Number of Significant Investigations in 2021 Matches it's 2020 Level
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The increased number of transactions reviewed is not reflected in the number of significant investigations completed, however, which remains similar to 2020. 11 significant investigations were reviewed in 2021, the same as in 2020 and an increase of 22 percent compared to 2019. |
While the number of significant investigations remains stable, these figures must be put in perspective with respect to the total number of decisions issued. In 2021, significant investigations only accounted for 4 percent of the FCA’s activity (against 5.6% in 2020). In parallel, simplified procedures accounted for 86 percent of the FCA’s activity (74% in 2020).
While the percentage of deals that give rise to a significant investigation decreased, the outcome of these investigations reflects stricter enforcement. Of the two Phase II investigations concluded in 2021, one resulted in the deal being withdrawn by the parties (Transaction No. 19-319)1 while the other led to the second prohibition decision ever issued by the FCA (Decision No. 21-DCC-79). It should be noted that for these two transactions, the companies proposed behavioral commitments that were deemed insufficient to address the competition concerns raised by the FCA.
Average Duration of Phase I with Remedies Falls while Phase II Hits New Record
The average duration of Phase I with remedies materially decreased, from 8.9 months in 2020 to 6.2 months in 2021.
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As a reminder, under French merger control rules, Phase I with remedies must in theory be completed within seven weeks of the formal notification (25 working days from the filing plus two additional weeks for the discussion of commitments). This deadline however does not take into account prenotification talks, which generally start shortly after the announcement of the deal.2 Despite the significant decrease in the average duration of Phase I cases with commitments, the total review process thus remains significantly higher than the theoretical maximum provided for by the legislation.
Although the yearly number of Phase II investigations is limited, a clear upward trend in the duration of these investigations can nevertheless be observed. In 2021, the average duration of Phase II cases jumped even further from 11.5 months in 2020 to 14.5 months.
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This 26 percent increase reflects the fact that the only transaction that went through the whole Phase II process in 2021 was eventually blocked by the FCA. The duration of that review (14.5 months) is comparable to the duration of the FCA’s investigation for its first prohibition decision in 2020 (13.8 months).
It is worth noting however that this new prohibition sets a new record in terms of duration of the prenotification phase: 6.5 months from the announcement to the filing. By comparison, over the period 2011-2020, the average duration of prenotification talks for Phase II investigations was 2 months. In this case, it indicates that even long pre-notification discussions with the FCA did not alleviate the competition concerns.
Interestingly, the other deal that gave rise to the opening of a Phase II investigation in 2021 also went through a 6-months prenotification phase and eventually led to the withdrawal of the transaction after a 10-months formal investigation. At 16 months total, this would have been the longest Phase II investigation conducted by the FCA over the past ten years if the deal had not been abandoned.
Conclusion
In both France and Germany, the trend is towards a post-Covid recovery in terms of the number of deals reviewed. This is not however reflected in the number of significant investigations completed, which remained stable in both jurisdictions, with a low percentage of deals giving rise to an in-depth investigation by the competition authorities.
For those deals that were subject to a significant investigation, however, the average outcome has been more unfavorable than ever for companies seeking clearance, with an ever-increasing percentage of deals being blocked or abandoned. These trends follow those observed in the US and at the European Commission level, where the percentage of deals leading to a significant investigation is steadily decreasing but leading to more restrictive outcomes: in the US, 37 percent of all significant merger investigations concluded in 2021 ended in either a complaint or an abandoned transaction; in the EU, 21 percent of significant merger investigations similarly resulted in a prohibited or abandoned transaction. See our transatlantic DAMITT report for more data.
Footnotes
1) See FCA Decision No. 20-DEX-02 of 18 December 2020 on the opening of a Phase II and FCA press release of 10 June 2021 on the withdrawal of Leclerc-ACDLec.
2) Please note that date of the formalization of the transaction, as retained in the FCA decision (e.g. signing, firm offer letter), was used as a proxy for the announcement date.