Global Merger Control in the New Millennium
The European Commission's prohibition of the merger of General Electric Co. and Honeywell Inc. portends a potentially troubling future for the review and approval of mergers, acquisitions and joint ventures throughout the world.
The transaction passed antitrust muster in the United States, but it encountered insurmountable opposition at the E.U. From numerous published reports, it appears that the competition methodology utilized by the EU differs markedly from the analysis undertaken by the U.S. Department of Justice's Antitrust Division.
The grumbling about the E.U.'s approach to the GE/Honeywell merger should remind many veteran antitrust aficionados of a similar cacophony heard during the 1980's. At that time, most state attorneys general perceived that the federal government's antitrust agencies were, overall, passive in clearing certain national mergers; then, the state attorneys general began to exercise significant independent authority in reviewing the competitive implications of significant acquisitions. As their responsibilities expanded, states implemented and improved the National Association of Attorneys General (NAAG) Multistate Antitrust Task Force.
The NAAG Task Force, which was chaired by the author from 1990 to 1992, continues to be the third prong, along with the Antitrust Division and the Federal Trade Commission, in the "Antitrust Triad" - a force that businesses must consider in evaluating the viability of a particular merger - local, regional or national. The NAAG Task Force reinforces a principle embedded in our national fabric - the sovereignty of the states. Indeed, as the U.S. Supreme Court continues to teach in a series of recent cases, the principle of federalism is alive and well – and much misunderstood. The states, through this task force, are not local functionaries meddling in national affairs. They are players of substance and fulfill a vital role in the continuing national debate regarding our nation's competition policy.
Unfortunately, relations between federal antitrust enforcers and their counterparts from the states, particularly in the Reagan Administration, were extremely contentious. Federal enforcers looked down on state antitrust enforcers and often treated them as interlopers; conversely, state antitrust officials considered federal enforcers to be, at best, ineffectual.
Importantly, over the past decade, through quite substantial good-faith collective efforts, state and federal antitrust enforcers have developed a series of mechanisms to coordinate their efforts and streamline reviews of acquisitions through efficient cooperation and respectful relationships. Indeed, the major antitrust enforcement authorities in both the federal and state governments have achieved harmonization, if not virtually complete methodological convergence, with regard to the analysis of mergers, acquisitions and joint ventures.
Which brings us back to GE/Honeywell. Just in the past few years we have witnessed an explosion in the number of countries adopting merger control regimes akin to our own Hart-Scott-Rodino Act. These foreign regimes typically require the merging parties to obtain some type of clearance prior to consummation of the transaction. At last count, over 60 countries have established procedures for prenotification and clearance of acquisitions. The difficulties in counselling business executives, not insubstantial when 10 or 15 states weigh in on a matter, should appear modest whenever 20 or 30 countries - such as Kazakhstan or Uzbekistan - invoke their own competition models and filing requirements and exert the full measure of their sovereignty over international mergers. Merger review and negotiations could well become Let's Make a Deal on a global scale.
Some U.S. government officials, quite publicly, have taken the position that European Competition Commissioner Mario Monti and the E.U. are out of touch with current thought on antitrust theory and industrial organization economics. Needless to say, recreation of a scene from the Ugly American is not conducive to conducting a constructive dialogue to establish a common set of rules for the review and clearance of international mergers. The United States and all those foreign nations with merger control laws must seek promptly substantive and procedural harmonization of our respective merger policies.
The February 2000 Report of the Justice Department's International Competition Policy Advisory Committee is certainly a good beginning. However, as nearly all counsellors know, efforts to achieve harmonization, at best, are still in their infancy.
The Second Bush Administration should take a lesson from the approach taken by key officials in the first Bush Administration - particularly the leadership exhibited by FTC Chairman Janet Steiger, together with Kevin Arquit, who directed her Bureau of Competition, and Assistant Attorney General James F. Rill, who was Chief of the Antitrust Division, in their respective dealings with the states attorneys general.
If members of the Second Bush Administration and Congress continue to dress down or beltittle merger control officials in other jurisdictions and nations, even casting doubt upon their competency, it will be a very long and difficult four years for United States corporations in the international arena.
Robert M. Langer is a member of the BNA ATRR Advisory Board and a partner and head of the Antitrust and Trade Regulation Practice Group at Wiggin & Dana LLP in Hartford. From 1990-1992, while the Assistant Attorney General in charge of Antitrust and Consumer Protection for the State of Connecticut, he served as Chair of the NAAG Multistate Antitrust Task Force.