In 2020 the total number of notifications to the FCO declined by around 14 percent (from about 1,400 in 2019 to about 1,200 in 2020) on an annual basis. 

While notifications declined in 2020 compared to 2019, there was a strong recovery in the second half of the year which eventually ran out of steam in December. The FCO concluded nine Phase II cases in 2020, two less than in the previous year. Four of those cases were unconditionally cleared, three were cleared with remedies, and in two cases the deals were abandoned. 

There were no outright prohibitions. However, companies often abandon deals in advance of an official decision if the FCO indicates to them that it is preparing to block their transaction. 

As in previous years, last year’s Phase II cases related to a large number of diverse industry sectors: the FCO opened in-depth investigations in respect of deals in the cinema, food retail, locomotive, hospital, furniture, car workshops and agricultural products industries.

In 2020 the average duration of merger investigations that proceeded to Phase II increased to 7.3 months (from 5.7 months in 2019). This was the longest average duration recorded in the last five years. Although many expected reviews of complex transactions to take longer in 2020 due to the challenges involved in transitioning to remote work during the pandemic, it is worth noting that less than one percent of transactions notified in Germany are subject to an in-depth Phase II investigation. As such, variations in year-over-year averages are typically the result of specific individual circumstances of the cases reviewed by the FCO. Moreover, a COVID-related temporary extension of the FCO’s merger review deadlines expired in the summer without having had any noticeable effect.  

The pandemic did not result in any relaxation in merger control standards, though. The number of significant merger investigations showed a 22 percent increase relative to 2019, with nine Phase I remedy cases and two Phase II cases.

In addition, two of the transactions filed in 2020 (on 10 April 2020 and 14 September 2020 respectively) are still currently undergoing a Phase II investigation. 

The high standards of the FCA are also reflected in the outcome of the significant investigations. In 2020, the FCA issued its first prohibition decision ever, blocking an acquisition by a large French supermarket chain in the retail sector (Decision No. 20-DCC-116). Remedies were also imposed in the other Phase II case that was decided by the FCA during the year. 

Duration of the French significant investigations reaches new heights

Under French merger control rules, the FCA’s Phase I must be completed within five weeks (25 working days) from the filing. In case commitments are submitted, or if the parties request to suspend the procedure, the review can be extended by two additional weeks. This theoretical deadline does not, however, take into account pre-notification talks, which – although theoretically not mandatory – are de facto required by the FCA. The possibility for the FCA to “stop the clock” if the notifying parties fail to provide requested information before the deadline can also increase the actual duration of Phase I investigations. 

Against this background, on average, Phase I exceeded six months over the past ten years when taking pre-notification talks into account. 2020 established a new record in that regard. Phase I remedy cases were cleared in 8.9 months on average, from the date of the deal announcement to the final FCA decision, up 16 percent compared to 2019 (7.7 months). This increase results both from longer pre-notification talks (adding two weeks to the timing on average) and an increase of almost three weeks for the Phase I investigation itself. While other factors may also have played a part, the pandemic likely explains part of the additional delays.

If at the end of Phase I, the FCA considers that the deal may cause serious harm to competition, it can initiate an in-depth investigation (Phase II), which must be completed within 13 additional weeks (65 working days), plus up to 20 working days if commitments are offered. Another 20-day period can be added if the FCA or the parties request a suspension of the procedure, with the overall limit of 21 weeks (105 working days) in total for Phase II. However, this theoretical deadline again excludes de facto mandatory pre-notification talks and the possibility for the FCA to stop the clock when it considers that necessary information has not been provided by the notifying parties.

Although the limited number of Phase II investigations each year makes it difficult to draw definitive conclusions, the duration of the two Phase II cases completed by the FCA in 2020 does show a significant increase compared to 2018 (no Phase II cases in 2019). Phase II investigations averaged 11.5 months from announcement to decision, up 5 percent compared with the 11-month average of 2018. 

Again, the pandemic may be to blame for part of this increased duration, although in this case it is also driven by the record-high 13.8-month investigation that resulted in the first prohibition decision issued by the FCA. In comparison, and despite the imposition of remedies, the other Phase II investigation conducted by the FCA lasted only eight months, i.e., less than the average duration for a Phase I case with remedies.  

This predominance mainly increases the number of simplified procedures (i.e., unproblematic, expedited investigations) before the FCA, where retail accounts for 78 percent of all decisions over the past ten years. But it is also reflected in significant investigations, as the FCA pays heightened attention to mergers that can result in a price increase for essential goods and staple foods to the detriment of consumers. Cases involving retail and agriculture/agribusiness thus represented often more than 50 percent of significant investigations each year for the past decade.

However, recent years have seen an increased focus on the health sector, which accounted for six significant investigations since 2015, and three in 2020 alone. Press, media and telecommunications have also been a focus for the FCA. In these cases, the FCA’s review in the context of merger control rules mirrors its priorities in terms of antitrust enforcement.

Enforcement in the digital sector has been limited, with only one Phase II case in 2018 (relating to the merger of the two online platforms SeLoger.com and Logic-Immo.com, both specialized in property advertising). This may be due to the large number of digital deals that fall below the (relatively high) French merger control thresholds. As a consequence, the FCA has expressed its extreme willingness to refer mergers to the European Commission under its new interpretation of Article 22 of Regulation No. 139/2004, which would enable national competition authorities to take “into account the acquisition practices of certain players and operations that currently fall ‘below the thresholds’ despite affecting competitive market dynamics are subject to tighter control” (see FCA, press releases dated 23 December 2020 and 9 January 2021). This new tool could have an impact on merger control in France going forward.

Footnotes

1) Please note that date of the formalization of the transaction, as retained in the FCA decision (e.g. signing, firm offer letter), was used as a proxy for the announcement date.