THE ANTITRUST HORIZON OUR INSIGHTS INTO ANTITRUST...

CLIFFORD CHANCE |

THE ANTITRUST HORIZONOUR INSIGHTS INTO ANTITRUST TRENDS 2019

CLIFFORD CHANCE |OUR INSIGHTS INTO ANTITRUST TRENDS 2019

1. MERGER CONTROL

2. ENFORCEMENT

3. THE DIGITAL ECONOMY

4. POLITICISATION

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CLIFFORD CHANCE |

Antitrust is making headlines. Calls for stronger enforcement are getting louder in every major

jurisdiction. Our report describes how this is playing out in four key areas.

Merger control regimes around the world are changing, with new rules, new agencies, new

policies and new ideas about which mergers could be harmful.

Trends in antitrust enforcement include record-breaking fines in Europe and Asia, increased

risks for individuals and renewed scrutiny of collusion in financial securities markets. In Europe,

there is growing competition between venues to attract damages claims.

In the digital economy, the antitrust horizon is foreboding for big tech players, with large scale

investigations ongoing, the creation of new regulators and regulations, and stricter merger

reviews. And changes to the way competition authorities think about data have potential to

affect major players’ ability to monetise large-scale data sets.

Finally, we are seeing ever more politicisation of M&A and antitrust. Various countries are

expanding politicians’ powers to intervene in foreign takeovers, and 'national security'

justifications for such intervention are becoming broader.

Sophisticated compliance will be required to achieve and maintain a competitive edge in the

coming year.”

OUR INSIGHTS INTO ANTITRUST TRENDS 2019

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THE ANTITRUST HORIZON

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THOMAS VINJE

Partner, Chairman,

Global Antitrust Practice

CLIFFORD CHANCE |

MERGER CONTROL

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CLIFFORD CHANCE |

Increased use of procedural penalties

highlights the need to put in place rigorous

compliance protocols, from the initial

planning phase through to the final merger

control clearance.”

The European Commission’s reported

difficulties in enforcing behavioural

remedies in a recent telecoms case will

likely make it even more averse to

such remedies.”

MIGUEL ODRIOZOLA

Partner, Madrid/Brussels

KATRIN SCHALLENBERG

Partner, Paris

5

THE TRENDS WE ARE SEEINGPROCEDURAL INFRINGEMENTS

Gun-jumping and failure to file

• EU: In April 2018, the European Commission (EC)

imposed a €125 million fine on Altice for implementing

its acquisition of the telecoms operator PT Portugal

before approval. This is the highest fine ever imposed

for ‘gun-jumping’, by any agency. The EC is still

scrutinising another case where the buyer allegedly

transferred ownership prematurely by using a so-called

"warehousing" structure, involving acquisition of the

target by an interim buyer prior to clearance by the EC.

• China: Of the 32 decisions penalising failure to notify /

gun-jumping that have been announced by Chinese

antitrust authorities since 2014, a total of 15 were

published in 2018 alone, with the duration of the

investigations ranging between two and 15 months.

• Poland: The Office of Competition and Consumer

Protection (OCCP) initiated proceedings to review

whether the conclusion of agreements between the

participants in an envisaged joint venture aiming at

financing the construction of the Nord Stream 2 gas

pipeline would amount to performing a concentration

without obtaining the consent of the OCCP.

• UK: While there is no prohibition on closing prior to

clearance, closed deals become subject to hold-

separate obligations. The Competition and Markets

Authority (CMA) recently imposed fines for two separate

breaches of those obligations in respect of the same

merger (Electro Rent/Microlease).

• Germany: The Federal Supreme Court recently decided

that a joint procurement agreement between merging

parties may amount to gun-jumping, as it anticipates the

effects of the intended integration, even if it does not

bring about the merger. This contrasts with the EU Court

of Justice’s Ernst & Young judgment, where the

termination of a cooperation agreement was not

regarded as (partially) implementing the concentration

as it did not contribute to the change in control of

the target.

Provision of incorrect or misleading information

• EU: The EC is investigating allegations that merging

parties provided incorrect or misleading information. In

two cases, the parties are alleged to have failed to

disclose information about research and development

projects that was potentially relevant for the assessment

of the transaction and/or the determination of

appropriate remedies.

Non-compliance with commitments

• EU: The EC is also investigating a telecoms company

for alleged breaches of a behavioural commitment to

offer wholesale 4G services to interested players at ‘best

prices under benchmark conditions’, which was given to

secure clearance of a 2014 transaction. It is reported to

have experienced significant difficulties in monitoring

and enforcing these commitments.

