The U.S. agencies only concluded 10 significant investigations over the last 12 months, with the number of concluded investigations never rising above three per quarter for the last five quarters. For context, the 10 significant investigations over the last 12 months amount to only half the number concluded in all of 2022 and less than a third of all significant investigations concluded in the last year of the Trump administration.

As detailed in our DAMITT Q2 2023 Report, this prolonged drop is largely explained by the disappearance of pre-complaint settlements. There has not been an observable increase in complaints and abandoned transactions to replace that notable drop in consent decrees. To the contrary, there have been three fewer complaints and abandoned transactions announced by the agencies in the first three quarters of 2023 than there were in the first three quarters of 2022.

In our DAMITT Q1 2023 Report, we asked what three quarters of such low activity said about the health of merger enforcement. While there typically are quarters with higher and lower levels of concluded investigations, we typically expect to see quarters with higher and lower numbers hover around the average like a heartbeat. Over the last year, however, we have yet to see any bounce back in the number of significant investigations concluded by the agencies despite the significant spike in merger filings in 2021 and 2022. As shown below, the number of concluded investigations has been well below historical averages for a full five quarters.

In particular, the DOJ has not concluded a single significant investigation in the last two quarters, which is the first time we have seen consecutive quarters of no merger enforcement by DOJ since DAMITT started tracking in 2011. You can almost hear the crickets from where we are sitting.

The publicly observable average duration of concluded significant merger investigations hit a high of 15.0 months in Q3 2023, well above historical DAMITT averages. Because this average only reflects two concluded investigations, we would caution against relying too heavily on this development. The average duration for the rolling-twelve-months ending Q3 2023 was 11.3 months, which is in line with the annual averages observed since 2017.

Keep in mind, however, that this does mark a reversal of a recent trend towards shorter average durations. For example, the average duration observed in Q2 2023 was 8.3 months and the average duration for the rolling-twelve-months ending Q2 2023 had fallen to 10.4 months. We have warned against relying too much on those shorter recorded durations in recent reports, and the most recent durations reinforce those warnings.

Parties also should keep in mind that the DAMITT average duration for the last 12 months only includes one pre-complaint consent. As a result, it is largely measuring the time from deal announcement to a settlement, abandoned transaction, closing statement, or complaint for transactions that received a complaint or were abandoned. Parties to transactions that receive complaints will need additional time to defend their transactions.

Despite Low Numbers of Significant EU Merger Investigations, Average Durations Remain Stubbornly High

The EC Has Issued Its First Prohibition in 2023 – and Its First Prohibition Based Solely on an Ecosystem Theory of Harm – but the Number of Significant EU Merger Investigations Remains Low, Especially for Phase I Remedy Cases

With only three significant merger investigations concluded in Q3 2023, the EC remained far below the quarterly average of 4.9 significant investigations concluded per month observed since 2011. As noted in our DAMITT Q2 2023 Report, this decrease is however driven exclusively by a decline in Phase I Remedy cases. This evolution mirrors the US agencies’ reluctance to settle cases pre-complaint, albeit in the different EU procedural setting.

On the other hand, the EC concluded two Phase II investigations this quarter, which is in line with the quarterly average observed since 2011. Q3 2023 saw the first prohibition of the year, in the Booking/eTraveli case, and the thirteenth prohibition since DAMITT started tracking significant merger investigations in 2011. This decision also marks a departure from previous practice, as it is the first prohibition based on a true ecosystem theory of harm, without any horizontal or vertical issues. The EC considered that the transaction would have allowed Booking to increase its dominance on its core market by growing the ecosystem of services it provides; in its review, the EC relied directly on the EUMR and departed from its merger review guidelines.

Senior officials from the EC commenting on the decision have made it clear that they intend to follow the same approach in the future if warranted by the facts of a case. Speaking at a GCR conference, Olivier Guersent, Director-General at DG COMP, stated that “if we were bound by our guidelines, then you would fossilize your practice to what it was when [we] issued the guidelines...we need to have some capacity to depart from guidelines, provided we justify in the decision why. That’s the only way for our merger control to be able to follow the evolution of the market.” Even with this new prohibition, however, the intervention rate of the EC remains low in 2023 compared to recent years and compared to trends in the United States.

