March 9, 2012
As we reported in our 2011 Mid-Year Update, antitrust and competition authorities around the world have continued to intensify merger enforcement efforts and have launched a number of important merger-related policy initiatives.
As discussed in this Update, these recent developments continue to underscore the growing regulatory complexity and other challenges facing parties as they plan to launch M&A transactions, particularly transactions involving global businesses.
Table of Contents (click on link)
The volume of M&A transactions subject to reporting under the Hart-Scott-Rodino Act ("HSR") continues to recover from the depths of the financial crisis. The number of transactions reported under HSR has more than doubled over the past two years (from 716 to 1,450 annually) — increasing 63% between FY 2009 and FY 2010, and increasing another 25% between FY 2010 and FY 2011. While the volume of HSR-reportable M&A transaction remains lower than prior to the 2008 financial crisis, the substantial increase in HSR filings over the past two years shows a significant recovery in M&A transactions, which seems likely to continue through FY 2012.
As reported in our previous update, the FTC and DOJ under the Obama Administration are issuing "second requests" (i.e., subjecting transactions to a formal investigation) at a substantially higher rate than under the previous Administration. The percentage of HSR-reportable transactions subject to a second request was 4.5% in FY 2009, the highest rate in a decade. And although it dropped a bit in FY 2010, the percentage of second requests remained a robust 4.1% in FY 2010. While the agencies have not yet published enforcement statistics for FY 2011, it is expected that these statistics will resemble the level of enforcement over the past two years. In addition, over the past several years, there appears to have been a significant uptick in investigations of "below the radar" transactions that are not subject to HSR reporting, a trend that appears to be continuing.
Enforcement rates also continue to be elevated as compared to historical levels. The DOJ/FTC enforcement rate (i.e., the percentage of all HSR-reportable transactions that were abandoned, blocked, or subject to a remedy) was 3.5% in FY 2009 and 4.1% in FY 2010. These rates were significantly higher than in the last two years of the Bush Administration (1.5% in FY 2007 and 2.1% in FY 2008). While enforcement statistics are not yet available for FY 2011, they are expected to be at the same relatively high levels, although it continues to be the case that the vast majority of HSR-reportable transactions are not subject to enforcement.
The numbers tell only part of the story. As discussed below, over the past year, the agencies have stepped up their litigation efforts, challenging (or threatening to challenge) more transactions in court than at any time since the Obama administration took office.
Since the beginning of 2011, the Antitrust Division has successfully blocked three major proposed mergers, two of which (AT&T/T-Mobile and NASDAQ/NYSE) were abandoned by the parties without a court-imposed injunction. The third, H&R Block’s attempt to acquire TaxACT, resulted in the first significant merger litigation victory for the DOJ in nearly a decade and the first major court decision applying key aspects of the 2010 Horizontal Merger Guidelines.
In December 2011, nearly nine months after AT&T announced its intention to acquire T-Mobile from its parent, Deutsche Telekom AG, the companies called off their blockbuster $39 billion merger. The parties abandoned the transaction in the face of a series of antitrust lawsuits and other regulatory hurdles surrounding the competitive consequences of the transaction, including a lawsuit brought by the DOJ and eight states seeking to enjoin the transaction, subsequent private antitrust lawsuits filed by Sprint Nextel and Cellular South (recently renamed "C Spire Wireless"), an FCC report concluding that the transaction would violate the Clayton Act, and a series of congressional hearings.
The core antitrust concern alleged by the DOJ was that the combination of AT&T and T-Mobile, two of the nation’s "Big Four" wireless providers, would lead to higher prices, less product variety and innovation, and reduced service quality in the market for mobile wireless telecommunications services. According to the DOJ’s complaint, the merger would substantially lessen competition both at the local level — i.e., in the 97 cellular market areas (CMAs) where the parties compete — and at the national level, where businesses and public-sector customers that required a national network could not turn to local competitors.
In addition to mirroring the DOJ’s claims, Sprint and Cellular South brought separate lawsuits alleging the AT&T/T-Mobile transaction would result in a number of antitrust harms that were not asserted by the DOJ. While private actions brought by competitors are not unheard of, they are certainly a rarity and underscore the high stakes involved in this transaction. Among other claims, Sprint and Cellular South alleged that the merger would lead to higher prices for wireless "backhaul" roaming services provided by AT&T, foreclose access to cutting-edge smartphones, and remove T-Mobile as a business partner in important industry initiatives. Although certain of Sprint’s and Cellular South’s claims were dismissed, the court allowed several claims to proceed to discovery.
Several weeks after the FCC issued its report signaling its opposition, AT&T and T-Mobile elected to abandon the deal rather than litigate the DOJ lawsuit and navigate further FCC proceedings.
H&R Block/2SS Holdings, Inc. (TaxACT)
On October 31, 2011, a federal district court enjoined H&R Block from proceeding with its proposed $287.5 million acquisition of rival 2SS Holdings Inc., the maker of TaxACT products, handing the DOJ its first trial victory in a merger challenge since 2003. The case, United States v. H&R Block, Inc., No. 11-cv-00948, also represents the first significant court decision applying the 2010 Horizontal Merger Guidelines. H&R Block, the country’s second largest provider of digital do-it-yourself (DDIY) tax preparation services, sought to acquire 2SS Holdings, the third largest supplier of DDIY tax preparation products. The DOJ argued that the removal of 2SS as an independent competitor would effectively result in a "duopoly" in the market for DDIY tax preparation services between H&R Block and Intuit, the market leader. H&R Block countered that the relevant market for tax preparation services was broader than only DDIY products and included other tax preparation methods, such as "pen and paper" preparation by individuals and assisted preparation by tax professionals. The parties further claimed that the likelihood of expansion by other existing DDIY companies would offset any potential anticompetitive effects from the merger.
District Court Judge Beryle Howell, in an 86-page opinion, sided with the DOJ. The case turned largely on market definition, with the court adopting the DOJ’s proposed definition of DDIY tax preparation and rejecting the parties’ broader definition. The court found that the DDIY market was highly concentrated, and agreed with the DOJ that the merger would lead to a further sharp increase in market concentration, giving H&R Block and Intuit a combined market share of over 90 percent.
The court’s analysis relied, in part, on ordinary course of business documents produced by the defendants. The court found that internal TaxACT documents, including competitive analyses prepared by the company and confidential memoranda prepared by its investment bankers, established that TaxACT viewed the DDIY products offered by H&R Block and TurboTax as its primary competitors, on which it based its own pricing and business strategy. Likewise, internal H&R Block documents supported the DOJ’s DDIY market definition.
