Dealmakers Face Regulatory Reckoning From EU After Buying Spree

(Bloomberg) --

Last year was a record for dealmakers. Now they face a reckoning as antitrust regulators across Europe scrutinize 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 Inc. or Amazon.com Inc. in a regulatory straitjacket that will bring real changes to how they operate. 

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

‘Mounting pressure’ 

“It’s critical that deal-makers anticipate and prepare for heightened scrutiny of transactions in 2022,” said Davis, a competition law specialist at Freshfields Bruckhaus Deringer LLP in London. It’s a trend “driven by mounting political pressure on antitrust authorities” to more aggressively police big business, she said.

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

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

New Year Ruling

Germany’s Federal Cartel Office kicked off 2022 by ruling that Alphabet Inc.’s 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 European Union 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. 

As commodity prices climb and global supply chains get stretched amid unprecedented pandemic demand, the EU is separately looking at short-term power trading, whether container shippers are teaming up on prices and possible collusion between producers of wood pulp - which helps make the cardboard for parcels. 

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. 

Officials have been scanning market data to try and pinpoint suspicious patterns, but there will always be more work to do, said Vestager, known for her aggressive pursuit of other industry giants like Gazprom PJSC. 

“I think you’d need a very hopeful view of human nature, to believe that we’re close to wiping out cartels.” 

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