Enforcement against gun-jumping, provision of incorrect or

misleading information and breaches of commitments remains

a high priority

OUR INSIGHTS INTO ANTITRUST TRENDS 2019 |

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CLIFFORD CHANCE |

THE TRENDS WE ARE SEEINGREGIONAL MERGER CONTROL DEVELOPMENTS

• US: 2018 saw a slight decrease in the number of

significant merger reviews, but an increase in vertical

merger enforcement, with the Department of Justice

(DOJ) more aggressively suing to block or require

divestitures, and the Federal Trade Commission (FTC)

being more open to behavioural remedies or none at all.

The DOJ is expected to produce a modification to its

vertical merger guidelines by the end of 2019 (FTC

Commissioners are divided as to whether such an

update is necessary). The DOJ Antitrust Division has

also announced plans to ‘modernise’ the merger review

process, which include shortening the review timeline to

six months for significant mergers (down from the recent

average of 10.7 months) and providing merging parties

with early access to staff to discuss their deal.

• China: Three antitrust authorities (NDRC, SAIC and

MOFCOM) have been consolidated into one: the State

Administration for Market Regulation (SAMR). This may

help fill in the gap between MOFCOM’s merger review

and NDRC/SAIC's consideration of the risks of

coordination (such as information exchange prior to

obtaining merger clearance and spill-over effects of

joint ventures).

• Africa: Angola has a new merger control regime and the

competition authority of the regional Central African

Economic and Monetary Community has started to issue

decisions. Egypt has expanded its filing requirements to

cover foreign-to-foreign transactions and Nigeria is set

to do so soon.

The T-Mobile/Tele2 case has shown that

consolidation in European mobile telecoms

markets is still possible, depending on the

specifics of the national market.”

New rules, new agencies and new policies: merger

control regimes in major jurisdictions are changing

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JENINE HULSMANN

Partner, London

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• EU: The current Competition Commissioner, Margrethe

Vestager, will end her term in November 2019, having

blocked (formally or informally) around twice as many

mergers as her predecessor. EC reviews remain

evidence-led, however, as demonstrated by its recent

clearance of the 4 to 3 merger between Tele2 and T-

Mobile in the Netherlands – the first mobile telecoms

deal in recent years to be cleared by the EC without

remedies.* In that case, the parties were able to show

convincingly that the target would not have been an

important competitor in the absence of the deal.

However, the costs and administrative burden to secure

that result were significant, with around 540,000 internal

documents submitted to the EC, a survey of 2,500

private retail customers and approximately 80 formal

information requests.

• France: In 2018, the French Competition Authority

(FCA) decided to further explore the introduction of an

ex-post control for certain transactions, and initiated an

additional consultation on this issue. The FCA also

suggested to broaden the scope of the simplified

procedure and streamline filing requirements.

• UK: After Brexit, the CMA will acquire jurisdiction to

review large mergers that are currently reviewed

exclusively by the EC in the EU. The CMA has proposed

that such mergers should become subject to mandatory

filing and suspension obligations, so that it is not forced

to formulate remedies long after other jurisdictions have

finalised theirs.

* Clifford Chance advised Tele2 on this deal

The creation of a single Chinese antitrust

authority is likely to expand and

strengthen China’s collaboration on

international transactions.”

YONG BAI

Partner, Beijing

OUR INSIGHTS INTO ANTITRUST TRENDS 2019 6

CLIFFORD CHANCE |

OBSTACLES ON THE HORIZONTHE CLIFFORD CHANCE PERSPECTIVE

Authorities are particularly interested in

‘killer acquisitions’ in the pharma and tech

sectors, but we expect a similar approach in

other sectors in 2019.”

An impetus for stricter merger control enforcement has

spawned new ideas that could create obstacles for future deals

DAVID TAYAR

Partner, Paris

CLIFFORD CHANCE

We have yet to see a case in which labor

market monopsony concerns have been

raised, but the US agencies’ focus on this

means that we are likely to see one soon.”

TIMOTHY CORNELL

Partner, Washington D.C.

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What is the theory? What are the implications? Is it being applied?

Common ownership: Where rivals

have multiple minority investors in

common, this causes them to

compete less fiercely.

Greater risk of prohibition or remedies for

mergers involving certain listed companies

or sector-focused investment funds.

Evidence for the theory is still being

hotly debated and investigated. The

EC has referred to it in two cases,

but not as a determining factor.

