Biic london 16 november 2007
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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.

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BIIC London, 16 November 2007

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Biic london 16 november 2007

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

Reasons and objectives of review

  • Reflect conclusions from Commission’s Merger Remedies Study (2005)

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

  • Incorporate recent jurisprudence

    • Important guidance in EDP/GDP, GE, Tetra, Cementbouw and easyjet judgements

  • Reflect experience gained in recent Commission practice

    • 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

  • Planned adoption of the new texts early 2008


General principles

General Principles

  • Allocation of responsibilities(EDP/GDP/ENI, GE/Honeywell)

    • 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 (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 principles1

General Principles

  • Assessment standard(GE/Honeywell, easyjet)

    • Commitments have to eliminate competition concerns entirely and to be 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

    • 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

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 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


Divestitures scope

Divestitures. Scope

  • All assets and personnel necessary to ensure 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 option


Divestiture purchasers

Divestiture. Purchasers

Divestiture only effective once business is transferred to suitable purchaser

  • 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

Non divestiture remedies

  • Removal of links with competitors

    • Divestiture of minority shareholding or, exceptionally, waiving rights related to minority stakes

    • Termination of distribution or other contractual arrangements

  • Access commitments:

    • 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

      • Ex.: pay-TV platforms; airport slots; gas release programs

      • Likely entry of new competitors

    • For foreclosure concerns

      • Access to pipelines, telecom networks, telematics networks

      • Likely use by competitors

    • For foreclosure concerns by IP rights or key technology

      • Granting of non-exclusive licenses

      • Ex.: GE/Instrumentarium; Axalto/Gemplus

    • Monitoring of such commitments

      • Self-enforcement of commitments via market participants

        • Via arbitration clauses (ARD, easyjet)

        • By national regulators


Non divestiture remedies1

Non divestiture remedies

  • Other non-divestitures:

    • 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


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