By Magnús Þór Kristjánsson
in an article by lawyers María Kristjánsdóttir and Heiðrún Lind Marteinsdóttir in Viðskiptablaðið on 11 February, and an article by Þórarinn Ingi Pétursson, MP for the Progressive Party, on Vísir.is on 17 February. discusses the administrative procedure for merger cases.
In the aforementioned article, the lawyers discussed merger control and compared the percentage of merger cases concluded at the first phase of the investigation (25 working days) in Iceland, Norway and by the European Commission. The MP's article cites the lawyers' article and draws the conclusion „that the administration of the Competition Authority is very different from that of its sister institution in Norway and the European Commission.“
The Competition Authority welcomes an informed debate on merger control in Iceland. However, in the interest of such a debate, it is necessary to point out that the comparison on which the articles are based does not provide a true picture of the actual case handling times for merger cases. Crucially, the comparison does not take into account that the procedures of merger parties, their advisers and competition authorities differ between countries. Taking this into account, it becomes clear that the efficiency of the country's competition authorities is more than comparable.
It is right to explain this in more detail.
Statutory deadlines are an exception.
In this regard, it is important to emphasise that merger proceedings are subject to statutory time limits, which are intended to protect the interests of both business and the public by ensuring that the merger investigation is not unduly prolonged. This represents an absolute exception to the general principles of public administration. If the competition authorities fail to reach a decision within the deadlines, it is not possible to intervene in mergers that harm competition. The competition authorities therefore bear a great responsibility in this regard.
However, the way in which merger matters and notifications are prepared varies between countries, as explained in more detail below.
Thorough preparation of a notification
Both for the European Commission and in the main neighbouring countries, it is exceptional for a merger to be notified without any detailed discussions and preparation having taken place in cooperation with the relevant competition authorities. These preliminary discussions (e.g. Pre-notification talks) take place before a notification is sent and are not subject to any time limits.
Í guidelines The EC's guidelines on best practice in merger cases state, for example:
„In DG Competition's experience, the pre-notification phase of the procedure is an important part of the whole review process. As a general rule, DG Competition finds it useful to have pre-notification contacts with notifying parties even in seemingly non-problematic cases. DG Competition will therefore always give notifying parties and other involved parties the opportunity, if they so request, to discuss an intended concentration informally and in confidence prior to notification … .“
The preliminary consultations are intended, in the first place, to ensure that all necessary information is available at or in the run-up to a merger notification, which is intended to expedite the handling of the case. There has been a failure in this regard in Iceland, but regarding 32% The merger notifications last year were deemed insufficient.
Secondly, merger parties can use pre-notification discussions to answer various questions that they know the relevant regulatory authority will seek answers to. This speeds up the case's proceedings, as this type of information gathering during the course of a case can often be time-consuming. In this context, for example, user surveys used in case proceedings can be mentioned. Such surveys can, for instance, be of considerable importance for the definition of markets.
Thirdly, it is widely recognised that preliminary discussions provide a forum for exploring whether a merger can be authorised with conditions and, where appropriate, settling the matter.
It is clear that this type of preparation significantly shortens the time spent on an investigation after statutory deadlines begin to run and makes it easier for competition authorities to conclude cases at the first phase of the investigation.
Foreign discussions here
In this country, pre-notification discussions have not become established. For some time, the Competition Authority has been advocating, in forums such as round-table discussions, that merger parties make greater use of the Authority when preparing for mergers. At the turn of the year, new guidelines were published. Rules on notification and procedure in merger matters in Iceland, where such preliminary discussions are specifically addressed, but the purpose of the new rules is, among other things, to increase efficiency and the speed of proceedings.
However, the usefulness of this type of pre-merger consultation is highly dependent on how the merging parties or their advisers handle the merger preparation and merger notifications. In this country, the preparation of merger notifications is largely in the hands of lawyers, but in most other countries, economic consultants take a greater part in this work. Economic analyses are an intensive but also time-consuming part of resolving a merger case. Good economic preparation of a merger therefore speeds up the investigation.
In neighbouring countries, a large part of the matter takes place before the merger notification.
The aforementioned pre-notification procedure in most neighbouring countries has led to a growing proportion of the substantive proceedings taking place before the merger parties submit a merger notification. However, this has the disadvantage that a large part of the merger investigation takes place in the context of pre-notification discussions, which are not subject to any time limits.
In 2017, the lawyer Christopher Cook published an article (Concurrences No. 2-2017) on the review of the actual processing time of merger cases at the European Commission. The data show that pre-notification discussions, from the public announcement of a merger until a merger notification is submitted following these discussions, have lengthened on average from 54 days in 2000 to 83 days in 2016. In the case of merger matters which concluded in the first phase of the investigation in 2016, preliminary discussions were held for 100-300 days in a little over 32% of the cases. It should be mentioned that in the Commission's investigation into the merger Halliburton and Baker Hughes Preliminary talks were held for 13 months.
The aforementioned article by the lawyers points out that 2-3% of cases at the European Commission are moved to the second phase of an investigation. If the time the preliminary investigations take were taken into account, the proportion would rise significantly and would be comparable to or higher than in Iceland. In 2020, this proportion was just over 40% in Iceland. Furthermore, it can be assumed that a large proportion of cases concluding at the second phase in Iceland actually take less time than cases concluding at the first phase with the European Commission.
The situation in Norway
The Norwegian Competition Authority has published Guiding principles on merger proceedings, which specifically addresses pre-notification discussions in the run-up to a merger case. The rules state that pre-notification discussions are particularly important in the case of large or complex mergers. According to information from the Norwegian competition authority, the time spent on such pre-notification discussions, outside the deadlines, can range from one to two months. In Norway, the experience with well-organised pre-notification discussions has been very positive, leading to fewer cases than would otherwise be the case requiring further investigation in the second phase. In at least one instance, pre-notification discussions concerning a relatively complex merger in Norway resulted in the case being settled during the first phase.
Better safe than sorry
Various other factors are important when comparing the duration of cases here with that of neighbouring countries. Thus, the turnover thresholds of individual countries matter (the relative number of notifications), the market conditions in the respective country (concentration), access to reliable information on market share, the manpower and financial resources of the competition authorities, and so on. The bottom line, however, is that the Competition Authority is constantly seeking ways to increase the efficiency of merger review. The Authority hopes that the newly revised legislation in this area, together with new merger rules, will speed up the handling of cases in this regard.
The article was published on Vísir on Monday, 22 February 2021.
The author is a project manager at the Competition Authority.
"*" indicates required fields
