Post-Brexit, the UK Competition and Markets Authority (CMA) is reviewing complex international transactions in parallel with the European Commission (EC). The authorities generally coordinate with each other when carrying out these investigations.
But consistent outcomes are not guaranteed. In the first major divergence in approach, the CMA has blocked the planned USD5 billion merger between Cargotec and Konecranes, just weeks after the EC cleared the deal with remedies.
Cargotec and Konecranes are both large players in the provision of container handling equipment and services to port terminals and industrial customers across the globe. It was therefore unsurprising that the deal attracted close scrutiny from a number of merger control authorities. Concerns were mainly centred on the lack of remaining competitors in the relevant markets, and the potential impact of the deal on global and/or national supply chains.
To address these concerns, the parties offered to divest various assets belonging to each of them. In February, the EC concluded that these divestments were sufficient and conditionally cleared the transaction. Other antitrust authorities, including in South Africa, also approved the merger subject to the same remedies.
But the CMA did not agree. It concluded that the asset packages "lacked important capabilities", meaning that the purchaser would not be able to compete as strongly as the parties do at the moment. It also said that the process of carving out the assets from the parties' existing operations, and "knitting them together" into a new combined business, would be "complex and risky". For the CMA, short of the divestment of the entire relevant division of one of the parties, prohibition was the only way to address its concerns.
The UK authority was not alone in its view. The U.S. Department of Justice (DOJ) announced that it had (the day before the CMA's prohibition decision) informed the parties that it would reject their proposal for remedies to deal with U.S.-related concerns and had threatened to sue to block the deal. While it had not come to a final conclusion before the transaction was abandoned by the parties, the Australian Competition and Consumer Commission (ACCC) had released a Statement of Issues that outlined its preliminary competition concerns. Announcing the discontinuation of its review of the proposed merger, ACCC Chair Gina Cass-Gottlieb said that "Australia customers had expressed concerns that the proposed divestiture remedy may not have been sufficient" to address concerns and that it was unclear that the "mix and match" assets from both companies included everything required for the divested business to function successfully.
There has been much discussion about the reasons for the diverging conclusions.
Executive Vice-President Margrethe Vestager has vigorously defended the EC's decision. She notes that the remedies package was market tested twice, with positive feedback from customers and competitors. The EC also sought to mitigate any risks to the divestment process by putting in place an upfront buyer requirement, meaning the authority had to approve suitable purchasers of the divestment businesses before the parties could complete the merger. Ultimately, she says, the EC had no discretion but to accept the remedies.
Interestingly, she has also reportedly stated that a divergence in outcome between the EC and CMA should be the exception rather than the rule. In theory this provides some level of comfort for parties to international transactions. But how often the authorities will reach a different final result in practice remains to be seen, particularly as the CMA (along with some of its international counterparts) is showing signs of being more sceptical about whether any merger remedies can adequately address antitrust concerns.
The CMA's prohibition also adds to the authority's growing tally of merger control interventions in 2022.
In addition to Cargotec/Konecranes, so far this year we have seen Nvidia abandon its acquisition of ARM as a result of UK antitrust and national security concerns (as well as antitrust concerns in the EU and U.S.). In an unusual phase 1 case, the CMA is considering clearing a completed vet merger on condition that the acquirer sells off the whole target business. And adverse provisional findings in the CMA's in-depth review of CHC/Babcock look set to result in further intervention. After a slight dip in intervention levels in 2021, all signs are that the CMA is set to keep up its tough approach going forward.
For more commentary on merger control intervention levels and the growing scepticism of certain antitrust authorities to remedies, see our Global trends in merger control enforcement report.
Originally published 4 May, 2022
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