In the field of antitrust, the current COVID-19 pandemic poses unprecedented challenges for merging parties and agencies worldwide. As the crisis unfolds, enforcement against cartels, investigations of excessive pricing, and the assessment of collaboration agreements in the pharmaceutical, life sciences, manufacturing, and retail industries are likely to become a priority for regulators as companies react to the impacts of COVID-19, and some government resources devoted to merger reviews will inevitably be diverted to enforcement in those areas.

In the U.S., the federal antitrust agencies remain open but have adjusted their merger review processes in light of COVID-19.¹ Both the Federal Trade Commission (FTC) and Department of Justice (DOJ) announced they are accepting electronic merger filings only and are working remotely.² No early termination will be granted for any e-filing while the temporary system is in place, and timing agreements for merger review are expected to be revised for complex transactions.³ The DOJ has requested that an extra 30 days be added to timing agreements for deals currently under review,⁴ and the FTC is similarly reviewing timing agreements and may seek modifications. Merging parties should thus expect delays obtaining clearance in the U.S. due to extended timing agreements, teleworking employees, and potential illness.

This Wilson Sonsini client alert concentrates on the measures being taken by the European Commission (EC) and national enforcers in Europe to prioritize and manage strained resources, and their impact on global merger reviews.

European Commission Measures

On March 13, 2020, the EC announced that companies are "encouraged" to delay merger notifications until further notice, highlighting the "complexities and disruptions" caused by the COVID-19 pandemic.⁵ As is the case in the U.S., the EC also advised that any notifications must now be made electronically.

EC staff responsible for functions critical to business continuity will work in shifts to comply with social distancing measures, as Belgium (the member state in which the EC is based) is in lockdown until at least April 5,⁶ but as of March 16, all staff in "non-critical" roles, including many case handlers, have moved to teleworking.

Transactions Not Yet Notified

Normally, the parties choose when to notify their deals to the European regulator (subject to pre-notification discussions) and the EC must thereafter adhere to statutory deadlines (e.g., to a 25 working days timeline for Phase I reviews). For transactions not yet notified, however, the EC has signaled that filings which are not considered urgent should be delayed insofar as possible. The agency's notice implies that it will continue to address merger notifications where the merging parties make clear that timing is an issue in their case. The delay in merger notifications (and likely slower review process) could lead to a significant backlog of cases, inevitably adding weeks if not months to deal timetables.

Transactions Under Review

For some transactions currently under review, there will be delays. Market feedback on proposed transactions forms a crucial part of the EC's merger analysis and the EC noted that its services are "likely to face difficulties" in collecting information from third parties in the coming weeks. With several European countries on lockdown, third parties may understandably rank providing feedback to EC questionnaires as low priority.

As the EC is bound by its statutory review periods, additional requests for information (RFI) may be issued by the EC as a prelude to a "stop the clock" decision, or the EC may invite the parties to withdraw their notifications "unilaterally," as the agency bids to gain time to conduct a proper review of the transaction.

The strain on EC resources or economic impact of COVID-19 on merging parties does not mean that the EC will go any lighter on problematic deals. The enforcer will be loath to lower its standard of review, as it will not want to risk its merger decisions being challenged before the courts.⁷ It remains to be seen whether (and if so how) the EC will ease its strict "failing firm" test for problematic deals in cases of a target firm in economic distress given the unprecedented financial difficulties faced by certain companies (particularly in the leisure or aviation industries), and whether it will be able to apply the test without a lengthy Phase II review.

Enforcement for Procedural Breaches

Hold-ups in merger reviews will naturally slow down M&A activity at a critical time for the global economy and for companies in financial difficulty. Business should not assume however that the EC will go easier on procedural breaches of the merger rules. Any formal exemption from the standstill obligation or appeal for flexibility in terms of gun-jumping rules will still need to be robustly argued and merging parties should continue to expect strong enforcement against any unauthorized pre-clearance integration or cooperation.

One way in which merging parties may be able to enhance the prospect of a smooth approval is to comply with any RFI in a timely and complete fashion—or make clear to the EC any resource limitations due to COVID-19 measures. This will also protect companies from any fine for the provision of incomplete or inaccurate information.

