Geopolitics, competition policy and M&A (2024)

A session report from the IBA’s 21st Annual International Mergers & Acquisitions Conference in New York

Session Chairs
Elsa Chen Allen & Gledhill, Singapore
Ilene Knable Gotts Wachtell, Lipton, Rosen & Katz, New York

Speakers
Hetal J Doshi US Department of Justice, Washington, DC
Olivier Guersent European Commission, Brussels
Haidee L Schwartz OpenAI, Washington, DC
Robert Tay Office of Significant Investment Review, Ministry of Trade and Industry, Singapore

Reporter
Bárbara V Ramperti Marval O’Farrell & Mairal, Buenos Aires

Panel overview

The panel discussion focused on the intersections between geopolitics, competition policy and foreign direct investment, emphasising the impact of generational shifts on these fields. The panel addressed the following four main areas:

• the role of geopolitics in antitrust and foreign investment reviews;
• the coordination between different regulatory agencies;
• the impact of geopolitics on remedies during the review process; and
• strategies for parties involved in mergers and acquisitions (M&A) to navigate such reviews effectively.

Introduction

Generational shifts: The discussion began with a comparison of the generational impacts, noting the transition from Generation Z to Generation Alpha. The latter’s experiences with the Covid-19 pandemic and rapid technological changes were highlighted as significant.

Seismic shifts in policy: The speakers drew parallels between the generational shifts and the evolving landscape of competition and foreign direct investment (FDI) policies.

Role of geopolitics in antitrust and FDI reviews

Olivier Guersent outlined the distinct nature of the European Union’s tools used to assess M&A activity, such as EU merger reviews, foreign subsidy reviews and FDI reviews. The EU’s rules on merger control (Council Regulation (EC) 139/2004) focus on preventing harmful effects of transactions at the competition level, without a geopolitical bias. The EU’s foreign subsidies regulation (Council Regulation (EU) 2022/2560) targets market distortions caused by foreign subsidies, while the rules on FDI screening (Council Regulation (EU) 2019/452) in the EU considers national security and public order aspects, distinct from competition policy.

From the perspective of the United States, Hetal J Doshi explained that there are two separate and independent review processes: (1) an antitrust review conducted by the Department of Justice (DOJ) or the Federal Trade Commission (FTC)) and (2) a national security review. Antitrust reviews are based solely on the competitive effects of the activity, while reviews focused on national security concerns are handled by the Committee on Foreign Investment in the US (CFIUS).

Robert Tay shared his thoughts on the situation in Singapore, emphasising that Singapore is a strategic hub in the Asia–Pacific region. He explained that new significant investment legislation aims to balance economic growth with national security. The legislation is designed to safeguard national interests, while remaining open to foreign investment. Security perspectives also play a key role in domestic transactions. Geopolitical tensions are also said to influence investment decisions, particularly in technology and infrastructure sectors.

Haidee L Schwartz shared her perspective on the evolution of competition policy and FDI as a response to geopolitical changes. Emphasis was placed on the importance of adapting to technological advancements and geopolitical shifts. It was highlighted that M&A transactions are facing further complexities these days due to the particularities of different antitrust and FDI regimes in different jurisdictions.

Coordination between agencies (antitrust and others)

The panellists discussed the need for effective coordination between antitrust and FDI agencies to manage cross-border investments and regulatory challenges. Robert Tay said that in Singapore antitrust Law and the new national security framework have a different scope of analysis and aim to address different outcomes. Although there are some similarities, they are separate processes.

Hetal J Doshi said that from the US perspective emphasis is placed on the cooperation and collaboration process among the different agencies, since there are implications that go beyond competition law. The Biden administration’s Executive Order on Promoting Competition in the American Economy emphasises the whole-of-government approach to antitrust enforcement, which involves multiple federal agencies and aims to promote competition and counter concentrated market power.

Olivier Guersent provided the perspective of the European Commission. He explained that Article 22 of the EU Merger Regulation (Council Regulation (EC) 139/2004) allows EU Member States to refer cases to the European Commission if they believe a merger or acquisition could substantially impact competition, even if it doesn’t meet the usual thresholds. He added that this situation is becoming more frequent. The Article 22 referral can affect deal certainty and timelines, especially in high-tech and digital markets.

The panel stated that the complexity of the regulatory conditions for closing transactions has increased. Adding that there is an added layer involving potential jurisdictional reviews, even in cases where mandatory filing thresholds are not met.

Haidee L Schwartz shared her thoughts on the impact of technology and innovation. She explained that artificial intelligence (AI) technology represents general-purpose technology with applications across many sectors, unlike more narrow technologies such as search engines or social media. She highlighted the cost of computing, particularly that running and developing AI models is expensive, which affects the evolution of the technology. She added that this high cost might lead to different dynamics for AI compared to other technologies. In addition to this, Schwartz explained that AI’s broad and diverse application makes it more complex to regulate, as it has an impact on various sectors such as healthcare, education and government services.

Importantly, AI is not exempted from antitrust clearance.

Strategies for parties involved in an M&A to navigate reviews effectively

Cooperation: Being cooperative and transparent during the review process is crucial. It helps in meeting strict time limits and ensures that all the relevant information is considered. Effective communication and addressing issues early on the process are critical to reducing burdens and fostering a positive relationship with regulatory bodies.

Directness: Being straightforward with the reviewing authorities can lead to a more efficient process. Credibility is paramount and disclosing all the facts is crucial.

Planning: Proper planning and early communication can help manage the review process better and reduce the burden on both parties. The advice includes planning ahead and understanding the perspective of the regulatory authorities involved. This involves being proactive in identifying and addressing potential issues, which helps streamline the evaluation process.

Understanding each jurisdiction: Specific requirements could vary and ensuring clarity and adherence to the rules can prevent uncertainty and facilitate smoother interactions with regulatory bodies.

Roles: It is important to differentiate between the roles of the parties involved and their legal representatives, emphasising the need for external counsel to convey accurate and trustworthy messages. Building trust with regulators and avoiding contradictory statements are essential for effective negotiation and the resolution of any issues.

Consistency in multiple jurisdictions: The panel highlighted the importance of consistent messaging across different jurisdictions and warned against providing varying information to different regulators, as discrepancies could lead to complications and increased scrutiny.

Addressing remedies and jurisdictional assessments: The discussion included comments on the necessity of aligning remedies and assessments across jurisdictions to prevent disputes and ensuring that remedies are practical and acceptable to all the parties involved.