Labour market monopsony:

Mergers that reduce the number of

firms offering a particular type of job

in a given area lead to reduced

wages and output, due to reduced

competition for workers.

Deals could be challenged on the basis of

their effects on local or regional labour

markets, merging parties could be required

to provide data on those effects and to

remedy them, e.g. by wage or employment

commitments. That would create a new

obstacle to securing clearance and

increase filing burdens.

Yes. Staff of the US FTC have been

instructed to consider labour market

impact for every merger the agency

reviews. But no merger has yet been

challenged on this basis and firm

evidence of anticompetitive harm is

patchy, at least outside the US.

Killer acquisitions: Many

transactions result in potential

future competition by the target –

through pipeline products or

innovation – being killed off, yet

they escape merger control

enforcement.

Proposed solutions include lower

jurisdictional thresholds, a broader

interpretation of what amounts to ‘potential’

competition and a requirement (proposed

by a senior EC official) that certain

powerful buyers should prove that their

deal is pro-competitive, instead of a

merger control authority having to prove it

anti-competitive.

Germany and Austria now have

transaction value thresholds to

ensure that such deals can be

reviewed, and the EC is considering

this. Some agencies are already

taking a more expansive view of

potential competition. Reversing the

burden of proof would require

legislation: unlikely in the short term

but a possibility in the EU thereafter.

Incipiency: By allowing

consolidation just shy of the point

where it becomes anticompetitive,

merger control increases the risk

that subsequent events (e.g. exit of

a competitor) will result in harmful

levels of concentration in markets

that tend towards consolidation.

Some have proposed lower thresholds for

intervention (e.g. where competition harm

is possible, rather than likely) and/or

incorporating a ‘buffer zone’ into reviews

(e.g. requiring the presence of at least one

more rival than is required to maintain

effective competition). This would mean

many more deals run into problems.

These proposals are recent and

there are no signs that they are being

seriously considered by major

antitrust agencies. However, in the

current antitrust climate, some may

be receptive.

7|OUR INSIGHTS INTO ANTITRUST TRENDS 2019

CLIFFORD CHANCE |OUR INSIGHTS INTO ANTITRUST TRENDS 2019 8

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ENFORCEMENT

CLIFFORD CHANCE |

THE TRENDS WE ARE SEEINGMORE RECORD FINES AND NEW ENFORCEMENT TOOLS

More record fines

• Google has again been the subject of record antitrust

penalties imposed by the EC (see page 13).

• Record (albeit smaller) fines have also been imposed in

a number of Asia Pacific countries:

– Australia, where the Full Federal Court imposed a fine

of AUD 46 million (US$ 32.4 million) on the Japanese

manufacturer, Yazaki Corporation, for its involvement

in a cartel concerning the supply of wire harnesses

used in the manufacture of the Toyota Camry – the

highest penalty ever handed down under the

Competition and Consumer Act 2010.

– Singapore, where the Competition and Consumer

Commission of Singapore (CCCS) fined 13 chicken

suppliers SGD 26.9 million (US$ 19.6 million) for

coordinating price increases and agreeing not to

compete for customers. This is the highest total

financial penalty imposed by the CCCS in a single

case to date.

– Japan, where the Japan Fair Trade Commission

(JFTC) is expected shortly to issue a record fine of

JP¥ 60 billion (US$ 545.8 million) on eight companies

for participating in an alleged cartel involving asphalt

for use in public road-building projects.

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New ways to resolve competition cases

• Competition authorities are expanding their tool kit to

deal with increased work loads and achieve efficient use

of resources, particularly in non-cartel cases:

– The EC is increasingly using its informal voluntary

‘cooperation framework’ to resolve non-cartel antitrust

investigations (which fall outside the leniency and

cartel settlement procedures). Parties that

acknowledge liability for a breach get a simpler

procedure and a reduction in fines. The EC has

adopted this approach in seven cases to date, with

fine reductions of between 10-50%.

– The US DOJ has chosen to resolve ‘challenging’

collusion cases (e.g. information sharing) according to

a civil standard, and has strengthened its approach to

enforcing resolution of those cases according to a

‘civil contempt’ proceeding in US court.

– The Turkish Competition Authority recently extended

the scope of its leniency programme to include

anticompetitive information exchanges and in 2018

granted full immunity for the first time to a leniency

applicant in the context of an information exchange

among 13 banks.

