Training Workshop on M&A
M&A Investigative Tools : A Synopsis
13 August 2005
By JEONG, Joong-weon
Korea Fair Trade Commission
CONTENTS
1
Various Tools for Merger Investigation
2
Policy Considerations
3
Conclusion
Acknowledgement – This Presentation is Based
on the ICN Merger Working Group’s Work
Various Tools for Merger Investigation
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Notification/Filing
Compulsory Request for Information
Voluntary Request for Information
Telephone Interview
Oral Evidence (Deposition, Testimony, Affidavit…)
On-site Visit or Inspection
Outside Experts
Public Data
Economic Analysis
Notification/Filing
•Most basic, and widely used
•Starting point for a merger investigation process
•Should not be too burdensome, but should provide
the agency with sufficient information to see if the
case merits further investigation
< ICN Recommended Practice >
"initial notification should be limited to the information needed to verify
that the transaction exceeds jurisdictional thresholds, to determine
whether the transaction raises competitive issues meriting further
investigation, and to take steps necessary to terminate the review of
transactions that do not merit further investigation."
Compulsory Request for Internal Document
•Internal documents are asked to the merging parties
to complement initial filing
•Advantage
- Un-filtered, in original state
•Disadvantage
Time-consuming, too much information
Tip : Remember to “frame” the request
Compulsory Request for Written Documents
•The investigator asks the merging parties or competitors
to fill in question sheet or data tables
•Advantage
- Less burdensome to merging parties and investigator
•Disadvantage
- The answer may be subjective or information might
be manipulated
Voluntary Request for Information
•Often used during early phase of investigation
•Also used by jurisdictions without compulsory
request powers
Example : Explanation of relevant market,
business and strategic plans, market studies,
Lit of competitors, suppliers, customers
Oral Evidence : Telephone Interview
•Very useful for obtaining quick answer for a small
but an important question
•Also, a good way of approaching someone who
is ”shy” to come forward in open setting
•Drawbacks:
-Hard to get in touch with the right person
-Interviewees are less prepared than in formal
meetings
Tip : Remember to make a transcript of conversation
Oral Evidence : Sworn Statements
•Prepared Statements
- Affidavits, declaration are prepared under
assistance by the investigators and submitted by the
merging parties or third parties
•Un-prepared Statements
- Sworn testimony or deposition are taken through
investigation hearings, transcribed during the
hearings
Use of Publicly Available Data
•Second most widely used tool for investigation
•Not burdensome to the merging parties
•Shows some idea about the company, its strengths and
weaknesses, product, sector, market share, cost,
developments and challenges
•But must be careful for biased information
Example : Sector publication, financial report,
Brochures, corporate and trade association reports,
Web Sites, Regulatory Agency’s report or Web Site
Economic Analysis
•Used for complex cases
•Used to predict economic impact of merger and to
define relevant market
•Must be careful to use correct data to gain correct
economic analysis
•Can be time-consuming
Use of Outside Experts/Studies
•Used for complex cases only
•Use of experts and commissioned studies are costly
•Be cautious that they are not competition experts
Tip : Remember to monitor the work and make
advance planning to make best use of the experts
On-site Visits/Inspections
•Surprise Inspection
-Used to obtain evidence if the merging party is
not complying with the request
-Very seldom used because it’s burdensome to
both agency and company
•Scheduled Visit
-Good opportunity to meet actual business people
-Gives good insight into how industry and
company works in practice
Confidentiality
•Merger investigation involves collection
information which might be confidential
of
•Jurisdiction needs safeguards in place to protect
confidentiality
< ICN Recommended Practice >
"Public disclosure of business secrets and other confidential information
received by competition agencies in connection with the merger review process
may prejudice important commercial interests and may have adverse effects on
competition. The prospect of potential disclosure may also discourage parties
from submitting all relevant information to and fully cooperating with the
reviewing agency. Confidential information that merging parties and third parties
submit in connection with the merger review process should therefore be subject
to appropriate confidentiality protections."
Enforcement Powers
•Investigation tools will be ineffective without some
kind of sanction
•Failure to submit or submitting false or misleading
information must be punished
-Sanction must be significant so as to act as a
deterrence
-Sanction should be imposed
compliance has been made
until
-Criminal prosecution can be an option
the
How the Survey Shows
According to the
Survey(2002)…
In a simple case,
ICN
Merger
Working
-Notification/Filing and public data were often used in
most jurisdictions
-Surprise inspection or outside experts were almost
never used
In a complex case,
-Notification/Filing, public data, and request for
information were often used in most jurisdictions
-Surprise inspection or sworn testimony were almost
never used
Group
Further Study on this Topic
•For further information on this topic, visit :
www.internationalcompetitionnetwork.org
(Downloadable reports are available)
•Keep on the lookout for technical assistance
projects by the RCC in Seoul
- Get in touch with the KFTC for more
information on RCC