Many jurisdictions have delayed or extended merger review timeframes. Some have even asked companies to postpone notifying non-essential mergers.
- European Union
The European Commission (Commission), for instance, has stated in its notice that, where possible, companies are encouraged to delay merger notifications until further notice. This is attributed to the fact that the Commission may face difficulties in collecting information from third parties (customers, competitors, suppliers) and also due to issues arising from remote working policies. Transactions currently in the pre-notification process will be subject to delay until further notice. Acquirers and merging parties are advised to build additional time into their transaction timetables.
The Commission is temporarily accepting and actively encouraging the digital submission of documents to the relevant case team. The notice did not comment on how the ongoing investigations will be affected. It is envisaged that these will continue to be investigated within the necessary timeframe to the extent possible.
- United Kingdom
The Competition and Markets Authority (CMA), for its part, has committed to ensure that disruptions to deadlines remain minimal. It has introduced a number of measures, including reallocation of resources, remote working, and conducting hearings remotely. However, it may extend statutory timeframes, where necessary, if circumstances dictate.
The French Competition Authority (FCA) has also indicated that it cannot guarantee that it will respect time limits in the examination of mergers. Although officers are working from home and investigations continue, the FCA echoed the same issues as those expressed by the Commission in gathering evidence from third parties. Companies are invited to postpone any non-urgent merger notification. Delivery of documents in physical form is no longer possible and companies are advised to communicate all documents exclusively by electronic means.
While the Federal Cartel Office (FCO) remains operational for the time being, the FCO has requested undertakings and their representatives to consider whether, in view of the challenging circumstances, a project has to be submitted to the FCO right away or can be submitted at a later date. Deadlines can still be met by sending a fax.
In order to ensure the continued availability of decisions, FCO divisions and the federal public procurement tribunals have also set up additional mailboxes that can be accessed by every employee of the corresponding department. The decision as to whether hearings take place at the federal public procurement tribunals will be decided on a case-by-case basis.
- United States
In the United States, the Federal Trade Commission (FTC) and Department of Justice (DOJ) Antitrust Division, which have concurrent jurisdiction to enforce U.S. antitrust law, have implemented a temporary electronic filing system for the submission of Hart-Scott-Rodino (HSR) filings and will not accept hard copy or DVD HSR filings until further notice. While this is the first time the agencies have implemented an electronic HSR filing system, Reed Smith attorneys have found the system to work smoothly. Early termination of the 30-day HSR waiting period will not be granted for any HSR filing during this time. As always, for any reportable transaction that raises anti-competitive concerns, the agencies may issue a ‘second request’ that extends the time-period for agency review.
The DOJ has stated that “[f]or mergers currently pending or that may be proposed, the Antitrust Division is requesting from merging parties an additional 30 days to timing agreements to complete its review of transactions after the parties have complied with document requests.” It is unclear whether this request applies to HSR filings in general, or only to transactions that are currently, or will be, subject to more robust antitrust investigations. As of the date of this publication, the FTC has not made a comparable request for additional time to conduct its investigations as a matter of course.
For a summary of the approach taken in different jurisdictions (including updates on electronic filings and meetings), please see our quick reference table.
Legislative Policies and Timeframes
In the EU, the Commission has committed to ensure some flexibility in its rules and legislative instruments to combat the impact of COVID-19. This includes allowing Member States to act decisively and in a coordinated manner by using the full flexibility of state aid and stability as well as the growth pact frameworks. This covers, in particular:
- State aid framework flexibility
- European fiscal framework flexibility
- Ensuring solidarity in the single market
- Mobilising the EU budget
- Alleviating the impact on employment
- Coronavirus Response Investment Initiative
The Commission has adopted a Temporary Framework in which it sets out the conditions for EU Member States seeking to support companies that are suffering due to the COVID-19 pandemic. It specifies that Member States can give grants, low-interest loans, loan guarantees and export credit insurance, provided they respect certain safeguards to avoid distorting the EU single market.1 These new rules will be in force until the end of the year, coincidently around the same time as Britain is set to leave the EU. The Temporary Framework will allow struggling companies to be able to receive funding of up to €800,000 from European governments. The goal is to ensure that sufficient liquidity remains available to businesses in order to preserve the continuity of economic activity during and after the COVID-19 outbreak.
For example, fishing and fish-farming companies can now receive support worth up to €120,000, a significant increase from the previous cap of €30,000, without having to wait for approval from the Commission. As per the normal regime, the aid cannot be used to buy new vessels or for exploratory fishing, among other limitations.
For other planned and timetabled legislative reviews, it is too early to tell what steps may be taken to delay new legislation. For instance, the Commission is currently reviewing the extension of the Vertical Block Exemption Regulation. It was anticipated that the ‘Staff Working Document’ in which the Commission will lay out the results of the evaluation would be published by mid-2020. The impact assessment phase of this consultation is due to take place in the second half of 2020. For the time being, the EC Directorate-General does not anticipate that COVID-19 will have an impact on the timeline for this process. However, it is not known how COVID-19 will affect other legislative policies and timeframes.
Relaxing of Competition Rules and Other Developments
Many businesses and industries have asked for the relaxation of competition rules.
European Union specific initiatives
Competition authorities in the European Competition Network (ECN)2 issued a joint statement on how to apply the European competition rules during the crisis. United, the authorities recognise the social and economic impact of the crisis. Jointly, they underline that the competition rules are flexible enough to take into account changes in market circumstances. They recognise that during this “extraordinary situation” companies may need to cooperate to meet the needs of consumers in respect of the supply of goods. Competition authorities will not actively intervene against such temporary measures to avoid a shortage in supply. They also offer to give informal guidance to companies willing to ask questions on these matters. However, they will not hesitate to take action against companies taking advantage of the current situation by charging unreasonable prices for essential products (like hand sanitising gel), cartelising or abusing their dominant position.