– The JFTC has a new commitments procedure that

allows parties to submit proposals to remedy alleged

infringements at an earlier stage. The procedure does

not apply to cartels, repeated breaches and material

breaches that could result in criminal charges.

Settlement procedures offering a fine

reduction in return for acknowledging liability

are becoming increasingly prevalent,

including in non-cartel cases.”

While competition authorities continue to impose

significant fines for anticompetitive conduct, they are

also seeking different ways to resolve cases efficiently


SAMANTHA WARD

Partner, London

Now that leniency can be obtained for

anticompetitive information exchanges in

Turkey, we expect to see a significant

increase in applications in the future.”

ITIR ÇIFTÇI

Partner, Istanbul

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CLIFFORD CHANCE |

THE TRENDS WE ARE SEEINGFINANCIAL MARKETS AND INDIVIDUAL LIABILITY

Share placements are attracting scrutiny from

competition authorities

• In June 2018, following two years of investigation by the

Australian Competition & Consumer Commission

(ACCC), the Australian Commonwealth Director of

Public Prosecutions laid charges against three banks –

ANZ, Citigroup and Deutsche Bank – alleging criminal

cartel conduct in relation to the AU$2.5 billion sale of

80.8 million shares in ANZ to institutional investors (the

ANZ Case). The Australian Securities and Investments

Commission (ASIC) has also instituted concurrent civil

proceedings against ANZ alleging failures to comply with

continuous disclosure obligations.

• This is the first criminal cartel case in Australia instituted

against a listed company and its executives, involving an

area of financial markets activity that has not been

considered by any Australian court or addressed by any

regulatory guidance notes previous published by the

ACCC or ASIC.

• In February 2019, the UK’s Financial Conduct Authority

(UK FCA) imposed antitrust fines on three asset

management firms for sharing strategic information

during an initial public offering and a share placement,

shortly before the share prices were set. This is the UK

FCA’s first formal decision under its competition

enforcement powers.

Individuals remain vulnerable to penalties across

all industries

• The US DOJ continues to prioritise criminal antitrust

enforcement against individuals, and in 2018 held more

criminal trials and obtained the highest number of

individual prison sentences in several years, while

announcing further high-profile charges, including

against the sitting CEO of a large canned tuna company.

• Criminal charges were laid in the ANZ Case against

several high-profile banking executives.

• Hong Kong's Competition Commission brought its first

case against individuals for their participation in a cartel,

seeking financial penalties against two individuals and a

director disqualification order against one.

• The Competition Commission of India fined officials of

Geep Industries involved in a battery cartel based on

10% of their average income in the previous three years.

• Chinese authorities imposed their first ever fine for

obstructing an antitrust investigation in September 2018.

Executives of Toyota Motor Sales had unplugged a USB

drive from which evidence was being retrieving,

instructed employees to turn off computers, insulted

officials and failed to provide requested materials.

• The UK CMA secured two orders banning estate agents

involved in a cartel from acting as company directors in

2018 and sought two more in February 2019.

Collusion and information exchange in financial securities markets

is back in the spotlight and antitrust risks for individuals are

increasing in all sectors

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The ANZ case raises questions around

the legality of certain common

arrangements for managing shortfalls by

underwriting syndicates.”

DAVE PODDAR

Partner, Sydney

Information exchange remains a focus

of attention by competition authorities,

particularly in financial services

investigations.”

ELIZABETH MORONY

Partner, London

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CLIFFORD CHANCE |

COMPETITION FOR ANTITRUST DAMAGES CLAIMSTHE CLIFFORD CHANCE PERSPECTIVE

• The English courts have been a particularly popular

venue for antitrust damages claims. Many factors have

contributed to this popularity, including a well-

established and broad disclosure regime, the increasing

availability of funding and the concentration of expertise

in specialist courts and tribunals, such as the

Competition Appeal Tribunal.

• The UK now has an "opt-out" collective action regime

and it is expected that the English courts will continue to

be an attractive venue for antitrust damages claims.

• However, in recent years, courts in other jurisdictions

have sought to compete to attract antitrust damages

claims to their venues, creating more choice for litigants.

France

• France's Chambre Commerciale Internationale de Paris

is aiming to attract EEA-wide claimants by using English

in proceedings and decisions. The Tribunal de

Commerce also has dedicated antitrust experts, and

industry experts are used in hearings to quantify loss.

• New formal discovery/disclosure rules were introduced

in 2018. These are generally viewed as pragmatic, as

they protect against the disclosure of trade secrets.

