Global Merger Insights: An Economist's Perspective

To help competition lawyers remain informed of the most significant developments in merger review across key jurisdictions, Compass Lexecon organised a global mergers breakfast in Brussels, where our expert economists shared updates from the jurisdictions in which they advise clients. Their comments suggest an increasing divergence in competition authorities’ approaches to merger reviews around the world, exemplified inter alia by several dissonant digital merger reviews, including Meta/Kustomer, Broadcom/Vmware, MS/Activision, Booking/Etraveli and Amazon/IRobot. We have summarised their insights below.

The views expressed are those of the authors only and do not necessarily represent the views of Compass Lexecon, its management, its subsidiaries, its affiliates, its employees, or clients.

United Kingdom

Neil Dryden - Co-Head of EMEA practice | London & Brussels

Between 2019 and 2023, the six-case moving average for blocked or abandoned deals at Phase 2 was over 50%, peaking at 5 out of 6 cases. Recently, this rate has dropped to 1 out of 6 (Adobe/Figma). In 2023, there was the highest proportion of Phase 2 cases that saw a partial or complete reversal of Provisional Findings (PFs), with three cases affected.

Two significant developments have shaped the merger control regime. Firstly, the Competition and Markets Authority (CMA) has introduced a substantial reform of Phase 2 investigations, effective from 25 April 2024. Among other things, this reform will allow the Merging Parties greater opportunities to present their case orally to the CMA, understand the arguments against the merger, and seek to address them. Secondly, a Court of Appeal judgment on 11 April 2024 (Cerelia) has clarified that the Competition Appeal Tribunal (CAT) should critically review complex assessments by the CMA during judicial reviews.

United States, The Federal Trade Commission (FTC)

Nathan Wilson - Executive Vice President | Washington, DC

The FTC largely continues its traditional activities, but the dramatic turnover of staff and management has led to more opaque communications between the agency and the Merging Parties, potentially resulting in longer investigations. As the staff’s turnover increased, FTC’s case teams take longer to align views on what grounds they can bring the case on.

Secondly, the agency’s leadership is a potential hurdle for the case team seeking to close investigations. Investigations may take longer, and the agency's reluctance to limit probes to viable court cases can stretch resources thin. Consequently, I have observed that complex investigations involving products outside of politically sensitive industries sometimes receive clearance without even the Second Request (2R).

United States, Department of Justice (DOJ)

Loren Smith - Executive Vice President | Washington, DC

The DOJ shows variability in its approach depending on whether you consider the case teams or leadership teams. Case teams continue to review mergers as they always have, focusing on whether the merger would result in a significant reduction in competition. However, the leadership team is increasingly leaving open theories, such as vertical foreclosure and labour market harms, which would have previously been dismissed earlier. Nearly all mergers with significant vertical or horizontal overlap are receiving Second Requests (2Rs), increasing the burden on the Merging Parties, especially in certain sectors, such as healthcare and tech. The DOJ, along with the FTC, is also exploring industry-specific initiatives, such as the tech and healthcare task forces.

The increased use of Second Requests (2Rs) has, among other things, increased the cost of running merger investigations in the USA. However, despite the increased level of scrutiny, the DOJ tends to push cases to court that it can win, to avoid a significant loss that could undermine the Guidelines.

China

Elizabeth Wang - Executive Vice President | Boston & Beijing

China remains a crucial market for mergers, with the Chinese antitrust regulator reviewing nearly 800 transactions in 2023, up from 450 in 2019. Most mergers clear quickly with a low intervention rate, with about 90% of mergers under the simple review process clearing within 40 days. In 2023, only four transactions were cleared with remedies, and none were blocked.

For complex, high-profile transactions, particularly in strategic industries, geopolitical factors play an important role. Such transactions must demonstrate benefits for China as well as its consumers. The recent Broadcom/VMware deal, which Compass Lexecon assisted with, illustrates that even a complex transaction in the semiconductor industry, and involving US companies, can succeed in China.

Brazil

Helder Vasconcelos - Senior Vice President | Lisbon & Madrid

The Administrative Council for Economic Defense (CADE) in Brazil has significantly increased the level of merger scrutiny, focusing particularly on third-party interventions, digital markets, and concerns about the exchange of sensitive information.