But the most important factor in the court’s decision was the analysis presented by the DOJ’s economist, Dr. Warren-Boulton. Dr. Warren-Boulton presented his conclusion that DDIY products constituted a relevant market, based in part on his study of historical IRS data reflecting over 100 million transactions involving customers switching from one method of tax preparation to another. Based on this study, along with a critical loss analysis and a merger simulation, he concluded that a hypothetical monopolist of all DDIY products could profitably impose a small but significant and non-transitory price increase. The court agreed in what turned out to be a critical finding in the case.
After finding in favor of the DOJ regarding market definition, the court concluded that the deal would likely result in coordinated and unilateral effects. The court held that coordinated effects were likely based on several factors, including its finding that TaxACT’s competition constrained market prices and H&R Block and Intuit had a history of moving their prices in tandem. The court also pointed to evidence of transparent DDIY pricing, the small and widespread nature of transactions, and barriers to switching between tax preparation methods and providers. With respect to unilateral effects, the court concluded that H&R Block and TaxACT were head-to-head competitors and that TaxACT had uniquely constrained H&R Block’s pricing such that post-merger, DDIY product prices were likely to increase.
The decision was a significant victory for the DOJ, marking the first time the DOJ had litigated a merger case to decision since its failed attempt to prevent Oracle from acquiring PeopleSoft in 2004.
On April 1, 2011 NASDAQ and Intercontinental Exchange Inc. submitted an unsolicited bid, worth approximately $11.3 billion, to acquire NYSE. If consummated, the deal would have given NASDAQ control over NYSE’s stock listings business, stock trading venues and market data licensing operations. According to the DOJ, NASDAQ and NYSE competed aggressively for listing consumers, as they are effectively the only companies providing corporate stock listing services in the US. The companies are also the only two providers of stock auction services and off-exchange reporting services. Accordingly, the DOJ argued that the merger would have eliminated competition for corporate stock listing services, opening and closing stock auction services, and off-exchange stock trade reporting services, as well real-time proprietary equity data products. The DOJ informed the companies that it intended to file an antitrust lawsuit to block the deal. NASDAQ and Intercontinental Exchange subsequently decided to abandon their proposed acquisition on May 16, 2011.
On February 13, 2012 the DOJ announced that it was closing two investigations relating to acquisitions of patent portfolios by a number of firms in the mobile handset space — Google Inc.’s acquisition of Motorola Mobility Holdings Inc., the acquisitions by Apple Inc., Microsoft Corp. and Research in Motion Ltd. (RIM) of certain Nortel Networks Corporation patents, and the acquisition by Apple of certain Novell patents.
The DOJ investigation centered on whether the acquiring firms could use the patents they sought to acquire to raise rivals’ costs or foreclose competition. In particular, the DOJ examined standards essential patents (SEPs) that Motorola Mobility and Nortel had previously committed to license to industry participants through their participation in standard-setting organizations (SSOs). SSOs work collectively to develop technical standards that establish precise specification for essential components of wireless technology. Abandoning such standards after industry participants make complementary investments can be extremely costly, raising concerns that, after a standard is set, a patent holder could opportunistically seek to extract higher payments for its technology than it could demand before the standard was set. Therefore, SSOs often require SEP owners to make certain disclosure and licensing commitments with respect to essential patents, such as the requirement that SSO members license them on "fair, reasonable and nondiscriminatory" (FRAND) terms.
The DOJ focused its investigations of certain SEP acquisitions on whether the acquiring firms (Google, Apple, Microsoft, RIM) would have the incentive and ability to exploit ambiguities in these licensing commitments to hold up rivals, particularly through the threat of an injunction or exclusion order, thus potentially preventing or inhibiting innovation and competition.
Apple and Microsoft sought to alleviate these concerns by committing to license SEPs on FRAND terms, as well as to not seek injunctions in disputes involving SEPs. According to the DOJ, Google’s commitments regarding SEPs were "more ambiguous." Nonetheless, the DOJ concluded that the acquisition of Motorola’s patents by Google did not substantially lessen competition, although it expressed "concern" over how Google may exercise its patents in the future.
In closing its investigation of these acquisitions, the DOJ suggested that it may seek further investigations and enforcement involving SEP-related conduct in the future. The DOJ stated that it would continue to "monitor the use of SEPs in the wireless device industry," and "will not hesitate to take appropriate enforcement action to stop any anticompetitive use of SEP rights."
It is now conventional wisdom that merger enforcement has been and will continue to be a priority under the Obama Administration. In particular, vertical mergers — mergers that involve the integration of buyers and sellers in the same supply chain — have received far more scrutiny than they had under prior administrations. Several DOJ enforcement actions in 2011, most notably Comcast/NBC, GrafTech/Seadrift Coke, and Google/ITA, and the issuance of a new merger remedy policy, reflect the DOJ’s efforts to aggressively investigate and seek remedies for mergers that allegedly raise vertical concerns.
On June 17, 2011, the DOJ’s issued a revised Policy Guide to Merger Remedies, replacing the 2004 version of the Policy Guide. The new Policy Guide brings the DOJ’s stated merger remedy policy into closer alignment with recent DOJ practices and enforcement priorities, as well as the FTC’s existing policy on merger remedies. Historically, the DOJ has strongly favored "structural" remedies–principally the divestiture of ongoing businesses or assets–over conduct (or behavioral) remedies for both horizontal and vertical mergers. The 2004 Policy Guide reflected this preference and made clear that conduct remedies would rarely be accepted. However, the new Policy Guide recognizes the DOJ’s willingness to utilize conduct remedies to address competitive concerns raised by vertical mergers. According to the Policy Guide, conduct remedies are a "valuable tool" in vertical mergers and are "a particularly effective option when a structural remedy would eliminate that merger’s potential efficiencies, but, absent a remedy, the merger would harm competition."
"Conduct" remedies generally involve terms that dictate or place restrictions on particular aspects of the merged firm’s post-merger behavior. The new Policy Guide recognizes that there is a "panoply" of conduct remedies that may be effective, so long as the chosen remedy is clearly drafted and tailored to address the specific competitive harm posed by the merger. According to the Policy Guide, the most common conduct remedies include firewalls that prevent the dissemination of information to specified personnel, non-discrimination provisions, mandatory IP licensing provisions, transparency provisions, and provisions that restrict certain exclusive contracting practices.
The DOJ’s traditional policy disfavoring conduct remedies was based, in part, on the view that conduct remedies are difficult to enforce and require ongoing oversight by the agency after the merger is consummated. In an attempt to minimize the need for ongoing DOJ involvement, the new Policy Guide states that consent decrees may provide for private arbitration to address controversies over the implementation of conduct remedies. The DOJ has also sought to address the need for oversight of conduct remedies through the creation of a new Office of the General Counsel, which is charged with consent decree enforcement.
The remedies implemented by the DOJ in three consent decrees in 2011 reflect this new approach to vertical merger enforcement.