• However, France’s ‘opt-in’ collective actions regime

(introduced in 2014) remains undeveloped, in part due

to its complexity.

England is expected to remain a popular

venue but businesses with activities in

Europe should be prepared for claims being

brought in other jurisdictions.”

London remains the primary destination for European

antitrust damages claims, but competition is increasing

MATTHEW SCULLY

Partner, London

Companies should prepare for an increase

in litigation funding in Germany, as it is

becoming increasingly popular following the

recent rail and truck cartel class actions.”

MICHAEL DIETRICH

Partner, Düsseldorf


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Germany

• Scope for collective actions is limited to certain claims

brought by consumer associations, but individual claims

can be bundled by assigning them to one entity.

• Claimants can request disclosure of information and

evidence to establish a damages claim, even before

court proceedings are commenced.

• While all antitrust damages proceedings are held in

German, courts are increasingly setting up additional

international (English-speaking) chambers to meet

international requirements.

The Netherlands

• Claimants have chosen Dutch courts for claims in

respect of several EU-wide cartels (e.g. the paraffin

wax cartel).

• Claimants often assign their claim to a special purpose

vehicle to litigate their claims on their behalf. Recent

legislation, expected to enter into force in summer 2019,

expands the collective action process to cover both

declarations that unlawful activity occurred and awards

of damages, offering a new route to follow-on claimants.

• Claimants can request disclosure of certain documents,

but this can be resisted if there are compelling reasons

against disclosure.

• English language proceedings before the Netherlands

Commercial Court (NCC) are available.

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3

THE DIGITAL

ECONOMY

CLIFFORD CHANCE |

THE TRENDS WE ARE SEEINGTHE DIGITAL ECONOMY

Google tops the rankings

• In the past three years, the EC has imposed its three

highest antitrust fines ever, all of them on Google:

– €1.49 billion in March 2019 for imposing restrictions

on the ability of large third-party websites to display

search advertisements from competitors to Google’s

AdSense business. These included outright

exclusivity obligations, minimum purchasing

obligations, requirements to reserve premium space

on results pages for Google’s adverts and controls

over the way rivals’ adverts were displayed. Google

ceased all these practices shortly after the EC issued

a statement of objections in July 2016.

– €4.34 billion in July 2018 for anticompetitive practices

related to Android. These included forcing bundles of

Google apps onto original equipment manufacturers

(OEMs), prohibiting open source versions of Android,

and offering incentives to OEMs conditional on the

exclusivity of Google Search on Android devices.

These restrictions resulted in the pre-installation of

Google Search and Google Chrome on virtually all

Android devices sold in the EEA, enabling it unduly to

fortify its positions in these markets. Google has

proposed remedies to address the EC's concerns.

– €2.42 billion in 2017 for giving an advantage to its

own comparison shopping service in search results.

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Online platforms

• The critical role of online platforms in the digital

economy and the significant market power they may

hold feeds calls for stronger antitrust enforcement. The

EC Commissioner for Competition, Margrethe Vestager,

has expressed frequent concerns about vertically

integrated online platforms which act ‘as both player and

referee’. In the US, antitrust enforcement against tech

platforms now has broad bipartisan support. Further

enforcement action in this area is to be expected.

• App stores are also an area of interest. The Dutch

Authority for Consumers and Markets recently launched

a market study into the relationship between app

providers and mobile app stores, citing their conflicting

interests as a reason for its investigation. Similarly, the

Japanese FTC has initiated a survey on trade practices

of app store operators.

• Interest in platforms goes beyond competition

enforcement. EU legislators agreed in February 2019 on

a new ‘Regulation on fairness and transparency for

business users of online platforms’, including search

engines, app stores, e-commerce marketplaces, social

media and price comparison tools. The Regulation will

complement the EU's competition rules, which remain

fully applicable.

Regulators are concerned that small tech

transactions can have an outsized impact

due to factors such as scale and network

effects. This is likely to make it harder to get

these deals cleared in the future.”

Antitrust authorities’ focus on Google and other online

platforms is intensifying


DIETER PAEMEN

Partner, Brussels

The new EU Regulation for online

platforms will impose significant new

transparency and fair-dealing obligations on

platform operators.”

LUCIANO DI VIA

Partner, Rome

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CLIFFORD CHANCE |

THE TRENDS WE ARE SEEINGTHE DIGITAL ECONOMY

Online sales restrictions

• With the Vertical Block Exemption Regulation (VBER)

set to expire on 31 May 2022, the EC is currently

evaluating the effectiveness of the VBER. The EC will

consider the increased importance of online sales and

the emergence of online platforms when determining

whether to revise the VBER.

