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Practical issues: merger filing thresholds - BIAC - June 2016 OECD discussion on jurisdictional nexus

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This presentation by BIAC was made during a roundtable discussion on Jurisdictional nexus in merger control regimes held at the 123rd meeting of the Working Party No. 3 on Co-operation and Enforcement on 15 June 2014. More papers, presentations and contributions from delegations on the topic can be found out at www.oecd.org/daf/competition/jurisdictional-nexus-in-merger-control-regimes.htm

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Practical issues: merger filing thresholds - BIAC - June 2016 OECD discussion on jurisdictional nexus

  1. 1. PRACTICAL ISSUES: MERGER FILING THRESHOLDS BIAC Competition Committee June 15, 2016 Presented by John M. Taladay
  2. 2. • Does your jurisdiction only count the sales and/or assets of what is being acquired (the target) rather than sales and/or assets of the selling entity or selling group? 71% 29% Yes No • 78 out of 80 Agencies Responded • 56 Replied “Yes” • 22 Replied “No” • 77 out of 80 Agencies Responded • 29 Replied “Yes” • 48 Replied “No” ICN Survey: Further Compliance is Required 2 • Can the local activities of the acquirer buyer (rather than the acquired business) alone trigger notification?
  3. 3. • Do the merger notification thresholds use objectively quantifiable criteria (e.g. sales and/or assets) and not other criteria, such as market share, market power, or other potential transaction- related effects? 70% 30% Yes No • 79 out of 80 Agencies Responded • 56 Replied “Yes” • 23 Replied “No” ICN Survey: Further Compliance is Required 3
  4. 4. 80 80 80 80 80 80 80 80 80 80 n=800 Total Filings €20m €144m €91m €57m €39m >€900m €28m €579m €343m €218m Evaluating Agency Activity to Determine Appropriate Thresholds 4 4 6 2 0 1 0 2 3 2 0 n=20 Prohibitions/ Modifications 9 15 6 2 4 4 10 8 7 1 n=66 Phase II Investigations• Example: Republic of BIAC • 800 Merger filings in last 5 years • 8% of filings received in-depth investigation • 2.5% of filings were challenged or modified through remedies • Current local turnover threshold: €20 million
  5. 5. • BIAC “Safety Net” Recommendation: • Measure efficacy of current threshold • If current threshold capturing deals at levels not frequently challenged, raise the threshold • If necessary, retain jurisdiction (safety net) on deals down to level of prior threshold • Ability to demand notification challenge for e.g., 6 months 5 Instituting Local Nexus With Elevated Thresholds: Safety Net Proposal 80 80 80 80 80 80 80 80 80 80 n=800 Total Filings €20m €144m €91m €57m €39m €1000m €28m €579m €343m €218m Safety Net Zone
  6. 6. • Local nexus still required • Can be used with all thresholds: turnover, asset, etc. • Utilize ability to change rules, regulations, filing requirements • If threshold embedded in statute, consider imposing “super-simplification” of notifications within safety net zone (“one pager”) 6 Instituting Local Nexus With Elevated Thresholds: Safety Net Proposal
  7. 7. 7 Market Share and Other Non-Objectively Quantifiable Based Thresholds
  8. 8. 8 Issues With Non-Objectively Quantifiable Measures When Setting Filing Thresholds • Typical data availability in markets with no sales presence: Genesis International Inc. Sales by Country Exeter International Sales by Country Country Sales Country Sales Algeria Algeria Angola Angola 1,136 Argentina 300,000 Argentina 402,726 Armenia Armenia Australia 1,600,000 Australia 2,501,246 Austria 1,300,000 Austria 640,999 Bahamas Bahamas Bahrain Bahrain Bangladesh Bangladesh
  9. 9. • Three basic options when facing market share (non- objective) notification: • Result: lower likelihood of receiving notification in many cases as compared to regimes with objective criteria 9 Market Share Threshold Dilemma File out of caution Puts burden on party and agency for unnecessary filings Don't File Who has burden to prove filing was necessary? Invest to Research Unknown Market Shares High cost to firms; subjective analysis
  10. 10. • Work to be done on conformity to Guidance/RPs • Jurisdictional nexus • Use of two party test, not just buyer • Regional competition authorities • Notification threshold levels • Subject to evaluation, testing, modification • Elements within agency's control • Use of objectively quantifiable criteria promotes notification • Efficient notification scheme benefits agencies, business and consumers 10 Conclusions
  11. 11. Presentation by the BIAC Competition Committee to the OECD Competition Committee Working Party No. 3 Discussion on Local Nexus and Jurisdictional Thresholds in Merger Control June 15, 2016

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