Merger Control 2018 Seventh Edition Contributing Editors: Nigel Parr & Ross Mackenzie GLOBAL LEGAL INSIGHTS – MERGER CONTROL 2018, SEVENTH EDITION Editors Nigel Parr & Ross Mackenzie, Ashurst LLP Production Editor Andrew Schofi eld Senior Editors Suzie Levy Caroline Collingwood Group Consulting Editor Alan Falach Publisher Rory Smith We are extremely grateful for all contributions to this edition. Special thanks are reserved for Nigel Parr & Ross Mackenzie for all their assistance. Published by Global Legal Group Ltd. 59 Tanner Street, London SE1 3PL, United Kingdom Tel: +44 207 367 0720 / URL: www.glgroup.co.uk Copyright © 2018 Global Legal Group Ltd. All rights reserved No photocopying ISBN 978-1-912509-17-1 ISSN 2048-1292 This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualifi ed professional when dealing with specifi c situations. The information contained herein is accurate as of the date of publication. Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY June 2018 CONTENTS Preface Nigel Parr & Ross Mackenzie, Ashurst LLP General chapter Anti-competitive buyer power under UK and EC merger control – too much of a good thing? Burak Darbaz, Ben Forbes & Mat Hughes, AlixPartners UK LLP 1 Country chapters Albania Anisa Rrumbullaku, CR PARTNERS 19 Australia Sharon Henrick & Wayne Leach, King & Wood Mallesons 24 Austria Astrid Ablasser-Neuhuber & Gerhard Fussenegger, bpv Hügel Rechtsanwälte GmbH 39 Canada Micah Wood & Kevin H. MacDonald, Blake, Cassels & Graydon LLP 47 China Ding Liang, DeHeng Law Offi ces 58 Denmark Olaf Koktvedgaard, Søren Zinck & Frederik André Bork, Bruun & Hjejle Advokatpartnerselskab 63 European Union Peter Broadhurst, Koen Platteau & Robert Hardy, Simmons & Simmons LLP 68 France Pierre Zelenko & Rahel Wendebourg, Linklaters LLP 81 Germany Peter Stauber & Rea Diamantatou, Noerr LLP 97 Hong Kong Neil Carabine & James Wilkinson, King & Wood Mallesons 106 India Anand S. Pathak, P&A Law Offi ces 114 Indonesia Chandrawati Dewi, Gustaaf Reerink & Bilal Anwari, ABNR Counsellors at Law 121 Israel Dr. David E. Tadmor & Shai Bakal, Tadmor & Co. Yuval Levy & Co., Attorneys-at-Law 131 Italy Luciano Vasques, DDPV Studio Legale 143 Japan Masahiro Nakatsukasa, Chuo Sogo Law Offi ce, P.C. 151 Korea Thomas P. Pinansky, Joo Hyoung Jang & Jungmin Hong, Barun Law LLC 162 Malta Ron Galea Cavallazzi & Lisa Abela, Camilleri Preziosi Advocates 171 Mexico James E. Ritch & Octavio Olivo, Ritch, Mueller, Heather y Nicolau, S.C. 174 Netherlands Joost Houdijk & Robbert Jaspers, AKD Benelux Lawyers 184 New Zealand Neil Anderson, Lucy Cooper & Hilary Beattie, Chapman Tripp 189 Romania Mihaela Ion & Laura Ambrozie, Popovici Nițu Stoica & Asociații 196 Singapore Daren Shiau, Elsa Chen & Scott Clements, Allen & Gledhill LLP 206 South Africa Marianne Wagener & Candice Upfold, Norton Rose Fulbright South Africa Inc. 217 Sweden Peter Forsberg & Haris Catovic, Hannes Snellman Attorneys Ltd 229 Switzerland Franz Hoffet, Marcel Dietrich & Allegra Schär, Homburger 241 Taiwan Matt Liu & Eugenia Chuang, Tsar & Tsai Law Firm 253 Turkey Gönenç Gürkaynak & Öznur İnanılır, ELIG Gürkaynak Attorneys-at-Law 261 United Kingdom Alan Davis & Angelique Bret, Pinsent Masons LLP, Bojana Ignjatovic, RBB Economics 271 USA Andrea Agathoklis Murino, Paul S. Jin & J. Todd Hahn, Goodwin Procter LLP 284 PREFACE e are delighted to introduce the seventh edition of Global Legal Insights – Merger Control. As in previous Weditions, the 29 country chapters each concern a particular jurisdiction and offer comment and strategic insights into merger control laws around the world, as well as their enforcement in practice. This edition also contains an additional chapter looking at anti-competitive buyer power under UK and EC merger control. This work, together with the other titles in the now well-established Global Legal Insights series, goes beyond the basic letter of the law and adds important colour and texture to the core topics which it discusses. The publishers have again gathered a group of leading practitioners from around the world to provide their personal insights into the practical operation of the merger control rules. We have continued to give the authors considerable scope to express their professional judgment and to explain the workings of their home regime, as well as a free rein to decide the focus of their own chapter. As merger control regimes are introduced in ever more countries, the trend to converge best practice and procedures continues. We hope that this latest edition of Global Legal Insights – Merger Control will be a useful resource in understanding the approaches of different competition authorities, and that merger control practitioners will continue to fi nd this book a useful and insightful addition to their libraries. Nigel Parr and Ross Mackenzie Ashurst LLP Anti-competitive buyer power under UK and EC merger control – too much of a good thing? Burak Darbaz, Ben