Benefits of a coordinated approach to regulator engagement
Managing the merger control filings for global transactions can be an onerous exercise. A question lawyers managing such transactions frequently face is the extent to which different regulators around the world may require different remedies. There is no doubt that a coordinated approach across jurisdictions can yield benefits, particularly in deals that require remedies to secure conditional clearance.
As global M&A activity surges, we address the challenges your global deal could face, focusing on the likelihood that the Australian Competition and Consumer Commission (the ACCC) accepts additional and/or separate remedies to those provided to merger control agencies in other jurisdictions.
- Allens has reviewed the outcomes of major global mergers announced since 2010 that involved engagement with the ACCC via the public informal merger process, and the competition regulator of either Canada, China, the European Union, New Zealand, the United Kingdom or the United States, where remedies were offered to one of the overseas regulators. Where remedies are required globally, the ACCC can take one of these routes:
- require no separate remedy at all;
- accept a remedy implementing the same remedy as offered overseas; or
- accept a different or additional remedy.
- From the 34 cases Allens reviewed, in nearly 70% of global mergers with an ACCC review component, the ACCC did not require a remedy when one was required by an overseas regulator, ie the ACCC approved these transactions without requiring a remedy in Australia on the basis that the transaction itself did not raise substantial competition concerns, or that the overseas remedies would also address any competition issues in Australia.
- These statistics should be viewed bearing mind that the merger filing process in Australia is voluntary (although the ACCC encourages merger parties to notify if the products of the merger parties are either substitutes or complements, and the merged entity will have a market share of greater than 20% in the relevant market(s) in Australia).
For large transactions involving global companies, where Australia is only one of many jurisdictions potentially requiring clearance, the need for ACCC clearance can raise challenges for merger parties hoping for minimal intervention from Australian regulators. However, the ACCC's approach to enforcement is robust and merger parties' engagement with the ACCC should be planned with care. For example, merger parties cannot assume that the ACCC will clear a transaction merely because the parties' Australian operations represent a minor share of their global footprints. The ACCC routinely takes an interest in such transactions as long as the transaction affects markets in Australia and, like other regulators globally, monitors press reports, engages with international agencies and will not hesitate to 'call transactions in for review' if it has concerns.
In some cases, divergence in the remedies accepted by the ACCC cannot be avoided because, for example, the competitive effects of the transaction are different in each jurisdiction. Nevertheless, there are substantial benefits in seeking to coordinate your engagement with all relevant competition regulators to ensure that the merger clearance process, and any remedies required, are as streamlined as possible.
The ACCC's position: general preference for streamlined remedies and coordination with overseas agencies
In its Merger Guidelines, the ACCC has indicated that it will not accept an undertaking from a party to a global merger unless the remedy is capable of being enforced by the ACCC and has been coordinated with the remedies of any applicable overseas regulators. This approach is in line with the International Competition Network's (the ICN) Merger Remedies Guide and Practical Guide to International Enforcement Cooperation in Mergers, which encourage cooperation among participating regulators to ensure a consistent approach to remedies. The ACCC is a member of the ICN.
Allens' review indicates the ACCC's commitment to this policy and its awareness of the benefits of a coordinated approach where an overseas regulator has considered it necessary to require a remedy. In the cases we reviewed, the ACCC has taken one of three approaches:
- required no remedy at all (this can be further segmented into transactions where the ACCC did not identify any substantial competition concerns in Australia and transactions whereby the commitments made by the parties to overseas regulator(s) were sufficient to address the ACCC's concerns);
- accepted a remedy implementing an overseas remedy; or
- accepted a different remedy altogether.
Below is the distribution of the above three approaches in the transactions reviewed:
We discuss each of these in turn below.
(a) No Australian remedy required
In nearly 70% of the transactions reviewed, despite the fact that a remedy was accepted by the overseas regulator, the ACCC did not require its own remedy.
Remedies were not required in Australia in the following two types of cases:
- where the ACCC did not identify any substantial competition issues in Australia (around 74% of transactions where the ACCC required no remedy); or
- where the commitments made by the parties to overseas competition regulator(s) were sufficient to deal with its competition concerns in Australia (around 26% of transactions where the ACCC required no remedy). In these transactions, the remedy required by the overseas regulator involved undertakings to divest aspects of the buyer's global business, which would thereby remove any overlaps in Australia.
