The Relationship between FDI Screening and Merger Control Reviews

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30 November 2022 Paris

While some governments address threats to essential security interests arising from inward investments as part of the competition review under public interest tests or exceptions, more recent policies subject certain transactions to parallel distinct and more stringent screening on grounds of national security. Recent geopolitical and geo-economic changes have led to a broader adoption or reform of dedicated FDI screening mechanisms. The Covid-19 pandemic has only accelerated this trend.

The increasing relevance of FDI screening raises the question as to whether and how such review mechanisms interact with merger control and affect businesses. First, concerns such as single-supplier risks may be common to both mechanisms. Second, more and more transactions may become subject to remedies and mitigation measures, with the latter risking undermining each other. The potential need for co-ordination between the two may thus arise at different stages of the review, from the notification to the assessment of potential harm as well as the design and implementation of remedies and mitigation arrangements.

In November 2022, the OECD's Competition Committee jointly with the Investment Committee held a hearing to explore the relationship between FDI screening for essential security interests and merger control.

During the hearing, experts and delegates discussed whether conflicts may arise between FDI screening and merger control, for instance with regards to the outcomes of their respective analysis and the remedies and mitigation measures imposed. Although delegates found that so far conflicts have not materialised, this may change in the future, as FDI screening mechanisms become more established. Thus, enhanced co-operation and co-ordination may be warranted, following the pioneering example of some jurisdictions.

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Invited speakers

Edouard Sarrazin Bio
Partner, DLA Piper