AB, the transaction was cleared by the EU Commission on 22 July 2013[37] and on 8 August 2013 by the MOFCOM.[38] As for the contemplated transaction, EU and Chinese Agencies required similar structural remedies. However, the U.S. and EU analysis is not always accepted by the MOFCOM. In Seagate/Samsung in 2011, the MOFCOM imposed significant remedies that contrasted with the unconditional approvals granted by the EU[39] and U.S. Agencies.

The cooperation between the Chinese MOFCOM and the U.S. Agencies, on the one hand, and the EU Commission, on the other hand, is being strengthened. Although fairly modest in terms of content, two Memoranda of Understanding were signed by the MOFCOM with the U.S. Agencies and the EU Commission respectively in July 2011[40] and September 2012.[41] Other major jurisdictions are ramping up their merger review regimes, including Brazil[42] and India.[43] Through COMESA, a regional organization, African countries have made a foray into merger control, too.[44] As the world’s competition regimes continue to proliferate, cross-border understanding and cooperation will become increasingly essential to a coherent global merger control scheme.


If you have any questions concerning these developing issues, please do not hesitate to contact the authors.



[1]   This material was first published by Thomson Reuters Limited in Sophia A. Vandergrift and Josselin J. Lucas, “The GE/ Honeywell Saga? Ehh, What’s Up Doc? A comparative approach between US and EU merger control proceedings almost 15 years after”, [2014] 35 E.C.L.R. 172 and is reproduced by agreement with the Publishers.

[2]   The views expressed by the authors in this article are their own and not those of the FTC or any individual Commissioner and/or of Paul Hastings LLP or any of its clients. The authors would like to thank Michael Stevens for his advice and assistance with this article.

[3]   European Commission, GE/Honeywell, Case COMP/M.2220, Decision of 3 July 2001.

[4]   Ms. Platt Majoras was appointed to serve as Chairwoman of the Federal Trade Commission in 2004 until she stepped down in 2008.

[5]   Deborah Platt Majoras, “GE-Honeywell: The US Decision, Remarks of Deborah Platt Majoras, Deputy Assistant Attorney General, Antitrust Division, US Department of Justice, Before the Antitrust Law Section, State Bar of Georgia”, November 29, 2001.

[6]   Joaquin Almunia, “EU competition policy, relations with the U.S., and global business”, Georgetown University Law Center, 7th Annual Global Antitrust Enforcement Symposium, Washington, D.C. (USA), 25 September 2013, speech n°13/749.

[7]   European Commission, GE/Avio, Case COMP/ M.6844, Decision of 1 July 2013.

[8]   European Commission, US Airways/American Airlines, Case COMP/ M.6607, Decision of 5 August 2013.

[9]   European Commission, Publicis/Omnicom, Case COMP/M.7023, Decision of 9 January 2014, not yet published. Press release n°IP/14/10. In his speech dated 25 September 2013 delivered in Washington DC (op.cit.), Mr. Almunia noted: “As to the near future, I expect our dialogue to continue – among other cases – on the transactions between the US advertising group Omnicom and its French competitor Publicis; a deal that would create the world’s biggest advertising group”.

[10] Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings.

[11] Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings.

[12] Premerger Notification Program, FTC, http://www.ftc.gov/enforcement/premerger-notification-program (last viewed Jan. 14, 2014).

[13] Article 8 of Council Regulation (EC) No 139/2004 of 20 January 2004.

[14] European Commission UPS/TNT Express, Case COMP/M.6570, Decision of 30 January 2013, not yet published. Press release n° IP/13/68.

[15] European Commission, Deutsche Börse/NYSE Euronext, Case COMP/M.6166, Decision of 1 February 2012.

[16] European Commission, General Electric/Honeywell, Case COMP/M.2220, Decision of 3 July 2001.

[17] 15 U.S.C. § 53(b) (for the FTC a preliminary injunction is warranted with “a proper showing that… [issuances of a preliminary injunction] would be in the public interest.”). The DOJ must meet the federal courts’ traditional, and perhaps more stringent, standard for a preliminary injunction.

[18] Article 3.1 of Council Regulation (EC) No 139/2004 of 20 January 2004.

[19] European Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 of 20 January 2004, § 54-61.

[20] European Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 of 20 January 2004, § 62-82.

[21] European Commission Staff Working Document, “Towards more effective EU merger control”, 25 June 2013, see especially part II on merger control for the acquisition of non-controlling minority shareholdings (“structural links”).