Below are examples of transactions where no remedy was required in Australia due to a lack of any substantial competition issues as identified by the ACCC:
- London Stock Exchange Group plc's acquisition of Refinitiv Parent Limited in 2020 (EU remedy requiring divestments);
- Alstom's acquisition of Bombardier Transportation in 2020 (EU remedy requiring divestments);
- GlaxoSmithKline plc's acquisition of the consumer healthcare business of Pfizer Inc in 2019 (EU remedy requiring divestments);
- Merger between Piscine Luxembourg Holdings 2 S.a.r.l (Zodiac) and Fluidra S.A. in 2018 (EU remedy requiring divestments);
- China National Chemical Corporation's acquisition of Syngenta AG in 2016 (EU and US remedies requiring divestments);
- Tullett Prebon Plc's acquisition of ICAP Plc's global hybrid voice broking business in 2016;1
- Anheuser-Busch InBev's acquisition of SABMiller plc in 2016;2
- Pfizer Inc's acquisition of Hospira Inc in 2015 (EU, US and Canadian remedies requiring divestments);
- Staples Inc's acquisition of Office Depot Inc in 2015;3
- Eli Lilly's acquisition of Novartis Animal Health in 2014 (US remedy requiring divestments);
- Reckitt Benckiser Brands Limited's acquisition of K-Y brand (from Johnson & Johnson) in 2014;4
- Agrium Inc's acquisition of Viterra's agri-products retail business in 2013 (Canadian remedy requiring divestments);
- Universal Music Holdings Limited's acquisition of EMI Group Global Limited in 2012 (EU remedy requiring divestments);
- United Parcel Service Inc's acquisition of TNT Express N.V in 2012;5
- Glencore International plc's acquisition of Xstrata Plc in 2012;6
- Johnson & Johnson's acquisition of Synthes Inc in 2012 (US remedy requiring divestments); and
- Unilever Group's acquisition of Alberto Culver Company in 2010 (US and UK remedies requiring divestments).
In relation to two transactions, Staples' acquisition of Office Depot and United Parcel Service's acquisition of TNT Express, neither raised competition concerns in Australia, but ultimately neither proceeded, as the remedies offered by the parties were rejected by overseas regulators.
Transactions where no remedy was required in Australia as commitments made by the parties to overseas regulator(s) were sufficient to address the ACCC's competition concerns included:
- Bayer AG's acquisition of Monsanto Company in 2018 (EU remedy requiring divestments);
- merger between El du Pont de Nemours and Company and The Dow Chemical Company in 2017 (EU remedy requiring divestments);
- General Electric Company's acquisition of Baker Hughes Incorporated in 2017 (US remedy requiring divestments);
- Novartis AG's acquisition of GlaxoSmithKlein plc's oncology products in 2015 (EU remedy requiring divestments);
- GlaxoSmithKlein plc's acquisition of Novartis AG's human vaccines business in 2015 (EU remedy requiring divestments); and
- Western Digital Corporation's acquisition of Hitachi Global Storage Technologies Holdings Ltd in 2011 (EU remedy requiring divestments).
(b) Alignment between Australian and overseas remedies
In around 15% of transactions reviewed, and in around 45% of cases reviewed where the ACCC were offered remedies, the ACCC accepted a remedy that was aligned with the remedy required by the overseas regulator. This involved the parties providing court enforceable undertakings to the ACCC that they would comply with the divestment commitments they had made to overseas competition regulators. Based on the transactions reviewed, the ACCC accepted court enforceable undertakings by the merger parties (as opposed to requiring no Australian remedy at all) in circumstances where it believed that the competition concerns arising from the transaction had a significant impact in Australia, or required that the buyer of the divested business be approved by the ACCC to ensure that it was capable of competing effectively in Australia. In contrast, the ACCC did not ordinarily require undertakings in global transactions that had a lack of any Australia-specific competition concerns.
While the most convenient outcome is clearly the lack of a separate remedy in Australia, remedies that are substantively aligned with those already required elsewhere raise fewer compliance hurdles for merger parties than if the ACCC were to require a different remedy. Nevertheless, complexities in the formal compliance process for implementing the divestment can still create costs and cause delays for merger parties. This can be the case, for example, where the buyer is required to divest an aspect of its business to an 'approved' third party. In those cases, separate approval must be sought from both the overseas regulator(s) and the ACCC, as the ACCC will want to satisfy itself that the acquisition of the divestment business or assets does not itself raise competition issues, particularly where the buyer has a different footprint in Australia.