EU competition law enforcers have also written to retail lobby group Eurocommerce to ask for particulars relating to the nature of information retailers may want to share, the grounds on which national regulators may grant exemptions, and the guidance the sector may need. The Commission is ready to provide informal guidance to companies that are unclear on the possibilities that competition law framework possesses to help them navigate through the current economic crisis.
- United Kingdom
In the UK, supermarkets and other retailers have also requested some breathing space from the application of competition law. The government has relaxed competition law rules to allow supermarkets to work together to meet food-supply challenges posed by the COVID-19 outbreak. The move allows retailers to share data with each other on stock levels, cooperate to keep shops open, and share distribution depots and delivery vans. It also allows retailers to pool staff with one another to help meet demand.
In its new guidance, released 25 March 2020, the CMA has indicated that businesses needing to cooperate during the COVID-19 crisis, to ensure the supply of scarce products, will be exempt from enforcement action. However, the exemption will only apply provided their measures are “appropriate and necessary, clearly in the public interest, contribute to the benefit and wellbeing of consumers, deal with critical issues that arise as a result of the pandemic and last no longer than necessary”. Nevertheless, the CMA has warned that the exemption does not give companies a free pass to engage in conduct that would otherwise harm consumers. COVID-19 will not be an excuse for businesses to use the crisis as a cover up for non-essential collusion, a possibility seen in the pharma, food, and drinks sectors.
The French Parliament recently adopted a law authorising the government to enact any measure to deal with the consequences of the spread of the COVID-19 pandemic. Such measures may include adapting the time limits and procedures applicable to administrative authorities, such as the FCA and the Consumer Protection Authority (DGCCRF). This may have an effect on process filings, declarations, requests and consultations, examining submissions, making decisions, and carrying out inspections, works, and requirements of any kind. Therefore, companies whose limitation periods should have expired in 2020 could still be investigated for anti-competitive practices after the period has elapsed and the measures have been lifted.
The Parliament has also put on hold the transposition into French law of the EU Copyright Directive, which, when completed, could mean tougher merger control rules for major digital technology companies. The new law would make it mandatory for them to inform authorities of every merger in which they are involved, regardless of the size of the transaction.
The German government and the FCO are open to cooperation between food suppliers and retailers to avoid potential food shortages, without changing the laws. Andreas Mundt, the head of the FCO, stated there is no need for emergency regulation to adapt the competition law rules. Public authorities have the tools to take flexible, temporary measures to cope with the COVID-19 crisis. Federal Minister for Economic Affairs and Energy Peter Altmaier and Andreas Mundt emphasised that they can take the essential measures to assist food retailers in coordinating necessary supply flows.
- United States
On 24 March 2020, the FTC and DOJ issued a joint statement detailing an expedited antitrust procedure and providing guidance for collaborations of businesses working to protect the health and safety of Americans during the COVID-19 pandemic. The statement recognizes that firms, including competitors, may need to collaborate on an immediate basis in response to the crisis - for example, by working together to bring goods to communities in need or by temporarily combining production. The agencies identify certain types of collaborative activities that are typically considered pro-competitive and consistent with the U.S. antitrust laws. These include research and development, sharing technical knowledge, development of suggested practice parameters by healthcare providers, joint purchasing agreements among healthcare providers, and private lobbying relating to the use of federal emergency authority.
The FTC and DOJ have committed to responding expeditiously to all COVID-19-related requests from businesses that are responding to the emergency. Through the FTC’s advisory opinion process and the DOJ Antitrust Division’s business review process, a business can seek guidance and comments from the agencies as to whether a proposed course of conduct is legal under the antitrust laws. While these processes generally take at least several months, the FTC and DOJ state that they will aim to resolve all requests addressing public health and safety within seven calendar days of receiving all necessary information.
Finally, the statement also provides that the agencies will account for exigent circumstances when evaluating efforts to address the spread of COVID-19 and its aftermath where joint efforts are limited in duration and necessary to assist patients, consumers, and communities affected by COVID-19. At the same time, the FTC and DOJ stressed that they will not hesitate to hold accountable, through civil and criminal enforcement of the antitrust laws, those who use the pandemic as an opportunity to subvert competition or prey on vulnerable Americans.
Norway is one of the first jurisdictions to relax competition rules by granting the aviation and transportation sectors a three-month temporary exception from the prohibition against anti-competitive agreements and practices.
The Spanish government has introduced extensive measures to alleviate the social and economic impact caused by COVID-19, including a reform of the foreign investment screening regime.
As businesses and industries grapple with the new reality brought about by the COVID-19 crisis, it is inevitable that competition law too will have to adapt and display flexibility to remain in step with this volatile situation. Given the possibility of further guidance from competition authorities and adjustments to competition law in the coming weeks and months as the crisis unfolds, it is wise to consult with experienced antitrust and competition lawyers regarding substantive antitrust and competition law issues.
Our Reed Smith Coronavirus team includes multidisciplinary lawyers from Asia, EME and the United States who stand ready to advise you on the issues above or others you may face related to COVID-19.
For more information on the legal and business implications of COVID-19, visit the Reed Smith Coronavirus (COVID-19) Resource Center or contact us at COVIDemail@example.com.
- Available at https://ec.europa.eu/
- A network of cooperation that includes the European Commission and the national competition authorities in EU Member States.