The Effectiveness of Merger Control Regimes in Preventing Anti-Competitive Consolidation. 

Abstract 

In this article, I have analysed and evaluated the effectiveness of merger control regimes in the European Union, the United Kingdom, and the United States. Through an initial overview of each of the systems and their thresholds, I considered the strengths and weaknesses of each system before determining their current effectiveness and finally concluding with a ‘perfect merger control’ in which I evaluated which aspects of merger control regimes could be implemented to create a unilateral ‘perfect merger control’. My analysis has primarily come through a comparison of the three processes and has informed my decision that current merger control regimes are effective in preventing anti-competitive consolidation.

Introduction

The regulation of mergers and acquisitions from an anti-competitive point of view is an often overlooked but crucial element that can hold up, alter and outright stop corporate consolidations from being brokered by market-leading companies. These regulators, known as ‘merger control regimes’ seek to prevent anti-competitive outcomes through the careful investigation of M&A deals, ensuring that consumers remain protected and industries and sectors remain competitive – driving growth and innovation. Merger control is and remains a crucial part of the competition and Antitrust law and is well established across many jurisdictions, including the European Union (EU), United States, United Kingdom, Canada, China and India. This article begins with an overview of each regime, giving the foundational knowledge needed to consider the issues presented when considering the effectiveness of the systems and what perfect merger controls could look like as legislation develops. 

Overview of Merger Control Regimes (EU, UK and US). 

Whilst all merger control regimes across all jurisdictions work to achieve the same common goal, they are all uniquely structured and possess different thresholds for review. The European Union’s appropriately named ‘EU Merger Regulation’ (EUMR) regulates all companies within nations that are members of the EU and has a two-stage process to review mergers, acquisitions as well as other corporate combinations beginning with phase one – initial review. This phase usually lasts around 25 days and during this period the EUMR undertakes a preliminary assessment to determine if the proposed deal in question would significantly harm the competition in the EU. In some cases, the process ends here if the body has no concerns and approves the merger under Article 6 (1) (b). However, if concerns arise the transaction is referred to phase 2 for an in-depth investigation. This second phase can take longer – usually lasting up to 90 days but can be extended by 15 working days for a maximum of 92 working days. In this period, the regulation assesses whether the merger would create or strengthen a dominant market position in which the company or companies in question could deter effective competition. Upon the completion of Phase 2, one of three outcomes is given – approval of the merger, approval with conditions or in some cases the EUMR may prohibit the merger altogether. 

The system used in the United Kingdom is similar to that of its EU counterpart, and PostBrexit, the Competition and Markets Authority (CMA) uses the Enterprise Act (2002) to control mergers in the UK. They have the same two-phase initial review and in-depth investigation, although the timelines differ slightly: 40 working days for phase one and 24 weeks (6 Months) for phase two. They hand down the same decisions (although the wording for what the EU describes as ‘approval with conditions’ is ‘’approval with remedies’ in the UK. One main difference is the Competition Appeal Tribunal (CAT) that exists in the UK, in which appeals to decisions given are heard and re-reviewed by a specifically designed tribunal – in the EU; the appeal process does not have this tribunal system with appeals having to go to the general court and possibly to the Court of Justice if the EU. 

The final system that this article will be reviewing is the merger control regime in the United States. The US has a similar two-phase system again, although with one distinct difference in that under the Hart-Scott Rodino Antitrust Improvements Act (HSR Act), in some cases, premerger notification is required by the Department of Justice (DOJ) and Federal Trade Commission (FTC). This is required when the size of the transaction and size of the parties involved meet the annually updated threshold based on changes to the US Gross National Product (GNP) in 2024; these thresholds were $111.4 million or higher for the size of the transaction and $222.8 million (in total assets or annual net sales) or higher for the size of parties. If a merger falls below this, they are not ordinarily subject to the HSR filing requirements. Phases one and two after this are similar to that of the EU and UK systems with phase one being an initial review and Phase two used if necessary to conduct a more in-depth investigation. 

The thresholds required for each of the three regimes to become involved in a perspective merger differ and are expressed in the table below for reference.

