At first glance, antitrust authorities’ skeptical approach to remedies does not appear to have translated into the overall number of conditional clearances. Excluding South African remedies from the data (where the authority’s concerns focus on public interest alongside antitrust issues), the total number of remedy cases was 91, only a slight decrease from 2022.

However, considering that 20 of these remedy cases are attributable to two series of U.K. veterinary practice transactions, in 2023 the number of acquirers obtaining clearances through giving commitments has in fact decreased significantly. 

Merger remedies still out of favor in the U.S.

Last year, we commented that total remedy cases in the U.S. had dropped to eight, a decrease of nearly 60%. In 2023 we saw a further 50% reduction to four.

This is a product of the continued reluctance by U.S. agencies, particularly the Department of Justice Antitrust Division (DOJ), to accept negotiated merger remedies. Instead they have favored challenging deals.

It is striking that since DOJ Head Jonathan Kanter took office in 2021, the agency has agreed only one remedy (which was the result of a mid-trial settlement). The Federal Trade Commission (FTC), while more amenable than the DOJ to consent decrees, has also announced it is focusing more resources on “litigating, rather than settling”.

Against this background, merging parties have more often chosen to “litigate the fix”, meaning that where their remedy offer is deemed insufficient by the agency, they litigate that remedy as part of the agency’s suit to block the transaction.

In some cases this has led to positive outcomes for the parties. In both Amgen/Horizon Therapeutics and ICE/Black Knight the FTC settled its challenge by accepting remedies. But this did come at a price – in each case the parties ultimately committed to a broader divestment package than originally offered.

There is every indication that the U.S. agencies’ hardline approach will continue in the coming year. Parties to potentially problematic deals should be prepared for protracted litigation and should put in the groundwork to enable them to put forward a robust remedy proposal. Even if not accepted by the agency, it may give the parties more leverage in litigation.

Uptick in conditions in local U.K. mergers

In contrast to the U.S., we saw the number of remedy cases in the U.K. increase for a second year in a row. Phase 1 conditional clearances more than doubled from 13 to 28.

Most of these cases were mergers involving local overlapping businesses, including retail fuel stations, pharmacies, supply of car parts and, as noted above, 20 independent acquisitions in the vet sector by two private equity-backed acquirers (see our article on ‘Private equity deals under increasing antitrust scrutiny’ for more).

Many were also completed transactions, which the Competition and Markets Authority (CMA) called in after the parties decided not to notify and then required the acquirer to sell off most, if not all, of the businesses purchased. These effectively amount to retroactive prohibitions.

This highlights the dangers of the U.K.’s voluntary merger control regime. The CMA’s close monitoring of markets means it is increasingly likely that the authority will learn of potentially anti-competitive transactions and require notification, with potentially serious outcomes for the acquirer.

European Commission conditional clearances shift from phase 1 to phase 2

Overall, the European Commission (EC) handed out fewer conditional clearances in 2023: nine, compared to 12 in 2022.

At phase 1, the number of remedies accepted decreased to four (from ten). On the other hand, phase 2 conditional clearances more than doubled (five compared to two). This shift may be significant. It suggests that, while it remains possible to get conditional clearance at EU-level, the EC may need the additional time afforded by a phase 2 investigation to get comfortable that the remedy package addresses its concerns.

Approaches to mitigate antitrust risk

Faced with a more challenging environment in which to convince authorities to accept remedy packages, we saw parties employ various strategies to achieve conditional clearance.

• Crafting global remedy solutions to address antitrust concerns across a number of jurisdictions. A good example is Sika/MBCC, where Sika committed to divest MBCC’s admixture business in the EEA, the U.K., the U.S., Australia, Canada, New Zealand and Switzerland. The relevant authorities coordinated extensively.
• Pulling and refiling notifications where an authority has concerns about a deal but a tight phase 1 review period does not allow enough time to test the proposed remedies. Parties used this tactic in three of the four phase 1 remedy cases at EU-level, in each persuading the EC to grant conditional clearance after the second phase 1 review.
• Using extended pre-notification to start early discussions on remedies with a view to getting complex commitments accepted at phase 1. Novozymes announced its acquisition of rival biotech firm Chr. Hansen ten months before it formally notified the deal to the EC. The EC’s approval was conditional on a wide divestment package comprising businesses from both parties, including distribution and production assets, as well as a pipeline project.

Parties should remember that early and constructive engagement on remedies is generally encouraged by the authorities. In that context, however, the CMA’s Chief Executive has warned merging parties against holding back “best and final” remedy proposals, saying that this tactic will extend the review unnecessarily and could result in a prohibition. 

Many antitrust authorities remained resolute in their preference for structural divestments over behavioral commitments, including in the EU, U.K., U.S., Germany and Australia. This played out in some key cases in 2023, e.g., Booking/eTraveli, where the EC rejected a choice screen remedy in favor of blocking the transaction.

Despite this, last year the proportion of conditional clearances involving behavioral commitments or hybrid remedies (i.e., packages that combined structural and behavioral elements) increased for the second year in a row, to 40%.

Given the increased willingness of antitrust authorities to intervene in non-horizontal transactions, this is not a surprise. Antitrust concerns arising in such deals, e.g., in relation to access or interoperability, are usually most appropriately addressed by conduct commitments rather than structural divestments.

Even in jurisdictions where the authorities have been most hostile to behavioral conditions, we saw them being accepted in certain (mostly non-horizontal) cases:

• EU: three of five phase 2 conditional clearances involved behavioral remedies. The EC heralded the licensing commitments accepted in Microsoft/Activision Blizzard as not only replacing competition lost by the transaction but in fact improving it, by empowering consumers and boosting the development of cloud game streaming technology. Access commitments were accepted in the other two cases, one of which raised horizontal concerns.
• U.K.: in its review of Microsoft/Activision Blizzard, the CMA initially rejected the licensing remedy. But it then cleared a restructured version of the deal under which cloud streaming rights to current and future Activision games (outside the EEA) would be sold to a third party, subject to commitments from Microsoft that ensure that the terms of the sale are enforceable by the CMA.
• U.S.: the FTC settled its suit to block Amgen/Horizon after the parties agreed not to bundle products or make rebates conditional on certain terms.

Other jurisdictions are much more willing to accept behavioral remedies. In China, all four remedies cases in 2023 involved a behavioral element. The same was true for all published decisions in Belgium, COMESA, Czech Republic, Hungary, Italy, South Korea and Turkey.

Viewed together, these cases send a clear message: where appropriate – particularly in non-horizontal mergers – behavioral remedies are not out of reach.

In last year’s report we predicted an increase in the use of upfront buyer or fix-it-first remedies. This played out in both the U.K. and U.S. in 2023.

The data for the U.K. is particularly significant. In 24 out of 27 phase 1 conditional decisions with structural remedies an upfront buyer commitment was required, showing the CMA’s eagerness to ensure that remedy packages are robust and implementation risk is minimized.

In the U.S., as remedy cases fell, a decline in the number of upfront buyers necessarily followed. However, the proportion rose: an upfront buyer was required in both structural remedy cases in 2023.

By contrast, in the EU, upfront buyers/fix-it-first remedies were announced in only 33% of structural remedy cases (two in total), a decline for the second year in a row. It will be interesting to see if we see a reversal of this trend. So far in 2024 the EC has (unusually) agreed to both an upfront buyer and a fix-it-first commitment in its conditional clearance of Korean Air/Asiana Airlines.

The EC is also taking a strict approach to compliance. It has launched an investigation into whether Vivendi breached its upfront buyer obligation (as well as the requirements to notify and not to implement the deal prior to EC approval) in relation to its acquisition of Lagardère.