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The Relationship between FDI Screening and Merger Control Reviews – MEZQUITA PÉREZ-ANDÚJAR – November 2022 OECD discussion

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The Relationship between FDI Screening and Merger Control Reviews – MEZQUITA PÉREZ-ANDÚJAR – November 2022 OECD discussion

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This presentation by Ignacio MEZQUITA PÉREZ-ANDÚJAR, Deputy Director General of Foreign Investments at the MINCOTUR Secretary of State for Commerce, was made during the discussion “The Relationship between FDI Screening and Merger Control Reviews” held at the 139th meeting of the OECD Competition Committee on 30 November 2022. More papers and presentations on the topic can be found out at https://oe.cd/fdimc

This presentation by Ignacio MEZQUITA PÉREZ-ANDÚJAR, Deputy Director General of Foreign Investments at the MINCOTUR Secretary of State for Commerce, was made during the discussion “The Relationship between FDI Screening and Merger Control Reviews” held at the 139th meeting of the OECD Competition Committee on 30 November 2022. More papers and presentations on the topic can be found out at https://oe.cd/fdimc

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The Relationship between FDI Screening and Merger Control Reviews – MEZQUITA PÉREZ-ANDÚJAR – November 2022 OECD discussion

  1. 1. FDI screening and merger control Ignacio Mezquita OECD Competition Committee meeting. 30 November 2022.
  2. 2. Some preliminar considerations on FDI screening 1. The context: ¿How to handle increasing geopolitical tensions that have come to stay? a. EU´s Open Strategic Autonomy: “cooperating multilaterally wherever we can, acting autonomously wherever we must”: FDI screening, IPI, Anti coercion, anti subsidies, CBAM… b. Regulation 452/2019: There was no comprehensive framework at EU level for the FDI screening on the grounds of security or public order, while our major trading partners had already developed such tool. Goals: legal certainty, guiding list of factors to take into consideration, cooperation, procedural predictability, proper handling of information … 2. Last resort instrument and the handling of regulatory overlaps (i.e. prudential issues, data protection or, in particular, competition): 3. Nature of the test: Impact of threats and vulnerabilites on security or public order Vs impact on effective competition
  3. 3. Overlaps in FDI screening and merger control The field in which the investment takes place: • Critical infrastructures • Critical technologies and dual use items • Supply of critical inputs • Access to sensitive information • Freedom and pluralism of media The features of the investor to be considered: • Control by the government, including state bodies or armed forces, of a third country, including through ownership structure or significant funding; • Previous involvement in activities affecting security or public order in a Member State; • Serious risk that the foreign investor engages in illegal or criminal activities Most of screened FDI transactions under the EU exchange mechanism are cleared with no mitigating measures. In Spain:  There has only been 1 FDI prohibition. It was not subject to Merger control  9% of screened FDI transactions where authorised subject to mitigating measures  Only half of these were also subject to merger control, but none of them required competition remedies
  4. 4. Merger control and FDI screening practices 1. The idea of control and the definition of the ultimate investor and of the target itself: direct investment and the 10% threshold, ultimate investor, public control, FDI as ownership or the right to use all or part of the assets of an undertaking, etc. 2. Analytical categories: market position, alternatives available to users, market foreclosure, essential facilities, etc. 3. Anti-subsidy Regulation as FDI screening procedure: in the absence of rules to address the distortive effects of foreign subsidies on the internal market, this regulation will specifically tackle the distortions to the level playing field caused by subsidized FDI 4. Remedies: “screening mechanism is an instrument of general application to assess, investigate, authorise, condition, prohibit or unwind foreign direct investments on grounds of security or public order”. The Commission notice on remedies and NCAs experience may inspire principles, substance and procedures
  5. 5. Merger control and FDI screening practices 5. Transparency & predictability: competition authorities have reached high standards in these fields. There is substantial room for improvement in FDI screening, but some considerations to be made: • The nature of the information handled and of the assessments made • Legal restrictions • Greater leeway to advance in procedural than in substantive issues 6. Room for international cooperation: again competition netwoks and practices outdo those regarding FDI screening. When it comes to FDI Screening: • Within the EU: it is a new tool (not deployed yet in every MS and subject to assessment) . Cooperation mechanisms , exchanges regarding projects or programmes of EU interest, Contact Points and Group of Experts. Ongoing analysis on potential improvements. • With non EU countries: “Member States and the Commission may cooperate with the responsible authorities of third countries on issues relating to the screening of foreign direct investments on grounds of security and public order” (i.e.EU-US Trade and Technology Council or bilateral seminars)
  6. 6. FDI screening and merger control Thank you

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