2021 – A busy year for mergers

2021 Saw Big Jump in Merger Notifications.

The number of mergers notified to the Competition and Consumer Protection Commission (CCPC) increased significantly in 2021. The CCPC’s Mergers & Acquisitions Report for the year, which was published earlier this month, reveals that 81 mergers were notified to it last year, compared with 41 in 2020. The CCPC had issued Determinations in respect of 66 of the 81 mergers notified to it during 2021 by the end of year. Several of the cases outstanding at year end had only been notified during December. A further seven cases had been decided at the time of writing. 35 cases were dealt with under the simplified notification proceedure introduced by the CCPC in 2020. The CCPC referred one other case to the EU Commission.

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Apply state of the art economics in the analysis of competition law mergers and regulation.

Merger Cases Taking Longer to Decide.

The CCPC Report notes that “non-extended Phase 1 cases”, i.e. those in which no competition issues arose took an average of 20.2 working days from notification to determination. This compares with 22.9 working days the previous year. While this is welcome, the time taken to decide cases overall has been rising as the following chart illustrates.

For most of the period from 2003, when the CCPC assumed responsibility for deciding on merger cases, up to 2013, the average decision time was around 30 calendar days. It dropped to 22.6 days in 2014 but has increased steadily since then. In 2020 the average duration of cases was 74.3 days. Three cases notified that year took more than 350 days to be decided. The figure for 2021 currently stands at 45.7 days but this includes several cases which are still open so this figure will increase further. As it is, the 2021 figure was only exceeded in 2020 and in 2018 when it was 49.2.

Problem Cases Are Increasing.

The number of mergers raising potential competition concerns, defined as cases involving an extended Phase 1 and/or Phase 2 investigation along with withdraw notifications, has also increased quite significantly, as illustrated by the following chart.

Again we must enter a caveat in respect of the 2021 figure. Eight cases notified in 2021 involved an Extended Phase 1 investigation while three have gone to Phase 2. A further four cases were outstanding at the time of writing.

Apart from a once off spike in 2012, up to 2016 a relatively small number of cases (approximately 5-8%) were considered to raise potential competition concerns by the CCPC in the sense that they required a close look. Since 2016 the proportion of cases raising concerns has increased significantly. 24% of all cases notified in 2020 raised potential concerns. Eight of these involved Extended Phase 1 investigations with another two going to Phase 2, one of which was subsequently withdrawn. While the proportion of problem cases for 2021 is currently 15.4%, this is higher than in any previous year apart from 2018 and 2020. The 2021 figure could increase to 18.5% if the four outstanding cases cited above were found to raise potential concerns. The increase in the number of potential problem cases explains the overall increase in the time taken to decide on cases.

The three cases which are the subject of ongoing Phase 2 investigations all involve banking mergers. Another banking merger was notified in December. 12 of the merger cases notified to the CCPC in 2021 involved parties involved in the financial services/insurance sectors. To that extent 2021 may be somewhat unusual.

The increase in the number of potential problem cases is difficult to explain. If undertakings recognise that anti-competitive mergers are unlikely to be permitted, then they are unlikely to attempt such mergers. In other words an effective merger control regime is likely to have a significant deterrent effect. An increase in the number of potential problem cases therefore raises doubts about the level of deterrence. Alternatively it may be that the CCPC has adopted a more cautious approach in its assessment of mergers. It would be useful to know which of these explanations is correct. To that end, it would be helpful if the CCPC could shed some light on the reasons for the increase in the number of potential problem cases.

More Information Needed.

The CCPC is to be congratulated for publishing its Annual Merger Report for 2021 so promptly, it appeared on the CCPC website on 4th January. The Report provides some useful information on merger cases dealt with by the CCPC. It would, however, be helpful if the CCPC could shed some light on the reasons for the increase in the number of potential problem cases over the past number of years. It would also be useful if the CCPC could include a breakdown in its report between the number of horizontal and non-horizontal mergers. While the Report provides some information in relation to remedies, it may well be time for a more detailed review into the effectiveness of merger remedies.

A Glass Half-full.

2021 saw the number of merger cases notified to the CCPC almost double on the previous year. The CCPC managed to deal with the majority of cases which did not raise any potential issues speedily. The simplified notification procedure introduced in 2019 has certainly contributed to this. While the CCPC has done a good job of processing straightforward cases, the number of potential problem mergers and the length of time taken to decide on such cases has increased considerably.

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