Forbes & Mat Hughes AlixPartners UK LLP Introduction The main context in which buyer power is relevant to merger control analysis is assessing whether customers – particularly large customers – have the ability and incentives to resist efforts by large suppliers to increase wholesale prices above the competitive level. This issue is routinely considered in merger assessments by the European Commission, the Competition and Markets Authority (CMA) and many other competition authorities globally, and countervailing buyer power is rightly emphasised in many competition authorities’ merger guidelines as a factor that may negate supplier market power.1 If a merged entity obtains lower input prices due to buyer power, this is generally seen by competition authorities as a rivalry-enhancing effi ciency. This is because reductions in a fi rm’s variable costs may be passed on to customers in the form of lower prices.2 This point is highlighted in both the CMA’s Merger Assessment Guidelines3 and the European Commission’s Horizontal Merger Guidelines.4 The European Commission’s Horizontal Merger Guidelines state that: “… increased buyer power may be benefi cial for competition. If increased buyer power lowers input costs without restricting downstream competition or total output, then a proportion of these cost reductions are likely to be passed onto consumers in the form of lower prices.”5 Nevertheless, a merger that increases a customer’s buyer power may have anti-competitive effects.6 This is a topical subject for several reasons. First, this issue is increasingly considered as a matter of course in UK merger control cases and in some EC cases. In particular, in January 2018, the fi rst UK adverse fi nding for over ten years (at either Phase 1 or Phase 2) on purchasing market power was reached by the CMA at Phase 1 in European Metal Recycling/Metal & Waste Recycling.7 Second, in some cases, anti-competitive buyer power may be an important competition concern in its own right. It is noteworthy that the CMA assessed this issue in some detail in its Phase 2 decision in Tesco/Booker (2017), refl ecting the fact that it received a large body of complaints on this issue and grocery retailers have been found in previous investigations to have substantial buyer power that may have certain anti-competitive effects.8 Similarly, this issue has also arisen in various mergers assessed by the European Commission, with the Commission reaching an adverse fi nding due to anti-competitive buyer power effects most recently in its Phase 2 decision in Liberty/Ziggo (2014). This latter case is of interest GLI - Merger Control 2018, Seventh Edition 1 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London AlixPartners UK LLP Anti-competitive buyer power under UK and EC merger control more generally as a competitor (KPN) successfully appealed the Commission’s conditional clearance decision to the European General Court, and the Commission is currently reviewing the merger again. This chapter: • considers the circumstances in which a merger may lead to anti-competitive buyer power; • assesses the application of various theories of harm associated with anti-competitive buyer power in the three cases referred to above, as well as some other recent UK cases that have considered the risks of anti-competitive buyer power; and • offers some conclusions about the implications for practitioners working on future cases. When is buyer power anti-competitive? Anti-competitive buyer power is addressed in a mere two paragraphs of the CMA’s Merger Assessment Guidelines and only three paragraphs of the European Commission’s Horizontal Merger Guidelines. However, several themes can be identifi ed from these guidelines and the economics literature relating to how mergers that increase buyer power may: • create or enhance monopsony power, whereby a powerful customer may be able to reduce input prices by withholding demand; • have an anti-competitive waterbed effect, where lower input prices negotiated by large buyers may lead to smaller buyers facing higher input prices, thereby harming competition in downstream markets; • have anti-competitive effects on suppliers’ incentives to invest to reduce costs or improve quality; and • enable powerful buyers to enter into agreements with their input suppliers that foreclose competition or deter downstream entry by these suppliers. These theories of harm are considered in turn below. The reason for describing these theories in some detail is to highlight the key economic relevant economic evidence that should be considered to assess whether these theories apply in any particular market context. Theory of harm 1: Monopsony power and withholding demand There are several defi nitions of buyer power. Competition authorities commonly draw a distinction between bargaining power (that is, the strength of buyers in negotiations with suppliers), and monopsony power.