1. Be sensitive to merger control rules in high-growth markets
High-growth markets present attractive mergers and acquisitions (M&A) and joint venture opportunities. But corporate planners need to be alert to the existence of merger control rules, which may require a transaction to be notified to a competition authority. Delays and fines can follow if the merger control rules are not respected.
Even when a merger notification requirement has been identified, the process in newer merger control regimes can be unpredictable. To properly advise companies on merger control issues in high-growth markets, local knowledge of the rules and a seasoned commercial assessment of the risks is essential.
2. Tread carefully among new competition laws
Countries enjoying high growth have some of the best drafted competition laws in the world. Multinationals used to dealing with established regimes will recognise in those new laws plenty of concepts that look very familiar.
But while laws may look the same, the methods of doing business in one country will not necessarily be permissible everywhere.
Competition law enforcement in high-growth markets can be dramatic
A particular challenge arises when the law is new and there is no competition authority guidance or local experience to shed light on how legislative provisions will apply in practice. Bringing in international experience and relying on case-law from more developed competition law countries can certainly help.
3. Nurture a compliance culture with sensitivity and realism
Competition law enforcement in high-growth markets can be dramatic, but enforcement is in many cases a relatively new development.
As a result, competition law awareness within businesses in high-growth markets can be low. This makes face-to-face training imperative and in an atmosphere which engenders trust. The challenge is to strike the right balance – developing a culture of compliance, but without “overtraining” or overauditing employees.
4. Remember competition law during M&A due diligence
Competition compliance issues also arise in the due diligence context. This is because competition law liabilities for violations committed are easily inherited. Reliance on warranties and indemnities can help mitigate the risk, but are rarely a cast-iron guarantee.
Advisers can work with companies to help audit companies post-acquisition (for the acquirer) and even pre-sale, if appropriate, (for the seller).
5. Don’t underestimate the enthusiasm of new competition authorities and their allies
India went from being a dormant regulator to imposing material fines for abuse of dominance and bid-rigging in the last few years. The Chinese antitrust authorities have become much more active in recent times imposing fines on domestic and international cartels as well as vertical price fixing.
Companies also need to be able to see the bigger picture; there is a very active worldwide network of competition authorities that meets up regularly to compare arsenals and battle plans. Often new regimes will work with more mature regimes to root out illegal conduct.
Many of our lawyers used to work at their local competition authority or have completed a secondment there. Being plugged into the international agency networks makes it easier to spot trends and predict policy developments before they become a problem for clients.