The structuring and thresholds set out in each of the three merger controls undeniably contribute to and achieve a substantial lessening of competition (SLC) centring around an analysis of whether a merger would harm competition, consumers or markets, reducing monopolies being formed and keeping sectors highly competitive. 

Comparative Analysis of Merger Control Regimes.

With the general structure and threshold of the EU, UK and US merger control regimes differing from one jurisdiction to another, the question of the effectiveness of the current systems and if elements of the systems were combined, could the current merger control landscape be strengthened? When considering this question, the strengths and weaknesses of each system must first be considered before moving on and determining how integral or detrimental these factors are and finally analysing the current needs of merger control legislation. 

The formalised and comprehensive process offered by the EU’s Merger Regulations is a definitive strength of their system, offering a clear structure that can easily be navigated by businesses as well as thoroughly reviewed and investigated in a manner that ensures competition is fierce across sectors, regardless of industry. The thresholds are clear and predominantly capture especially large mergers, spending their time on highly impactful consolidations. The appeal process is robust, offering a platform in which decisions can be challenged, although, without the presence of a dedicated tribunal-style system, such as the CAT in the UK, it leaves a more generic and untailored system, which weakens the integrity of such appeal decisions. This, paired with a highly bureaucratic system runs the risk of hindering timely decisions, having an adverse impact on the merging parties due to the timeconsuming investigative process lasting up to 90 days. Overall, the EU has one of the more rigorous and well-established merger controls – affording reliability and a good reputation although this comes at a cost of time, a precious commodity in the corporate world. 

If the EU’s system is drawn out, the UK has deviated and has produced a far more flexible and fast system benefiting merging parties with speedy reviews, allowing competition concerns to be headed off within the first 40 days. The voluntary notification system is another plus, with companies having the option to ensure that they are permitted to merge. This proactive approach is far more time-efficient than its reactive counterpart. While the CMA may spend more time reviewing and investigating voluntarily notified mergers, they are significantly reducing the likelihood that they have to prohibit and un-wind a merger after its completion and, thus, in the long run, saving time and reducing the risk of anti-competitive mergers damaging the corporate landscape in the UK. The CAT is also to be boasted about in that a purpose-built tribunal offers a specialised approach to appeals, leading to more targeted rulings. While flexible, the main weakness of the UK’s merger controls is how effectively it can cope with complex international mergers, given the reliance on market share thresholds. This, in theory, could allow companies to merge without the CMA’s review by way of not meeting the thresholds while subsequently creating an anti-competitive issue. 

The US system is distinct in its pre-phase HSR Act, which, like its UK counterpart, allows for a quick initial review. The second request provides a detailed and adept investigation, allowing the agencies involved to be able to say with near certainty if a merger is likely to harm competition. Their somewhat straightforward appeal process through the courts falls between the EU and UK systems, although there is no doubt that it would benefit from a specialised tribunal or court to deal with these specific appeals. The glaring weakness of this system is the focus on transaction size as opposed to market share, allowing smaller companies that may not have enormous financial evaluations to merge, whilst obtaining an unfair proportion of market share, decreasing competition. 

Effectiveness of Current Merger Control Regimes. 

The overall effectiveness of these regimes is somewhat subjective depending on the criteria, although in this case, I have selected 4 fundamental factors that give an accurate overview of current regimes’ effectiveness. These factors are decision speed, review/investigation thoroughness, thresholds and appeals. 

Starting with decision speed, the EU’s EUMR system has an impressively fast decision speed, especially when compared to the longer average review and investigation period of the UK’s CMA. Having a faster period of involvement to decision protects the companies entering into merger control and ensures that regardless of the initial review’s outcome the decision is given to those involved in a timely manner allowing both parties to either move forward or re-evaluate before either company has been adversely affected through stagnant periods of uncertainty. In this regard, the EU’s 25 working day average phase one is significantly quicker than that of the UK, which is 40 working days. Phase two is also faster with a usual 90 working day period given before a final decision is given. When compared to the UK the EU is coming out on top again with the UK taking around 6 months before returning a phase 2 decision. 