EU National Competition Agencies

Most of the EU national agencies involved in global deals have switched to remote working and are only accepting electronic filings. In particular:

• The UK Competition and Markets Authority has stated that it intends to progress cases and meet its statutory deadlines but will monitor review timetables and extend statutory timeframes where necessary. Any updates to timing will be communicated to the parties involved.⁸
• The French competition agency has followed the EC and announced that companies should delay any non-urgent merger plans as it cannot guarantee the usual deadlines. The agency shut its doors on March 17 and all staff are working remotely. Delays in the review timetables of mergers currently under review and those due to be notified in the coming weeks are likely as the French agency will also struggle to solicit timely feedback from third parties.⁹
• The German competition agency indicated on March 17 that it is operating as normal, but that parties should consider whether, in light of COVID-19, a merger filing needs to be submitted as a priority or can be delayed.¹⁰

Wilson Sonsini Observations

While merger reviews will not be "business as usual", the EU and U.S. regulators have shown no sign of grinding to a halt. In order to minimize the impact of COVID-19 on transactions in the EU, merging parties should:

1. Assess deal timetables realistically. Drop-dead dates in agreements subject to a "live" merger review or those still subject to negotiation may need to be revised.
2. Review merger agreement provisions, including termination and material adverse change clauses, carefully to assess risk allocation and any obligations on the parties to consummate the deal.
3. Engage with the EC as early as possible during deal negotiations to get a sense of whether the EC will be willing to accept a filing or will request a delay (impacting deal timetables). If parties attempt to push a filing through, there is a risk that the EC could declare the notification incomplete or raise additional RFIs to buy time.
4. Anticipate delays and resource limitations when assessing companies' ability to respect deadlines for submissions or responses to RFIs and address these up-front with agencies to avoid procedural sanctions.
5. Identify key legal and commercial employees for the review process and ensure they have sufficient remote support.
6. (Over-)prepare any advocacy presentations. When oral submissions or hearings cannot be conducted face-to-face, clear and streamlined presentations are necessary to land key messages.

Deirdre Carroll, Schweta Batohi, and Alexandra Keck contributed to the preparation of this Wilson Sonsini client alert.

[1] Wilson Sonsini client alert, The Impact of COVID-19 on Merger Reviews: Practical Considerations for the United States, available at: https://www.wsgr.com/en/insights/the-impact-of-covid-19-on-merger-reviews-practical-considerations-for-the-united-states.html.

[2] ‘FTC Outlines Agency’s Response to Coronavirus Challenges’, FTC press release (March 17, 2020), available at: https://www.ftc.gov/news-events/press-releases/2020/03/ftc-outlines-agencys-response-coronavirus-challenges.

[3] ‘Premerger Notification Office Implements Temporary e-Filing System’, FTC press release (March 13, 2020), available at: https://www.ftc.gov/news-events/press-releases/2020/03/premerger-notification-office-implements-temporary-e-filing.

[4] ‘Justice Department Announces Antitrust Civil Process Changes for Pendency of COVID-19 Event’, DOJ press release (March 17, 2020), available at: https://www.justice.gov/opa/pr/justice-department-announces-antitrust-civil-process-changes-pendency-covid-19-event.

[5] ‘Special measures due to Coronavirus/Covid-19’, EC news section (March 13, 2020), available at: https://ec.europa.eu/competition/mergers/news.html.

[6] ‘Coronavirus: Measures introduced for EC staff’, EC press release IP/20/445 (March 12, 2020), available at: https://ec.europa.eu/EC/presscorner/detail/en/IP_20_445.

[7] A current review involving Italian and French cruise-ship builders was suspended on March 13 but is apparently on course to be blocked—despite the COVID-19 related economic and social crises in both countries and the cruise-ship industry generally (Case M.9162 – Fincantieri/Chantiers de l’Atlantique); ‘EU antitrust regulators suspend Fincantieri-Chantiers probe, await data’, Reuters (March 17, 2020), available at: https://www.reuters.com/article/chantiers-ma-fincantieri-eu/eu-antitrust-regulators-suspend-fincantieri-chantiers-probe-await-data-idUSL8N2BA6FT. The EC stated that the current crisis may have impacted on the companies’ ability to respond to an information request on time, triggering the suspension.

[8] ‘CMA Covid-19 update’, UK CMA news section (March 18, 2020), available at: https://www.gov.uk/government/news/cma-covid-19-update.

[9] AdlC statement on COVID-19 measures (March 17, 2020), available at: https://www.autoritedelaconcurrence.fr/fr/article/adaptation-des-procedures-de-controle-des-concentrations-en-raison-du-coronavirus-covid-19.

[10] Bundeskartellamt statement on COVID-19 measures (March 17, 2020), available at: https://www.bundeskartellamt.de/EN/.