1. The DOJ’s consent decree for the Comcast/NBC joint venture includes several conduct remedies which were designed to address the DOJ’s concerns that following the transaction Comcast would discriminate against competing multichannel video programming distributors (MVPDs) as well as online video distributors (OVDs), by increasing the price or withholding the availability of NBC programming. These conduct remedies include provisions requiring that the joint venture license NBC content to OVDs on terms "economically equivalent" to those given to MVPDs and other OVDs and prohibiting Comcast from discriminating against OVDs and MVPDs or engaging in exclusive or restrictive licensing practices.
2. The GrafTech/Seadrift consent decree involved GrafTech International’s acquisition of Seadrift Coke. GrafTech was the largest manufacturer of graphite electrodes in the U.S., while Seadrift was one of two U.S. manufacturers of petroleum needle coke, the primary input for graphite electrodes. The DOJ’s competitive concern centered around its belief that the merger would give Seadrift access to competitor pricing and production information that GrafTech receives in its dealings with its customer, ConocoPhillips, which was also Seadrift’s primary competitor. This access, the DOJ feared, could result in anticompetitive price and output coordination between Seadrift and ConocoPhillips. As a remedy, DOJ required GrafTech to strike provisions in its long-term supply contract with ConocoPhillips that would otherwise have allowed GrafTech to access ConocoPhillips’ competitively sensitive information. The consent decree also prohibited GrafTech from implementing similar provisions in future supply contracts, and required GrafTech to report to the DOJ on production and sales, implement information firewalls, and take additional measures to segregate GrafTech employees involved in negotiating Conoco contracts from Seadrift employees.
3. The Google/ITA consent decree requires various conduct remedies to address the DOJ’s vertical merger concerns regarding Google’s acquisition of the software company ITA. ITA provided customized search engine technology (called QPX) for online travel intermediaries (OTIs), such as Hotline, Orbitz, and Bing Travel. Google planned to enter the travel search business in direct competition with other OTIs. According to the DOJ, the merger would have given Google control of QPX, along with access to sensitive information about its future competitors. Under the consent decree, Google agreed to various conduct remedies designed to ensure that its OTS competitors would have ongoing access to QPX. Google agreed that, for the next five years, it would continue and renew current licenses; offer contracts to new parties on FRAND terms; and continue to invest in research and development of QPX at substantially the same level that ITA had pre-merger. The consent decree also requires Google to offer its competitors any innovations related to a new ITA product that had been under development at the time of the merger, and prohibits Google from providing preferential treatment to companies that purchase certain other Google products.
As we discussed in our summary of the 2010 Horizontal Merger Guidelines, the guidelines de-emphasize market definition analysis and place an increased focus on competitive effects. The guidelines contain a number of statements that appear to suggest that, in certain circumstances, market definition is not necessary to evaluate the likely competitive effects of a merger. Section 4 of the guidelines asserts that "[t]he Agencies’ analysis need not start with market definition" and that "[s]ome of the analytical tools used by the agency to assess competitive effects do not rely on market definition." These statements stand in stark contrast to the 1992 Horizontal Merger Guidelines, which provided that the first step in merger analysis was to "assess . . . whether the merger would significantly increase concentration and result in a concentrated market, properly defined and measured." However, it does not appear that courts have adopted this new approach. Recent court cases indicate that courts continue to treat market definition as a central element of antitrust analysis.
In City of New York v. Group Health Inc., 649 F.3d 151 (2d Cir. 2011), the Second Circuit upheld the dismissal of New York City’s attempt to block a merger between two health insurance companies that provide insurance to municipal employees. The district court had dismissed the complaint, finding that the City’s alleged relevant market was improper. The City sought to amend its complaint and base its claim on the "Upward Pricing Pressure" (UPP) test, which analyzes the effect of a merger on the merged firm’s price incentives. The City contended that the UPP test could establish the anticompetitive effect of the merger without the need to define a relevant market. While the Second Circuit upheld the district court’s denial of the City’s motion to amend on procedural grounds, the court expressed its skepticism that the UPP test could substitute for a definition of the relevant market. The Second Circuit stated that "the applicable case law requires a plaintiff asserting a claim under the Sherman Act, the Clayton Act, or the Donnelly Act to allege a market in which the challenged merger will impair competition" and noted that the district court’s "research ha[d] not revealed a single decision in federal court adopting this [UPP] test."
Other cases decided after the 2010 guidelines were released further confirm that a party alleging antitrust violations continues to bear the burden of identifying a relevant market. In FTC v. Lundbeck, 650 F.3d 1236 (8th Cir. 2011), a decision involving a series of pharmaceutical acquisitions, the Eighth Circuit stated that the government "bears the burden of identifying a relevant market" in opposing a transaction. The FTC challenged the acquisitions alleging that they resulted in Lundbeck controlling two allegedly competing drugs. The Eighth Circuit upheld the dismissal of the case, finding that the FTC had failed to meet its burden to prove that the two drugs were in the same product market and had thus failed to identify a relevant market. Based on testimony from physicians who indicated that they do not take price into account when deciding which of the drugs to prescribe, the court observed that, although the drugs treat the same medical condition, there is little evidence that a price increase for one drug would lead physicians to prescribe the other drug more frequently–a strong indication, in the courts view, that the drugs do not compete and are not in the same relevant product market as alleged by the FTC. The Eighth Circuit later rejected the FTC’s petition for en banc review and the FTC elected not to appeal the Eight Circuit’s decision to the Supreme Court.
Similarly, in Southeast Missouri Hospital, v. C.R. Bard, Inc., 642 F.3d 608 (8th Cir. 2011), a class action suit brought by a hospital against a supplier of medical supplies, the Eighth Circuit stated that "[t]o prevail on any of its claims, [the plaintiff] has the burden of identifying a relevant market" and that "[w]ithout a well-defined relevant market, a court cannot determine the effect that an allegedly illegal act has on competition."
The DOJ’s successful efforts to block the H&R Block/Tax Act transaction also suggest a continued focus on market definition, which was a central issue in the case. In U.S. v. H&R Block, 2011 WL 548955 (D.D.C. Nov. 10, 2011), the court stated that although in circumstances where "market power itself can be directly measured, then in theory market definition is superfluous, at least as a matter of economics . . . [a]s a matter of law, however, a market definition may be required be Section 7 of the Clayton Act." The court also observed that it was "not aware of any modern Section 7 case in which the court dispensed with the requirement to define a relevant product market."
Although the latest version of the Horizontal Merger Guidelines appeared to signal a de-emphasis of market definition in evaluating horizontal mergers, as demonstrated by the recent cases discussed above, courts will likely continue to start their antitrust analysis with an obligation requiring the agencies to define the relevant market and provide evidence in support of the market definition. As Acting Assistant Attorney General for Antitrust Sharis Pozen noted, in light of the H&R Block decision, practitioners "can be assured that market definition retains the key role it has always played in [DOJ] investigations and litigations." Although the outcome of specific mergers will continue to turn on the facts specific to each case, these decisions indicate that market definition will continue to play a significant role in merger analysis and litigation.
