This is clearly good news for merging parties. Overall, the average time to get unconditional clearance at phase 1 (by far the most likely outcome of a merger review) remained steady last year at 22 working days. We also saw a decrease in the time taken to reach other types of decision, such as unconditional and conditional clearances after an in-depth investigation.
However, looking at aggregated data on review periods does not tell the whole story. The picture remains varied across jurisdictions, particularly in relation to in-depth probes.
In international transactions, we also saw the filing strategies of merging parties having an impact on timing of clearances (and relationships with certain authorities).
UK fast track procedures yield timing successes
In Carpenter/Recticel, the Competition and Markets Authority (CMA) used its phase 2 fast track process for the first time, reaching a decision more than two months before its phase 2 deadline. The parties triggered the expedited process by accepting that the deal raised antitrust concerns and requesting that the review progressed quickly to the consideration of remedies. The mechanism has since been used in another phase 2 case and we expect to see more of it in future.
Several phase 1 cases also were fast-tracked to the remedies stage.
This has led to a marked decrease in the average time to receive a UK phase 1 conditional clearance – 88 working days in 2022, down from 98 in 2021. In one 2022 case (Ali/Welbilt), the CMA accepted phase 1 remedies in just 32 working days.
The UK government is planning to build on these efficiencies by injecting further flexibility into the fast track system in upcoming reforms to the rules.
Chinese phase 1 simplified procedure remains quick
In China, 98% of cases benefitting from the simplified procedure were cleared in an average of 11 working days in 2022. This period has decreased steadily since we started compiling this report in 2015 and has plateaued over the past three years.
The amended Anti-Monopoly Law also introduces a new “classification and grading” merger review regime. For a three-year pilot period from August 2022, the State Administration for Market Regulation (SAMR) can delegate the scrutiny of qualifying simplified concentrations to certain provincial-level market agencies. SAMR remains the single window to accept merger filings. It then decides whether to delegate to the local agencies and reaches decisions after considering the opinions of the local agencies. This development is expected to improve the efficiencies of the simplified procedure in the long run.
In-depth SAMR reviews are, however, much more unpredictable. The average investigation period for a remedies case (including the often lengthy “initiation period” before SAMR formally starts the review period) was 310 working days in 2022, ie over a year. This is significantly longer than the 180-calendar day statutory maximum.
These long review periods clearly have a major impact on deal timetables. In one case last year (DuPont/Rogers), the parties walked away from the transaction after SAMR clearance could not be obtained before the long stop date.
SAMR has attempted to make improvements to the system by introducing a “stop-the-clock” mechanism in the amended Anti-Monopoly Law. This allows it to suspend the review period in certain circumstances, eg if parties have not submitted the required information.
We will keep an eye on the impact of the new rule in practice. It should inject greater flexibility to the benefit of both SAMR and merging parties, especially in complex cases involving remedy discussions. Historically, if SAMR was unable to complete its review within the statutory period in such cases, the parties often needed to refile, restarting the whole investigation period. However, the new mechanism could result in even longer reviews and more uncertainty.
EC consults on streamlining reviews
In 2022, over 80% of deals receiving phase 1 unconditional clearance from the European Commission (EC) were reviewed under the simplified procedure. Parties generally obtained clearance less than 20 working days from the date of filing, ie at least five days ahead of the standard phase 1 review deadline.
The EC wants to build on the success of the simplified procedure by bringing more deals within its scope. It has launched a consultation on possible changes. The EC is also seeking views on plans to streamline information requirements in short form and standard notifications. If adopted, these changes should alleviate some of the time and administrative burden of preparing an EC filing. They may also reduce pre-notification periods, which currently take around two to three months for simple cases and can be much longer for complex deals.
However, the proposals do not address investigation periods at phase 2. Here, extensions to the regular timetable (up to a maximum of 125 working days) and sometimes multiple suspensions (which stop the clock) are now standard.
For example, the EC’s in-depth investigation into Illumina/GRAIL took 275 working days to complete. Its review of HHI’s acquisition of DSME lasted over two years, which included three suspensions totalling 19 months.
For now, at least, there is no sign that the EC intends to take steps to reduce these in-depth review periods.
Other authorities act to speed up merger reviews
In Brazil last year, the antitrust authority started testing an automatic electronic review system for fast track deals. It hopes this will reduce review periods in fast track cases to an average of 15 days or less.
Improvements to the fast track review process were also a focus in South Korea. The Korean Fair Trade Commission (KFTC) expanded the list of transactions that can benefit from the 15-day review, including certain purchases of real estate.
Interestingly, the KFTC has also established an International M&A Division, prompted by a surge in the number of global deals reviewed by the agency. The aim is to increase internal resources and enable greater collaborate with other antitrust authorities. For non-problematic cases, this should lead to quicker reviews.
Authorities criticise parties’ tactics in global transactions
Last year, officials at both the Federal Trade Commission (FTC) and Australian Competition and Consumer Commission (ACCC) voiced concerns about certain behavior of merging parties in relation to timing and (lack of) coordination across parallel merger control review processes.
ACCC head Gina Cass-Gottlieb noted that some merging parties choose to focus their efforts on a particular jurisdiction and “appear to be marking time” until they secure that clearance. They then notify the deal in other jurisdictions at a later stage, attempting to leverage the already-obtained clearance. She believes this slows down the entire process.
FTC Director Holly Vedova observed that certain companies appear to have the mind-set that merger control is a “customer service” and that agencies are put under pressure to expedite reviews to get to a decision before the deal’s long stop date.
We have also observed an uptick in the number of cases withdrawn and then refiled at EU level. There are two possible reasons for this. First, the parties are buying more time in an attempt to get approval in phase 1, avoiding a lengthy in-depth review. Second, they are trying to align the EU timetable with reviews in other jurisdictions, particularly the UK.
As a result, it is more important than ever that merging parties carefully consider their filing strategy in multinational transactions.
On one hand, parties may consider the potential for efficiencies by initially focusing on a smaller number of filings in certain jurisdictions and then making the remaining notifications after the first clearance is obtained. On the other, they should not underestimate the challenges that could arise in jurisdictions that consider the parties are trying to prejudge the outcome of their reviews by completing other merger control approval processes first.
