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27.07.2016 Analysis: Part 2 GCR Global Competition Review

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RATING ENFORCEMENT 2016

ANALYSIS: PART 2Wednesday, 6 July 2016 (2 weeks ago)

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Rating Enforcement: Analysis Part 2

Table 12: Budget

Authority Budget in millions ofeuros

US (DOJ) 144

US (FTC) 112.6

DG Comp 97.7

Japan 85.5

Korea 80.4

Russia 67.4

Australia 48

Italy 46.8

UK 35

Germany 28.8

Canada 28.3

Mexico 24.3

India 24

Spain 22.9

Turkey 20.3

France 19.9

Sweden 15

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Netherlands 14.6

Ireland 12

Denmark 11.6

Chile 10.5

Norway 10.5

Switzerland 10.3

Singapore 10

Brazil 9.1

Romania 9.1

Czech Republic 8.5

Belgium 8.4

Israel 8

New Zealand 8

Greece 7.7

Portugal 7.3

Colombia 6.8

Finland 6

Austria 2.84

Poland 2.8

Pakistan 1.7

Lithuania 1

Latvia 1

The DoJ’s antitrust division is both a civil and criminal enforcer ofcompetition law in the US – and with regard to its cartel enforcementagainst foreign companies, some criticise it as the world’s wouldbepoliceman. It has a €144 million budget to fit the task, topping thetable once again with a small increase over 2014. This contrasts withthe US FTC’s downtick from €115.5 million in fiscal year 2014 to€112.6 million in 2015.

Korea’s Fair Trade Commission showed that much can be done evenif belts are being taken in a notch. Despite a yearonyear budgetdecline from €95.2 million to €80.4 million, the KFTC turned in a fivestar performance, drawing high praise from practitioners and hittingevery note of cartel, merger, unilateral conduct and advocacy work.



Meanwhile, Japan’s Fair Trade Commission barely hung on to thefourandahalf stars it has held for several editions of Rating Enforcement,despite what Baker & McKenzie partner Junya Ae says was anincrease in its competition enforcement budget. He adds thatJapanese practitioners are wondering why the JFTC is less activewhen enforcing against international cartels.

Belgium illustrates another difficulty for an antitrust enforcer: a decentbudget for the size of the privatesector economy, but the authority isbeing held back from spending it as it would like. While only 51% ofthe agency’s budget actually went to salary last year, 70% had beenallocated for that purpose. A recent reorganisation as an independentagency, and resulting confusion about the status of the authority’semployees, impedes the hiring of new staff. This in turns affects theability of Belgium’s competition authority to promptly handle leniencyapplications and big deals such as Delhaize/Ahold.

Table 13: Proportion of budget spent on salary

Authority Per cent spent on salary

Netherlands 93

Latvia 91

Switzerland 88

DG Comp 86.5

Romania 85

UK 84

Germany 81

Mexico 80

France 79

Norway 78

Italy 75

Japan 75

Portugal 75

Sweden 75

Austria 74

Russia 70



Russia 70

Singapore 69

Denmark 65

US (FTC) 65

Canada 64

Israel 62.5

Ireland 60

Pakistan 60

US (DOJ) 60

Lithuania 59

Finland 58

Chile 55

Belgium 51

Poland 51

Turkey 51

Greece 48

Czech Republic 41

Australia 39

Spain 38

Korea 35

New Zealand 34

Brazil 28

Colombia 27

India 9.5

A record €3.45 trillion was spent on global mergers and acquisitionsin 2015 according to data compiled by Bloomberg. It is no surprisethat the majority of jurisdictions participating in Rating Enforcement saw abump in the number of merger filings they received during 2015.

As in 2014, Russia, the US DoJ, the US FTC, Germany and Korea allreceived the largest number of notifications. The latter four allreported spikes in merger filings compared to 2014, as did Australia,the EU, France and the UK.

Russia continues to handle significantly more mergers than any otherauthority, although the number of mergers filed in 2015 was down



compared to 2014, from 2,246 to 1958 – likely because of Russia’sweakening economy. In 2014, it handled 600 more notifications thanthe US DoJ, but that difference has now dropped below 200.Meanwhile, the DoJ’s filings rose by more than 150 and the USFTC’s by more than 100.