In contrast to the DOJ, the FTC has had mixed results its efforts to block and unwind transactions over the past year. Indeed, the FTC suffered three significant losses in litigated merger challenges in 2011. These losses have not deterred the FTC. It is continuing to investigate a number of significant merger matters, and is continuing to defend its opposition to one merger challenge in the Eleventh Circuit.
Phoebe Putney/Palmyra Park Hospital
The FTC challenged Phoebe Putney Health System Inc.’s proposed acquisition of rival Palmyra Park Hospital alleging that the acquisition would create a monopoly in acute health care services in the Albany, Georgia market. The acquisition was structured such that the Hospital Authority of Albany-Dougherty County would purchase Palmyra’s assets using funds provided by Phoebe Putney and subsequently enter into a lease with Phoebe Putney giving it control of Palmyra. Based on the involvement of the Authority in the transaction, the district court held that the acquisition was immune from FTC challenge under the state-action doctrine and denied the FTC’s request for injunctive relief. On appeal, the 11th Circuit upheld this dismissal finding that the Authority’s acquisition of Palmyra and subsequent lease to Phoebe Putney was "authorized pursuant to a clearly articulated state policy to displace competition" and thus was protected by state-action immunity. The court rejected the FTC’s argument that since the acquisition was in substance a transfer of control of a hospital from one private party to another–a transfer engineered by a private party and only rubber-stamped by a governmental entity–there was no genuine state action.
ProMedica/St. Luke’s Hospital
The FTC challenged ProMedica Health System, Inc.’s consummated acquisition of St. Luke’s Hospital and sought a temporary restraining order and preliminary injunction to enjoin ProMedica from consolidating its operations with St. Luke’s. The FTC alleged that the acquisition would give ProMedica control of nearly 60 percent of the market for general acute-care inpatient hospital services and over 80 percent of the market for inpatient obstetrical services. The district court granted the preliminary injunction pending a full administrative trial on the merits. On December 5, 2011, the ALJ issued its Initial Decision requiring ProMedica to divest St. Luke’s. The ALJ found that the acquisition would increase ProMedica’s bargaining power with commercial payors–the hospitals did not contest the government’s definition of the relevant market which excluded insureds covered by government health plans–leading to consumer harm in the form of higher reimbursement rates. The ALJ rejected the hospitals’ contention that (1) the pro-competitive benefits and increased efficiencies outweighed any anti-competitive effects; (2) the merger should be allowed to proceed since St. Luke’s was in financial distress; and (3) a viable alternative remedy to divestiture would be the establishment of a separate "firewalled" negotiation team that would negotiate and administer contracts on behalf of only St. Luke’s. ProMedica’s appeal of the ALJ’s decision to the full Commission is currently pending.
LabCorp/Westcliff Medical Laboratories
The FTC challenged Laboratory Corporation of America’s consummated merger with Westcliff Medical Laboratories. LabCorp and Westcliff were the second and third largest independent clinical laboratories in Southern California. The FTC voted 4-to-1 to seek a preliminary injunction and to commence an administrative proceeding. Commissioner Rosch, in his dissenting statement, declared that while he had reason to believe that the transaction was likely to lead to anticompetitive effects, the relevant product market alleged in the complaint–"the sale of clinical laboratory testing services under capitated contracts to physician groups"–was legally flawed as it failed to include clinical laboratory services provided under fee-for-service contracts. Commissioner Rosch’s dissent appears to have presaged the ultimate outcome of the case. In its order denying the FTC’s request for injunctive relief, the district court, citing Rosch’s dissent, rejected the FTC’s proposed market definition on the basis that "otherwise identical products are not in separate markets simply because consumers pay for those produces in different ways." The court also gave significant weight to LabCorp’s costs of continuing to hold the Westcliff assets separate and to the potential for significant efficiencies from the acquisition. The Ninth Circuit refused to grant the FTC an injunction pending its appeal of the district court’s decision, and the FTC subsequently withdrew its appeal and dropped its administrative challenge to the acquisition.
On December 13, 2010, the Commission unanimously upheld an ALJ decision ordering Polypore International, Inc. to divest the assets it had acquired in its February 2008 acquisition of Microporous Products L.P. The ALJ’s Initial Decision had found that the acquisition unlawfully reduced competition in four North American markets for flooded lead-acid battery separators and ordered Polypore to divest Microporous to an FTC-approved buyer within six months. The Commission held that the acquisition harmed competition in three of the four relevant markets–the Commission reversed the ALJ with regards to one market, finding that the FTC complaint counsel did not prove that Microporous participated sufficiently in that market for the transaction to reduce competition–and agreed with the ALJ that divestiture was the appropriate remedy. An appeal of the Commission’s decision by Polypore is currently pending before the Eleventh Circuit.
In January 2012, the FTC issued a complaint alleging that the combination of Omicare and PharMerica Corporation, two of the largest U.S. long-term care pharmacies, would significantly increase the Omnicare’s already substantial bargaining leverage with Medicare Part D prescription drug plans. The FTC alleged that the combined firm would thus have an anticompetitive advance in negotiating prices it charged Part D health plans. The FTC rejected Omnicare’s offers to settle the matter through divestitures or other measures, and, on February 23, 2012, after the company announced that it would abandon its efforts to acquire PharMerica rather than challenge the FTC’s complaint, the FTC dismissed its complaint.
The FTC is currently investigating Express Scripts’ proposed $29 billion merger with Medco Health Solutions. The companies are two of the three largest pharmacy benefit managers in the United States. Combined, they manage prescription drug benefits for more than 115 million people and handle one of every three prescriptions filled in the United States. On September 2, 2011, the FTC issued a second request in connection with the transaction. On February 10, 2012 both Medco and Express Scripts certified their substantial compliance with the second request and are awaiting a determination by the FTC whether it will approve the merger. Both companies have publicly stated that despite the second request, they anticipate that the merger will be completed in the first half of 2012.
While the conventional wisdom that merger lawsuits brought by private parties are unlikely to stop a merger is still largely correct, recent developments serve as a reminder that private merger challenges, though infrequent and often unsuccessful, do continue to arise and may be increasingly common going forward. Over the past year, a number of private lawsuits involving high-profile mergers have been litigated. Some, such as Sprint’s and Cellular South’s cases against AT&T/T-Mobile, were brought by competitors of the merging parties. Such competitor-driven merger suits face rigorous antitrust injury requirements and, as a result, continue to be relatively uncommon.
