Transcript Merger Review - The Commission’s Green Paper

BIIC
London, 16 November 2007
The new EU merger
remedies policy
Dr Johannes Luebking
Deputy Head of Unit, Directorate C-5, DG Competition
The views expressed are personal and do not necessarily reflect the
views of the European Commission nor those of DG COMP
Reasons and objectives of review
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Reflect conclusions from Commission’s Merger Remedies Study (2005)
http://ec.europa.eu/comm/competition/mergers/studies_reports/remedies_study.pdf
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Incorporate recent jurisprudence
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Reflect experience gained in recent Commission practice
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Relevant recent remedies cases such as Inco/Falconbridge or GDF/Suez
Update with regard to changes introduced in 2004 Merger Review
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Important guidance in EDP/GDP, GE, Tetra, Cementbouw and easyjet
judgements
Mainly concerns options to extend deadlines to discuss and assess
remedies
Planned adoption of the new texts early 2008
General Principles
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Allocation of responsibilities (EDP/GDP/ENI, GE/Honeywell)
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Commission informs the parties of the competition concerns
identified
It is for the parties to propose remedies, Commission cannot
unilaterally impose conditions
Commission has to assess the effects of the operation, as
modified by the remedies
Commission has eventually to prove that remedies are not
sufficient to remove competition concerns
Proportionality
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(Cementbouw)
Parties do not need to submit remedies that go further than what
is necessary to remove competition concerns
If they do so, however, Commission cannot reject them and
impose different ones
General Principles
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Assessment standard (GE/Honeywell, easyjet)
 Commitments have to eliminate competition concerns entirely and to be
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comprehensive and effective from all points of view
Certainty as to the implementation
Probability as to the assessment of the operation (“more likely than not
that the operation modified significantly impedes effective competition”)
Appropriateness of different types of remedies
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Divestitures generally preferred, including for non-horizontal concerns
Other structural commitments, such as access remedies, acceptable if
same effect as divestiture – divestitures as “benchmark”
Where market structure is affected only by future behaviour of the
merging parties, also other remedies may have to be assessed (Tetra)
Commitments on future behaviour, however, only exceptionally accepted.
Certainty of implementation and effective monitoring particularly required
(easyjet)
Divestitures. Additional
information requirement
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There is a clear asymmetry of information on the
right scope of viable business; Commission has the
burden of motivation to reject commitments
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New information obligation of the parties in the
Implementing Regulation: Form RM
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Nature and scope of commitments offered;
Conditions for their implementation; and
Suitability to remove any impediment to effective competition
Deviations from Commission’s Model Texts
For divestitures, in particular, detailed factual description required on how
the business is currently operated; to be compared with scope of
Divested Business as offered in the commitments
Divestitures. Scope
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All assets and personnel necessary to ensure viable
and competitive business to be transferred
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Independent access to supply (Inco/Falconbridge; GDF/Suez;
Evraz/Highveld), IP rights,…
Shared assets (duplication, if necessary) and personnel to be
transferred
Modalities:
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Preference for stand-alone business
Carve-outs acceptable
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Risks for viability and competitiveness to be limited by requiring
transfer of a stand-alone business >>>carve out started in
interim period
Reverse carve out as option
Divestiture. Purchasers
Divestiture only effective once business is transferred to suitable purchaser
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Suitable purchaser to be agreed within fixed time-limit
–
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Normal procedure.
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Multitude of purchasers available (also including special purchaser
requirements)
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No specific issues interfere with divestiture
Up-front buyer
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Uncertainty of implementation
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Difficult interim preservation:
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Obstacles for divestiture, e.g. third party rights
Uncertainty that Business will attract suitable purchaser
If high risk of degradation
Fix-it-first remedy
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Preferable where identity of purchaser is crucial for effectiveness of remedy
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E.g. if viability is ensured by specific assets of the purchaser (Inco/Falconbridge) or
where purchaser needs to have specific characteristics (tele.ring)
Non divestiture remedies
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Removal of links with competitors
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Divestiture of minority shareholding or, exceptionally, waiving rights related to
minority stakes
Termination of distribution or other contractual arrangements
Access commitments:
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Granting of non-discriminatory access to infrastructure, networks, technology/IP
rights or essential inputs.
Acceptable, to lower barriers to entry or eliminate foreclosure concerns, if same
effect as divestiture
For lowering entry barriers
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For foreclosure concerns
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Access to pipelines, telecom networks, telematics networks
Likely use by competitors
For foreclosure concerns by IP rights or key technology
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Ex.: pay-TV platforms; airport slots; gas release programs
Likely entry of new competitors
Granting of non-exclusive licenses
Ex.: GE/Instrumentarium; Axalto/Gemplus
Monitoring of such commitments
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Self-enforcement of commitments via market participants
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Via arbitration clauses (ARD, easyjet)
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By national regulators
Non divestiture remedies
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Other non-divestitures:
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To be assessed on a case-by-case basis
(Tetra)
May be accepted in specific
circumstances, such as conglomerate
concerns
Difficulty of monitoring and risks of
effectiveness: they may only amount to
mere declarations of intentions