United States: International Competition Network: Converging International Merger Enforcement

The International Competition Network (ICN) is an informal network of antitrust agencies from developed and developing countries around the world. It was launched in October 2001, with the cooperation of antirust officials from 14 jurisdictions: Australia, Canada, the European Union, France, Germany, Israel, Italy, Japan, Korea, Mexico, South America, the United Kingdom, the United States and Zambia. Today, 90 member competition agencies from 80 jurisdictions participate.

The ICN focuses on improving worldwide cooperation and enhancing convergence by providing its members with a specialized, informal venue for addressing practical competition concerns. Members confront antitrust enforcement and policy issues of common interest and develop proposals designed to promote procedural and substantive convergence. The ICN addresses antitrust issues through results-oriented, project-driven working groups. Annual conferences allow participating competition agencies to meet face to face to discuss their projects and proposals, as well as the potential implications of implementing those proposals.

The ICN is the only international body devoted exclusively to competition law enforcement. However, it exercises no rule-making authority. Rather, where participating members reach a consensus on recommendations, the individual antitrust agencies are left to decide whether and how best to implement those recommendations based on their assessment of the likely effects of the recommended action on competition enforcement in their respective jurisdictions.

As a result of increased globalization and the introduction or expansion of antitrust enforcement in many countries, many transactions now are subject to simultaneous antitrust scrutiny by multiple competition authorities around the world. Approximately 70 jurisdictions have enacted merger review laws and merger notification regimes. Although markets for many products are increasingly global, competition law is nonetheless enforced by individual competition regimes on a national or regional basis. Review of a transaction by multiple jurisdictions can create significant complications for both the regulators and the parties due to the varying procedural and substantive policies of the reviewing authorities. The ICN’s Merger Working Group was created to address the complications confronted by the reviewing authorities while recognizing the increased burden on parties to transactions involving multi-jurisdictional review.

The Mergers Working Group, created in 2002, was divided into three subgroups that each focus on different aspects of merger review: (1) Merger Notification & Procedures, (2) Analytical Framework for Merger Review, and (3) Investigative Techniques for Conducting Effective Merger Review. This year, subgroups 2 and 3 have been combined to form the Merger Industry and Analysis (MIA) subgroup. Since its formation, the Mergers Working Group has produced an influential body of work that has been consulted by developing regimes seeking to build the basic framework of competition law, as well as by mature competition authorities seeking to converge their policies and procedures with those of estab- lished authorities in other jurisdictions that commonly conduct simultaneous review of major transactions.

The Notifications and Procedures Group, which is comprised of members from Australia, Canada, the European Union, France, Germany, Italy, Japan, Korea, Mexico, South Africa, Spain, Switzerland, the United States, and the Organisation for Economic Co-operation and Development (OECD), developed Eight Guiding Principles for merger notification and review that were adopted by the ICN at its inaugural conference, held in Naples, in September 2002. The principles outline guiding rules on which they propose merger regimes be based: sovereignty; transparency; nondiscrimination on the basis of nationality; procedural fairness; efficient, timely, and effective review; coordination; convergence; and protection of confidential information.¹

Since 2002, the Notification and Procedures subgroup has developed 13 Recommended Practices for Notification and Review Procedures. The first 11 Practices have been adopted by the ICN over the past three years, while the remaining two will be presented for adoption at the fourth annual conference, to be held in Bonn, Germany, in June of this year, hosted by the Bundeskartellamt. The Recommended Practices address (1) the nexus between the merger’s effects and the reviewing jurisdiction; (2) clear and objective notification thresholds; (3) timing of merger notification; (4) merger review periods; (5) requirements for initial notification; (6) conduct of merger investigations; (7) procedural fairness; (8) transparency; (9) confidentiality; (10) interagency coordination; (11) review of merger control provisions; (12) remedies; and (13) competition agency powers.²

In the short time since adoption by the ICN, the Recommended Practices have acted as a catalyst, prompting change of many jurisdictions’ merger review procedures. Of the ICN member jurisdictions with merger review laws, 46 percent have made or proposed changes to bring their merger regimes into closer conformity with the Recommended Practices.³ Nearly two-thirds of these jurisdictions interviewed by the ICN cited the Recommended Practices as having played a role in their reform efforts.⁴ An additional eight percent are planning to make such changes.⁵

For example, in 2005, the Brazilian competition authority, CADE, issued its decision in ASC/Krone in which it interpreted the Brazilian merger threshold of R$ 400 million to apply to sales only in Brazil, consistent with the Recommended Practice on Jurisdictional Nexus. Prior to ASC/Krone, CADE’s interpretation of the Brazilian merger threshold as applicable to worldwide sales resulted in the notification of numerous transactions that had no jurisdictional nexus with Brazil, and thus no impact on competition within Brazil.