Only 10 other authorities experienced a decline in mergernotifications, seven of which were European. Brazil, New Zealandand Canada also saw reduced merger activity, with filings at the latterdown by almost 20%, potentially because slightly higher notificationthresholds were introduced in early 2015.

Table 14: Number of mergers filed

Authority Merger filings Population*

US (DOJ) 1,801 (jointly with FTC) 321,368,864

Russia 1,958 142,423,773

US (FTC) 1,754 321,368,864

Germany 1,219 80,854,408

Korea 669 49,115,196

Brazil 404 204,259,812

Austria 366 8,665,550

Australia 350 22,751,014

DG Comp 337 513,949,445

Japan 296 126,919,659

Poland 228 38,562,189

France 218 66,553,766

Turkey 205 79,414,269

Canada 204 35,099,836

Israel 159 8,049,314

Mexico 141 121,736,809

India 127 1,251,695,584

Norway 96 5,207,689

Spain 93 48,146,134

Netherlands 89 16,947,904

Pakistan 83 199,085,847

Ireland 78 4,892,305



UK 71 64,088,222

Sweden 61 9,801,616

Portugal 60 10,825,309

Colombia 51 46,736,728

Italy 51 61,855,120

Denmark 42 5,581,503

Romania 40 21,666,350

Lithuania 38 2,884,433

Belgium 32 11,323,973

Czech Republic 31 10,644,842

Switzerland 29 8,121,830

Finland 26 5,476,922

Latvia 18 1,986,705

New Zealand 12 4,438,393

Greece 8 10,775,643

Chile 6 17,508,260

Singapore 5 5,674,472

* Source: CIA World Factbook

Table 15: Mergers that led to indepth review

AuthorityNo. of mergers thatled to an indepth

review

Per cent of mergersthat led to an indepth

review

New Zealand 12 100

Pakistan 68 82

Latvia 10 56

Colombia 26 50.98

Greece 3 38

Singapore 1 20

Italy 7 18

Canada 33 16

Belgium 5 15.50

Brazil 61 15

UK 11 15

Lithuania 5 13

Switzerland 3 10

Israel 15 9



Israel 15 9

Norway 9 9

Russia 185 9

Finland 2 8

Denmark 3 7

Mexico 10 7

Sweden 4 7

Netherlands 5 6

Korea 32 5

Australia 13 4

Ireland 3 4

Portugal 2 3.33

DG Comp 11 3

US (DOJ) 32 3

Poland 7 2.50

US (FTC) 20 2.28

Japan 6 2

Austria 5 1.40

Germany 13 1

Spain 1 1

Turkey 2 1

India 1 0.80

Czech Republic 0 0

France 0 0

Romania 0 0

Chile 16 (voluntary MR) Not available

It takes experience to assess if a deal warrants further scrutiny, sohistorically, younger enforcers have tended to send a largerproportion of filed mergers to an indepth review compared to theirmore mature counterparts.

It is the first time Pakistan has featured in the Rating Enforcement surveyand it jumps straight to second in the table, having sent a whopping82% of its 83 mergers to an indepth review. It sits only behind NewZealand, which unsurprisingly tops the list, because its voluntaryregime subjects all filed mergers to thorough scrutiny. The proportion



of Latvia’s Phase II reviews rose from 36% to 56%, the thirdhighestin the table, while Colombia and new entrant Singapore scrutinised51% and 20% of all mergers respectively. Meanwhile, the number ofPhase II’s in Greece dropped from 50% to 38%.

The European Commission and other leading agencies in the US,Germany, France, Japan and Korea continued to register singledigits, sending 5% or less of all filed mergers to Phase II. Elsewhere,the Czech Republic slashed the proportion of indepth probes from11% to zero, while Poland, which previously subjected all mergers tofurther scrutiny, sent only 2.5% of mergers to Phase II, following theintroduction of a new regime at the beginning of the year.

