Whenever a merger, acquisition or joint venture is proposed, it has to be examined by the authorities. That’s when the competition lawyers step in
Competition is one area of law that is intrinsically linked to the ‘real world’. It governs the world in which deals are done, ultimately existing to allow markets and the wider economy to function effectively.
“Competition law occupies that interesting space where dry law meets the real world,” says Osborne Clarke competition partner Simon Neill. “Much of the economic success of the western world rests on the concept of the free market and the benefits, in terms of lower prices, choice and innovation, that the process of competition delivers to consumers. This is what competition law seeks to uphold and protect.”
This type of law can be broken down into two categories. There is antitrust, which can itself be divided into two more subcategories. The first is anti-competitive agreements between companies, which is a mainstay of competition law, and includes cartels.
The second subcategory of antitrust law is the monitoring of companies with a dominant position in a certain market. Companies with a monopoly or large market share have a responsibility not to abuse their advantages by making prices unaffordable or excluding others from the market.
The other key category in competition law is merger control. This means that whenever a merger, acquisition or joint venture is proposed, it has to be examined to make sure that it will not dominate the market and stop potential competition. A real-life example of this would be preventing the Big Six energy companies from merging.
As with every area of City law, lawyers need to understand the markets and clients they work with. However, competition lawyers are often expected to dig deeper than a corporate lawyer might.
“You learn in detail about a whole range of industries and how they work in terms of who customers are and who suppliers and competitors are,” says McGuireWoods competition partner Matthew Hall. “You even know how the manufacturing process works sometimes. You get deep into understanding how these businesses work.”
Life in practice
Day to day, competition lawyers spend their time advising clients on whether their plans are compliant with regulations. Regulation differs for different types of companies and what sort of stronghold they have on a market.
For instance, if a company has a very strong market position, it will need to make sure it does not abuse that power. “Many commercial practices that would be fine for non-dominant companies to engage in, such as offering different terms to equivalent customers, dropping prices below cost, entering into exclusivity arrangements and using fidelity rebates, will give rise to problems,” says Neill.
Apart from making sure clients are compliant with regulations, competition teams focus on merger control and investigatory work, such as inspecting cartels. Both merger control and investigatory work involve long-term projects, which can go on for months. Indeed, investigating cartels can take years. This work comprises a large amount of research and drafting and can also involve talking to experts to gain a deeper understanding of market issues involved.
“When you are senior, there is a lot of strategy involved in competition law,” says Hall, “both in terms of liaising with regulators and just making judgment calls on whether a particular agreement is okay.”
Neill explains that those debates can range from advising how far a manufacturer can go in influencing resale prices, evaluating the risks of entering into a joint venture with a rival or assessing whether a dominant company can run a bundled promotional offer.
Competition lawyers also spend time keeping up with the new case law generated by the European Commission, Competition and Markets Authority and other national authorities across the EU.
What skills are needed?
“Being a competition lawyer brings an intellectual test,” says RPC competition associate Paul McComb. “It can be quite a technical area of law.
“The other good thing is the scope for debate that exists. As a competition lawyer you need to be prepared to challenge what is being said to you, whether that is among your own team members, clients or regulators. It is good to have an inquisitive mind.”
Another important skill that competition lawyers cultivate is the need to be co-operative and understanding. Good ‘people’ skills are vital, as competition law can be seen to hold up corporate deals.
“Working with corporate colleagues to ensure that competition law doesn’t undermine the transactional process and that it all works smoothly is very important,” says Hogan Lovells competition partner Christopher Hutton.
“Competition lawyers can be quite unpopular and the last thing you want is to be called in on a deal at the last minute and have to say that a transaction cannot go ahead or a certain body needs a six-month notification period.”
Colleagues within their own firm are not the only people competition lawyers have to keep happy. Good relationships with competition authorities and industry bodies such as Ofcom, Ofgem and the health sector body Monitor are key.
“Building up trust with the regulators is important and can make a real difference at a practical level,” says Neill. “Authorities set the deadlines and timescales for cases [but] a good rapport can result in a little more flexibility being shown.”
“You need to put yourself in everyone else’s shoes when you’re a competition lawyer,” says McComb. “It is a skill that you learn, not something you have. You need to think of the regulators and your client while bearing in mind economics, public policy, legal and commercial concerns. Those four things all have to feed in to your thoughts.”
What’s happening in the field?
Competition is an area of law that changes relatively rapidly, as so many other factors act upon it. The scale of market investigations has changed over the past decade, with inspections now far more extensive than they once were.
“Ten years ago you would be looking at the nuts and bolts of an industry,” explains Hutton. “We are now seeing a lot more market investigations than we used to. It is not that anyone had been accused of breaking the law, more that there is a wide-ranging market review to see whether any particular feature of the market means competition isn’t working as well as it could.”
He cites the current investigation into the energy market, which is looking at how the Big Six function. The companies could be forced to divest or split certain operations.
“It is right that the market is being looked at closely but I think it is also an example of where competition law is becoming increasingly politicised,” Hutton says. “Ofgem should possibly have looked at some of the market more closely and referred it to the [Competition and Markets Authority] before, but the current investigation was really prompted by comments made by the Labour Party and Ed Miliband.
“To a certain extent, competition law and investigation is beginning to be seen as a panacea, that the CMA can solve all problems if they just spend eight months looking at a hugely complicated industry. The CMA are useful, and are important for consumers, but should be independent and not politicised.”
This change in the number and scale of market investigations is also partly due to the fact that market bodies such as Ofgem, Ofcom, the Financial Conduct Authority and Monitor have been given new powers. Every regulated industry has its own regulatory body with competition law powers.
The trainee’s role
“[Competition law] is usually one of the most interesting seats to do as a trainee,” says Neill. “You can play a genuinely important role while learning an immense amount about how the business world operates.”
As competition practices involve a mix of contentious and non-contentious work, trainee tasks will vary on whether the team’s workload is litigious or advisory.
“If we’re working on litigation then trainees can be putting together bundles for court, but we aim to test people as much as we can,” says McComb. “We give them drafting assignments and develop them in that way as that gives people confidence. And from a purely selfish point of view, as an associate, the more you can help them develop, the better it is for you.”
Non-contentious work might focus on synthesising case law so that clients understand the basics of the rules better, assessing where in the world a transaction might need to be notified or responding to information requests from the competition authorities.
As Neill says: “We have moved into an increasingly complex and sophisticated world of competition law enforcement – and this is only going to increase in the future.”
- Anatomy of a Deal: Universal’s purchase of EMI: Universal took a massive risk when it bid for EMI, with few believing it would get competition clearance.
Brussels and regulatory bodies
Across the EU there are competition rules that closely reflect each other.
One set is governed by the European Commission and applies to changes that can affect trade between member states.
National competition rules, which in the UK are enforced by the Competition and Markets Authority, apply to developments that only affect competition in those member states.
Real complexities can arise where a large-scale deal, such as the merger between Dixons and Carphone Warehouse earlier this year, falls within the exclusive jurisdiction of the European Commission but nevertheless has competitive effects that are felt only in particular member states. In such cases, both the parties and the relevant national competition authorities [NCAs] may have the right to ask the commission to refer the case back to be assessed at a national level.
There are fixed deadlines during which the regulators will make their decisions so that you need to answer questions from it effectively and quickly within their deadlines. They are quite in the driving seat and quite fixed in their timetable.