众说| ANTITRUST IN ASIA: ONE SIZE FITS ALL?

文章标题：ANTITRUST IN ASIA: ONE SIZE FITS ALL? | Foreign Direct Investment & Mergers: Towards Broader Provisions?

Challenges of the fast development of foreign investment regulations around the world and merger control regulations for global businesses is a lack of predictability.

It can be difficult to predict whether one’s deal will be caught by foreign investment laws. To the extent regimes arbitrarily enforce foreign investment rules against specific countries, potentially with little precedent, and those countries retaliate, investment in the related foreign countries becomes less certain and predictable. A company can become the victim of foreign investment politics even where its investment in a foreign country does not raise political, national security or other concerns and would benefit the residents of that country. Unlike competition law merger control, which although not an exact science has some generally-recognized uncontroversial metes and bounds, foreign investment statutes appear to have less structured reviews and are often driven by domestic industrial policy, which can shift at times. Accordingly, it can be difficult to predict how a foreign investment review will come out.

In addition to lost opportunity costs, this lack of predictability has many direct implications. Deal financing may be impacted because the parties cannot properly ascertain the risk ex-ante. Deal-related foreign exchange likewise may be skewed by uncertainty, especially regarding timing. Parties may incur excess transactional costs trying to contract for an unknown variable.

At worst, and under the wrong administrators, cross-border M&A can become political and subject to lobbying.

There are the risks in different competitive impact, industrial policy, public interest, strategic national interests…How could these risks be minimized? What are the pros and cons of a consolidated or a segmented approach?

In the consolidated approach, one aspect is often not properly analyzed and a regulator applying a consolidated approach is unlikely to be an expert in all perspectives. Accordingly, one approach may be examined too heavily and another too lightly. And this occurs often in regulated industries that may not be subject to competition merger control.

Sometimes, if the consolidated approach involves multiple agencies coming together for a committee decision (for example the US CFIUS process), there may be too many viewpoints. Too many viewpoints can create delay and hold-up.

The benefit of a consolidated review is that the timing can be quicker, especially for deals that do not raise any issue. Also, the imposition of remedies can be easier when there is only one agency making remedial determinations.

The segmented approach can have effects at the other end of the spectrum: different positioning across agencies, remedies that are incompatible within the same jurisdiction, higher transactional costs from having to have multiple teams fighting on multiple fronts.

As far as the standards themselves, competition impact is probably the best defined and most predictable, while public interest is probably the most ambiguous and quite often opaque. Industrial policy probably should never affect merger review as that is driven by macro-economics. National security, while a legitimate concern, is not easily defined.

Although not yet widespread, some jurisdictions have sought to introduce public interest factors into the merger review process. This can lead effectively to foreign investment considerations being wrapped into merger reviews, e.g., by expecting foreign investors to contribute to the public interest in the context of a merger. That introduces uncertainty into the merger approval process, although some would argue that the net effect is no different to a separate foreign investment requirement. It also can lead to a preoccupation with public interest remedies at the expense of strict competition regulation. Legislatures are of course free to include public interest criteria, although some businessmen hold that they not do so. If they do, they should define those criteria clearly (and narrowly) and not fold them into the competition assessment, as, doing so, risks putting antitrust agencies in an invidious position and confusing the antitrust review process.

Whether antitrust or foreign investment, the regulatory burden in most emerging economies has dramatically increased in recent years.

While the regulatory burden for competition merger control is increasing, for the most part countries are following a well-trodden path (most following the EU filing process and determinations by the more experienced regulators (the EU and US)). More and more countries are harmonizing their competition merger control regimes (take for example Latin America and the recent legislative changes in Mexico, Chile, Argentina, etc.). Accordingly, there are more predictable outcomes. So, a greater burden, but enjoy more surety.

One area for improvement is around the timing of merger reviews. Although outcomes are trending toward increased predictability, the timing of reviews potentially adds a significant element of delay and uncertainty to the transaction process. This results in real costs borne by the parties, their investors and employees. Competition agencies should, to the extent reasonably practicable, cooperate and implement best practice tools to facilitate reasonably efficient and timely reviews.

In Africa, several regional economic communities are moving to a federal system of competition regulation. Teething problems abound with some domestic laws conflicting with treaty obligations, as well as countries who “double date” as members of competing “RECs”. In due course, it is hoped that greater harmony and certainty will be achieved.

That said, in many emerging markets, a history of colonialism and perceived post-colonial economic imperialism has perhaps rightly jaundiced regulators towards foreign investment without some obligation to contribute to the broader economy. The shifting of supply chains overseas and a failure to invest sustainably are typical concerns. It’s largely an ideological debate, and investors will need to embrace the principle of “give and take”.

To successfully navigate the regulatory waters, it is helpful to assemble a group of advisors that understand your business, will work closely with you, keep an eye out for pitfalls to your business and have contacts within the emerging jurisdictions to help understand the laws. Conducting a proper risk assessment and engaging early with the reviewing body early in the transaction, and to the extent possible, understanding the process and timeline, can help minimize the risk of delays and improve prospects of getting the required regulatory approvals.

Reference：

1. CONCURRENCES. Interview with Gabriel McGann, Senior Managing Counsel, Competition, Coca-Cola.

2. KWM. New Rules for Foreign Investment: Strengthening Supervision, Introducing New Expenses and Penalties.

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