Internal business documents from merging firms have long been an important source of evidence for competition agencies investigating mergers – especially in
- helping them assess whom the merging firms view as their competitors and in
- evaluating the consistency of the arguments put forward by the merging parties.
Under the UK’s Competition and Markets Authority (CMA), documents have provided key evidence in just over 40% of Phase 1 cases overall – rising to 75% in cases referred for a Phase 2 investigation.
And the importance of documents has been growing.
My analysis of the evidence determining the CMA’s 300+ merger decisions to date shows that
- In 2018 and 2019 to date business documents have been a leading source of evidence in more than 70% of Phase 1 cases that the CMA has identified as threatening significant harm to competition
– well up on previous years.
And in cases that the CMA has unconditionally cleared at Phase 1 growth in the role of business documents has been more dramatic still.
- Between 2014 and 2016 documents were a key source of evidence in fewer than 30% of clearance cases.
From 2017 that figure has steadily increased to 60%.
One factor behind the figures is that the CMA has greatly increased the range and number of documents it asks companies to provide as a matter of course during Phase 1.
These days that includes email traffic as well as more formal documents associated with analysis and planning.
Technology now enables the analysis of documents (for example, through search algorithms) that would not have been possible even a few years ago.
One Phase 1 case involved the analysis of over 30,000 documents.
Another factor is that the CMA has been paying more attention to the potential for competition harm in cases where markets are young and dynamic.
As the CMA describes in a recent article, business documents are inevitably a more important source of evidence in these cases because of the relative lack of historic information.
Questions For Merging Firms
Judging from conversations during cases and at my recent merger briefings, the growing importance of internal business documents is prompting some merging firms to ask some fairly fundamental questions, especially about what should they change in::
- how they view business documents – opportunity or threat
- how and when they prepare for mergers
- how they communicate internally
- what they document and in what terms
- how they argue their case.
What’s your view of the issue? Do feel free to comment….
© Adrian Payne, 2019