Remedies in EU
Merger Control – An Essential Guide
Simon VANDE
WALLE[1]
Professor,
University of Tokyo
Table of Contents
1.1
The importance of remedies
in EU merger control
1.1.1 Merger control’s most frequently used
tool to protect competition
1.1.2 Remedies consume significant resources
and have important economic consequences
1.2
Recent debate and
controversy surrounding remedies
1.2.1 Are merger remedies effective?
1.2.2 The structural vs. behavioural debate
1.2.3 The call for ex post assessments
of remedies
2
Legal framework and
criteria for assessing remedies
2.1
Terminology: remedies,
commitments, ‘conditions and obligations’
2.2.2 Remedies in Phase I and the requirement
of ‘clear-cut’ remedies
2.3
Basic criteria for
assessing remedies
2.3.1 The remedy must entirely eliminate the
competition problem
2.3.2 The remedy must be proportionate
2.3.3 The remedy must be capable of being
implemented in a short period of time
2.4
The burden to submit
remedies is on the parties but the burden of proof is on the Commission
3.2
Practical aspects of
remedies discussions between the Commission and parties
3.3
Market test of proposed
remedies
3.4
Modifying proposed remedies
and the issue of ‘late remedies’
4.1
Labels and their relevance
4.1.1 Structural and behavioural remedies
4.1.2 Structural remedies: only divestitures?
4.1.3 All divestiture remedies include
ancillary behavioural remedies
4.2.1 The Commission’s preference for
divestitures
4.2.2 The structural vs. behavioural debate
4.2.3 Divestitures are preferred but not
risk-free either
4.2.4 Scope of the divested business
4.2.4.1 Divestiture of a viable business
4.2.4.2 Divestiture of a stand-alone business
4.2.4.3 Carve-outs and divestitures of assets
4.2.5 Third party rights in relation to the
divestiture
4.2.6 Finding a suitable purchaser of the
divestiture
4.2.7 Standard arrangement, upfront buyer
clause, fix-it-first remedy
4.2.7.4 Which arrangement in which case?
4.3
Removal of links with
competitors
4.4.1 Digital sector: interoperability
remedies
4.4.4 Airline mergers: slot remedies
4.5
Other behavioural remedies
5.1
Interpretation of the
remedy
5.2
Appointment of a monitoring
trustee
5.3
Approval of a suitable
purchaser
5.3.1 The parties’ search for and negotiations
with a purchaser
5.3.2 Submission of the purchaser proposal
5.3.3 Assessment of the purchaser proposal
5.3.3.1 Does the purchaser meet the purchaser
requirements?
5.3.4 The Commission’s decision on the
suitability of the purchaser
5.4.2 Access and behavioural commitments
6.1
Commission’s powers to
investigate compliance
6.2
Complaints from third
parties
6.3.1 Distinction between ‘conditions’ and
‘obligations’
6.4
Arbitration and expert
determination as a parallel enforcement mechanism
6.4.3 Safeguards to protect third parties
relying on arbitration
6.4.4 Other features of merger arbitration
6.4.5 Actual arbitration cases
6.5
Enforcing the remedy in
national courts
1 Introduction
1.1
The importance of remedies in EU merger control
1.1.1
Merger control’s most frequently used tool to protect
competition
The goal of EU
merger control is to prevent concentrations from causing lasting harm to
competition in the EU.[2]
Remedies are by far the most common tool by which the European Commission seeks
to achieve this. They constitute the Commission’s most widely used form of
intervention. The only other formal way for the Commission to prevent harm to
competition is to prohibit a concentration.[3] Prohibitions are rare. In three decades of EU merger
control, the Commission has only prohibited 30 concentrations, an average of
one prohibition per year. By contrast, there have been more than 450 cases
where remedies were made binding. In short, the vast majority of concentrations
that raise competition problems are approved with remedies. Figure 1
illustrates this, by comparing the yearly number of remedies decisions and
prohibition decisions in the past decade.
