REGULATORY RULES SHOULD BE IMPROVED IN COOPERATION WITH THE LEGAL COMMUNITY

Especially if new rules concern mergers

On 26 September 2019, Deputy Head of FAS Andrey Tsyganov took part in a Conference of the Corporate Counsel Association - “Two sides of the same medal. Corporate control vs responsibility of companies, shareholders, top-executives”.

In his report – “Gladiator makes a decision in the arena”: Antimonopoly issues of corporate control”, Andrey Tsyganov pointed out that any regulatory risks should be exposed and prepared for.

“FAS is not a gladiator. We get in the arena prepared. And we wish very much that our counteragents also come in the arena prepared, understanding what they can face and how to overcome these risks”, started Deputy Head of FAS.

He mentioned mergers and acquisitions among the major antimonopoly issues of corporate control. Deputy Head of FAS described the main regulatory acts in this field, the timelines for petition consideration, and gave FAS statistics on mergers.

“Out of 1275 mergers considered by FAS in a year, the antimonopoly body extended the timeframe for petition consideration only in 13 % to request additional information. On 67 mergers FAS orders the companies to exercise particular actions designed to minimize the risks threatening competition. Only 30 mergers were not approved. There are two reasons. Threat to competition and failure to provide full and reliable information to enable FAS to perform analysis”, continued Andrey Tsyganov.

Deputy Head of FAS said that merger approval timing is a problem for business:

“For business time is money. The timeframe for petition consideration in Russia is 1 month with a possibility to extend for two more months. According to Global Competition Review, in Japan the average period for considering merger petitions is 486 days, in the UK – 200 days. We endeavor to meet our deadlines, although there are exceptions in practice. A good example of such exceptions is “Bayer/Monsanto” merger, which took over a year to finalize”.

“Using traditional methods of analysis – simple adding companies’ shares on a particular market, it may seem at the first glance that there is no threat to competition at all. This approach can apply to non-complex mono-product mergers. “Bayer/Monsanto” required a deeper analysis to determine not only quantitative but also qualitative indicators for the merger consequences. As a result of our analysis and the order issued, “Bayer” agreed to transfer technologies and to meet the conditions set by the Russian antimonopoly body”, informed the speaker.

He underlined that executing FAS orders is mandatory and described the consequences of failure to execute them, as well as FAS initiatives to unify merger rules and consideration timelines in different countries, unifying waiver procedures and the “Digital Dog” project, which will enable companies to file electronic petitions and the antimonopoly body - to analyze big data arrays using artificial intelligence.

“The system will ease the life of companies and FAS. Because one element of this project is unified electronic filing of petitions, and the second element is big data analysis. Human brain will have the final word in decision-making but some data will be processed by computers. We intend to launch the project by the end of 2020”, emphasized Andrey Tsyganov.

He also said that upon a FAS request, the Antimonopoly Experts Association has started devising recommendations for consideration of mergers and acquisitions.

“In the past 2-3 years FAS has drafted more than a dozen recommendations on diverse areas of the antimonopoly enforcement that have been approved by FAS Presidium. There are no such recommendations in Russia in the field of mergers so far. It is essential that practicing lawyers and experts are involved in it because for us as a regulator it is important that the efforts on improving the merger rules are carried out in cooperation with you, lawyers. Otherwise, you will have to abide the rules written by somebody else and perhaps people who drafted them would not fully understand what you really need. We do not wish that that lawyers’ practice becomes the life of bestiaries – gladiators fighting wild animals”, concluded Andrey Tsyganov.