Merger Control - Mandatory and Voluntary Regimes

Mandatory and Voluntary Regimes

A merger control regime is described as "mandatory" when filing of a transaction is compulsory. Mandatory regimes normally also contain a so-called "suspensory clause", which implies that the parties to a transaction are indefinitely prevented from closing the deal until they have received merger clearance. The majority of merger jurisdictions worldwide have mandatory merger control systems. An examples of a mandatory system with suspensory clause is provided by the European Union merger control.

A distinction can also be made between "local" and "global" bars on closing/implementation; some mandatory regimes provide that the transaction cannot be implemented within the particular jurisdiction (local bar on closing) and some provide that the transaction cannot be closed/implemented anywhere in the world prior to merger clearance (global bar on closing). A number of jurisdictions worldwide have a merger control regime which imposes a global bar on closing. This creates obstacles for the parties to a concentration to close a transaction until a number of the regulatory clearances required are obtained.

A merger control regime is described as "voluntary" when the parties are not prevented from closing the deal and implementing the transaction in advance of having applied for and received merger clearance. In these circumstances the merging parties are effectively taking the risk that the competition authority will not require them to undo the deal if in due course it is found that the transaction is likely to have an anti-competitive effect. Voluntary regimes are fairly exceptional. The United Kingdom, for instance, has a voluntary merger control regime. However, the Office of Fair Trading can request the parties to a merger that has already completed to hold the two businesses separate pending an investigation (so called "initial undertakings").

Mandatory regimes can be considered effective in preventing anticompetitive concentrations since it is almost impossible to unravel a merger once it has been implemented (for example because key staff have been made redundant, assets have been sold and information has been exchanged). On the other hand, voluntary regimes are seen as constituting less of a burden for merging firms.