Managing merger control filings during COVID-19

Challenges created by the COVID-19 crisis

Novel Coronavirus (COVID-19) is having a major impact on the “business continuity" of courts and regulatory authorities. This affects, in particular, merger control proceedings as these are typically subject to specific time limits that the authorities (and in some cases the parties) must respect. In most countries, a transaction is deemed to be approved if the authority does not open an in-depth investigation within a certain time period (which is often one month from the date of notification). This creates significant challenges for competition authorities in the current situation. The need for staff of the authority to work remotely is slowing down the internal processes, due to IT challenges and the need to re-organise processes that, in some authorities, are still very much paper-based. Moreover, it is more difficult for authorities to conduct market investigations since many companies are in crisis mode and have limited capacities to deal with inquiries of competition authorities, which they will often consider as not business critical.

Many competition authorities have already reacted to the new circumstances and released statements on how they will operate during the coming months.

Coping strategies of competition authorities

The European Commission, most of whose staff is working remotely since 16 March, has encouraged companies to delay merger notifications until further notice, where possible. The Commission pointed out that its services are likely to face difficulties in collecting information from third parties and in accessing information and databases due to the remote working measures. Since hand deliveries of documents may be difficult the Commission accepts - and encourages - all submissions in digital format.

Also the German Federal Cartel Office has requested companies to consider delaying the filing of merger notifications, if possible. To facilitate electronic communication with its staff, it also created dedicated e-mail addresses for each of its departments.

The Austrian Competition Authority has asked companies to file merger notifications only in urgent cases and to contact the Authority in advance. Read more here.

The French Autorité de la Concurrence has stressed that it may not be able to handle cases within the usual time periods and that companies should expect adjustments. Read more here.

The Danish Competition and Consumer Authority has suspended the time limits for all merger control proceedings for 14 days starting on Wednesday, 18 March. It encourages companies to contact the authority well in advance of a planned merger notification and has declared that it will work to ensure that the normal deadlines are met as far as possible.

Spain has suspended all time limits for procedures of public sector entities, including time limits of the Spanish competition authorities. All services are reduced to online-based services and activities are highly limited. Read more here.

The Finnish Competition & Consumer Authority has published a statement requiring companies to specifically agree with the FCCA that a notification may be filed.

Also outside the EU, various competition authorities have implemented measures to cope with the COVID-19 crisis. Argentina for example announced to suspend deadlines in all files pending before the Argentine Antitrust Commission for two weeks. By contrast, the Brazilian competition authority CADE stated a few days ago that it does not plan to extend deadlines for the payment of fines or make procedural deadlines more flexible as a result of the coronavirus pandemic.

What to do if you are working on a project requiring merger control approval?

Given that authorities have adopted different measures to cope with the COVID-19 crisis, the best way forward may differ from country to country. Where the current business climate prompts the parties to slow down negotiations or postpone closing, delaying notification will be less of a challenge for companies.

However, in many cases (in particular where the M&A process is at an advanced stage) obtaining timely clearance will remain of major importance and delaying the merger notifications may not be an option for the parties. In these cases it will be key to discuss with the competition authority as early as possible how best to deal with the situation. Simply notifying the transaction may put the authority under undue time pressure, is likely to antagonize the authority and may result in more complicated and longer proceedings than would otherwise be the case.

The exceptional circumstances require a flexible and creative approach as well as early communication and close cooperation with the authority. For instance, it may be advisable to approach the authorities having to approve the transaction on a strictly confidential basis well before signing. This allows the authorities to better plan the allocation of their resources. Moreover, it enables parties to understand at an early stage the likely timing of the merger control process and to consider how the possibility of delays should be addressed in the transaction agreements.

In many cases it may also be advisable to first file a draft of the notification with the authority, even in jurisdictions where this is not mandatory or standard practice. This gives the authority time to review the transaction before the clock starts ticking and avoids the opening of a "Phase 2" investigation merely to win more time.

There is an increasing consensus that the world will be different once we have overcome the COVID-19 crisis. This may also be true for the area of merger control. It is likely that we will see significant consolidation in various industries as a result of this crisis. Moreover, competition authorities will be faced with a large number of distressed M&A transactions whether the parties will rely on the failing company defence to obtain clearance for transactions that would not be approved under normal circumstances. And perhaps the crisis will also give new impetus to proposals to simplify merger control procedures or adapt notification thresholds, which would be a welcome positive result of this challenging and exceptional situation we are all going through.