On the other hand, a number of consumer-driven private merger suits made headlines over the past year, some of which continued long after the parties received government approval and had closed the transaction. These private cases include a class action involving the 2008 merger between Sirius and XM Radio, which settled in August 2011 for a package of concessions valued at more than $180 million. In addition, over the past year, dismissals of a number of consumer-based challenges were upheld on appeal, including the City of New York’s lawsuit against a merger between two health insurers, a class action challenge to a hospital merger, and a private action against Pfizer’s 2009 acquisition of Wyeth.
Merger enforcement has become an increasingly international affair, with merger control regimes in more than 75 jurisdictions worldwide. The expansion of merger enforcement often presents challenges to transacting parties, particularly those with a substantial presence in a large number of countries. A single transaction that triggers pre-merger filings and waiting periods in multiple jurisdictions may be complicated by differing waiting periods or conflicting remedies. The DOJ and FTC have made efforts over the past year to engage antitrust enforcers in non-U.S. jurisdictions with the aim of fostering closer coordination and more open communication during merger reviews.
US-EU Merger Working Group
In October 2011, marking the twentieth anniversary of the original Memorandum of Understanding ("MOU") between U.S. and European Union (EU) antitrust authorities, the FTC, DOJ, and Competition Director-General of the European Commission updated their "Best Practices on Cooperation in Merger Investigations" guidelines. The new guidelines seek to provide a framework for interagency cooperation by setting forth best practices that the three agencies will apply, to the extent consistent with their respective laws and enforcement guidelines, when they review the same merger. The objectives of the guidelines are to promote fully-informed decision-making, minimize the risk of divergent outcomes, enhance efficiency of investigations, reduce burdens on merging companies, and increase transparency in the merger review process. The Best Practices encourage prompt initial contact and communication between the agencies and provide that the agencies should share information consistent with their confidentiality obligations, while encouraging merging and third parties to grant confidentiality waivers to further encourage effective coordination. The revised Best Practices also include an expanded section on remedies and settlements and emphasize that early and frequent cooperation is particularly important to avoid inconsistent or conflicting remedies.
In a similar manner to that proposed in the Best Practices on Cooperation between EU National Competition Authorities in Merger Review, discussed below, the revised EU/US Best Practices on Cooperation encourage merging and third parties to grant waivers to the respective antitrust authorities to facilitate information sharing, in an attempt to maximize the synergies of cooperation, while reducing the fact-finding burden on both the parties and authorities. It remains to be seen whether these revised Guidelines will lead to more uniform results being realized across the Atlantic and thus help to avoid diverging outcomes.
In July 2011 the FTC and DOJ signed an MOU with China’s three antitrust agencies, the Ministry of Commerce, the National Development and Reform Commission, and the State Administration for Industry and Commerce. The MOU provides for periodic high-level consultations among all five agencies and details specific areas for cooperation including: (1) information exchange and advice about enforcement and policy developments; (2) trainings, workshops, etc.; (3) feedback on proposed laws, regulations, and guidelines; and (4) cooperation on specific cases or investigations. Moving forward, a key issue will be when, and how closely, U.S. and Chinese antitrust agencies will cooperate in individual cases and share case-specific information. The MOU states that information exchanges must comply with domestic law, implying that the agencies will share information on pending transactions only with the consent of the parties involved. The MOU comes in the wake of a growing number of international mergers, including those involving Chinese State-owned companies.
In March 2011 the FTC and DOJ signed an MOU with the Chilean antitrust agency, the Office of the National Economic Prosecutor. The US noted that "the provisions in the agreement provide a sound basis for enhanced cooperation on a day-to-day basis" between the antitrust agencies, while also aiming to reduce possible conflicts between the two countries’ antitrust enforcement activities. The MOU codified a mutual acknowledge of the importance of antitrust cooperation, as well as an agreement to take one another’s important interests into account in order to minimize possible conflicts and an agreement to maintain the confidentiality of any sensitive information provided by the other party.
As discussed in the 2011 Mid-Year Merger Enforcement Update, despite the financial crisis, 2011 has been an eventful year in EU merger enforcement. Based on European Commission (the "Commission") data, 309 merger transactions were notified to the Commission throughout calendar year 2011. Although nowhere near the peak of 402 notified mergers in 2007, the most recent figures are higher than those for calendar years 2009 and 2010.
In addition, the overall number of notified transactions that have been subject to "Phase II" in-depth reviews is much greater than has been witnessed in recent years. During 2011, the Commission issued eight Decisions initiating Phase II proceedings, doubling the number achieved in 2010. Indeed, the number of such in-depth reviews in 2011 increases to ten when one takes into account those Phase II proceedings that were opened in 2010 but were carried over into 2011.
This increase in Phase II reviews seems to confirm the view that the Commission is adopting a more rigorous approach in its analysis, especially in light of the fact that the number of strategic transactions has increased. It is in fact striking that, among the ten mergers which were subject to an extended review in 2011, four of them were cleared unconditionally, namely: the Votorantim/Fischer JV, UPM-Kymmene/Myllykoski, Caterpillar/MWM, and Samsung/Seagate Technology. In spite of the initial concerns that the Commission had as regards those four transactions, it did not eventually issue a Statement of Objections in any of them, finding in each case that the merged entity would continue to face competition and that customers would still have sufficient alternative sources of supply. In fact, of the seven Phase II cases which were closed in 2011, only the Hitachi/Western Digital Corporation merger required the adoption of a conditional clearance decision.
The Commission’s rigorous approach reached its peak with the two merger prohibitions adopted over just roughly one year. On 26 January 2011, the Commission prohibited the Greek air carriers Aegean Airlines and Olympic Air from merging and, a couple of months later, started reviewing the proposed merger between Deutsche Börse and NYSE/Euronext, which was in turn prohibited on 1 February 2012. Four months later, in May 2011, Sara Lee and SC Johnson withdrew their notification in relation to the proposed sale of Sara Lee’s insecticides business. The parties confirmed that the transaction, as originally notified, had been abandoned due to the initial competition concerns raised by the European Commission. The transaction did move forward, however, in jurisdictions outside the EU.
Finally, as of 21 February 2012, there were two Phase II investigations carried over from 2011 which are still under review, namely: J&J/Synthes and Südzucker/ED&F MAN. In both of these reviews, the respective deadlines available to the Commission in which it is expected to adopt a decision have been extended.
In addition to the appointments of Cecilio Madero Villarejo, Bernd Langeheine and Linsey McCallum mentioned in the 2011 Mid-Year Merger Enforcement Update, it is also worth noting that on 1 May 2011, Kai-Uwe Kühn and Jonas Rasimas commenced their respective mandates as Chief Economist and Director of Directorate B, responsible for competition matters in the fields of energy and environment. Mr. Kühn, a German national, is an Associate Professor from the University of Michigan, whereas Mr. Rasimas, a Lithuanian national, previously acted as the Chairman of his country’s Competition Council.
