A Change of Pace: Get up to speed with this Summer’s top stories
When we thought about our global predictions back in January, we didn’t envisage the events of the last few months.
We don’t yet know the full impact of the pandemic on our economies and societies. But what is clear in the competition law arena – as well as in many other policy areas – is that responses by both agencies and governments have spurred developments and reforms that were already on the horizon.
Competition law now has a vital role to play in supporting the recovery, ensuring competitive and efficient markets and protecting consumers from attempts to take advantage of a crisis. Competition agencies are therefore firmly under the microscope, facing huge pressure to adapt quickly to the “new normal” and find solutions to existing, complex problems – from addressing the market power of digital platforms to delivering on green political promises.
You may have seen that we recently published our global in-depth report, Summer’s Top Competition Stories 2020. This draws together the four important competition law trends that we are seeing right now and how they will impact your business over the coming months and beyond. Spoiler alert: the digital economy and sustainability feature prominently in all of them.
If you haven’t already checked out the real deal – including our bitesize video presenting different perspectives from our colleagues in Brussels, China, Düsseldorf, the UK and the US – here is a taster of the four top stories we cover:
1 The sprint towards ever greater state interventionism
We were already talking about the rise of anti-globalisation and big government before the pandemic. But now governments are finding ways to more openly and creatively intervene in markets than ever before.
The big area to watch is foreign investment control, with the majority of OECD regimes being expanded to catch more deals in more sectors – a move catalysed by heightened concerns about foreign companies taking advantage of the crisis to acquire strategic domestic companies. Further reforms are already coming, and these changes will mean added complexity in the M&A space.
The tech sector is facing some of the greatest scrutiny, with many FI reforms specifically targeting technology, data, and communication infrastructure – viewed as central to national security and industrial policy. And this is on top of increased agency intervention and swathes of legislative reform expected in many jurisdictions.
Meanwhile, state support will come at a price. Struggling recipient companies will face wide-ranging and long-term commitments designed to deliver on broader public policy goals like sustainability, employment, and long-term investment. As we saw with the Global Financial Crisis in 2008, they should expect to be closely scrutinised as quasi-public property – and so should their investors.
2 Competitor cooperation in times of crisis: A chance to reshape the rules?
At the height of the global pandemic, companies welcomed the willingness of competition authorities to quickly turn around informal guidance on temporary and necessary business cooperation initiatives designed to ensure uninterrupted supply of essentials, most notably in the healthcare space.
But as we move into the recovery phase and companies seek to bring closed sectors back online, don’t forget that the competition rules still apply. While interim authorisations and comfort letters provide some comfort, they won’t stop authorities from using their powers (including dawn raids) to investigate companies who have been working together during the pandemic.
Beyond guidance on individual cooperation measures, the crisis has highlighted the existing need for longer-term guidance on lawful cooperation in two key areas: sustainability (the crisis beyond the crisis) and digital cooperation. With Germany chairing EU talks between national governments until the end of the year, at least in the EU we expect progress here.
3 Playing politics with distressed M&A
The standard of competitive assessment by agencies will remain high, but subject to intense political scrutiny. Governments are interfering more than ever in which deals go ahead and which don’t, especially in strategic sectors like tech and biopharma.
Procedurally, derogations should help ease the pressure of needing to close crisis-driven deals before obtaining the necessary clearances. While successful failing firm cases will continue to be rare, notwithstanding the circumstances.
The big area to watch will be remedies. Where divestments are required to address competition concerns, potential buyers must be financially viable. And in many jurisdictions, including the US, parties will generally need to find an upfront buyer. This might be tough, especially in struggling sectors like transport. So over the coming months we are likely to see more extensions to remedy deadlines, and ultimately more remedy waivers and failures.
Finally, we can’t not mention the end of the Brexit transition period (and the One Stop Shop under the EU merger rules in the UK) in December. We are already seeing the UK CMA keen to position itself as a leading global authority, in anticipation of many deals becoming subject to parallel EU and UK review.
4 Capitalising on a crisis: Competition, market power and exploitation
As we enter the recovery phase amid a heightened awareness of consumer harm and inequality, competition policy is tasked with even more urgently addressing its perceived deficiencies in the face of attempts to take advantage of the crisis.
Tech features prominently here. Concerns about the market power of digital platforms are not new. But with more of us pushed online during lockdown, the scope for consumer harm is even greater than before. Working out how best to address the issues remains the top priority for many agencies.
Meanwhile, as people start to venture out more in the new normal, ensuring that consumers are not exploited when trying to protect themselves from continuing health and other risks is going to be another big focus.