Counsel to Counsel - January 2008 - (Page 20) global perspectives ©iStockphoto.com/Stuart Miles CROSS-BORDER M&A DEALS: National Security and Interest Reviews Raise Flags By John M. Toth P olitical concerns and perceived national security threats can lead national review agencies to quash deals in the name of national security or to protect local “champion” companies from competitive disadvantage. The latitude afforded these agencies may go well beyond evaluating commonly accepted competitive concerns, forcing inside counsel to come to a new understanding of the politicization of the processes impacting company M&A risk analysis and planning. Recent developments in the United States, Europe and China reflect the various ways politics and protections affect cross-border transactions even as competition concerns seem closer to convergence. strengthens competition or enhances benefit to the consumer, without evidence of conspiracy to restrain trade or anticompetitive conduct, the Department of Justice and Federal Trade Commission do not see their role as protecting other companies from a legitimate transaction.” For acquiring companies based outside the United States, however, political controversy, such as in the Dubai Ports World matter, is always possible. Rule of Reason The prevailing competition doctrine in the United States remains “the rule of reason,” which applies antitrust law only to “unreasonable” restraints of trade, notes Barry A. Pupkin, partner, Squire, Sanders & Dempsey L.L.P. “U.S. law focuses on preserving competition, not competitors,” he says. “If a business combination “China has seen this done in the U.S. with the Dubai Ports deal as well as the failed attempt by China’s national oil company to acquire Unocal, and wanted a similar mechanism when needed for specific transactions.” In its proposed 2006 acquisition of a company managing U.S. ports, Pupkin notes, “Dubai Ports World had received FTC and DOJ antitrust clearance for the acquisition, and it was approved by the Committee on Foreign Investment in the United States [CFIUS, see sidebar],” before the deal collapsed under a storm of controversy that included a threatened presidential veto of any legislation proposed to block the deal. “It was actually a political outcry in Congress, not competition law, that caused the problem.” Despite increased public and political concern over foreign acquisitions of U.S. businesses, national security remains largely separate from competition enforcement. New Emphasis Brian Hartnett, a partner at Squire Sanders based in Brussels, believes that European competition law is moving closer to the U.S. “rule of reason” in competition assessment. While many point to the European Commission’s use of the “portfolio effect” doctrine to bar the General Electric/ Honeywell merger (citing the potentially 20 LexisNexis® Martindale-Hubbell® http://www.iStockphoto.com/Stuart
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