Having gone for over four years without prohibiting a merger, the Commission has proceeded to do so twice within one year under the stewardship of Competition Commissioner Joaquín Almunia. Despite this, Commissioner Almunia maintains that "prohibition decisions will remain rare, since in most cases we are able to accept the solutions proposed by the parties."
The first of these prohibition Decisions concerned the two main Greek air carriers, Aegean Airlines and Olympic Air, and was based on the finding that the transaction would have resulted in a quasi-monopoly on the Greek air transport market. This was the first merger prohibition since the Ryanair/Aer Lingus merger in 2007, a failed merger that, interestingly enough, also concerned the two main carriers of Ireland, another relatively small EU Member State. These two decisions confirm that, despite a tendency over the years to emphasize the role of "hub-and-spoke" systems in air transport markets, mergers between air carriers in point-to-point markets where entry is unlikely will continue to receive very close scrutiny, even in those situations where the available scale of operations on those markets is relatively small. An appeal has been filed against the Aegean Airlines/Olympic Air prohibition Decision before the General Court in Luxembourg.
The second prohibition Decision adopted by the European Commission concerns Deutsche Börse and NYSE/Euronext, two giants in the financial services sector. The companies, which are better known for operating the stock exchanges of New York, Frankfurt, Paris, Amsterdam, Lisbon and Brussels, had agreed to combine their operations in a USD $10 billion transaction, a merger that would have created one of the largest financial trading firms in the world. Although the parties obtained conditional clearance from the DOJ on December 22nd and offered further remedies to the Commission, they ultimately could not satisfy the Commission’s concerns in the EU. The prohibition decision was adopted by the College of Commissioners on 1 February 2012 after an investigation procedure that occupied much of 2011.
When analyzing the potential effects of the transaction, the Commission’s main concerns related to the alleged market for financial derivatives based on European underlyings, a market where Eurex, operated by Deutsche Börse, and Liffe, operated by NYSE Euronext, are the two largest exchanges. The wide-ranging market test undertaken by the Commission evidenced the strong opposition against this transaction among a broad range of stakeholders. Furthermore, the Commission believed that the merger would have allegedly strengthened Deutsche Börse’s vertical silo in a market where entry is unlikely to occur. Commissioner Almunia, who had previously been Commissioner for Economic and Monetary Affairs and who has repeatedly expressed a particular interest in the functioning of the financial sector, stated that the merger would have led "to significant harm to derivatives users and the European economy as a whole."
This transaction is surprisingly similar to the proposed merger between Nasdaq and NYSE, which was dropped in May 2011 in the face of opposition from the U.S. DOJ. Even if the reasons that finally determined the fate of both transactions were different in substance, they reflect increasing convergence and coordination between the Commission and antitrust enforcers in the U.S. In closing the DOJ’s parallel investigation of the merger in the U.S., then-AAG Pozen noted that "[t]he open dialogue between the Antitrust Division and the European Commission was very effective and allowed each agency to conduct its respective investigation while mindful of ongoing work and developments in the other jurisdiction."
In addition to the highly publicized reforms that Commissioner Almunia is considering to implement in the context of State Aid investigations (namely, the creation of a "fast-track" approval procedure and the amendment of the rules relating to ‘Services of General Economic Interest’), the Commission is also seeking to address a number of perceived "gaps" affecting merger control.
To this end, the Commissioner has indicated that his Services are currently examining whether the scope of the EU Merger Regulation could be extended so that acquisitions of significant minority stakes falling short of the acquisition of "control" could be subject to European Commission scrutiny. In contrast, other competition regulators such as the DOJ and even a number of European National Competition Authorities ("NCAs") already have competence to review such acquisitions. According to the Commissioner, DG Competition is examining "whether it is significant for us to try and close this gap in EU merger control".
In addition, in November 2011 the Heads of the European NCAs and the European Commission agreed to a set of best practices ("Best Practices on Cooperation between EU National Competition Authorities in Merger Review") aimed at fostering and facilitating information sharing between NCAs within the European Union for those mergers that are not subject to review under EU merger control rules, but which require clearance in several Member States. The EU’s 20-year-old EU Merger Regulation (the "EUMR") created a one-stop-shop for the regulatory review of mergers and acquisitions above certain turnover thresholds. However, many mergers and acquisitions fall below the EU threshold but meet the notification requirements of one or more national merger regimes of the EU Member States. For example, in 2010, 240 transactions fell outside the Commission’s exclusive jurisdiction, but still required notification to two or more NCAs in the EU.
The Best Practices aim, therefore, at fostering cooperation between NCAs regarding in-depth investigations and remedies in an attempt to "reduce burdens on merging parties and third parties by facilitating, where possible, the alignment of timing and the overall efficiency, transparency, effectiveness and timeliness of the merger review process." Cooperation between NCAs should, in particular, be encouraged when: "forming a view as to whether a transaction qualifies for notification or investigation"; when the merger impacts more than one Member State; and "in relation to mergers where remedies need to be designed or examined in more than one Member State."
In order to achieve this, the Best Practices place an obligation on the NCAs to keep each other informed of their progress. It is worth noting that the Best Practices seem to foster not only the exchange of information but also joint decision-making for the design of remedies. In this respect, the Best Practices indicate that "[t]he NCAs concerned will also keep each other appraised of the launch and progress of any remedies discussions, if not conducted jointly".
Finally, the Best Practices also encourage the merging parties to assist in the process of coordination between NCAs: by (i) contacting NCAs concerned "as soon as practicable" to provide them with preliminary information on the merger; and (ii) by providing a waiver (annexed to the Best Practices) to all NCAs concerned in order to allow them to also exchange confidential information. Furthermore, the Best Practices leave the door open for joint pre-notification contacts to be conducted between the merging parties and the NCAs concerned.
The European Commission also revised in November 2011 its 2010 guidance on "Best Practices on submission of economic evidence." This reform brings together a number of improvements developed in practice aimed at making the parties understand how to submit economic evidence that is acceptable for the Commission’s purposes and the form pursuant to which evidence such as a consumer survey will be accepted as economic evidence supporting a merger.
Additional guidance has also been made available by the Commission in 2011 in the form of its "Best Practices in proceedings concerning Articles 101 and 102 TFEU" and in the extension of the Mandate of the Hearing Officer. Even if the above two reforms mainly concern cartels and abuse of dominance cases, they nevertheless have an influence on the conduct of merger proceedings. The reform extending the role of the Hearing Officer — the Commission official responsible for guaranteeing the right of the parties to be heard — also includes that official’s investigatory powers in merger proceedings.
