EU competition authorities have not yet put the full kibosh on deals – but that’s not to say they make it easy. Companies like Sun/Oracle, LiveNation/Ticketmaster and BAA have felt the regulatory sting of these competition reviews and, while some have survived intact, all are slowed, or altered, by the experience. This, often despite getting the okay in their home jurisdictions and other locales. While antitrust scrutiny in the EU is nothing new, those expecting lighter treatment in light of heavy economic circumstances are in for a less-than-pleasant surprise. This leads many to describe EU competition policies as tenacious…and that’s just what their friends say.

Worries about competition enforcement are no mere abstractions, and indeed shape many a merger. Companies that touch the EU frequently and publicly sweat out concerns about competition enforcement, with disclosure documents giving voice to real concern. Among those are recent disclosures of merger offers by several target companies where the offer was made explicitly conditional on easy passage past competition authorities. Otherwise stated, nervous offerors are far more interested in wheeling-and-dealing with their targets than dancing with the regulators.

This comment comes through loud and clear, in the context of merger offers, for companies as varied as Adecco (targeting Spring Group); AIT Investments (targeting Goldshield Group); and Eurasian Natural Resources Corp (targeting the Central African Mining and Exploration Co.). U.S. companies looking to get deals done also disclose to the SEC that their mergers are subject to competition scrutiny. For example, the Disney/Marvel and Dress Barn/Tween Brands deals both led to disclosure that, in part, expressed concern about EU scrutiny.

These quite public concerns are voiced for good reason, as competition law in the EU is anything but simple….or quick. Every proposed merger must be reviewed and these reviews can proceed quite slowly. There are multiple bodies involved at both the EU and nation-state level, with each review essentially triaged based on value metrics. In particular, a complex set of jurisdictional rules based on “the annual turnover of the combined businesses” in global and EU sales determines whether the EU Competition Commission or national authorities review the merger.

Adding to aggravations, the Competition Commission at both the EU and UK levels can move quite slowly. It often takes years to investigate matters. And if an unfavorable opinion is handed down then appeals further slow things.

As if that weren’t enough, the commission’s approval at both the EU and UK level can appear unpredictable, as several recently announced mergers exemplify. Consider the quite different mergers proposed between Sun/Oracle; Merck/Schering/Plough; LiveNation/Ticketmaster (LNTM); and PepsiCo and certain bottlers. All were handled by EU level authorities, other than LNTM, which was handled at the UK level.

Last week, for example, the EU commission approved Merck’s $41 billion takeover of Schering-Plough. The Commission cited that the “proposed transaction would not significantly impede effective competition in the European economic area or any substantial part of it”. The commission, however, did require as a condition for approval the sale of Merck’s animal health business to its French joint venture partner. In contrast to the Sun/Oracle concerns which slowed down that merger deal to a crawl, on October 27, the EU Competition Commission cleared the way for PepsiCo’s purchase of two bottling companies, Pepsi Bottling Group and PepsiAmericas.

In comparison, Oracle’s proposed $7 billion acquisition of Sun Microsystems has received much scrutiny from the commission. Although a formal decision has not yet been made, the commission stated recently that Oracle has “failed to produce hard evidence to placate concerns that its purchase . . . would hurt competition.” Of primary concern, the commission stated that if the merger occurred, then consumer alternatives to Oracle and Sun databases would be too limited. Accordingly, it’s expected that the sale or spin-off of Sun’s MySQL database may be required before the deal gets the commission’s blessing.

But the commission’s hesitation on making a decision on the merger isn’t without repercussions. Oracle claims that while the commission is performing their investigation it is costing their company an estimated $100 million per month as a result of “rivals like Hewlett-Packard [] and IBM [] poach[ing] customers amid uncertainty about the closing of the deal.” Not only is the deal costing Oracle millions, and potentially billions, but Sun shares are on the decline and they recently announced layoffs of 3,000 employees worldwide citing delays and uncertainty in regulatory approval as the primary factors. While the commission’s stated primary responsibility is “making markets work well for consumers” this group seems to exclude consumers employed by the parties to this transaction.

Showing who’s boss in the LNTM matter, the UK level the commission plays a similarly dominant role in merger activities. Great caution is evident in their provisional ruling on October 8th, stating that a proposed merger between Ticketmaster, the world’s largest seller of tickets to live events, and Live Nation, the world’s biggest concert promoter, “will limit the development of competition in the market for live music ticket retailing.” While even the Boss (aka Bruce Springsteen) has chimed in stating their concern with such an entertainment mega-deal coming to fruition, the undisputed boss is clearly the Competition Commission.

Interestingly, UK level review does provide the affected companies with an out: skip out of the UK. Apparently, the UK is the only country of 13 which the deal affects worldwide that has expressed concern with the merger. While representatives from LiveNation and Ticketmaster continue to argue that the merger would bring efficiency in an otherwise failing music industry, they have a Plan B. Both have voiced that the merger would ultimately go through…even if that means selling UK operations to comply with the UK commission’s preliminary findings.

Of primary concern to the UK commission is worry that “the merger could severely inhibit the entry of a major new competitor [].” Specifically, the commission cited the publicly-traded German ticketing company CTS Eventim, which trades on the Xetra. Reportedly, CTS is planning expansion into the UK and abroad, an expansion arguably hurt by the LNTM merger.

UK level competition concerns were also raised, even in the heat of financial crisis, with regard to the 2008 rushed merger of Lloyds TSB and HBOS. However, in December 2008 at the UK level, it was determined that the stability of the UK financial markets outweighed competition concerns.  But the EU commission remained concerned and recently hinted at breaking up the bank.  On October, however, Lloyds announced plans to sell its investment banking division, and the EU commission has preliminarily hinted that this move will ease their competition concerns.

