It is getting increasingly tough to get deals cleared across the world.
In the EU, the EC is more likely to block a merger than in the past. In 2022, the EC issued two prohibition decisions compared to none in the full years 2021 and 2020. In the past ten years (2013 – 2022), there have been 11 prohibition decisions, seven of which occurred in the past five years (2018 – 2022) (see WAMS).
In November 2022, Kronospan abandoned a planned acquisition of Pfleiderer's unit ahead of the EC's veto since the buyer did not offer suitable remedies. This would have been the third vetoed deal in 2022 following a veto of Illumina/Grail in September 2022 and a January block of the Hyundai/Daewoo Korean shipbuilding deal. Further, the Kronospan/Pfleiderer merger was the fourth abandoned deal in 2022 following Recticel/Greiner, Arm/ NVIDIA and Trimo/Kingspan Group, another indicator of the EC's toughening stance on merger control enforcement.
In the US, the antitrust enforcers at the FTC and the DOJ adopted an aggressive and expansive stance toward merger enforcement under the Biden Administration. The agencies have engaged in vigorous and active merger enforcement across all industries, including challenging more cases, attempting to block vertical transactions and scrutinizing acquisitions by private equity firms. As of the fourth quarter of 2022, the DOJ and FTC had at least nine merger victories, including deals challenged, then abandoned. Both US agencies have been publicly reluctant to accept merger remedy proposals as well.
The US agencies have also used a number of procedural changes that have added to regulatory uncertainty and delay, including, for example, complete suspension of early termination, changes to compulsory process, and the use of "warning letters" for deals not challenged. The Biden Administration's February 2021 "suspension" of early termination means that reportable mergers must wait for the 30-day HSR waiting period to expire before closing, even if they have no antitrust issues. As a result, we have seen a significant uptick in companies making HSR filings under letters of intent or term sheets.
In Australia, toughening merger control enforcement is manifesting in longer review periods. In the 2020/2021 financial year, the Australian Competition & Consumer Commission (ACCC) extended the benchmark timelines against which it measures its performance from eight weeks to 12 weeks for Phase 1 and from 20 to 24 weeks for Phase 2. In August 2022, the proposed acquisition of Port of Geelong by a consortium led by Spirit Super and Palisade Investment Partners was abandoned after a seven-month review, including two extensions to the provisional decision date. The review period for the proposed acquisition of Alliance Airlines/Qantas deal is anticipated to total ten months following the third extension of the ACCC's provisional decision date.
Similarly, in the UK, there has been an apparent hardening of the position taken by the CMA. Given the voluntary nature of UK merger control, many cases are not notified, but—for the first time—in 2022 (from the start of the CMA's financial year to the end of December) more Phase 1 cases were referred for an indepth Phase 2 investigation, abandoned, or resolved with remedies than were actually unconditionally cleared. As for Phase 2 cases, the proportion of unconditional clearances was also low: only two cases were cleared unconditionally after an in-depth review, whereas two cases were blocked, five subject to remedies and two abandoned.
In MENA, in 2022, the Saudi Arabian competition authority blocked its first deal on substantive grounds (see WAMS). Egypt has switched from a post-closing merger control notification regime to a suspensory preclosing notification regime. Under the new regime, parties cannot close a transaction unless approved by the Egyptian Competition Authority, subject to steep fines between approximately US$1 and US$20 million (see WAMS).
Meanwhile, both Kuwait and Morocco issued significant fines for merger control violations this year, and 17 competition authorities have launched the Arab Competition Network to bolster regional collaboration among the regulators. These changes indicate that MENA competition authorities are ready to scrutinize deals more closely than under the previous regimes, and parties should expect more merger control enforcement in the coming year.
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