Antitrust

S H E A R M A N & S T E R L I N G L L P | 2 3 of an interim enforcement order — effectively the standstill obligation once an inquiry starts in the U.K.'s merger regime. These examples demonstrate that it is more important than before to take care with 'ordinary course' covenants and that the risks of closing over filing requirements are greater than they were previously. 3 There are ways to manage gun-jumping risks. Some agencies, including the EC, have become more receptive to waiver requests from the standstill obligation or working with parties to speed up clearance in unproblematic cases. The EC has granted standstill derogations in almost all cases where the purpose is preserving the financial or competitive viability of the target business. Comparable derogations also exist in other jurisdictions such as Portugal, Greece, Norway, Romania, Brazil, Switzerland, etc. REQUESTS FOR INFORMATION — INTERNAL DOCUMENTS The tougher implementation of procedural rules can also be seen in the increasing use of powers to request internal documents. In Australia, for example, the new merger review process recently broadened the competition authority's powers to obtain information, documents and evidence to improve evidence gathering. The CMA is also not afraid to aggressively pursue information on high-profile mergers. In the EU, the amount of documentation that must be provided in difficult cases has increased dramatically. The Bayer/ Monsanto review in 2018 involved a disclosure of more than a million documents. This massive disclosure obligation sits in addition to the enormous amount of information required in the 'Form CO.' Disclosure of such a large volume of internal documents creates a challenge for parties' to ensure consistency with their antitrust defense — as well as difficulties managing the review timetable. Requesting documents allows the EC to suspend the review of a merger ('stop the clock'), which significantly delays the clearance of the deal. In 2017, the EC has suspended the timetable in nearly half of the in-depth reviews initiated or concluded by the EC in 2017 (5 out of 11), and suspensions have ranged from 7 to 96 working days. Even where authorities demand voluminous data and internal documents within tight time frames, parties need to pay careful attention to the documents provided, given that they can face heavy penalties for failing to disclose sufficient or correct information during reviews, or if they provide misleading responses to requests for information. On this basis, the EC has recently imposed €110 million fine on Facebook and is currently investigating against Merck and Sigma-Aldrich, and against General Electric and LM Wind. In each case, the EC alleges that the companies' failure to provide information impacted the ultimate outcome of the merger review. Similarly in Brazil, Conselho Administrativo de Defesa Econômica (CADE) imposed fines of €10.9 million on JBS and Rodopa for providing misleading information during the merger analysis. In November 2017, the CMA fined hungryhouse €23,000 for failing to adequately respond to an information request during the CMA's review of its acquisition by Just Eat. Document review exercises in complex deals require careful project planning and sufficient resources for preparing 1. The EC recently imposed a record-breaking fine on Altice for gun-jumping and is still investigating into potential gun-jumping in Canon's acquisition of Toshiba Medical Systems (TMS). Similarly, the U.S. agencies recently obtained a US$600,000 penalty for gun-jumping violations relating to Duke's acquisition of Osprey. 2. This case involved a two-step acquisition procedure known as 'warehousing.' On signing, Canon acquired a single non-voting share in TMS, for which it paid effectively the full value of TMS. At the same time, an interim buyer acquired voting shares in TMS for a nominal amount. Canon also took options over these shares. Canon intended to have control of TMS only when it exercised the options following notification and merger approval. 3. The severity of risk posed by breaching gun- jumping rules varies across the different regimes. In the EU, the EC can impose a fine of up to 10% of worldwide turnover. Similarly, in the U.S., the Department of Justice (DOJ) can impose fines of up to US$41,484 per day, per company for gun- jumping offenses. In China, however, the average amount of the fine imposed per penalized company is low (CNY190,000). It remains to be seen whether the State Administration for Market Regulation (the new agency consolidating the former three antitrust enforcement agencies) will take a stricter approach on gun-jumping cases and increase the fine on gun-jumping. and verifying submissions are watertight within the deadlines. Disclosure of facts and evidence must be full and accurate, even for future projects on product development or innovation. Parties should have a good understanding of what their documents say and be prepared to address documents that do not support their arguments and the defense presented during notification. LEGAL PRIVILEGE Finally, parties may well be aware that the scope of legal privilege varies from one jurisdiction to another. This proves particularly challenging in cross-border deals where disclosure in one jurisdiction may lead to disclosure to authorities and courts in other jurisdictions. Records of legally privileged materials excluded from disclosure and the rationale used for claiming privilege can help justify future privilege claims. CONCLUSION For companies with multi-jurisdictional operations engaging in complex transactions, evaluating the risks posed by procedural rules across jurisdictions can be particularly challenging; not only do the rules frequently lack clarity, but assessment by the regulators takes place on a case-by-case basis and there are often stark differences in approach between regimes. Competition authorities have recently shown that they are likely to enforce the rules rigorously as a deterrent to others. Given the increased enforcement activity from competition authorities across the world, businesses must be aware of the risks and take measures to mitigate these based on the individual circumstances of their case.

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