The U.S. and its antitrust law, the corollary to European competition law, might seem to lend its self to a more simple "one size fits all" policy. Nevertheless, M&A deals on completion are reviewed by the Department of Justice (DOJ), the Federal Trade Commission (FTC), possibly a collage of industry specific regulators, and a complicated tapestry of statues. In general though, responsibilities for antitrust enforcement in the United Stated are divided between the FTC and DOJ. Each is focused on specific industries, allowing them to bring increased expertise over the merger review process. The FTC has purview over such industries as autos and trucks, chemicals, energy, healthcare and pharmaceuticals, while the DOJ has jurisdiction over computer software, financial services, and telecommunications services and equipment, among others. The two agencies do work together in enforcing antitrust matters by issuing guidelines and joint reports, but primarily through the Hart-Scott-Rodino pre-merger notification process. This requires a filing, with both the DOJ and FTC, prior to the consummation of any significant merger or acquisition, with information about both parties.

It seems that the U.S. regulators are sometimes on a different page from their European and British counterparts. The DOJ recently approved Oracle Corp. and Sun Microsystems $7.4 billion mega-merger. On the other hand, the FTC has requested more information from Merck and Schering Plough. And PepsiCo Inc. recently announced that it withdrew and will re-file its notification and report forms filed with the FTC, which will allow the agency an additional 30 days to review its still pending proposal to acquire the Pepsi Bottling Group, Inc. and PepsiAmericas, Inc.

European and U.S. regulators, however, do see eye-to-eye on some proposed mergers. The DOJ has requested more information from the Tickmaster and LiveNation and is reportedly going to ask for “major concessions” before it approves any deal. A lot of “bosses” (Springsteen, the UK Competition Commission, and the DOJ, of course) are getting involved with the Tickmaster and LiveNation deal.

With its ongoing concern for fair operation of markets, the regulatory authorities can influence consolidation activities downstream as well. Look no further to BAA and the hit it was forced to take (granted, in its own self-interested description) over the sale of certain assets. In March, the UK’s Competition Commission ordered BAA, owner of seven UK airports, to divest three airports – Gatwick, Stansted, and either Edinburgh or Glasgow – citing “competition problems with adverse effects for both passengers and airlines.” Some saw this action as economically counter-productive because of depressed equity prices and recapitalization (or rebalancing) of their balance sheets.

There was a silver lining to this, in the eyes of many. The forced divestiture, which is the largest to date by the commission, was ordered to improve competition among UK airports. At the same time, many saw the forced sale as a shot in the arm for the acquisition and credit markets. The sale has generated £1.5 billion through the sale of Gatwick last week to Global Infrastructure Partners and is expected to generate an additional £1.5 billion through the sale of Stansted and one additional airport.

Another wrinkle presented itself in the BAA-Competition Commission saga, which isn’t over yet. As of the time of this article’s writing, controversy swirls around the sale of Gatwick, due to alleged conflict of interest. In particular, one of the Commission’s members is also a part of the consortium that ultimately bid for Gatwick. A decision by the Competition Appeals Tribunal is expected within the next two months.

The regulatory backbone for all of this is the somewhat-messy result of the EUs attempt to approximate a federal system, with the federal layer imposed post-facto on happily autonomous nation states already possessing their own competition laws. Like other corporate matters, the EU regulates competition through EU level rules that are contained in a variety of legal instruments, including the EU Treaty itself. With regard to the regulation of mergers, the primary legislative text is the EC Merger Regulation, enacted in 2004, and more formally known as the Council Regulation (EC) No 139/2004. This regulation contains the main rules for the assessment of concentrations. Sitting at the top of the regulatory hierarchy and responsible for investigating and enforcing the EC Merger Regulation is the EU Competition Commission. The EU framework “sits above a series of domestic antitrust laws for member EU states such as the U.K.” and the result is often a complex web of dual jurisdictions.

The picture is further clouded in the case of the UK authorities. In the UK, the Competition Commission is the body responsible for implementing EU level competition rules. As with certain other central UK agencies, they are an independent public regulatory body that helps to ensure “healthy competition between companies in the UK for the benefit of companies, customers and the economy.” The Enterprise Act of 2002 changed the role of the commission from advisory to a more active one responsible for taking remedial action as well as introducing new guidelines and rules, particularly with regard to both mergers and fair market operations.

As if the dual antitrust authority weren’t complex enough, there is yet another body involved in the UK. All of the UK’s competition commission investigations are actually commenced and referred by the Office of Fair Trading (OFT) or certain other regulators. The OFT is the UK’s consumer and competition authority which aims “to make markets work well for consumers . . . by promoting and protecting consumer interests throughout the UK, while ensuring that businesses are fair and competitive.”

Gifted with all of these enforcement agencies, scrutiny doesn’t look to be getting any lighter. This is doubly so on the level of competition regulation, even in the face of a debilitating economic environment. With their redoubled efforts, it is doubtful that the EU and UK Competition Commission’s will relax their scrutiny with regard to mergers, no matter how beneficial they might be. If they believe that they have the potential to have an adverse effect on competition, authorities are prone to step in. In line with this trend toward recovery, to the chagrin of many, there has been an uptick in U.S. antitrust investigations, taking lessons from their transatlantic counterparts. Indeed, it seems these days that no merger is 100% safe from scrutiny, and resulting litigation time and expense.