This is the latest Jones Day Global Merger Control Update, which discusses recent developments in current merger regimes, as well as the emergence of new merger control regimes worldwide.
Over the past few years, merger control enforcement has surged around the world, reaching well beyond the major jurisdictions. Today, over 110 jurisdictions have merger control regimes. Some are more active than others, but all must be taken into consideration when assessing the antitrust risks of a cross-border M&A transaction.
In this Update, we discuss (i) key changes to existing regimes in Italy, South Africa, South Korea, and Tanzania, (ii) the adoption of a new merger control regime in Thailand, and (iii) anticipated changes to the current regime in Argentina.
KEY CHANGES TO EXISTING MERGER CONTROL REGIMES
Italian Parliament Approves New Set of Premerger Thresholds
On August 2, 2017, the Italian Parliament approved the Law on Market and Competition ("Law"), which provides a new set of premerger filing thresholds that became applicable on August 29, 2017.
The Law, which amends the text of Article 16 (1) of Law No. 287/1990, provides the following new cumulative thresholds for notifying a transaction:
The combined Italian turnover of all the undertakings concerned exceeds €492 million (approximately US$545 million); and
The individual Italian turnover of each of at least two undertakings involved in the transaction exceeds €30 million (approximately US$33.2 million).
Apart from the slight decrease of the first threshold (from €499 million to €492 million), there is a significant twofold change with respect to the second threshold, namely: (i) while the threshold is lowered from €50 million to €30 million, (ii) it now applies to at least two of the undertakings concerned (e.g., buyer and target), instead of just the target undertaking. It is anticipated that this will result in increasing notifiable transactions, particularly for the creation of greenfield JVs, albeit modestly.
Please also refer to our earlier publication.
South Africa Increases Value Thresholds for Classification of Intermediate Mergers
Effective October 1, 2017, the threshold values for the classification of intermediate mergers increased. The thresholds for large mergers remain unchanged. Intermediate mergers are subject to a less burdensome review process than large mergers (review periods are shorter, etc.).
The lower threshold (calculated with reference to the total asset value or sales of the target, whichever is higher,) has increased from ZAR80 million (approximately €5.1 million/US$6 million) to ZAR100 million (approximately €6.3 million/US$7.5 million).
The higher threshold (calculated with reference to the combined asset value or turnover, whichever is higher, of the acquirer and the target), has increased from ZAR560 million (approximately €35.5 million/US$42 million) to ZAR600 million (approximately €38 million/US$45.1 million).
The new thresholds for intermediate mergers are as follows:
Combined sales in South Africa exceeding ZAR600 million (approximately €38 million/US$45.1 million), but below ZAR6.6 billion (approximately €418.5 million/US$496.4 million); or
Combined assets in South Africa exceeding ZAR600 million, but below ZAR6.6 billion; or
Sales of acquiring undertaking in South Africa, plus assets of target exceeding ZAR600 million, but below ZAR6.6 billion; or
Assets of acquiring undertaking in South Africa, plus sales of target exceeding ZAR600 million, but below ZAR6.6 billion;
And either of the following:
Sales of target exceeding ZAR100 million (approximately €6.3 million/US$7.5 million); or
Asset value of target exceeding ZAR100 million.
The thresholds for large mergers remain unchanged.
South Korea Amends Monopoly Regulation and Fair Trade Act
On September 26, 2017, the State Council of South Korea approved an Amended Enforcement Decree of the Monopoly Regulation and Fair Trade Act ("Amended Decree"), which, among other amendments, revises the merger control thresholds.
Currently, a transaction is reportable if one party's total amount of worldwide assets or turnover is equal to KRW200 billion (approximately €149.8 million/US$177.6 million) or more, and the other party's amount of its worldwide total assets or turnover is KRW20 billion (approximately €14.9 million/US$17.7 million) or more.
The Amended Decree raises the above thresholds to KRW300 billion (approximately €224.9 million/US$266.3 million) and KRW30 billion (approximately €22.4 million/US$26.6 million), respectively. This will reduce the number of notifiable transactions.
In addition, the threshold of the local nexus test has increased from KRW20 billion to KRW30 billion (approximately €22.4 million/US$26.6 million). The local nexus test applies, in addition to the above thresholds, if (i) both parties to the transaction are foreign companies (where each party had Korean sales of KRW20 billion), or (ii) one party subject to the reporting requirement is a domestic company and the other party is a foreign company (where the foreign company had Korean sales of KRW20 billion).
The Amended Decree entered into force on October 19, 2017.
Tanzania Increases Value of Notifiable Transactions
The Government of Tanzania amended the merger control threshold by Order of May 22, 2017, which entered into force on June 2, 2017.
Previously, a transaction was notifiable if the combined value of the merging parties' assets exceeded TZS800 million (approximately €0.3 million/US$0.4 million).
Under the new threshold, a transaction is notifiable if the combined value of the merging parties' assets or sales exceed TZS3.5 billion (approximately €1.3 million/US$1.6 million).
As it appears that the threshold may refer to the parties' worldwide sales or assets, the amendment has little practical impact in case of large, international transactions.
Thailand Introduces Dual Merger Control System
Thailand's new Trade Competition Act ("Act") was published in the Government Gazette on July 7, 2017, and entered into force on October 5, 2017. The Act provides for a new, dual merger control system:
Premerger approval: any merger or acquisition likely to result in a "monopoly" or "dominance" must be notified prior to closing.
Postmerger approval: any merger or acquisition that may "materially reduce competition" must be notified after closing.
The Act foresees that the Office of the Trade Competition Commission ("OTCC") should publish procedural guidelines within 365 days of the entry into force of the new law, to detail in particular the definition of "material reduction of competition" and the applicable thresholds. Until then, the regime is not operative. It is understood that a sales and market share threshold will be used to determine "monopoly" and "market dominance," and that an asset test will be used to determine the "material reduction of competition" test. The OTCC is also expected to identify markets that are likely to be monopolized, in order to give additional guidance to businesses in determining whether premerger approval must be obtained.
Argentina Proposes Changes to Antitrust Laws
Argentina is conducting a comprehensive overhaul of its antitrust laws, including merger control. A draft bill underwent a public consultation process in 2016.
The most notable proposed change with regard to merger control is the introduction of a suspensive, premerger regime to replace the current postclosing system. In addition, the reform foresees new, more inflation-resistant thresholds, new decision timeframes, and a fast-track mechanism. The reform is intended to bring the regime more in line with international best practices and to speed up clearance procedures, which currently can take up to two years or more.
The reform bill is currently pending before the Argentinian parliament, and the timeframe for adoption and implementation has yet to be clarified.