Merger control: distressed M&A in the time of Covid-19

20 May, 2020

19 May 2020 By: Nicolas Teijeiro / Marcus Vinicius Bitencourt / Bruna B. Rocha / Renata Dalcol de Amorim Ferreira / Carolina Bawlitza / Maria Claudia Martinez Beltran / Isabel Gallástegui / Jorge Benejam / Daniel Flores / Luis Vargas / Rafael Urday Several antitrust issues have taken center stage during the coronavirus disease 2019 (COVID-19) pandemic.  Issues such as price gouging, state aid, and competitor collaborations are top of mind.  But another antitrust issue is likely to share center stage as countries slowly begin to re-open – the failing firm defense.  Most jurisdictions have provisions establishing a failing firm defense in merger control, but the defense often involves a high standard and is rarely triggered.  In the current environment, we are likely to see an increase in the application of the defense. This article provides a brief overview of the main elements of a failing firm defense or exemption focusing on the standards applicable in the United States, Europe, Argentina, Brazil, Chile, Colombia, Mexico and Peru. Failing firms One of the main goals of competition law is to ensure the efficient allocation of resources. In general, struggling companies that cannot keep up with evolving market conditions and consumer trends tend to be replaced by new or better firms. Consumer welfare benefits greatly from companies’ need to be efficient to stay in business and compete, which lowers prices and increases product quality and innovation. However, in certain exceptional cases consumers may benefit more from companies keeping the assets of a failing firm alive than from shutting it down, despite any competition concerns, such as the likelihood of increased consolidation or higher prices. In such cases, the typical antitrust cure (enjoining an anticompetitive merger) may become worse than the disease (allowing a presumably anticompetitive merger go forward), because the assets may exit the market for good. The “failing firm defense” potentially offers some flexibility to companies that wish to merge in the extreme circumstances related to the COVID-19 pandemic.  If the relevant elements are present, financially strained companies (and their buyers) may be able to put forward failing firm arguments to obtain clearance from antitrust agencies around the world. Applicable standards In the United States, the bar set by the failing firm defense is high.  Courts have confirmed that parties face a difficult burden when trying to insulate an otherwise potentially anticompetitive merger based on the failing firm defense.  The failing firm defense not only requires proof that the company is in danger of imminent business failure, but also that it cannot successfully reorganize or be sold to a different buyer.  In practice, each of these factors can be difficult to prove, and establishing all three of them can be close to impossible. Specifically, as stated in Section 11 of the US Horizontal Merger Guidelines of the US Department of Justice and the Federal Trade Comission: “the Agencies do not normally credit claims that the assets of the failing firm would exit the relevant market unless all of the following circumstances are met: the allegedly failing firm would be unable to meet its financial obligations in the near future; it would not […]

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Legal Alert Covid-19: Obligation to wear masks and their infringement as a source of the crime of harming public health

20 April, 2020

April 20, 2020 / By Ignacio Schwerter On April 17, 2020, Resolution No. 282 of the Ministry of Health was published in the Official Gazette. By means of this resolution, the authority established the mandatory use of masks in different places and under different circumstances: 1. To all people using public or private transportation subject to payment. The same obligation applies to those who use lifts or funiculars, regardless of their public or private nature and the number of people using them. Finally, the same measure applies to all operators of the various means of transport covered by this Resolution, as well as to those people working in them. 2. To all people in the places indicated below, when 10 o more occupy the same space: a) Closed spaces in schools and higher education b) Closed spaces in airports and terraports c) Closed spaces in theatres, cinemas, discotheques, casinos and similar venues d) Closed spaces in supermarkets, shopping centres, hotels, pharmacies and other similar establishments open to the public. e) Closed spaces in public and private health establishments. f) Closed spaces in places where products, medicines or food are manufactured, processed, deposited or handled. g) Closed spaces in workplaces. h) Galleries, grandstands and other rooms for the public in sports halls, gyms or stadiums. This is not applicable to sportsmen and women during the practice of sport. i) Pubs, restaurants, coffee shops and similar places, in their public or closed spaces, for those attending or working in them. J) Residences for the elderly. These measures began to apply at 5:00 a.m. of April 17, 2020 and will remain in effect indefinitely, until the epidemiological conditions allow for their suspension. Finally, it is important to bear in mind that the violation of the measures described above will be punished according to the provisions of Book X of the Health Code, and, when applicable, according with the Criminal Code as an attack on public health. The crime in question punishes anyone who endangers public health by violating the rules of hygiene or health, duly published by the authority, in times of disaster, epidemic or contagion, with imprisonment or a fine from six to twenty monthly tax units (unidades tributarias mensuales). Contacts For more information, please contact: Ignacio Schwerter Counsel ischwerter@dlapiper.cl * This report provides general information on certain legal or commercial matters in Chile, and not intended to analyze in detail the matters contained in it, not is it intended to provide a particular legal advice on them. It is suggested to the reader to look for legal assistance before making a decision regarding the matters contained in this report. This report may not be reproduced by any means or in any part, without the prior consent of DLA Piper BAZ | NLD SpA 2020.