Table 16: Number of mergers challenged

Authority No. of mergerschallenged

Per cent of mergerschallenged

Chile 3 50

Singapore 2 40

Greece 3 38

UK 11 15

Italy 5 10

New Zealand 1 8.25

Portugal 4 6.66

DG Comp 22 6.5

Belgium 2 6

Latvia 1 6

Russia 119 6

Norway 5 5

Denmark 2 4.75

Canada 9 4.5

Colombia 2 4

Finland 1 4

Pakistan 3 4

Israel 6 3.75

Mexico 4 3

Netherlands 3 3



France 7 2.75

Lithuania 1 2.6

Australia 8 2.25

Brazil 8 2

Japan 6 2

Sweden 1 2

Turkey 4 2

US (FTC) 22 1.25

Korea 8 1

US (DoJ) 20 1

Austria 3 0.82

Poland 1 0.4

Germany 4 0.33

Czech 0 0

India 0 0

Romania 0 0

Spain 0 0

Switzerland 0 0

Ireland Not a proper answer Not a proper answer

Table 17: Proportion of challenged mergers blocked

Authority No. of challengedmergers blocked

Per cent of challengedmergers blocked

Ireland Not available Not available

Lithuania 1 100

New Zealand 1 100

Sweden 1 100

Colombia 1 50

Singapore 1 50

Russia 54 45

Netherlands 1 33

Germany 1 25

Mexico 1 25

Turkey 1 25

Canada 2 22

Brazil 1 13

US (FTC) 2 9

Australia 0 0



Austria 0 0

Belgium 0 0

Chile 0 0

Czech Republic 0 0

Denmark 0 0

DG Comp 0 0

Finland 0 0

France 0 0

Greece 0 0

India 0 0

Israel 0 0

Italy 0 0

Japan 0 0

Korea 0 0

Latvia 0 0

Norway 0 0

Pakistan 0 0

Poland 0 0

Portugal 0 0

Romania 0 0

Spain 0 0

Switzerland 0 0

UK 0 0

US (DOJ) 0 0

Chile once again tops the list of challenged mergers table (see table16), having contested 50% of all mergers that were filed in 2015,although this figure is half the 100% record it maintained in 2014.Premerger notification is voluntary under Chile’s merger regime, andof the deals it challenged, zero were blocked. New entrant Singaporechallenged 40% of the five mergers that were filed in 2015, blockinghalf of the deals it contested, while Greece also challenged nearlytwofifths of the eight mergers that were filed in Athens – the samepercentage as in 2014, but half the actual number of deals.

Of the 10 authorities who topped the table in 2014, none challenged



a higher proportion of deals in 2015. Indeed, only nine enforcersoverall posted more aggressive figures in 2015, and of those, onlyLatvia and Italy saw more than a 5% spike – from zero to 6%, and2% to 10% respectively.

Elsewhere, the number of deals challenged in the Czech Republicdropped to zero, down from 11% in 2014, moving the enforcer fromfourth in the table to joint bottom alongside India, Ireland, Romania,Spain and Switzerland, all of which failed to contest a merger.

Russia once again challenged the largest number of deals,contesting 119 in total, six times more than its closest competitors,the US FTC, US DoJ and the EU.

It wasn’t a noteworthy year for many of the world’s leading enforcers,based on this metric. None of DG Comp, France, Japan, Korea orAustralia blocked any deals. The US DoJ and FTC challenged 1% ofall mergers, with the latter blocking 9%, but the former didn’t rejectany.

Fewer than half of the survey’s participating authorities reported anychallenged mergers that were subsequently abandoned by theparties during 2015.

Israel very much bucked this trend, as 83% of the six mergerschallenged by its Antitrust Authority were abandoned. This is not justa huge increase on last year – when zero mergers were abandoned– but also marks a stark swing away from its record of resolving mostof its challenged mergers with remedies. In 2014, four out of fivedeals were resolved with remedies, but in 2015 figure this droppedbelow 20%.

Japan and Mexico also reported a sharp increase in abandoned



mergers, with 50% of all challenged deals abandoned in eachjurisdiction – both up from zero in 2014. Meanwhile the proportion ofmergers abandoned in Germany dropped from 84% to 50% – from10 to two overall.