The thoroughness of the review/investigation periods is the most significant of the factors and forms the entire basis of a decision made by any merger control regime. As such, each of the regimes undoubtedly has vigorous and thorough checks in place to ensure that mergers are effectively approved, advised, and, in some cases, blocked. The US system is a prime example of this, initially through their pre-notification phase in which informal discussions between involved parties and agencies allow for a preliminary review before entering phase one, in which a more thorough review allows the agencies to confirm and change their initial finding quickly. The second request investigative process is really where the US system slows down and becomes extremely thorough – while taking around the same period as its UK and EU counterparts – the highly detailed and aggressive approach of the DOJ and FTC ensures that all concerns are managed and dealt with,  regardless of the time it takes, as no formal limit is placed on their second request, differing from the EU’s 90 working days and UK’s 24 weeks.

The thresholds that the EU, UK and US have created determining their involvement is another key consideration that can significantly impact their overall effectiveness. The UK’s thresholds set by the CMA are leading in this aspect. When looking at the common metric among the three, turnover, the UK comes in with the lowest threshold of £70 million (compared to the EU’s €5 Billion and the US’s $101 million). Having this significantly lower threshold allows the CMA to be highly effective at catching a wider range of potentially anticompetitive mergers through the inclusion of companies which may turnover less than traditional merger control candidates but could still pose a risk to the competitiveness of the UK’s markets. When paired with the 25% share of supply test, which neither the EU nor US have implemented, the CMA also catch mergers that may be below the turnover threshold, this is especially relevant in niche areas where market share may be high but total turnover significantly less than other established markets. This two-pronged approach gives the CMA a high degree of sensitivity to potential competitive harm. 

The final factor, appeals, is arguably less significant than the other three factors, although it is crucial in creating a system of integrity with safeguards in the case of mistakes. Whilst all three jurisdictional bodies have appeal procedures set in place, the UK is the undeniable leader in this regard with its purpose-built Competition Appeal Tribunal (CAT). The tribunal’s specific focus allows for much faster decisions than that of the US and EU appeal courts. The CAT’s entire process usually lasts between 6-9 months, while the US takes between 2-3 years and the EU’s taking even longer. This fast result allows merging parties to obtain quicker resolutions, which is particularly valuable in fast-moving industries or when the CAT’s ruling is uncertain. It also has a wider remit in that it can review both factual and legal aspects of the CMA’s rulings, allowing for a more thorough and comprehensive review, especially when compared to the EU’s General Court which is focused on more procedural issues, ultimately allowing the CAT to scrutinize the CMA’s economic analysis. The competition-specific specialism aids in ensuring both consistency and sufficient expertise ensuring that both potential legal and reasoning issues are addressed. 

The ’Perfect Merger Control Regime’. 

When analysing the current merger control structures and guidelines, each system has distinct features that both strengthen and weaken the overall effectiveness of the bodies. This poses the question as to whether changes can be made, creating a more effective unilateral system that can be used across jurisdictions. I would begin by implementing the US structure with the two-phase review and investigatory process, as well as keeping the HSR Act’s process of pre-merger notifications – enabling the review process to be expedited and updates to be given to the parties involved regularly. I would build on this by implementing the EU’s rigorous phase two investigation depth. This would allow for concerns to be completely considered. Throughout this phase, I would permit the parties to propose and make changes that limit a substantial lessoning of competition. Further to this, the UK’s appeal system would be implemented, as well as their guidelines. As previously mentioned, having a dedicated appeal body increases both the speed and how effective the body can be in handing down adequate decisions, and the thresholds that the UK have in place reflect the widest range of companies due to the low turnover requirement whilst simultaneously ensuring that companies operating in more niche sectors that may not have a significant turnover are still screened. As a whole, these implementations take the best from each of the merger control regimes, creating a fast, in-depth, specialised and challengeable system that is universal enough to be implemented across all jurisdictions. 

Conclusion 

Whilst there is undeniably scope to argue both for and against the effectiveness of merger control regimes in preventing anti-competitive consolidation, I am confident in my assertion that the EU’s merger regulation, the US’s HSR Act and the UK’s CMA are all effective in protecting their jurisdictions against anti-competitive behaviour. Whilst they are all effective, I would argue that the UK’s system is the most sophisticated and best suited to deal with a range of mergers across all sectors, due to its decision speed and specialised approach to competition law as a whole. 

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