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Legal Alert Covid-19: Chilean banking and credit measures in the context of Coronavirus

16 April, 2020

April 16, 2020 / By Mauricio Halpern y Vicente Vergara The financial tensions originated as a result of the recent worldwide outbreak of the coronavirus (also known as COVID-19), has motivated the Chilean Government, in conjunction with the Central Bank (“BC”) and the  Financial Market Commission (“CMF”), to put into effect an “Emergency Economic Plan”, which seeks to provide support to the most vulnerable workers, companies and families in the country, and will permit to grant new loans in the amount of up to USD 24,000 million and complement the capitalization of the Small Business Guarantee Fund (FOGAPE), a state-run fund to support small entrepreneurs. As part of the contingency plan, the following measures have been adopted and/or announced to date: Capitalization of Banco Estado: an extraordinary capitalization of Banco Estado (the most important public banking institution of the country) for USD 500 million within a period of 12 months was approved, which will increase the capacity of Banco Estado to grant loans, reaching USD 4,400 million (Law No. 21,225). CMF Measures: to safeguard the solvency and liquidity of its audited entities, the CMF, among other measures, has announced: Facilities for the Payment of Mortgage Loans. For the borrowers who were in compliance at the time of the state of emergency was ruled, it was agreed to allow the rescheduling of the payment of up to 3 installments to dates after to the original maturity of the loan, without being treated as renegotiations for banking provision purposes. Softening the Payment of Consumer Loans: For individuals and PYMES (acronym for “pequeñas y medianas empresas”, which is small and medium businesses), the payment dates are extended in up to 6 months, without being treated as renegotiations for banking provision purposes. Extend the Term of Disposal of Goods Received in Payment. The term for banks to dispose of the assets they receive in payment of past due debts is extended to 18 months, to prevent such assets from being sold at prices lower than the regular prices in the market (CMF Resolution No. 2432, as of March 25) Central Bank Measures: On April 8, the Central Bank of Chile announced a package of measures to provide liquidity and supporting to the flow of credit, whose main cornerstone is the granting of credit facilities for banks in order to motivate them to continue financing and refinancing loans to individuals and companies. The measures are the following: Creation of a Credit Line Conditioned to the Increase of Placements (“FCIC” for its initials in Spanish): consists on a special facility destined for banking entities that have commercial and/or consumer loans placed, for an amount corresponding to 3% of the base portfolio. Creation of a Liquidity Credit Line (“LCL”): consists on a credit line in Chilean pesos, limited to the average reserve requirement in pesos of each bank. The access and use of the LCL will be subject to the same conditions associated with the increase in the placements established for the FCIC. The initial amount of the FCIC and LCL lines is equivalent to USD 4,800 million. Creation of an Additional Credit Line: the initial amount […]

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Permisos sin goce de sueldo y baja de salarios: las medidas en que piensan las empresas para afrontar la crisis (Diario Financiero)

19 March, 2020

Luis Parada in Diario Financiero comments on some of the measures taken by the companies to face the Coronavirus health crisis. Diario Financiero

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