• The EC's e-commerce enquiry and other recent

experiences with selective distribution (e.g. the Pierre

Fabre, Coty and Ping cases), MFN clauses (hotel

booking, e-books), geo-blocking (Guess) and resale

price maintenance (Asus) in an online context will shape

the new VBER. Stakeholders are invited to comment by

the end of May 2019.

Data

• Regulators are becoming increasingly comfortable in

taking into account the role of data in competition law

investigations. The most notable data-related antitrust

case so far is the investigation of the German Federal

Cartel Office (FCO) into Facebook's practices regarding

user data. Finding that Facebook is dominant in the

market for social networks, the FCO held that Facebook

abused its dominant position by requiring users to agree

to the collection of data from third-party sources, and to

that data being merged with their Facebook account as

a precondition for using the social network.

• The FCO based its finding of an exploitative abuse on

the breach of data protection principles, making it the

first competition authority to treat this as an antitrust

breach. It could do so because German case law

explicitly provides that not only excessive prices, but

also inappropriate contractual terms and conditions, may

constitute an exploitative abuse. Given that Article

102(a) TFEU also considers unfair trading conditions to

be abusive, the FCO’s case may open the door to more

antitrust investigations based on exploitative data-

related theories of harm – though not necessarily

premised on a breach of data protection principles.

• Another area of focus is the circumstances in which

competition may be foreclosed by a business refusing to

give rivals access to its data, or using its own data on

rivals’ activities to gain a competitive advantage. A

number of investigations in this area are ongoing, so we

expect to see developments in this area in the coming

year or so.

• Regulators are also refining their thinking on the role of

data in merger assessments, considering the extent to

which the combination of two companies' datasets may

confer a unique competitive advantage to the merged

entity. In 2018, the EC conducted such an analysis

during its review of the Apple/Shazam merger, but found

no evidence of any such anticompetitive effects. Future

data-driven mergers will, however, continue to face

increasing scrutiny.

The European Commission’s review of its

distribution safe harbour will assess whether

the rules should change to reflect the past

decade’s developments in digital markets.”

Antitrust in flux – as experiences with online sales restrictions

and data evolve, so does antitrust policy

3

The German decision against Facebook

could become a blueprint for enforcement of

data-related antitrust infringements in other

jurisdictions.”

TONY REEVES

Partner, Brussels

IWONA TERLECKA

Counsel, Warsaw

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CLIFFORD CHANCE |

Influential reports and new task forces in a number of countries

will shape the future regulation of digital markets

WHAT NEXT FOR ANTITRUST IN THE DIGITAL ECONOMY?THE CLIFFORD CHANCE PERSPECTIVE

United States

• Following a series of hearings on ‘Competition and

Consumer Protection in the 21st Century’, the

FTC’s Bureau of Competition announced in February

2019 the creation of a Technology Task Force, with

a broad mandate to pursue investigative and

enforcement actions against exclusionary conduct

in technology markets. The Task Force will also

participate in the review of tech sector mergers. This

includes ex-post assessments of deals that have already

taken place, and FTC officials have not excluded the

possibility that such deals could be unwound if found to

be anticompetitive.

Australia

• The ACCC published in December 2018 an interim

report in its Digital Platforms Inquiry. Its

recommendations include asking (or requiring) large

digital platforms to give advance notice of their mergers,

clarifying the relevance of data and potential competition

in the test for assessing those mergers and creating a

new authority to regulate unfair or anticompetitive

discriminatory self-preferencing by platforms.

France

• The digital sector is a key priority for the FCA in 2019. It

has a joint project with the German FCO to study

algorithms and has launched individual cases against

tech giants, including Google.

UK

• The March 2019 report of the Digital Competition

Expert Panel (the ‘Furman Report’) proposed various

measures to promote competition in digital markets. It

suggests the creation of a new regulator with wide

powers to police powerful tech companies and to

facilitate data mobility and open standards. The report

also calls for mandatory merger filing obligations for

powerful tech companies and a new test allowing

mergers to be blocked where large-scale competitive

harm is not likely, but is nonetheless credible and

plausible. However, the CMA has already warned that

such a test could give rise to practical challenges and

unintended consequences.

• The UK government has already acted on one of the

report’s recommendations, asking the CMA to carry

out a market study of the digital advertising market.

