Transcript Merger Review - The Commission’s Green Paper

The new EU merger
remedies policy
Carles Esteva Mosso
Head of Merger Control Policy Unit
DG Competition
Reasons and objectives of the review
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Reflect conclusions from the 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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Important guidance in EDP/GDP, GE, Tetra, Cementbouw and Easyjet
judgements
Relevant recent remedies cases such as Inco/Falconbridge or GDF/Suez
Update with regard to changes introduced in 2004 Merger Review

Mainly concerns options to extend deadlines to discuss and assess
remedies
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Conclusions of the Remedy
Study on divestitures
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General Principles
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Allocation of responsibilities
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Commission informs the parties of the competition concerns identified
It is for the parties to propose remedies,
Commission has to assess the effects of the operation, as modified by the remedies.
Assessment standard (GE/Honeywell)
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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”)
Proportionality
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(EDP/GDP/ENI)
(Cementbow)
Parties do not need to submit remedies than go further than what is necessary to remove
competition concerns. If they do so, however, Commission cannot reject them and impose
different ones.
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 than a
divestiture
Where market structure is affected only by future behavior of the merging parties, also other
remedies may have to be assessed (Tetra). Commitments on future behavior, however, only
exceptionally accepted. Certainty of implementation and effective monitoring particularly required.
Divestitures. Scope
Insufficient scope of the divested business is the
major source of remedy failure (remedies study).
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Divestitures. Scope
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All assets and personnel necessary to ensure a viable and
competitive business to be transferred
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–
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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 an option
Alternative divestitures (“Crown jewels”)
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In case there are uncertainties in relation to the business to be divested,
parties could propose an alternative divestiture, to be implemented if the
first one does not take place in a short deadline.
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 to be
included 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
Divestiture. Purchasers
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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)
Divestiture process
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Short divestiture two-step process (normally 6+3
months)
Interim preservation and hold separate obligations
Monitoring Trustee:
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Timely appointment as up-front trustee
Trustee explicitly responsible for third party
complaints
Publication of identity and tasks
Hold-separate manager:
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Clear definition of role in commitments
Immediate, up-front appointment
Supervision/removal by Trustee
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 than a divestiture (e.g. Lowering entry barriers: only if there
will be actual entry of new competitors)
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Monitoring of such commitments
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Via market participants: self-enforcement of commitments (arbitration
clauses)
By national regulators
Other non-divestitures:
–
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To be assessed on a case-by-case basis (Tetra),
Difficulty of monitoring and risks of effectiveness: they may only amount
mere declarations of intentions
Procedure: Phase I
remedies
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Remedies have to rule out “serious doubts”.
Only acceptable when competition problem is readily
identifiable and can easily be remedied (recital 30
ECMR).
To be submitted within 20 WD (extension 10 WD)
Only limited modifications acceptable after deadline
(Philips)
Commission will offer opportunity to withdraw
remedies if concerns finally not arise in one or more
markets
Procedure: Phase II
remedies
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Remedies must remove competition concerns
They should be submitted before day 65
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If submitted before day 55, no extension
If submitted after day 55 or before day 55 but modified version
submitted after, extension of 15 WD.
Art 10.3 extension possible
Late modified remedies in phase-II:
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Commission not obliged, but allowed to accept late remedies
(i.e. modified remedies submitted after day 65). (Edp/GDP/Eni)
Conditions described in Remedies Notice:
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Modified remedies fully and unambiguously remove competition
concerns without need for further investigation or market test
Commission must be able to properly consult with Member
States, (i.e. to keep 10 WD deadline)
No Art 10.3 extension will normally be granted after day 65
Next steps
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Public consultation on draft open until
29 June 2007.
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Commission’s adoption of definitive
version expected by end of 2007