The FNE's Gun-Jumping Investigation Into GSK's Acquisition Of Pfizer's Consumer Healthcare Business In Chile: When A Joint Venture Is Not A Joint Venture And Why It Matters

• Published date: 06 October 2022
• Subject Matter: Corporate/Commercial Law, Antitrust/Competition Law, Consumer Protection, M&A/Private Equity, Corporate and Company Law, Antitrust, EU Competition , Consumer Law
• Law Firm: Herbert Smith Freehills
• Author: Mr Kyriakos Fountoukakos, Daniel Barrio and Jose Munoz

Earlier this year, the Fiscalía Nacional Económica (FNE), Chile's competition authority, closed a gun-jumping investigation into GSK's acquisition of Pfizer's consumer healthcare business in Chile. The FNE reached this conclusion after a 2-year ex-officio investigation which was based on the erroneous assumption that the deal constituted an acquisition of joint control by GSK and Pfizer over a newly formed joint venture. The case highlights the importance of careful merger control analysis on a global basis, managing external messaging about a deal and liaising with regulators upfront to avoid issues including specifically in Latin American jurisdictions. This is important to minimise antitrust risk and ensure a smooth timetable for a transaction.

According to the merger control rules in Chile, in cases of acquisitions of sole control over a business, the turnover of the acquirer and the target counts towards meeting the merger threshold. Whereas in joint control situations, the relevant turnover that needs to be taken into account in order to assess whether a merger filing is required is that of each of the jointly controlling parents, including their corporate groups, and potentially the turnover of the joint venture itself. This can result in a filing of an acquisition of a small target given the parents themselves may have sufficient turnover. In this case, if the deal was an acquisition of sole control, it would not meet the thresholds as the target did not have enough turnover. However, the FNE assumed that the transaction was one of joint control and on that basis, the FNE assumed that GSK and Pfizer corporate groups' turnovers in Chile would have been large enough to trigger a filing in Chile.

FNE's assumptions were mainly based on public statements made by the companies themselves according to which, the deal would have led to the creation of a world-leading joint venture. However, the FNE also relied on other public information such as merger clearances obtained in a number of jurisdictions, including the US and the EU, as well as sales data provided by the national health authorities which showed that GSK and Pfizer had significant sales of consumer healthcare products in Chile.

The parties were ultimately able to demonstrate that the transaction was in fact an acquisition of sole control and because of this, the relevant turnover was not that of GSK and Pfizer's corporate groups as the FNE initially assumed, but instead that of GSK's group as the acquirer and Pfizer's consumer healthcare business in Chile as the target. On that basis, the parties were able to demonstrate that the notification thresholds in Chile were not met and therefore, that they had not missed a filing.

FNE's gung-jumping investigation was closed rather unspectacularly on 24 January 2022, without a fine. However, the case is interesting for a number of reasons. It shows the importance of announcing deals publicly in way that would not raise questions with competition authorities around the world. In a press release of 19 August 2019, GSK announced that it had completed the acquisition of Pfizer's consumer healthcare business to create a "world-leading Joint Venture". This led the FNE to the erroneous assumption that the deal constituted an acquisition of joint control, which started the ex-officio gun-jumping investigation in the first place. Had the press release been a bit clearer in relation to GSK's acquisition of sole control over Pfizer's consumer healthcare business, the case might have never happened. However, the FNE could have also contacted other...