Key differences between U.S. and EU merger investigations
Antitrust scholars and practitioners have long debated merger policy, and where harm to competition can come from. A recent point of debate is whether acquisitions of startups by incumbent companies can stifle competition by removing future competitors. On the other hand, some argue that these acquisitions can be an important part of the ecosystems of certain industries. None of this information matters if enforcers can’t apply that information through investigations and, in some cases, enforcement actions. Fortunately, U.S. enforcers have this ability. The EU may not.
The U.S. and the EU both have robust antitrust enforcement regimes that influence antitrust policy around the world. U.S. and EU enforcers also tend to have a good working relationship and influence each other. However, these agencies do have key differences — sometimes due to differing structural needs and sometimes due to different politics.
One key difference is the way the agencies take up merger investigations. At the EU level, the European Commission (EC) reviews mergers, or as they call them, “concentrations” with an “EU dimension.” A concentration is simply a merger, acquisition of control, or the creation of a full-function joint venture. The EU dimension is defined as a concentration that meets certain size thresholds, as measured by turnover. When a concentration does not have a European dimension, then the national competition authorities follow each of their regimes and can review such mergers.
This sounds a lot like the Hart-Scott-Rodino Act, which I covered in a previous post on how U.S. merger reporting works, but there is a key difference. The EC test determines whether the EC reviews the merger as opposed to Europe’s national competition authorities. This means that the EC cannot investigate mergers that do not meet its threshold because these mergers are outside of the EU merger regulations unless special provisions are applied. This division of authority is likely due to political considerations, like balancing the needs of the EU with the sovereignty of the member states. The Hart-Scott-Rodino Act, however, was a solution to a different problem: you can’t catch what you can’t see.
Since 1914, the Clayton Antitrust Act gave enforcers the power to review mergers, but enforcers didn’t always know that mergers were taking place. The Hart-Scott-Rodino Act was a solution to this problem, and this 1976 law required private parties to report their mergers if those mergers met a certain size threshold. The Hart-Scott-Rodino Act also improved merger enforcement by setting up a concrete process for review with a defined timeline. This is where U.S. enforcers have a significant advantage over their EU counterparts; they are not restricted in what they can investigate and act on. The Hart-Scott-Rodino Act sought to improve merger enforcement by standardizing how larger mergers are handled, it did not limit the agencies’ existing authority to undertake investigations on their own.
One might be concerned that some mergers will still slip through the cracks if they are not reportable under the Hart-Scott-Rodino threshold. This is not necessarily the case. U.S. enforcers rely on additional sources of information to identify potential subjects of investigation. For example, tech- and investor-focused publications often report on acquisitions in the tech industry. This reporting can become the foundation of a merger investigation, if significant concerns are raised. For example, Facebook announced its purchase of WhatsApp in February of 2014, and the merger was also reported in publications like CNN. The merger closed in October of theSet featured image same year, giving U.S. enforcers notice and opportunity to engage in an investigation regardless of whether the merger met Hart-Scott-Rodino thresholds. The merger could have also been investigated, and action taken, after the merger closed. However, this later action may have run into the “unscrambling the egg” problem I discussed in an earlier post. This also happened with Microsoft’s acquisition of LinkedIn: announced June 2016, reported in Wall Street Journal, and closed in December of the same year.
Additionally, the agencies themselves can demand additional reporting as part of negotiated settlements with companies. This happened in the settlement of the Anheuser-Busch (AB) InBev/SABMiller merger. Although the Department of Justice believed the the conditions placed on this beer merger would protect competition, the agency expressed concern that this assessment could change if the company continued to acquire small craft breweries and beer distributors. The settlement placed additional reporting duties on AB InBev so that the agency would be notified of these transactions.