The second Phase II investigation concluded this quarter resulted in a conditional clearance with behavioral remedies, confirming a trend observed in the DAMITT Q2 2023 Report of greater acceptance for non-structural remedies. With this new decision, the proportion of deals cleared with only behavioral commitments has risen to 43% so far this year, significantly above the 12% average observed over the 2011-2022 period.

Turning to Phase I, the EC has historically concluded 9 Phase I Remedy cases on average by the end of the third quarter between 2016 and 2022. By contrast, the EC has only concluded two cases in Phase I with remedies so far this year. As a result, the EC will be hard pressed to catch up to the historical average.

In addition, despite the new Phase I Remedy case concluded in Q3 2023, the proportion of transactions cleared in Phase I with remedies out of all Phase I cases remains below 1 percent in 2023, a sharp decrease since 2016 when these transactions represented approximately 5.5 percent of all Phase I cases.

Looking at EU significant merger control investigations overall per quarter, the numbers show a slow decline over time, albeit one that is far less pronounced than the sharp drop observed across the Atlantic.

The Average Duration of Phase II Investigations Slowly Declines While Average Duration of Phase I Remedy Cases Slightly Increases, but Both Remain Remarkably High

The average duration of EU Phase II investigations continues to slowly decline. With an average of 16.6 months observed over the past 12 months, this is nearly two months faster than the record-average duration observed in 2021, and one month less than in 2022.

The “shorter” average duration observed thus far in 2023 should, however, be viewed with caution since, as previously indicated, it was primarily driven by a limited number of shorter investigations. The median duration over the last 12 months was 17.2 months, closer to the 17.5-month average duration observed since the beginning of the year.

Glimpsing into the future, the four Phase II investigations currently pending with the EC have already clocked on average 18.8 months as we write this report, so 2023 is likely to conclude on the high end in terms of duration.

Parties should also be careful not to overlook that there are significant differences depending on the outcome of the review. As indicated in our DAMITT Q2 2023 Report, significant merger investigations concluded in 2023 have lasted longer than the average observed of the past five years in each category when looking at duration per outcome: 15.6 months vs 11.3 months on average for unconditional clearances; 17.3 months vs 15.4 months on average for Phase II with remedies; and 22.5 months vs 20.9 months on average for prohibitions.

While litigation is less in focus for merger investigations in Europe as the EC can prohibit a deal outside of a courtroom, litigation can still become relevant following an adverse EC decision. Of the deals blocked by the EC since 2011, all but two have been appealed by the acquirer or the parties. Parties to a deal prohibited by the EC wishing to appeal the decision should however be aware of the long timelines to obtain a ruling by the General Court. Leaving aside appeals that were withdrawn, the General Court ruled on the matters on average 41.8 months after issuance of the EC prohibition decision. And this does not account for the time necessary to obtain a decision from the higher EU Court, which can double that timeline.

Conclusion

Parties to transactions subject to significant merger investigations continue to face an elevated risk of seeing their deal blocked or abandoned on both sides of the Atlantic, even if the intervention rate shows relatively few deals actually receive this level of scrutiny. To ensure the ability to defend their deals through a potential investigation, parties to the average “significant” deal in the U.S. should plan on at least 12 months for the agencies to investigate their transaction and may want to add on additional time to address the continuing uncertainty at the agencies. Parties should also plan for another 6 to 12 months if they want to preserve their right to litigate an adverse agency decision.

On the EU side, parties to transactions likely to proceed to Phase II should allow for at least 18 months from announcement to clearance and should not rely on the theoretical deadlines provided for in the EU Merger Regulation, even after a deal has been formally notified. Parties should be aware that the EU Commission is less and less likely to accept remedies without an in-depth investigation; if parties still plan on obtaining a Phase I clearance with commitments, they should factor in around 10 months from announcement to a decision, with significant time set aside for pre-notification talks with the Commission and the potential need to pull and refile their filing.