Examples of this are:
- Thales S.A's acquisition of Gemalto N.V in 2019 (EU remedy requiring divestments);
- Thermo Fisher Scientific Inc's acquisition of Life Technologies Corporation in 2013 (EU and US remedies requiring divestments);
- Baxter International Inc's acquisition of Gambro AB in 2013 (EU remedy requiring divestments);
- Scandinavian Tobacco Group A/S' acquisition of Swedish Match AB in 2010 (NZ remedy requiring divestments); and
- Novartis AG's acquisition of Alcon Laboratories Inc in 2010 (US remedy requiring divestments).
In each of those cases, the ACCC accepted a court enforceable undertaking in which the parties committed to complying with an existing commitment to an overseas regulator to divest part of its business to a third-party purchaser that the ACCC would approve. This gave the ACCC certainty that the proposed purchaser of the divested business would not create issues from an Australian competition perspective.
(c) Different remedy accepted by the ACCC
In the remaining 18% of transactions (about 55% of cases where the ACCC was offered a remedy in Australia), the ACCC either accepted a different remedy from one required by overseas regulators or did not accept the proposed undertaking (which was required by the overseas regulator).
For example, in the following transactions, the business units or products that were required to be divested in Australia were different from those divested overseas:
- the merger between Mylan N.V. and Pfizer's Upjohn Inc. division in 2020;7
- Elanco Animal Health Incorporated's acquisition of Bayer Aktiengesellschaft's animal health business in 2020;8
- Iron Mountain Incorporated's acquisition of Recall Holdings Limited in 2015;9 and
- the merger between GSK Consumer Healthcare and GlaxoSmithKlein plc/Novartis AG in 2014.10
In Hertz's acquisition of Dollar Thrifty in 2014, a behavioural (or 'quasi-structural') licensing undertaking was offered and accepted by the ACCC in Australia, although a structural (ie divestment) undertaking was provided in the US. The Australian undertaking involved amendments to Hertz's licensing agreement with the Australian Thrifty licensee that essentially preserved the pre-existing independence of the Thrifty licensee in Australia for the foreseeable future.
Generally speaking, in relation to structural remedies, the ACCC would only require a different remedy (ie, require a different business unit or product to be divested) where different competition concerns arise in Australia (compared with its global position).
The ACCC is also not afraid to take a different position from other regulators. Notably, it did not accept the behavioural undertaking offered by Google in relation to its acquisition of Fitbit, even though the European Commission had required a similar undertaking from Google in the EU.11 The ACCC rejected the undertaking on the basis that it considered that the long-term behavioural undertaking offered in a complex and dynamic industry could not be effectively monitored and enforced in Australia.
Google's acquisition of Fitbit has made this topic extremely relevant, and shows that merger parties should not necessarily expect competition regulators to follow the findings or approaches of other regulators, particularly in dynamic and complex technological markets. As discussed above, the ACCC rejected the behavioural undertaking offered by Google, even though the European Commission had required a similar undertaking. This shows that the ACCC assesses the effectiveness of any remedies offered by the merger parties in the context of the specific market dynamics in Australia, noting that it is a smaller jurisdiction than the US or the EU, and that the Australian regulator is more inclined to view behavioural remedies as difficult to monitor and enforce in certain contexts, such as in complex and dynamic industries.
The ACCC has taken a well-publicised interest in the activities and practices of the global digital platforms, with its Digital Platform Services Inquiry, Digital Advertising Services Inquiry and mandatory news media bargaining code (finalised in December 2020). These indicate the considerable knowledge the ACCC has accumulated about technology and digital platform companies, and suggest that it will not hesitate to accept (or reject) remedies it considers are necessary to protect Australian consumers from the anti-competitive effects of mergers. The very integrated and global nature of digital businesses, however, does suggest that remedy implementation would benefit from a level of coordination between global merger control agencies, which we know the ACCC supports and pursues through the ICN.
The ACCC's approach to remedies over the past decade indicates its general inclination to align its response with that of an overseas regulator in appropriate circumstances. In further good news, the results of Allens' review confirm our own experience that there is a low risk of requiring different remedies, unless the competitive conditions in Australia warrant divergence or, in the case of behavioural undertakings, if the ACCC considers the undertaking to be difficult to enforce or monitor.
Of course, past behaviour is not necessarily the best predictor of future conduct, and the particular facts and circumstances of a deal may result in different outcomes from those the ACCC has reached in the past. However, Allens' review provides useful guidance for merger parties in relation to the ACCC's approach to assessing remedies in global mergers, and, in particular, identifying what types of considerations will lead the ACCC to take a different approach from competition regulators in other jurisdictions.
Nevertheless, there are clear benefits for merger parties in planning their ACCC engagement strategy to achieve as streamlined a remedy response as possible, including by planning consecutive engagements and providing written submissions to assist the ACCC in concluding that any competition concerns have already been addressed by commitments provided overseas and that no Australian remedy will be required.