Germany

• The German government has created a ‘Competition

Law 4.0 Commission’ to develop proposals by Autumn

2019 to adapt European competition law for digital

markets. Among other things, it will consider how to

foster internationally competitive European digital

businesses and cooperation and standardisation in

new industrial technologies, as well as regulating

access to data and new rules for powerful platforms.

The Commission will also consider reforms to

address the increasing use of algorithms and

artificial intelligence (AI).

2019 – LOOKING AHEAD

“Countries like the UK are considering broad

ex ante regulation of big tech. If

implemented, this will result in regulatory

fragmentation and less legal certainty.”

NELSON JUNG

Partner, London

The Competition Law 4.0 Commission will

report shortly before Germany assumes the

rotating Presidency of the EU, so will shape

EU antitrust laws as well as German ones.”

JOACHIM SCHÜTZE

Partner, Düsseldorf


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4

POLITICISATION

CLIFFORD CHANCE |

THE TRENDS WE ARE SEEINGTHE POLITICS OF THE DEAL

17

The lowering of the threshold in Germany to

shareholdings of just 10% will significantly

increase the number of foreign investments

that are subject to scrutiny.”

Governments are giving themselves new powers to interfere

in foreign takeovers on national security grounds


MARC BESEN

Partner, Düsseldorf/Brussels

The EU Regulation will mean more mergers

are reviewed on national security grounds,

but only in those countries that choose to

implement a screening regime.”

MICHEL PETITE

Of Counsel, Paris

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A global trend

• United States: Legislation enacted in August 2018

considerably expanded the scope of investments that

may be reviewed by the Committee on Foreign

Investment in the United States (CFIUS) and provided

for mandatory filing requirements for certain foreign

acquisitions, including passive, non-controlling interests.

A pilot programme has already implemented mandatory

filing for deals with targets involved in certain critical

technologies in 27 industries and wider requirements

are due to be in place by February 2020.

• South Africa: Legislation enacted in February 2019

mandates the President to create a committee to screen

mergers for national security concerns. It also elevates

the importance of public interest issues, such as

employment, in merger control reviews.

• Germany: From January 2019, the shareholding

threshold that triggers a filing requirement for certain

foreign investments is lowered to 10%, from 25%.

• UK: Legislative proposals to be progressed in 2019

would allow the government to review, on national

security grounds, any deal giving significant influence

over a business or asset (including IP rights), no matter

how small and even if located outside the UK.

• Netherlands: Draft legislation would allow the

government to block acquisitions of telecoms-related

targets on national security grounds.

• Hungary: From January 2019, filing obligations

apply to certain foreign investments in Hungarian

companies active in areas such as critical

infrastructure, military/dual-use products, credit data

processing and electronic communications.

• France: The list of protected industries and strategic

assets for which foreign investment is subject to

authorisation by the French Minister of Economy

was expanded from January 2019 to include various

technologies, such as information systems security,

space operations, AI, robotics and data hosting.

Increased EU intervention levels in the future

• The EU Regulation establishing a framework for

screening foreign investments will apply from

October 2020. It does not confer powers on the EC

to block or impose remedies on foreign takeovers,

but it does clarify what factors EU governments can

apply when exercising their powers. The result is

likely to be that some EU countries expand the

scope of their screening regimes even before the

Regulation becomes applicable (Germany has

indicated that it will do this) and some will introduce

new ones (the Prime Minister of the Czech Republic

has voiced support for such legislation).

• The Regulation will also require EU governments to

share (and, in some cases, gather) information on

transactions giving rise to potential national security

and public order considerations, which is likely to

lead to higher intervention levels in the EU.

CLIFFORD CHANCE |

The range of issues that may be considered a matter of national

security is growing, creating new risks for infrastructure, technology

and data-driven deals

THE TRENDS WE ARE SEEINGDOES NATIONAL SECURITY NOW MEAN ECONOMIC SECURITY?

4

If the impact of a transaction on R&D

investment in the target is a new trend in

national security reviews, all buyers need to

take heed, not just those linked to China.”

• Trump widens the scope for government

intervention: President Trump has said ‘American

strategy recognises that economic security is national

security’. This is being reflected in CFIUS reviews, in

which deals threatening ‘US technological superiority’

are increasingly subject to challenge.

• Political hostilities: The failure of the Qualcomm/NXP

deal in July 2018, following delays in securing Chinese

merger control clearance, may have been the first deal

to fall victim to growing US-China political hostilities. If a

trade war develops, US buyers may find deal-making

gets harder for transactions that require filing in China.

