EC's Draft Notice on remedies acceptable under the Merger Regulation

The Working Group of the Antitrust Committee submitted comments to the European Commission on the Draft Notice on remedies acceptable under Council Regulation (EEC) No 139/2004 and under Commission Regulation (EC) No 802/2004 (the “Draft Notice”). The draft Notice is intended to provide guidance to companies on modifications to concentrations to restore conditions for effective competition.


The Working Group suggests the Commission to incorporate the following guiding principles:

• The Commission should incorporate flexibility into the final Notice. Merger transactions should always be based on negotiations, and a “checklist” approach is discouraged. A remedy approach that did not adequately address all relevant issues to one merger may be a feasible remedy for another merger with a different set of market facts.
  
• Remedies must also be proportional to competition concerns; and may not be broader than necessary to remove competition barriers. The central focus should be on whether the remedy adequately addresses the Commission’s competition concerns. Additionally, in adherence to the proportionality principle, the Commission should strike a sensitive balance between the simplification of the procedure, resulting in shortening of the duration of merger procedures as well as parties’ expenses.

Different types of remedies include divestiture of a business to a suitable purchaser, removal of links with competitors, and other remedies such as waiver commitments or sharing commitments. Since the reform of the Merger Regulation, divestitures may not necessarily be the most effective way to restore competition. Again, the principle of proportionality is the gold standard by which the necessity of the remedy should be assessed.

The Commission will normally consider 6 months for the first divestiture period and 3 months for the trustee divestiture period, and a further 3 months is typical for the closing of the transaction. Divestiture periods can also be modified (shortened) on a case-by-case basis. Additionally, the Working Group recommends the final Notice contain more detail on circumstances that would affect a shorter divestiture period as appropriate, with reference to specifics such as dissipation of assets, customer churn, key employee departures, and the like. Finally, with respect to divestitures, the Working Group suggests a follow-up period of five years instead of 10 and also notes that the one-week notice period to provide a list of proposed Trustees is impracticable for a variety of reasons.

Per the parties’ right to be heard, the Commission must provide a detailed account of the results of the market test. A mere summary is generally insufficient as it does not allow the parties to the concentration to reconstruct the Commission’s ultimate verdict on the offered commitments. Furthermore, the current Commission practice of taking note of unnecessary commitments without making them binding creates legal uncertainty and should be altered.

In conclusion, the Working Group’s main suggestions for the EC Notice on merger control include flexibility, restoration of competition, and proportionality.

Download the IBA Submission to the European Commission’s Draft Notice on Merger Remedies.

Download the Draft Notice on remedies acceptable under the Merger Regulation.

For more information, please contact Leslie Alekel.