The new merger remedies policy

Carles Esteva MossoActing Director - Policy and Strategy

DG Competition

The new merger remedies policy

Remedies package adopted in October 2008:

Amended Merger implementing Regulation (including new Form RM)

Revised remedies Notice

Objectives:

Implement lessons from the Merger Remedies Study (2005)

http://ec.europa.eu/comm/competition/mergers/studies_reports/remedies_study.pdf

Incorporate recent jurisprudence

Reflect experience gained in recent Commission practice

Update with regard to changes introduced in 2004 Merger Review

General Principles

Allocation of responsibilities 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 Balance of probabilities standard to assess effects: prohibition only if it is

more likely than not that the operation, as modified, significantly impedes effective competition

Incumbent to the parties to remove uncertainties as to the implementation of the remedy

Proportionality Parties do not need to submit remedies than go further than what is

necessary to remove competition concerns. The Commission will review whether remedies submitted are necessary and proportionate. However, the Commission cannot reject them and impose different ones.

Appropriateness of different types of remedies Divestitures, generally preferred, including for non-horizontal concerns Other structural commitments, such as access remedies, acceptable if

same effect than a divestiture

Merger remedies study: issues on divestitures

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Divestitures. Scope

All assets and personnel necessary to ensure a viable and competitive business to be transferred

– Independent access to supply (Inco/Falconbridge; GDF/Suez; Evraz/Highveld), IP rights,…

– Shared assets (duplication, if necessary) and personnel to be transferred

Modalities:– Preference for stand-alone business– Carve-outs acceptable

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”)

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

There is a clear asymmetry of information on the right scope of viable business; Commission has the burden of motivation to reject commitments

New information obligation of the parties included in the Implementing Regulation: Form RM

– 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

Suitable purchaser to be agreed within fixed time-limit– Normal procedure.

Multitude of purchasers available (also including special purchaser requirements)

No specific issues interfere with divestiture

Up-front buyer– Uncertainty of implementation

Obstacles for divestiture, e.g. third party rights Uncertainty that Business will attract suitable purchaser

– Difficult interim preservation: If high risk of degradation

Fix-it-first remedy– Preferable where identity of purchaser is crucial for effectiveness

of remedy– 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

General benchmark: – Acceptable if same effect than divestitures

Access commitments: – Granting of non-discriminatory access to infrastructure,

networks, technology/IP rights or essential inputs.– They may lower barriers to entry or eliminate foreclosure

concerns, with same effect than divestitures (e.g. Lowering entry barriers: only if there will be actual entry of new competitors)

– Monitoring of such commitments Via market participants: self-enforcement of commitments

(arbitration clauses) Via national regulators

Other non-divestitures: – 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.

Procedure: Phase I remedies 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 the opportunity to withdraw remedies if concerns finally do not arise in one or more markets

Procedure: Phase II remedies Remedies must remove competition concerns They should be submitted before day 65

– 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:– 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: 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