EU to sharpen deal scrutiny as M&A activity surges to record levels

There is 'mounting political pressure on antitrust authorities' to more aggressively police big business

Margrethe Vestager, the EU’s antitrust chief, warned in a speech in October that the commission was planning “a series of raids” targeting any companies which may be colluding on prices.

Last year was a record for dealmakers. 

Now they face a reckoning, as antitrust and competition regulators across Europe scrutinise the boom in mergers that could see them extract concessions or even block acquisitions.

Those same authorities are wielding new powers or about to acquire fresh capabilities they could use to wrap companies like Apple or Amazon in a regulatory straitjacket that will bring real changes to how they operate.

Globally, companies struck $5tn-plus of deals in 2021, nearly a trillion more than the previous record set in 2007.

But, regulators seem less impressed, according to lawyer Michele Davis, and are more inclined to see the downside rather than the benefits of rivals teaming up.

“It’s critical that deal-makers anticipate and prepare for heightened scrutiny of transactions in 2022,” said Ms Davis, a competition law specialist at Freshfields Bruckhaus Deringer in London. 

It’s a trend “driven by mounting political pressure on antitrust authorities” to more aggressively police big business, she said.

Nvidia’s bid for British chipmaker Arm shows the risk that companies face when rivals complain a takeover will strangle competition. US regulators have sued to block the $40bn deal, the UK government is weighing a potential veto citing national security concerns, while the EU says it is “deeply concerned” about the deal.

Killer acquisition

The UK’s Competition and Markets Authority (CMA), flexing its muscles post-Brexit, last month ordered Facebook parent Meta Platforms to unwind its acquisition of a GIF search engine. It was designed to halt a so-called killer acquisition, where big firms buy potentially innovative emerging rivals.

Germany’s Federal Cartel Office kicked off 2022 by ruling that Google was of “paramount significance for competition”. 

This new classification makes it easier to act against the company and is weighing a similar ruling for Amazon, Apple and Meta.

The EU is also lining up new powers for early 2022 that would let it curb big tech under the planned Digital Markets Act and Digital Services Act. 

The CMA’s Digital Markets Unit, also intended for debut early this year, aims to introduce ‘strategic market status’ measures which would limit how internet giants can expand into new areas.

It’s not only big tech under the microscope of regulators. European watchdogs are also under pressure to crack down on surging energy prices and check for potential collusion. Political pressure has forced the European Commission to investigate surging gas prices – even though energy regulators say that so far they see no clear evidence of manipulation.

Margrethe Vestager, the EU’s antitrust chief, warned in a speech in October that the commission was planning “a series of raids” targeting any companies which may be colluding on prices.

• Bloomberg