Elsewhere, the US DoJ challenged 20 mergers, half of which weresubsequently abandoned – the largest number in the survey and theonly enforcer to report double digits in this field. It is also double whatit reported in 2014.

Many of the world’s leading enforcers continued to strike fear into thecompanies whose deals they contested, with at least one dealcollapsing following a challenge in Japan, Germany, Australia, theUS, France and Korea.

Threequarters of all jurisdictions resolved at least one merger withremedies, while more than half of all jurisdictions resolved at least50% of all challenged mergers.

Once again Russia topped the table, although the number of deals itresolved dropped by more than half. The UK, DG Comp, the US FTCand US DoJ were the only enforcers to approve 10 or more dealswith remedies. The UK improved its remedies record, which jumpedfrom zero to 84% of all challenged mergers. Seven agenciesmeanwhile cleared all of their challenged deals with remedies.

Of those authorities who experienced a drop in remedies decisions,Ireland’s was the starkest, declining from 100% to zero, although theactual numbers dropped from just one to zero. Lithuania, Spain andNew Zealand witnessed drops from 67% and 50% respectively.

Table 18: Proportion of challenged mergers abandoned

No. of challenged Per cent of challenged



Authority mergers abandoned mergers abandoned

Russia Not available Not available


Israel 5 83

Germany 2 50

Japan 3 50

Mexico 2 50

Portugal 2 50

Singapore 1 50

US (DOJ) 10 50

Chile 1 33

UK 3 27

Australia 2 25

Italy 1 20

US (FTC) 4 18

France 1 14

Greece 1 12.5

Korea 1 12.5

DG Comp 2 9

Austria 0 0

Belgium 0 0

Brazil 0 0

Canada 0 0

Colombia 0 0

Czech Republic 0 0

Denmark 0 0

Finland 0 0

India 0 0

Latvia 0 0

Lithuania 0 0

Netherlands 0 0

New Zealand 0 0

Norway 0 0

Pakistan 0 0

Poland 0 0

Romania 0 0

Spain 0 0

Sweden 0 0



Switzerland 0 0

Turkey 0 0

Table 19: Proportion of mergers resolved with remedies

AuthorityNo. of challengedmergers resolved

with remedies

Per cent of challengedmergers resolved with

remedies


Belgium 2 100

Denmark 2 100

Finland 1 100

Latvia 1 100

Norway 5 100

Poland 1 100

UK 11 100

DG Comp 20 91

Brazil 7 88

Korea 7 87.5

France 6 86

Italy 4 80

Canada 7 78

US (FTC) 17 77

Australia 6 75

Mexico 3 75

Turkey 3 75

Chile 2 67

Austria 2 66

Pakistan 2 66

Russia 65 55

Colombia 1 50

Japan 3 50

Portugal 2 50

US (DOJ) 10 50

Netherlands 1 33

Germany 1 25

Israel 1 17

Czech Republic 0 0

Greece 0 0



India 0 0

Lithuania 0 0

New Zealand 0 0

Romania 0 0

Singapore 0 0

Spain 0 0

Sweden 0 0

Switzerland 0 0

Table 20: Average length of an indepth merger review

AuthorityAverage length of in

depth merger review (indays)

Portugal 225

Chile 199

Netherlands 194

Spain 180

UK 180

Poland 162

Turkey 155

Ireland 150

Norway 150

Colombia 144

Denmark 135

Singapore 120

Germany 117

Sweden 115

DG Comp 112.5

Austria 105

Latvia 96

Finland 90

Greece 90

Japan 90

Mexico 87

Switzerland 7590

Brazil 82

Australia 77

Israel 74.5

New Zealand 64



New Zealand 64

Lithuania 63

Italy 62

Canada 48

Belgium 46

Korea 26.5

Pakistan 1421

US (FTC) Not available

Czech Republic Not available

France Not available

India Not available

Romania Not available

Russia Not available

US (DOJ) Not available

For the third year in a row, we asked competition enforcers how longit took, on average, to conclude an indepth merger review. Althoughthe statistics can be skewed depending on how many indepthinvestigations are opened in one given year and when a merger’sclock officially begins, the data gives some indication of the generaltiming of a Phase II review in these jurisdictions.

