United States: What’s New in Merger Control

Merger control regulations are in constant evolution. This article deals briefly with some of the more interesting developments in Australia, Brazil, Jordan and South Korea.

Australia 

On September 23, 2004, the Australian Competition Authority ("ACCC") published a "Guideline for informal merger reviews." In Australia, premerger notification is voluntary and the Guideline, which supplement the Merger Guidelines of 1999, is intended to provide transparency and accountability while preserving the benefits of the existing informal system. This Guideline will be only applicable to complex non confidential notifications. The process for reviewing confidential mergers is not within its scope of application. In particular, the Guideline focuses mainly on four aspects:

• review of time frames,

• guidance on the type of information required to allow the ACCC to review a merger and indication of scenarios when the ACCC could use its powers to request further information,

• making the process more open through the set up of communication processes among the parties and the ACCC, and

• accountability by means of a Public Register where key documents regarding ongoing merger reviews, including statements of issues and competition assessments, will be published.

From a practitioner’s point of view, the review of time frames and the type of information to be provided within the notification submission are the most relevant. As to the review time frames, the ACCC suggests a standard time line where a decision approving the transaction or the issuance of a statement of issues (and the beginning of a 2 phase procedure) could be adopted in about 6 to 8 weeks. The deadline starts to count from the date when the Authority considers that the parties have provided "sufficient information" to undertake an initial assessment. The deadlines are not binding for the ACCC and can be extended on request of the parties or ex officio by the Authority. The deadlines can also be suspended where the ACCC considers that the filing is incomplete and more information is requested, or when market enquiries can not be conducted due to confidentiality aspects of the transaction. Where remedies are negotiated even before the statement of issues, the ACCC could decide to set up a separate time frame, if possible with the agreement of the parties.

As regards the type of information to be provided, the ACCC includes a separate annex with a non- exhaustive list of information and other aspects which will be normally analyzed in the context of a merger review. The ACCC lists the following aspects: background information about the parties, details of the transaction and copies of the agreements, market definition and market shares of the parties and competitors, outline of competitive constraints of the merged entity, demand and supply side substitutability, dynamic aspects of the market (growth, innovation, product differentiation, etc.), issues of vertical integration, analysis of the countervailing power of customers and suppliers, information about process and capacity to individually raise prices post-transaction, level of imports, barriers to entry, etc.

On January 19, 2005, the Brazilian Competition Authorities ("CADE") considered that a transaction involving ADC Telecommunications, Inc. and Krone International Holding Inc. did not meet the jurisdictional thresholds as in particular, the parties’ combined turnover in Brazil was less than R$ 400 million. The decision clarifies Art.54.3 of the Brazilian Act 8884/94 by concluding that the turnover threshold of R$ 400 million should be interpreted as turnover in Brazil. Therefore, a transaction will not have to be filed in Brazil where the Parties’ combined turnovers in Brazil is lower than R$ 400 million, and the combined market share of the Parties is less than 20%. If one of the two thresholds is met, filing would still be necessary.

This interpretation was put forward by Commissioner Roberto C. Pfiffer, who considered that, in the last years, cases where the Parties’ combined turnover in Brazil was lower than R$ 400 million or the combined market share of the Parties was less than 20% of the affected market were not considered to cause anticompetitive effects. In addition, in his opinion, this interpretation would be consistent with regulations of other jurisdictions where the turnover threshold combines the national turnover of the parties in the country of notification with their worldwide turnover, as it is the rule in Argentina, Belgium, Czech Republic, Denmark, European Union, France, Germany, Greece, Hungary, Israel, Italy, Mexico, Netherlands, Portugal, Spain, Sweden and Switzerland.

Although Commissioner Pfiffer suggested that this interpretation should become the rule, it is too early to conclude that CADE will strictly follow it in the short term.

In 2004, a new Competition Law (Law No.33) was passed in Jordan. According to the new law, filing is mandatory in cases of transactions where the parties’ market share in the Jordanian market exceeds 40%. The jurisdictional threshold does not take into account the worldwide turnover of the parties or the turnover in Jordan. It is not clear whether Jordanian authorities have jurisdiction over foreign transactions where the parties do not have local presence; as a precautionary measure, filing would be advisable in such cases provided that the market share exceeds 40%.

The notification must be submitted within 30 days of the execution of the transaction agreements. If the authority considers the notification complete, a public notice is issued including a summary of the transaction and inviting third parties to submit comments. In practice, it may take several months for the authority to declare the filing complete since date of submission. The decision must be adopted within 100 days from date of publication of the notice. During the entire period from execution of the transaction agreements to the date a decision is adopted, the transaction must be suspended in Jordan.

As regards the question of completeness, according to the law, the parties have to provide a long list of documents such as copies of their by-laws and articles of incorporation, lists of products sold in the country and market share estimates, lists of directors and senior management of each company, lists of branches and subsidiaries of the parties, etc., as well as the usual financial reports and copies of the transaction agreements.

All the documents must be notarized and legalized at the Jordanian consulate and translation into Arabic is a requisite. However, in practice, it is possible to submit the documents in English and consult with the authorities which documents or parts of the documents should be translated into Arabic.

Another particularity of the Jordanian procedure is that, even if submission of the filing by one of the parties releases the others from submitting a filing, the non-filing parties must submit a formalized letter of acknowledgment declar- ing that all the information and documents submitted are correct. Violations of the obligation to file or the implementation of the transaction in Jordan during the suspension period are subject to a fine of not less than JD 1,000 (~US$1,420) and a maximum of JD 50,000 (~US$71,023).

Following a new law, as of 1 April 2005, the scope of premerger notifications has been expanded for share and asset acquisitions. As regards "foreign-to-foreign" transactions, where the jurisdictional thresholds are met,¹ concentrations will have to be filed prior to closing and within 30 days from the sale of execution of the transaction agreements in case either the acquirer or the target has total revenues or assets over 2 trillion Won (~US$ 1.6 billion) in the last financial year. Post closing filing will be required if either the acquirer or the target has total consolidated revenues or assets over 100 billion Won (~US$ 83 million) and less than 2 trillion Won (~US$ 1.6 billion) in the last financial year. Filing will not be necessary in case of acquisitions where the assets or the turnover of each party is under 3 billion Won (~US$ 2.5 million). However, the review period has been extended from 60 days to 90 days, in order to provide more time for investigation when needed.

^{1 In case of share acquisitions, a filing will be necessary if (i) the acquirer acquires > 20% (15% in case of listed companies) of the shares of the target, (ii) either the acquirer or the target has consolidated total assets or revenues > 100 billion Won (~US$ 83 million) AND (iii) sales revenues in Korea of both the acquirer and the target are > 3 billion Won (~US$ 2.5 million).} 

Copyright © 2007, Mayer, Brown, Rowe & Maw LLP. and/or Mayer Brown International LLP. This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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