In addition, as noted above, antitrust authorities in the U.S. and EU signed an updated Best Practices guide for cooperation in merger investigations, which further strengthens the cross-Atlantic lines of communication regarding merger enforcement.
One of the most active areas of EU merger enforcement over the past few years has been in relation to innovative industries, especially in the high-tech and pharmaceutical sectors. The Commission is increasingly developing a more dynamic approach to the analysis of such markets, especially given its focus on the vertical and conglomerate effects of mergers. In doing so, it has emphasized that it is seeking to foster the launch of new technologies and the entry of new competitors that could potentially displace incumbent operators.
As noted in the Mid-year Merger Update, the Commission cleared the Intel/McAfee merger — bringing together the world’s largest computer chip manufacturer and a leading vendor of information technology security software — in January 2011. Senior Commission officials have expressed the view that the Commission’s approach in that case reflects how it is most likely to approach mergers in other IT sector cases.
Another case which was also cleared, subject to conditions, across both sides of the Atlantic, involved the acquisition of US-based pharmaceutical company Cephalon by the generic pharmaceutical company Teva from Israel. On 13 October 2011, the European Commission adopted a Phase I decision, concluding that the proposed divestment of Cephalon’s generic pipeline Modafinil product would allow a competitor to emerge and to compete effectively with the merged entity. Modafinil is an active pharmaceutical ingredient important for the treatment of excessive daytime sleepiness associated with narcolepsy. One week earlier, on October 7, the FTC required Teva to sell the rights and assets related to a generic cancer pain drug and a generic muscle relaxant, as well as to enter into a supply agreement that will allow a competing firm to sell a generic version of Cephalon’s modafinil tablets in 2012. In addition, the DOJ submitted two subpoenas to Cephalon requesting information on "certain promotional practices" for Cephalon’s sleep drugs and chronic lymphocytic leukaemia.
The recent clearance on 13 February 2012 of the acquisition of Motorola Mobility by Google, only hours prior to the clearance of the merger by the DOJ, also raises some issues about the approach to be taken to industries characterized by critical IP rights. Prior to clearance being granted, the transaction had been held up by additional information requests issued from both sets of antitrust regulators with a view to better understanding the workings of the market. Both authorities across the Atlantic cleared the merger without conditions, but expressed concerns during the course of their respective review procedures about the increasing number of patent lawsuits that have arisen in relation to the smartphone market over the past few years.
Commissioner Almunia made it clear that the green light for the transaction had been granted solely in relation to "the changes in market conditions which result directly from the merger" and that "[the clearance] decision does not mean that [it] blesses all actions by Motorola in the past or all future action by Google with regard to the use of these standard essential patents." He also emphasized that the Commission would not hesitate to open antitrust proceedings concerning patent litigation, as was indeed done on 31 January 2012 against Samsung. In a similar vein, the DOJ stated that "[the] division will not hesitate to take appropriate enforcement action to stop any anticompetitive use of standard essential patent rights". In a statement which echoed the concerns expressed by the Commission in Brussels, the DOJ expressed its views regarding Google’s stance and, furthermore, highlighted that "[d]uring the course of the division’s investigation, several of the principal competitors, including Google, Apple and Microsoft, made commitments concerning their standard essential patents (SEP) licensing policies. The division’s concerns about the potential anticompetitive use of SEPs was lessened by the clear commitments by Apple and Microsoft to license SEPs on fair, reasonable and non-discriminatory terms, as well as their commitments not to seek injunctions in disputes involving SEPs. Google’s commitments were more ambiguous and do not provide the same direct confirmation of its SEP licensing policies."
The phenomenal growth of the Chinese economy has recently produced a number of international mergers which have fallen within the scope of the EUMR. As already indicated in our Mid-Year Merger Update, during the first half of 2011, the Commission reviewed several mergers involving Chinese State-owned companies and, more specifically, the State-owned Assets Supervision and Administration Commission of the State Council (SASAC): China National Bluestar/Elkem, Huaneng/Intergen and DSM/Sinochem. These proposed mergers were cleared after Phase I reviews, and more merger activity involving Chinese acquirors can be expected. In all three cases, the Commission left open whether all Chinese State-owned companies could be seen as being part of a same entity for the purposes of merger control.
Nevertheless, in a Decision adopted on October 3, 2011, the Commission took a significant step as regards the way in which it will assess mergers involving State-owned companies in the future. The Decision concerned the acquisition of joint control over Israeli agrochemical company Makhteshim Agan Industries Ltd. by the Chinese State-owned company China National Chemical Corporation and Israeli company Koor Industries. Even if the European Commission left open whether the State-owned companies enjoyed independent power of decision-making in relation of the State-owned Assets Supervision and Administration Commission of the State Council (SASAC), the Commission for the first time undertook an analysis "as if all the Chinese State-owned enterprises in the sectors concerned were part of a single economic unit". Following the adoption of this methodology, the Commission assessed overlaps and vertical links in the activities concerned and found that the proposed transaction would not significantly impede effective competition. Interestingly, the investigation also demonstrated that concerns existed in the market as regards the likelihood of other anti-competitive types of conduct occurring, such as predatory pricing (para.61), information exchanges within trade associations (para.77), and price discrimination (para.81). All these concerns were considered by the European Commission, on the particular facts at hand, to be unfounded.
As regards mergers with a trans-Atlantic dimension, it is still to be seen whether the revised Best Practices bring about an improvement to the good cooperation that the regulators on both sides of the Atlantic have been developing over the last decade.
A number of relatively controversial EU merger clearance Decisions are currently the subject of legal challenge before the General Court in Luxembourg. Those challenges raise a number of important legal principles, including the appropriateness of the public commitments proposed by the parties to a merger (i.e., Oracle/Sun Microsystems, where no legally binding commitments were offered). As a matter of emerging Commission practice, it is interesting to note that a public commitment to license on agreed terms by Google was also accepted by the Commission most recently in its Google/Motorola Mobility review, without the need for formal commitments to be tabled to this effect. This departure from normal practice will no doubt be justified by the Commission as being prompted by the openness of the IT sector, although it remains to be seen whether the General Court will adopt a view which condones such a significant departure from practice. Another issue which arises is the assessment of the incentives to foreclose competitive entry and the importance which control over essential data has acquired during the last decade in relation to such foreclosure concerns (Thomson/Reuters).
Most recently, on February 15, 2012, Cisco announced its intention to appeal the European Commission’s clearance of the Microsoft/Skype merger. Cisco claims that the Commission erred in its analysis by failing to take full account of the consequences of the merger on the videoconferencing market. Cisco, who has been joined in its appeal by Messagenet, an Italian VoIP service provider, is particularly concerned about standards interoperability and claims that "Microsoft’s plans to integrate Skype exclusively with its Lync Enterprise Communications Platform could lock-in businesses who want to reach Skype’s 700 million account holders to a Microsoft-only platform."