The majority of enforcers take between three and five months toreview a complex deal and decide on a course of action. Portugaland the Netherlands once again appear at the top of the table – thistime alongside Chile – in taking the longest amount of time tocomplete a review. The Netherlands, however, dropped from first tothird, after shaving 45 days off of an average review. Portugal nowtops the list: its reviews in 2015 on average took sevenandahalfmonths to conclude, despite launching only two Phase IIinvestigations last year.

In Pakistan and Korea, indepth reviews last less than a month.Korea usually takes 26 days to complete a review, while Pakistanordinarily completes an indepth merger investigation within two to



three weeks – perhaps unsurprising given that the enforcerscrutinised 82% of the 83 mergers filed in 2015, with only 30competition enforcement staffers. Enforcers must be efficient whenexamining deals to prevent a backlog of cases. Broadly speaking,those enforcers who initiate the most indepth reviews tend to takeless time completing their investigations. Elsewhere, Canada andBelgium continue to keep their Phase II reviews shorter than twomonths on average.

A number of authorities trimmed the amount of time it took to reviewcomplex deals in 2015, with Austria, Germany, Belgium and the EUall taking between 35 and 45 days less on average to conclude theirinvestigations; the European Commission saw the average durationof an indepth review return to 2013 levels after witnessing a steepclimb in 2014.

The average wait time in Poland jumped from two months to 162days. Poland previously subjected all mergers to indepth scrutiny,but in 2015 it sent only 2.5% of mergers to Phase II, following theintroduction of a new regime at the beginning of the year. Turkeymeanwhile extended the average length of an indepth mergerinvestigation from just 16 days to five months – nearly a tenfoldincrease.



(Click for larger image)

Table 21: Number of firstin leniency applications

Authority No. of firstin leniencyapplications

Russia 35

Canada 33

Germany 28

Brazil 22

UK 22

Australia 17

Austria 12

France 8

Mexico 8

http://www.globalcompetitionreview.com/cdn/images/gcr/surveys/re_extras/analsyis-graph2-re2016.jpg



Mexico 8

Singapore 6

Romania 5

New Zealand 3

Norway 3

Chile 1

India 1

Latvia 1

Portugal 1

Turkey 1

Belgium 0

Israel 0

Lithuania 0

Pakistan 0

South Africa was, by some distance, the top enforcer for firstinleniency applications last year, breaking into triple figures with animpressive 115 filings. This year, however, the agency declined totake part in Rating Enforcement, so whether this year saw a repeat of thatspike in applications – caused by the agency’s ConstructionSettlements Project – is unknown. We also are unable to reportwhether its unusual presence at the top of the leniency applicationstable was also repeated this year, but it seems unlikely.

Broadly, things are back to normal on the firstin scene, with the everhyperactive Russia bagging the top spot. Coming right in afterwardsare Canada, which took third place last year, Germany, the UK andBrazil, and Australia. The top five is more or less business as usual.The UK and Brazil are new entrants. Otherwise, Canada, Germanyand Australia roughly maintain their positions from last year’s survey,and while the Federal Cartel Office has dipped from 42 to 33 filings,the numbers are for the most part steady.

Lower down the table, it’s clear that Belgium had a poor year forattracting whistleblowers: from six applications in 2014 to zero new



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leniency files last year. Israel, Lithuania and Pakistan join the agencyat the bottom, having received no firstin applications. The Pakistaniauthority appears in Rating Enforcement for the first time; it’s worth notingthat the authority had a quiet year in 2014 and handed down only€1.18 million in cartel fines last year.

If the number of firstin applications Germany received sagged in2015, the broader leniency picture looks much healthier: it receivedonly four fewer applications last year than in 2014, coming to a totalof 76. And once again, the absence of South Africa has evenedthings out a little in the top ranks of the leniency applications table:usual suspects like Japan, Canada, Russia, DG Comp and Australiareturn to the top of our list, with Brazil a new entrant in second place.Meanwhile, it was an exceptionally good year for Mexico, which sawa tripling of its number of applications from six to 18 – that’s onefewer than Australia, and only six fewer than the UK.