Antitrust and merger control

Merger control is the review of proposed mergers and acquisitions by competition (antitrust) authorities to ensure they do not substantially lessen competition or create market power that harms consumers. Clearance is frequently a condition to closing in the definitive agreement.

United States

In the U.S., merger review is shared by the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ). Deals above size thresholds must be notified before closing under the Hart–Scott–Rodino (HSR) Antitrust Improvements Act, which imposes a waiting period (generally 30 days) during which the agencies may clear the deal, or issue a "second request" for more information that significantly extends review. Substantive analysis follows the agencies' Merger Guidelines, examining market definition, concentration (e.g. the Herfindahl–Hirschman Index, HHI), and likely competitive effects.

European Union

In the EU, the European Commission reviews concentrations with an EU dimension under the EU Merger Regulation, applying a test of whether a deal would significantly impede effective competition. Many other jurisdictions (UK, China, Brazil, etc.) operate their own regimes, so large cross-border deals may need multiple approvals.

Outcomes and remedies

Authorities can:

• clear the deal unconditionally;
• clear with remedies — structural remedies such as divestitures of overlapping businesses, or behavioural commitments; or
• block the transaction (or the parties abandon it in the face of a challenge).

Horizontal mergers between close competitors draw the most scrutiny, while vertical deals are reviewed for foreclosure concerns.

Deal implications

Antitrust risk is allocated in the contract through conditions to closing, "hell-or-high-water" or efforts covenants describing how hard the buyer must fight for approval, break fees if the deal fails on antitrust grounds, and long-stop dates by which approvals must be obtained.