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Alex Chisholm, Nelson Jung, Oct 15, 2014
Developments over the past few months have been described as a “volcanic rise in protectionist sentiments from national governments.” General Electric’s bid for Alstom as well as numerous recent takeover proposals in the pharmaceutical sector, in particular Pfizer’s attempt to acquire AstraZeneca and AbbVie’s proposed takeover of Shire, have reinvigorated the long-running debate about greater state intervention in cross-border deal-making. There have been calls for a widening of public interest tests in merger control, or for the use of other legislative tools designed to protect vital sectors of the economy from certain foreign takeovers.
This article commences by briefly summarizing the evolution of merger control regimes, away from broad public interest tests and towards a competition-based assessment, in the United Kingdom and also internationally. In light of the recent, increasingly vocal demand for new or wider public interest considerations, it is time to take stock and explore what implications a shift or reversal in policy of this type may have. In order to do so, we set out to answer the question whether the U.K. merger control regime is in good health. One of the key tenets of medicine is the injunction that doctors should “first, do no harm;” any treatment required for a merger control regime must thus be based on a thorough diagnosis of its current state and the full potential implications of the medicine to be prescribed.
We will therefore examine the legal framework governing the current U.K. merger control regime insofar as public interest considerations are concerned, including its important interface with EU law. We then briefly move outside the confines of merger control to assess the extent to which public interest considerations can be invoked under foreign investment control rules in the United Kingdom and a number of other jurisdictions. Against this background, the article examines evidence relating to the economic impact of foreign investment, before it points to costs and risks that may arise if the United Kingdom or other jurisdictions were to broaden public interest tests in merger control. In the final section we will identify some hallmarks of what we regard as an economically efficient and durable regime.
We are not legislative policy makers. Instead, the CMA, as a statutory body and operator of the U.K. merger control machinery, applies the law as it is enacted. We are, however, mindful of the ongoing need to keep under review the working of the regime and how it is applied in light of new circumstances and observed shortcomings. It would be remiss not to point out costs and risks of potentially forfeiting the valuable progress made in recent years in clarifying and strengthening competition law regimes across the world—and with it the world trading system—and thereby greatly improving consumer welfare outcomes and easing tensions between nations. Any reversal of this progress would not be costless, in particular if examined in an international context.