These are the remarks of a presentation by Kaarli H Eichhorn - General Electric Company made during a roundtable discussion on Jurisdictional nexus in merger control regimes held at the 123rd meeting of the Working Party No. 3 on Co-operation and Enforcement on 15 June 2014. More papers, presentations and contributions from delegations on the topic can be found out at www.oecd.org/daf/competition/jurisdictional-nexus-in-merger-control-regimes.htm

1. OECD COMPETITION COMMITTEE
Working Party No. 3 on Co-operation and Enforcement
All documentation related to this discussion can be found at:
http://www.oecd.org/daf/competition/jurisdictional-nexus-in-merger-control-regimes.htm
ROUNDTABLE ON LOCAL NEXUS AND JURISDICTIONAL THRESHOLDS
IN MERGER CONTROL
15 June 2016
Remarks by Kaarli H Eichhorn
General Electric Company
Thank you very much for the opportunity to share some remarks from a practitioner’s viewpoint on the
significant topic of jurisdictional nexus in merger control.
The OECD’s attention to this issue is important.
As more jurisdictions put merger control rules in place, they often seek guidance and inspiration from
more established jurisdictions such as the OECD member countries. The precedents that we set in our
merger control regimes therefore have an effect far beyond the borders of Belgium, Estonia, or Sweden.
A global consensus has been building on key principles of competition law, as reflected, for example, in
OECD recommendations and the International Competition Network’s Recommended Practices.
Competition authorities should continue to converge on these international best practices, including on
merger control.
The best practices our governments will establish, and can share, will serve to encourage sound
competition policies globally where our companies, together with their employees and investors, will
profit from the removal of impediments to trade, access markets where everyone is expected to
compete honestly, and where well-resourced competition agencies enforce the law with fairness and
objectivity; ultimately where our customers will benefit from constant innovation, quality and
competitive terms for the products and services they purchase.
So, does business want for merger control to be infrequent and applied to a very limited number of
M&A transactions? Does business wish for a wide range of exemptions and for thresholds to be set so
high so as to allow most transactions to escape notification?
No. That is not in the business interest. But jurisdiction must only be exercised over a transaction that is
firmly connected to that jurisdiction and we should strive to minimise the assertion of jurisdiction over
transactions lacking a significant nexus to a jurisdiction.
We should recall that the vast majority of merger transactions lead to no intervention. At the EU level,
that number is 90% and that is probably a representative number globally also. Only a very modest
number of transactions become subject to remedies and even fewer to prohibitions. We must therefore
craft these merger regimes in a manner proportionate to the interests we are seeking to protect.
But is it appropriate to look at the issue of jurisdictional nexus in isolation, as we do here today?

2. All documentation related to this discussion can be found at:
http://www.oecd.org/daf/competition/jurisdictional-nexus-in-merger-control-regimes.htm
It is true that a wider assessment of the efficacy of any given merger regime will have to include a wider
set of factors, such as whether notification is mandatory or voluntary, what data is required for
notification, what the review period is.
But the nexus question is vital.
It is a fundamental principle that ought to be respected – no meaningful local nexus, no jurisdiction.
It is very telling that when the ICN some years ago – as also set out in the Secretariat’s background
paper - identified four main types of cost for companies related to merger control, three of them are
unrelated to filing requirements (i.e. the actual process of obtaining a clearance) but are instead related
to nexus:
• costs associated with ascertaining whether filing requirements are met:
• costs associated with compliance with filing requirements for transactions that lack an
appreciable nexus to the notified jurisdiction; and
• costs associated with the resulting delays to M&A from the merger review process.
Those who, on the contrary, claim that the question of nexus is inconsequential where the regime in
question may capture a very significant number of transactions but where the regime is efficient, lean
and is capable of rendering its decisions fast, miss the point.
First, the mere fact that the signing of a transaction may need to be separated from closing can in some
cases of an in itself jeopardize a transaction. For some highly time critical transactions, even a small or
modest delay can have consequences. More importantly, even where the parties are confident that the
review will ultimately result in a clearance decision, the fact that the transaction’s “be or not to be” has
been put in the hands of a government, will cause uncertainty for the parties. It follows from
yesterday’s OECD session on public interest grounds that the presence of non-competition grounds in
certain jurisdictions’ merger control procedures (be that industrial policy, investment or localisation
policies, labour & employment or more widely defined public policy imperatives) would cause even
further insecurity to a transaction with no, or a very weak, local nexus.
Second, even if a number of sophisticated and experienced jurisdictions have made, and continue to
make, great efforts in making their processes simpler, cutting red tape, removing unnecessary
documentary requirements, digitising, speeding up processes (and argue that companies may need to
file but get cleared quickly) these efforts may not be possible for others. They will instead take note of
the wide jurisdiction exercised by some sister agencies and may simply follow that lead. Conversely, it
will take a significant amount of time and experience to reform the review process itself, empower
officials, be flexible, speed up reviews where necessary, have the skill and confidence to focus on key
aspects of a transaction and waive data and document requirements where appropriate. Sometimes, such
reforms may, however, not be straightforward or even possible as a competition agency may be required
to apply generally applicable administrative rules that apply across a wider set of government agencies.
Third, there are ‘processing’ costs involved. There is significant internal time and resources that must
be devoted to collecting data for the purpose of notifications. This is time that companies and their
investors would no doubt prefer be devoted to more important matters: to innovate, to drive demand
for the products and services provided by the company, to provide better solutions for consumers and
to compete in the marketplace. Costs for outside lawyers and consultants would similarly need to be
factored in, but in the greater scheme of things they are not significant when compared to the wider
harm that is caused to the M&A process, companies and the economy at large.