• Access to data: CFIUS opposed the acquisition of

MoneyGram by Chinese-owned Ant Financial due to

concerns that it would give access to 2.4 million bank

and mobile accounts of MoneyGram’s US customers,

and recently instructed a Chinese company to sell the

dating app Grindr for similar reasons. The UK

government has also identified access to data as a

potential national security consideration in draft

guidance issued in connection with legislative proposals.

• Impact on R&D: Two deals in 2018 saw government

scrutiny based not on buyer nationality, but on wider

concerns that the target’s R&D would not be maintained:

– The UK government threatened to subject Melrose’s

acquisition of engineering firm GKN to a national

security review on the grounds that long-term

investment and stability in GKN’s business was a

matter of national security and the (British) buyer’s

business model was potentially incompatible with that

need. To avoid a review, Melrose agreed pledges on

R&D expenditure, HQ location and disposals.

– President Trump blocked the acquisition of US

chipmaker Qualcomm by Singaporean firm

Broadcom, following CFIUS concerns that Broadcom

would reduce Qualcomm’s R&D spending, so

allowing Chinese companies to replace it as a leader

in 5G technology and standard setting.

Scrutiny in the US and elsewhere

remains focused on China. Any Chinese

involvement in a deal is now frequently

analysed by the parties as a risk factor.”

JOSH FITZHUGH

Counsel, Washington D.C.

ALEX NOURRY

Partner, London

“

“


Mission creep: the scope of deals raising national security concerns has expanded in recent years:

MILITARY/

DUAL-USE PRODUCTS

CRITICAL

INFRASTRUCTURE

(e.g. ports, utilities)

CRITICAL

TECHNOLOGY

(e.g. quantum computing,

cryptography,

5G, robotics)

SENSITIVE

DATABASES

(e.g. health sector,

financial services)

CLIFFORD CHANCE |

WHAT NEXT FOR POLITICS IN ANTITRUST?THE CLIFFORD CHANCE PERSPECTIVE

A manifesto for meddling

• In February 2019, the governments of France and

Germany issued a ‘Manifesto for a European industrial

policy fit for the 21st Century’, proposing various

changes to EU competition laws, including:

– powers for the EU Council (comprising national

ministers of each EU member state) to override

Commission merger control decisions ‘in well-defined

cases, subject to strict conditions’;

– adapting merger control legislation and guidelines to

take greater account of global competition and

future/potential competition, ‘to enable a more

dynamic and long-term approach to competition, at

the global scale’;

– greater consideration of State control or subsidisation

of market players in merger reviews;

– a reciprocity mechanism for public procurement with

third countries, including better use of possibilities in

existing EU procurement rules to take into account

factors other than price;

– easier rules for EU governments to give State aid for

‘important projects of common European interest; and

– temporary public ownership of businesses in

certain sectors to ensure their ‘long-term

successful development’.

Champions in all domains

• The manifesto was partly a reaction to the January

2019 decision of the EC to block the proposed merger

between German train manufacturer Siemens Mobility

and its French rival Alstom. The deal was considered

by French and German politicians to be vital to create

a global competitor able to compete with China’s

CRRC, the world’s biggest train maker, but the EC

concluded that it would harm competition in markets

that were European in scope, not global.

• In the past, successive French governments have

often called for EU competition rules to be relaxed for

the benefit of national or European ‘champions’, to no

avail. These new proposals, however, stand a much

greater chance of success, for two reasons. First, they

have German support this time. Second, the UK –

traditionally a strong opponent of protectionist policies

– is exiting the EU.

• The French Minister of the Economy has hailed Brexit

as a ‘historic opportunity to redefine the capitalism that

we want’ and called for European champions ‘in all

domains – in rail, in space, in naval construction, but

also in new technologies’.

2019 – LOOKING AHEAD

A number of EU member states are wary of

proposals for a political override of decisions

of the Commission, so if it comes to pass,

those powers may be tightly circumscribed.”

Proposals to allow politicians to override competition laws

reflect a shift in the EU’s centre of gravity

ANASTASIOS TOMTSIS

Partner, Brussels

UK merger control and antitrust enforcement

is the subject of current political debate –

divergence from past practice seems

inevitable, especially once the UK steps

outside of the EU antitrust community.”

GREG OLSEN

Partner, London


“

“

CLIFFORD CHANCE 19|

CLIFFORD CHANCE |

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Editors for this publication


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