Also as expected, an appeal has been lodged before the General Court challenging the prohibition Decision in relation to the Aegean Airlines/Olympic Air case. In that case, the notifying parties argue, among other things, that the Commission failed to define the markets properly and failed to state its precise theory of harm flowing from the proposed merger.
Furthermore, it should also be noted that Western Digital has challenged DG COMP’s conditional clearance decision of its merger with Hitachi, on the grounds that the so-called "priority rule" had been incorrectly applied. Under normal circumstances, the Commission considers that the competitive assessment of a notified merger occurs on the date of its notification and the Commission will therefore analyse the relevant markets affected by the proposed transaction by taking into account all those cases notified until that date, but not those notified thereafter. In the case at hand, Western Digital filed its notification just a day after Seagate had notified the Commission of its intention to acquire Samsung’s hard-disk drive business. Given that both transactions affected the same market, the European Commission analysed Western Digital’s transaction on the assumption that the Seagate/Samsung deal had gone ahead. As a result of this, the Western Digital transaction was analysed within the framework of a more concentrated market — even if both transactions had been notified within a day of one another — with the Commission deeming it appropriate to impose commitments on the merging parties in that case. To complicate matters further, Western Digital also claimed that its pre-notification talks with the Commission had been launched before those relating to the Seagate/Samsung merger.
Recent merger notifications in various sectors have raised the issue of the proper scope of merger reviews in light of pending competition law investigations in the industrial sectors affected by the proposed merger. In addition to the Thomson/Reuters case (see above), the Commission is currently investigating a number of antitrust infringements by companies involved in mergers. For example, in April 2011, the Commission opened an investigation into an alleged "pay-for-delay" settlement between US-based pharmaceutical company Cephalon and Israel-based generic drugs firm Teva. A week later, Teva announced its intention to acquire Cephalon and, after obtaining the relevant antitrust approvals, completed the transaction on October 14, 2011.
A similar intersection between stand-alone antitrust rules and merger control review arose within the context of Telefónica’s acquisition of Brazilian mobile operator Vivo. In 2010, Telefónica acquired sole control of Vivo, a joint venture that the Spanish telecommunications incumbent had formed in 2003 with Portugal Telecom, its counterpart in Portugal. The deal raised much political interest, but was nevertheless completed without any commitments at EU level. However, in October 2011 the European Commission sent a Statement of Objections to both companies regarding an alleged violation of competition rules within the context of the acquisition. According to the Commission, the merging parties concluded an agreement in July 2010, as part of their overall merger plans, whereby they agreed not to compete with each other in their respective "home territories" on the Iberian peninsula.
Another example of the frequent overlap between mergers and other antitrust practices can be found in the so-called "power cables" cartel investigation. In this case, Prysmian, an Italian company allegedly involved in a global price-fixing and market-sharing cartel (and which recently received a Statement of Objections from the European Commission), acquired Draka, a Dutch competitor, after having obtained clearance for its merger from the European Commission in February 2011.
2011 was also the year that saw the much-awaited reforms in merger control regimes finally adopted in key jurisdictions such as Brazil, India and Russia. Whereas India was the only country that adopted ex novo a merger control regime, Russia and Brazil have introduced important reforms to their existing merger control regimes. The reforms, all undertaken in an attempt to increase legal certainty for foreign companies operating in those jurisdictions, bring all four "BRICs" (i.e. Brazil, Russia, India and China) into the list of countries with merger control rules in force.
As indicated in the 2011 Mid-Year Merger Update, the new Indian merger control regime establishes a mandatory pre-notification merger control regime for a wide range of transactions, insofar as they exceed a certain value of the assets and/or turnover. In particular, a de minimis threshold is established and, as a result, no notification will usually be required where the assets or the turnover of the target in India do not exceed INR 2.5 billion and INR 7.5 billion respectively. Even if further improvements could be effected (e.g., avoidance of the word "normally", which appears excessively in the law), this reform is undoubtedly a step in the right direction and will make life easier for companies doing business in India.
2011 also witnessed the introduction of a local nexus threshold into the merger regime in Russia. Until now, given how broadly the Russian merger control rules were drafted, most transactions between large companies had to be notified in Russia even where the effects of that transaction in that jurisdiction were minimal. On 6 January 2011, a much-awaited reform entered into force and, as a result, a notification will not be generally required where the target company does not have any subsidiaries in Russia and where its revenues do not exceed RUB 1 billion.
Finally, a new Brazilian merger regulation was passed on 5 October 2011. The law, which is intended to enter into force on 29 May 2012, removes the existing market share test in order to establish a pre-merger control regime based on the revenues of the parties involved in the transaction. As a result, transactions will have to be notified primarily where one of the parties’ revenues in Brazil exceed BRL 400 million, as long as another party’s revenues exceed BRL 30 million. The reforms adopted have also affected other areas of Brazilian antitrust policy, including the restructuring of the antitrust authorities.
 The U.S. federal government’s fiscal year begins on October 1st and ends on September 30th.
 City of New York v. Group Health Inc., 649 F.3d 151 (2d Cir. 2011).
 Mesaner v. Northshore Univ. HealthSystem, No. 10-2514, 2012 U.S. App. LEXIS 731 (7th Cir. Jan. 13, 2012).
 Golden Gate Pharmacy Servs., Inc. v. Pfizer, Inc., 433 F. Appx. 598 (9th Cir. 2011).
 The other two Phase II investigations that were closed in 2011 were the Aegean/Olympic case, which ended with a prohibition, and the Sara Lee/SC Johnson case, which would have probably ended with commitments had not it ultimately been abandoned.
 A third Phase II decision was opened on 18 January 2012 into the planned acquisition of joint control over a branch of the Italian state-owned ferry group Tirrenia by Compagnia Italiana di Navigazione ("CIN") of Italy. The concentration was notified to the Commission on 21 November 2011.
 Almunia, J. Introductory remarks at the press conference on the Aegean Airlines/Olympic Prohibition, Brussels, 26 January 2011. See further Almunia, J., Improving Europe’s Competitiveness in the Global Economy, Annual British American Business Conference, London, 28 June 2011.
 Antitrust Authorities on both sides of the Atlantic seem to be paying increasing attention to air transportation and the European Commission and the U.S. Department of Transport have in fact adopted a specific report on the sector: "Transatlantic Airline Alliances: Competitive Issues And Regulatory Approaches". Antitrust authorities have scrutinized, among others, joint ventures for Transatlantic businesses, code-share agreements or carrier alliances.
 Almunia, J., EU Merger Control has Come of Age: "Merger Regulation in the EU after 20 years", co-presented to the IBA Antitrust Committee and the European Commission Brussels, 10 March 2011, SPEECH/11/166.
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