Figure
1 – Number of approvals with remedies vs. prohibitions per year (2011-2020)
Hence, remedies
are central to the European Commission’s merger control activities. The
European Commission is by no means unique in this respect. Competition
authorities in other EU Member States, with the exception of Germany[4], also rely mostly on remedies, not prohibitions, to
protect competition. Likewise, in the United States, most problematic mergers
are not blocked by the courts but cleared with remedies, through ‘consent
orders’ (FTC) and ‘consent decrees’ (entered by a court at the request of the
Department of Justice).[5]
In spite of
their importance, remedies are somewhat of a niche topic in the academic
literature. Most of the major EU competition law textbooks either treat the
topic very summarily[6] or
skip it altogether.[7] Only
a handful address the topic in some depth[8] and even fewer in a comprehensive
way.[9]
Monographs on the topic are also scarce.[10]
1.1.2
Remedies consume significant resources and have
important economic consequences
The importance
of remedies within merger control is also reflected in the significant
resources that flow into the design, implementation and enforcement of
remedies. European Commission staff working on mergers spend considerable time
and efforts on remedies,[11] as
do undoubtedly the parties themselves and their lawyers.
The steady flow
of merger clearances with remedies has also increased the demand for the
services of monitoring trustees, the independent third parties that oversee the
merging parties’ compliance with remedies. [12]
Given that some remedies are in place for a long period of time,[13] the trustee’s involvement with a case can last for
several years. Only a handful of persons and firms offer trustee services.[14] Some trustees focus solely on providing trustee
services in competition cases, while others are part of firms that offer a
variety of services, typically consulting, audit, accounting or banking
services.
The economic
importance of remedies is evidenced by the size of some divestiture transactions.
Divestitures – the most common type of remedy in EU merger control – have
sometimes constituted very significant transactions in their own right. As the
size and geographic reach of mergers has grown, so has the size and complexity
of divestitures. In 2018, for instance, Bayer, a German-based multinational,
agreed to divest part of its business as a remedy to obtain clearance for its
acquisition of U.S. seeds company Monsanto. The resulting deal, which had a
value of 7.6 billion euro[15], was
one of the largest divestitures in EU and U.S. history.[16] Other recent deals have also resulted in very large
divestitures, including cases such as AB InBev / SAB Miller,[17] Dow / DuPont,[18] GE / Alstom,[19] Holcim / Lafarge[20], and Ball / Rexam.[21]
The large size
of these divestitures highlights the impact that remedies can have not just on
specific markets but on entire industries. In line with this, some commentators
have emphasized the role remedies play in restructuring markets, and argue that
they constitute opportunities for government authorities to intervene in
markets for an extended period of time, transforming mergers into a trigger for
economic regulation.[22] This
is probably not a characterization which competition enforcers would embrace.
Indeed, in court proceedings, the Commission has stated that remedies ‘cannot
be instrumentalised by the Commission as a means or opportunity for
“engineering markets or economic planning”’.[23] Yet there is no gainsaying that remedies can have important
economic consequences. They may raise issues that touch upon economic
sovereignty, employment[24],
competitiveness and industrial policy. [25] This
also explains why a topic that appears technical at first attracts the
attention of policymakers, who are interested in the economic and strategic
impact of remedies.
1.2
Recent debate and controversy surrounding remedies
1.2.1 Are merger remedies
effective?
Given the
central role that remedies play in merger enforcement, it is probably not an
exaggeration to say that, if remedies are ineffective, merger control is also
largely ineffective. Admittedly, the threat of a prohibition – even if
prohibitions are rarely actually issued – probably also has an impact. It
probably stops many clearly anticompetitive mergers from being pursued. These
are the ‘deals that never leave the boardroom’.[26] However, apart from this deterrent effect of
prohibitions,[27]
effective remedies are crucial in ensuring that merger control fulfils its
promise of keeping markets competitive.
The
effectiveness of remedies and, by extension, the effectiveness of merger
control has been the subject of some controversy in recent years. The debate
has been most vigorous in the United States, where it became part of a broader
debate about economic concentration and the role antitrust law should play in
the economy.
An important
contribution to the debate came in 2015, when John Kwoka published his study on
the consequences of mergers in the United States. Kwoka assessed, among others,
whether remedies had been effective in preventing price increases from mergers.