In 2003, consistent with the Recommended Practice on Transparency, the U.S. Department of Justice, under the leadership of Assistant Attorney General R. Hewitt Pate, announced new guidelines on the issuance of public statements, in appropriate circumstances, describing the reasons for closing an antitrust investigation.⁶ This new policy helps businesses to understand and comply with complex antitrust regulations, and also facilitates greater convergence of merger review by assisting international competition agencies to understand U.S. standards for antitrust enforcement.

Many other jurisdictions also have cited the Recommended Practices as a standard of international best practices. The Peruvian competition authority is benchmarking proposed legislative changes against the Recommended Practices. The Russian Antimonopoly Service used the Recommended Practices to persuade legislators to change competition policy. The Canadian competition authority cites the ICN as an authority on international convergence.⁷ Also, while many current and aspiring European Union Member States, such as Estonia, France, Latvia, Macedonia, the Netherlands and Poland, cited convergence with the European Community Merger Regulation as a primary motivator for merger regime change, a number of these countries also cited the ICN’s Recommended Practices as a factor influencing their merger reforms.⁸ As evidenced from the above, the Recommended Practices have played a major role in promoting convergence of merger review procedure among competition regimes worldwide.

The Merger Working Group’s Analytical Framework subgroup also has contributed to the convergence of international merger review policy. While the Notification and Procedures subgroup focuses on coordinating global merger review procedure, the Analytical Framework subgroup focuses on comparing and contrasting the existing merger analyses of participating ICN members. For example, the work of the Analytical Framework group facilitates international convergence by assisting jurisdictions in understanding the fundamental analyses necessary to effective merger review, as well as highlighting important distinctions between the analyses and practices of various members. In its first year, the group examined the analytical frameworks of a dozen member jurisdictions and produced a discussion paper that examined basic issues involved in choosing a particular substantive framework. In the following year, the group produced a working draft of a Merger Guidelines Workbook that focuses on core analytical principles of merger review, including market definition, concentration, unilateral and coordinated effects, entry, efficiencies, failing firms, vertical and conglomerate mergers, and remedies.⁹ The group also prepared a report on merger remedies that summarizes key principles and practices employed by various competition authorities, illustrates significant issues through case studies, and serves as a guide to choosing, designing, and implementing merger remedies.¹⁰

Finally, the ICN designated the Investigative Techniques subgroup with the task of identifying best practices for merger investigations. As part of its mandate, the group published a comprehensive manual covering investigative techniques, including guidance on planning a merger investigation, developing reliable evidence in merger cases and the role of economists and econometric evidence, as well as a private sector perspective on merger review. In the summer of 2002, the group prepared and distributed a questionnaire to ICN members for the purpose of gathering information regarding the various investigative techniques used by competition authorities, including the manner by which the agencies gather information in merger review proceedings, the types of data used by the agencies, and the various enforcement powers held by the participating authorities. The group assessed the responses of 31 ICN member jurisdictions and prepared the ICN Investigative Techniques Handbook for Merger Review.¹¹ This report serves to "inform agencies on the practical advantages and disadvantages of the tools and techniques used in merger investigations around the world, enable them to make better use of the tools they currently have, and facilitate the adoption of those they find most useful."¹²

In sum, in the short time since its formation in 2001, the ICN has made a significant contribution to international merger review, facilitating global convergence of policy and procedure, and assisting both developing and mature competition regimes with merger reform. Through the cooperation of its international members, the ICN has paved the way for greater harmonization of notification policy and procedure, published substantial guidance regarding merger review analyses used by member jurisdictions, and provided valuable guidance concerning key investigative techniques and practices employed by various competition agencies around the globe. Expect more good things to come.

Copyright © 2007, Mayer, Brown, Rowe & Maw LLP. and/or Mayer Brown International LLP. This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Mayer Brown is a combination of two limited liability partnerships: one named Mayer Brown LLP, established in Illinois, USA; and one named Mayer Brown International LLP, incorporated in England.