3. All documentation related to this discussion can be found at:
http://www.oecd.org/daf/competition/jurisdictional-nexus-in-merger-control-regimes.htm
Government should monitor and control where there is a clear purpose for doing that, it should
intervene in the affairs of its citizens and business where there is a material reason to do so. When it
does, it should use the least burdensome means at its disposal. An agency which allocates scarce tax
payers funds to review transactions which have no meaningful link with its jurisdiction have failed, and
have at the same time hampered business activity, investment, trade and employment.
Is this but a small concern for business? It certainly is not. Just a decade ago a relatively few number of
jurisdictions enforced merger control laws. Today the situation has changed dramatically with
approximately 120 jurisdictions represented in the ICN and with the majority of those having merger
control as one of the cornerstones of their regimes,
Businesses thus have to submit their transactions to a markedly increased group of enforcement
authorities. It is a different world.
The company I work for has a very steady transaction flow. Our own data shows that in the 1990s we
had a modest number of deals that needed to be cleared in 5 or more jurisdictions, while in the decade
thereafter that number rose sharply, by 900%, and it keeps going up.
By way of example, the most recent transaction I worked on was subject to a great number of pre and
post-closing merger clearances. The pre-closing clearances required amounted to almost 30. Upon
review, more than half of these had jurisdictional thresholds in place which wholly or partially
contravene international best practice insofar as local nexus is concerned. More than half.
The ICN self-assessment exercise is tremendously important opportunity for agencies and legislators to
identify where further improvement is needed. That would entail:
• focussing thresholds on objectively measurable data such as meaningful levels of assets or
revenues within the jurisdiction;
• ensuring that jurisdictional thresholds do not capture transactions on the basis of one merging
party alone;
• ensuring that, in acquisitions, only the target’s activities are measured and not that of the seller;
• making sure that joint venture transactions are caught only where the joint venture is intended
to or likely to have activities in the jurisdiction (with the parents’ presence of little or no
relevance); and
• removing market share thresholds - even if attractive to certain agencies these are a
tremendously complex and costly means to consider jurisdiction.
Randy Tritell’s presentation was thought-provoking. The work of the OECD and the ICN has led to
significant reforms and improvements. But much work remains to be done. Of note: more than 90% of
agencies that responded, stated that their jurisdictional rules are in conformity. Yet almost 40%
acknowledge that the Buyer alone can trigger a notification requirement, and almost 30% admit that the
Seller’s activities count for jurisdictional purposes (as opposed to Target). Finally 30% of jurisdictions
confess they still use market share thresholds. Indeed, much work remains to be done.
In conclusion, our thresholds must have a strong local nexus, be clear and objective, easy-to-use and to
comply with, and subsequent reviews must be lean, focussed and ensure they protect the interests of
competition in the most effective way possible. This will benefit government and business alike.
Thank you.