In 2023, CADE saw a 51% increase in cases compared to 2018, with a notable rise in sectors like power generation, real estate, wholesale pesticides, fertilizers, soil correctives, and oil and natural gas extraction. Additionally, 2023 marked a record number of gun-jumping investigations, with a total of 54 cases, reflecting the increased level of regulatory scrutiny.

Other key legal developments in the area include:

1. Law No. 14,470/2022, which simplifies the process for competition damage claims, allowing affected parties to claim twice the value of the damage caused.
2. Law No. 2768/2022, inspired by the European Digital Markets Act (DMA), which aims to regulate digital platforms.

APAC

Dennis Beling - Senior Vice President | Brussels & Singapore

The APAC region is focussed on two areas: North-East Asia (particularly Japan and Korea) and South-East Asia. The role of economics in merger review has increased in North-East Asia. There has been more visible involvement of economists from the competition authorities, a deeper engagement on economic evidence, more direct exchanges with economists, and more explicit references to economic analyses in the decisions.

In Southeast Asia, there has been a trend towards harmonizing competition law regimes, with some countries like Indonesia and Singapore having established review processes, while others like the Philippines and Thailand have started more recently. The level of engagement on economic issues varies, but it has been increasing overall.

Finally, Malaysia plans to introduce merger control, adding another relevant jurisdiction to the review of global mergers.

Australia

Cindy Nah - Senior Economist | London

Australia has announced a new merger control regime giving the Australian Competition and Consumer Commission (ACCC) significantly more power to review mergers, effective from 1 January 2026 subject to the legislation passing.

The main changes would include:

• Mandatory and suspensory merger control regime:
  • Notification to the ACCC would become mandatory for all upcoming transactions if certain revenue or market share thresholds are met. These thresholds will also be applied to all transactions in the past three years, while transactions without receiving a determination from the ACCC or Tribunal will be prohibited.
• Increased focus on economic and legal evidence:
  • The ACCC aims for more rigorous, evidence-based analysis and is looking to appoint economist Dr. Philip Williams AM as a new commissioner to support this goal.

South Africa

Neil Dryden - Co-Head of EMEA practice | London & Lisbon

In March 2024, the Competition Commission published revised guidelines on the public interest test that address the amendment to the Competition Act in 2019. This amendment requires competition authorities to assess whether a proposed merger will promote a greater spread of ownership by Historically Disadvantaged Persons (HPDs) and workers in markets, in addition to existing public interest considerations.

EU Foreign Subsidies Regulation (FSR)

Lorenzo Coppi - Co-Head of EMEA practice | London, Milan & Brussels

Since the introduction of the new FSR regime in 2023, the European Commission (EC) has initiated in-depth FSR reviews in public procurement, but not in mergers until recently. The EC launched its first in-depth FSR review of a transaction (Emirates Telecommunications' acquisition of parts of PPF Telecom) in June 2024. Companies have been reluctant to trigger an in-depth review, often modifying deals in the pre-notification phase to avoid it. However, an in-depth review would provide much-needed guidance on assessing potential competition distortions from foreign subsidies, an area that is lacking established economic consensus.

France

David Sevy - Executive Vice President | Paris & Brussels

The French Competition Authority (FCA), while not a gating jurisdiction for most global mergers, is an active and creative agency, setting precedents for other competition authorities.

The digital market remains a priority for the agency in the coming years, with attention focused on below-threshold transactions, where the FCA has shown its willingness to test various tools. The Towercast case exemplifies the FCA's creative approach, addressing concentration below thresholds and using Article 102 TFEU (Article L. 420-1) to revive the Continental Can case law.

Italy

Lorenzo Coppi - Co-Head of EMEA practice | London, Milan & Brussels

Since January 2023, the Italian Competition Authority (ICA) can request the Merging Parties to notify a merger or an acquisition, even if this does not meet revenue thresholds. As in other jurisdictions, this provision was designed to capture high-value-low-revenue acquisitions of nascent companies in tech/digital markets, and so-called “killer acquisitions”. However, since its introduction, this provision has been widely used by the ICA also in sectors outside the digital space, such as outdoor advertising, sterilisation of medical instruments, and cement.

In the short time since its introduction, this provision has been widely applied outside the digital space, indicating the ICA's broad approach to capture any concerning mergers or acquisitions. Additionally, the appointment of an academic economist as a commissioner has increased the sophistication of economic analysis in merger reviews, resulting in more robust merger reviews.