To do so, he conducted a meta-analysis[28] of previously published ex post assessments of
mergers, i.e. studies that estimate a merger’s impact on prices. [29] His analysis covered 49 mergers,[30] of which 12 had been cleared with remedies by the
U.S. antitrust authorities. Kwoka found that those 12
mergers led to significant price increases, in spite of the remedies. On
average, the mergers cleared subject to a divestiture remedy led to a price
increase of 5.65%.[31] Conduct remedies did even worse: they led to a 13.33% price increase,
although that estimate was based on a sample of only two mergers.[32]
On the basis of
these figures, Kwoka concluded that ‘many challenged mergers are subject to
remedies that fail to prevent postmerger price increases.’[33]
Kwoka’s findings
sparked a rebuke from FTC officials, who challenged Kwoka’s findings on various
grounds. They argued that the studies he had analysed covered only a small
number of transactions, which had occurred in a small and unrepresentative set
of industries. They concluded that ‘[Kwoka’s] evidence cannot support [his]
broad conclusions’.[34]
Kwoka’s study
also stirred up the debate across the Atlantic. His study related to price
effects of mergers in U.S. markets, which begged the question: what has the impact
of mergers been on prices in Europe? Have remedies in the EU been able to
prevent price increases? At first sight, one would expect a similar tendency as
in the United States, because the Commission’s approach to merger remedies is
not fundamentally different from the one of the Department of Justice and the
FTC. All these authorities use remedies, not prohibitions, as the primary tool
to address anticompetitive effects from mergers. All have a preference for
structural remedies, but at the same time accept behavioural remedies in
certain cases.
Almost
immediately after the publication of Kwoka’s book, the European Commission
commissioned a similar meta-analysis, but this time of ex post assessments
of European mergers.[35] The
study, published in 2016, found that unconditionally approved mergers led to a
price increase of 5% on average[36],
suggesting that merger control in Europe had not caught all anticompetitive
mergers. Remedied mergers, however, had a more moderate effect. On average, the
price after a remedied merger increased by 1.64%.[37] A subsequent meta-analysis by the same authors, based
on a slightly different set of ex post studies, suggested that the
remedies did even better. That study found that remedied mergers led, on
average, to a price decrease of -0.6%.[38]
Does this mean
that remedies in the EU have been effective in preventing the harm from
mergers, in contrast to remedies in the U.S.? This was not the conclusion which
the authors of the two studies drew. On the one hand, they acknowledged that ‘a
stylized conclusion (…) would be that remedies are effective in eliminating
post-merger price increases’. [39]
However, they then went on to conclude that the difference between Kwoka’s
findings and the study’s finding was ’likely to be due to the differences in
the way the two samples were selected.’[40] Indeed, the study conducted for the Commission had
significant limitations. The sample of mergers was small: 25 mergers, of which
seven had been reviewed by the European Commission, while others were reviewed
by other European competition authorities. Of these 25 mergers, only eight had
been subject to remedies, approved by various competition authorities in the
EU. Only one merger had been subject to remedies approved by the European
Commission.[41]
Hence, it seems difficult to draw any firm conclusions on the effectiveness of
remedies in the EU from this study and even less so on the effectiveness of
remedies approved by the European Commission.[42]
With no recent
study to draw any conclusions from, the question on the effectiveness of
remedies in the EU remains open. Anecdotical evidence about specific merger
remedies demonstrates that some merger remedies have not been effective or only
partly effective,[43] but
it is difficult to assess how widespread these problems are.
The only
large-scale study is DG COMP’s merger remedies study of 2005, which is
discussed in section 1.2.3 (The call for ex post assessments of
remedies).
1.2.2 The
structural vs. behavioural debate
Like most
competition authorities across the world,[44] the Commission has a policy that favours structural
remedies over behavioural remedies. However, this still leaves room for behavioural
remedies in some cases. The optimal stance on this issue continues to spark
discussions. The debate is also linked to questions about how interventionist
the Commission should be in regard to vertical and conglomerate mergers. Those
are the type of mergers where the choice between behavioural and structural
remedies presents itself most acutely. In that type of mergers, divestitures
are sometimes extremely difficult to conceive, leaving the Commission with a
choice between prohibiting the transaction or accepting a behavioural remedy.
This topic is
explored in greater detail in section 4.2.2.
1.2.3 The call for
ex post assessments of remedies
Ex post
assessments of mergers, also known as merger retrospectives, seek to assess
whether a merger has had an impact on competition in one or more of the
relevant markets. If the merger was accompanied with remedies, such assessments
also shed light on the effectiveness of the remedy. If the remedies were
effective, the merger should not have any negative impact on competition.