If you have a question about obtaining merger clearance in Australia, or would like to discuss the content of this Insight, please contact a member of our team.
- Google LLC's acquisition of Fitbit Inc (2021)
- London Stock Exchange Group plc's acquisition of Refinitiv Parent Limited (2020)
- Merger between Mylan N.V. and Pfizer's Upjohn Inc. division (2020)
- Alstom's acquisition of Bombardier Transportation (2020)
- Elanco Animal Health Incorporated's acquisition of Bayer Aktiengesellschaft’s animal health business (2020)
- GlaxoSmithKline plc's acquisition of the consumer healthcare business of Pfizer Inc (2019)
- Thales S.A.'s acquisition of Gemalto N.V. (2018)
- Merger between Piscine Luxembourg Holdings 2 S.a.r.l and Fluidra S.A (2018)
- Bayer AG's acquisition of Monsanto Company (2018)
- Merger between El du Pont de Nemours and Company and The Dow Chemical Company and DowDuPont Inc (2017)
- General Electric Company's acquisition of Baker Hughes Incorporated (2017)
- China National Chemical Company's acquisition of Syngenta AG (2016)
- Tullett Prebon Plc's acquisition of ICAP Plc's global hybrid voice broking business (2016)
- Anheuser-Busch InBev's acquisition of SABMiller plc (2016)
- Iron Mountain Incorporated's acquisition of Recall Holdings Limited (2016)
- Pfizer Inc's acquisition of Hospira Inc (2015)
- Staples Inc's acquisition of Office Depot Inc (trading as OfficeMax)
- Novartis AG's acquisition of oncology products from GlaxoSmithKline plc (2015)
- GlaxoSmithKlein plc's acquisition of Novartis AG's human vaccines business (2015)
- Eli Lilly's acquisition of Novartis AG's animal health products (2015)
- Merger between GSK Consumer Healthcare and GlaxoSmithKlein plc/Novartis AG (2014)
- Reckitt Benckiser Brands Limited's acquisition of K-Y brand from Johnson & Johnson (2014)
- Hertz Global Holding Inc's acquisition of Dollar Thrifty Automotive group (2014)
- Thermo Fisher Scientific Inc's acquisition of Life Technologies Corporation (2014)
- Baxter International Inc's acquisition of Gambro AB (2013)
- Agrium Inc's acquisition of Viterra's agri-products retail business (2013)
- Universal Music Holdings Limited's acquisition of EMI Group Global Limited (2012)
- United Parcel Service Inc's acquisition of TNT Express NV (2012)
- Glencore International plc's acquisition of Xstrata Plc (2012)
- Johnson & Johnson's acquisition of Synthes Inc (2012)
- Western Digital Corporation's acquisition of Hitachi Global Storage Technologies Holdings Ltd (2011)
- Unilever Group's acquisition of Alberto Culver Company (2010)
- Scandinavian Tobacco Group A/S' acquisition of Swedish Match AB (2010)
- Novartis AG's acquisition of Alcon Laboratories Inc (2010)
Our analysis is accurate as at July 2021.
With thanks to Andrew Brodzeli, Katarina Thompson and Winnie Ma for their research.
Divestments were required in the UK and a behavioural undertaking was provided in the US (with ICAP agreeing that it would not nominate a director to Tullett Prebon's board post-acquisition).
Divestments were required in the EU and US, in addition to a behavioural undertaking provided in the US (which prevented the merged entity from disincentivising independent beer distributors from advertising rival beers).
Divestments were offered in the US but ultimately rejected and the transaction was blocked by the FTC.
Reckitt Benckiser agreed to license the K-Y business in the UK to a third party for a period of eight years.
Divestments were offered in the EU but ultimately rejected and the transaction was blocked by the European Commission.
Glencore provided both structural and behavioural remedies in China and behavioural remedies in the EU.
The approved purchaser and the drugs to be divested were different in Australia compared with overseas jurisdictions, being the EU, US and New Zealand.
The approved purchaser and the products to be divested were different in Australia compared with overseas jurisdictions, being the EU, US and Canada.
The approved purchaser and the products to be divested were different in Australia compared with overseas jurisdictions, being the UK, US and Canada.
The approved purchaser and the products to be divested were different in Australia compared with the US.
The parties nevertheless completed the acquisition before the ACCC had finished its merger review. Consequently, the ACCC's final decision is not known and this matter is now an enforcement investigation of a completed merger.