Editorial: Uphill battle

Author: | Published: 5 Mar 2018
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Merger review is only supposed to focus on the result that the combination of two or more companies will produce: will the deal negatively impact choice for consumers and will it have an effect on the number of players in a market?

Following on from the previous point, competition rules are also supposed to be indifferent to nationality and sector (or most sectors at least if you set aside defence for example). Are they really though?

A number of countries globally have very active foreign direct investment programmes – for instance, Asian and Middle Eastern buyers flush with cash have been snapping up EU assets for the past few years. Two of the UK's most prized assets, Hinckley Point and Land Rover, were acquired by Chinese and Indian investors respectively.

This may be good for business but it's getting regulators a bit flustered.

The UK is currently reviewing legislation that would place more emphasis on national security considerations when regulators examine M&A proposals involving a foreign party. The 2002 Enterprise Act allows the Secretary of State for Business to review combinations with this specific angle in mind though there is no general rule allowing regulators to do the same.

Over the years, macroeconomic conditions have slowly permeated the merger review process: the sale of some of the UK economy's crown jewels (Cadbury to Kraft and AstraZeneca to Pfizer) have attracted both intense media and government scrutiny though the deals themselves didn't have any inherent competition issues attached to them.

In the US, the Trump administration has on a general level helped foster a business-friendly environment. But the Committee on Foreign Investment in the United States (Cfius) has been in the limelight recently for its broad definition of national security. While it was never meant to take this criteria into account – at least explicitly – it has creeped up in its reviews, and is now believed to relate to issues such effect on the US economy and on US critical infrastructure. Germany's Foreign Trade Act and the Foreign Investment Review Board in Australia are going in the same direction in their respective jurisdictions.

This trend towards a more protections antitrust stance could prove challenging for foreign buyers. They will need to jump through more hurdles, provide more guarantees and clarity surrounding their intentions, and generally be more forthcoming with regulators in giving up information. It's increasingly going to be an uphill battle to get deals done and dusted.

Enjoy the issue,

Amélie Labbé
Managing editor