Takeover politics

A look at the EU and UK merger control rules, and in particular, the opportunities for political interventions in order to protect what is perceived to be the national interest.

In light of Pfizer's reported interest in acquiring AstraZeneca, this week we wanted to look at the EU and UK merger control rules, and in particular, the opportunities for political interventions in order to protect what is perceived to be the national interest.

In the EU, the European Commission has exclusive jurisdiction over transactions with an EU dimension. Applying national law to a transaction with an EU dimension can infringe EU law. However, Member States may seek permission from the Commission to investigate issues relating to the prudential management of national financial institutions, national security, or the plurality of national media that are linked to a transaction with an EU dimension. For example, News Corp's proposed acquisition of BSkyB was cleared by the EU Commission as regards the likely effect on competition. However, the media plurality questions were dealt with in the UK (the proposed transaction ultimately collapsed in the fallout from the 'News of the World' phone hacking scandal).

In the UK, there are (limited) opportunities for political interference in transactions which raise wider public interest concerns. In such cases, the Secretary of State may impose additional conditions on a transaction to address such public interest concerns or, where a proposed transaction is considered to be in the public interest, notwithstanding any competition concerns, can override the competition assessment and clear a transaction which might otherwise be blocked (or which might be cleared only subject to conditions). Currently, the specified considerations which can trigger a public interest intervention are limited to national security/defence, media plurality, accuracy and quality, and the stability of the UK financial system. The HBOS/Lloyds deal was cleared following political intervention on the basis of public interest considerations (financial stability) and in spite of potential competition concerns.

If you would like to discuss these issues, please do not hesitate to contact us.