[22] Joaquin Almunia, “EU competition policy, relations with the US, and global business”, Georgetown University Law Center, 7th Annual Global Antitrust Enforcement Symposium, Washington DC (USA), 25 September 2013, op.cit.

[23] See, e.g., FTC v. St. Luke’s Health Sys., Ltd., 1:13-CV-00116-BLW, (D. Id. Mar. 26, 13); United States v. Twin America, LLC et. al, 12-cv-8989 (S.D.N.Y. Dec. 11, 2012).

[24] Article 1.1 of Council Regulation (EC) No 139/2004 of 20 January 2004.

[25] Article 1.2 of Council Regulation (EC) No 139/2004 of 20 January 2004.

[26] Hart-Scott-Rodino Annual Report, Fiscal Year 2012, Appendix B.

[27] Article 3.4 of Commission Regulation (EC) No 802/2004 of 7 April 2004 implementing Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings.

[28] European Commission, Decision of 10 June 2009 imposing a fine for putting into effect a concentration in breach of Article 7(1) of Council Regulation (EEC) No 4064/89 (Case COMP/M.4994 Electrabel/Compagnie Nationale du Rhône).

[29] General Court of the European Union, Judgment of 12 December 2012, T-332/09, Electrabel v. European Commission. An appeal is pending before the European Court of Justice (C-84/13 P).

[30] US v. Biglari Holdings, Final judgment, 30 May 2013, US District Court for the District of Columbia, Civil Action No. 1:12-cv-01586.

[31] EU Commission statistics available at http://ec.europa.eu/competition/mergers/statistics.pdf.

[32] Article 10 of Council Regulation (EC) No 139/2004 of 20 January 2004.

[33] Article 14 of Council Regulation (EC) No 139/2004 of 20 January 2004.

[34] European Commission, UTC/Goodrich, Case COMP/ M.6410, Decision of 26 July 2012.

[35] US-EU Merger Working Group, Best practices on cooperation in merger investigations, 14 October 2011, and FAQs on the US-EU Merger Working Group’s Best practices on cooperation in merger investigations, available on the EU Commission’ website: http://ec.europa.eu/competition/mergers/legislation/best_practices_2011_en.pdf

[36] US-EU Merger Working Group, Best practices on cooperation in merger investigations, 14 October 2011, footnote n°10 and FAQs on the US-EU Merger Working Group’s Best practices on cooperation in merger investigations, §11.

[37] European Commission, Baxter International/Gambro, Case COMP/ M.6851, Decision of 22 July 2013.

[38] MOFCOM Announcement No. 58 of 2013 on Approval of Decisions on Anti-monopoly Review Against Concentration of Undertakings in the Acquisition of Gambro AB by Baxter International Inc. with Additional Restrictive Conditions.

[39] European Commission, Seagate/HDD Business of Samsung, Case COMP/ M.6214, Decision of 19 October 2011.

[40] Memorandum of Understanding on Antitrust and Antimonopoly Cooperation Between the US Department of Justice and Federal Trade Commission and the People’s Republic of China National Development and Reform Commission, Ministry of Commerce and State Administration for Industry and Commerce, 27 July 2011.

[41] Memorandum of Understanding on Cooperation in the area of anti-monopoly law between the EU Commission (Directorate General for Competition) and the National Development and Reform Commission and the State Administration for Industry and Commerce of The People’s Republic of China, 20 September 2012.

[42] A memorandum of understanding was signed on 8 October 2009 between the Directorate General for Competition of the EU Commission and the Brazilian Authorities. An agreement between the US and Brazilian Governments regarding cooperation between their competition authorities in the enforcement of their competition laws were signed on 26 October 1999.

[43] Memoranda of understanding were signed by the Competition Commission of India with the US Agencies on 27 September 2012 and, separately, with the Directorate General for Competition of the EU Commission on 21 November 2013. See Joaquin Almunia, “Competition, innovation and growth: an EU perspective on the challenges ahead”, Third BRICS International Competition Conference, New Delhi, 21 November 2013, speech n°13/958: “Only a few years ago, our dialogue was limited to some authorities, such as the FTC and the DOJ from the US”.

[44] The Common Market for Eastern and Southern Africa (COMESA) Competition Commission, http://www.comesacompetition.org (last viewed Jan. 14, 2014).

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