Some ex post
assessments focus specifically on remedies. The 2005 Merger Remedies Study conducted by DG COMP[45] was a major such study, analysing 96 remedies,
imposed in 40 Commission decisions that were issued in the five-year period
from 1996 to 2000. It revealed several shortcomings in the remedies accepted in
those cases. Those learnings were subsequently reflected in the Commission’s
Remedies Notice of 2009.
The 2005 study
was based on interviews and mainly aimed at identifying issues in the design
and implementation of remedies. It did not conduct a detailed ex post assessment
of the evolution of each market concerned.[46] The study’s findings on the
effectiveness of remedies were therefore presented as ‘a first indication of
how effective a remedy might have been in preserving effective competition’.[47] With that caveat in mind, the study found that 57% of
all remedies analysed had been effective.[48] 24% of all remedies had been partially effective,
while 7% had been ineffective.[49] In
12% of cases, the effectiveness of the remedy could not be determined, for
instance because of a lack of information.
Among different
types of remedies, the study found that commitments requiring a party to exit a
joint venture had been most effective (77% of such remedies had been
effective), while access remedies had been least effective (40% of such
remedies had been effective).[50]
Since then, no
large-scale ex post assessments have been conducted, although two
meta-analyses were conducted that included several mergers approved with
remedies.[51]
However, those analyses included only a very small number of mergers with
remedies approved by the European Commission, namely one and three cases. The
results of those studies were discussed in section 1.2.1 (Are merger remedies
effective?).
The lack of
large-scale retrospectives on EU mergers has led to a growing chorus of
observers calling for more ex post assessments.[52]
In September
2020, Commission Vestager announced that the Commission would ‘look back at
some of [its] recent decisions, to see, for instance, what effect those
decisions have had on prices and choice, quality and innovation.’[53] This suggests some ex post assessments of
mergers will be conducted in the near future.
2
Legal framework and criteria for assessing remedies
2.1
Terminology: remedies, commitments, ‘conditions and
obligations’
In the context
of EU merger control, the terms ‘remedies’ and ‘commitments’ are synonyms. This
contrasts with the field of Article 101 and 102 TFEU, a field which the
European Commission sometimes refers to as ‘antitrust’[54], where the two terms have distinct meanings. In that
field, remedies denote orders imposed by the European Commission to bring an
infringement of Article 101 or 102 TFEU to an end.[55] Commitments, by contrast, denote the obligations
voluntarily taken up by companies in order to avoid the finding of an
infringement by the Commission.[56] The
latter concept bears similarities to the merger control concept of commitments
(or remedies, as the two are synonymous in the context of merger control).
While commitments/remedies in merger control are made binding and avoid a
prohibition, commitments in the field of antitrust are made binding and avoid a
finding of an infringement.
The EU Merger
Regulation only uses the term ‘commitments’ but the Implementing Regulation and
the European Commission, in its decisions and guidance, use both ‘commitments’
and ‘remedies’, sometimes in one and the same text. For instance, the
Implementing Regulation explains that, when companies offer ‘commitments’ to
the Commission, they have to be accompanied by a ‘form RM relating to
remedies’.[57] The
Commission’s guidance on commitments is known as the ‘Remedies Notice’ and
mostly uses the term ’remedies’.
The term
‘conditions and obligations’ refers to the commitments as attached to the
Commission decision. For all practical purposes, the term ‘conditions and
obligations’ is interchangeable with the term ‘commitments’. However, strictly
speaking, there is a subtle difference. The term commitments looks at the
process from the viewpoint of the parties: they commit to do certain things.
The term ‘conditions and obligations’ is simply the flipside from the
perspective of the Commission. The Commission makes the parties’ commitments
binding by turning them into ‘conditions and obligations’ attached to the
decision. This slight difference in nuance is borne out by the text of the EU
Merger Regulation, which provides that the ‘conditions and obligations’ are
‘intended to ensure that the undertakings concerned comply with the commitments
they have entered into vis-à-vis the Commission’[58].
Together,
‘conditions and obligations’ constitute the commitments, but the terms
‘conditions’ and ‘obligations’ each have a distinct meaning. The difference is
relevant for the enforcement of the remedies, namely what happens in case of a
breach, and we discuss the exact meaning in that section (section 6.3.1
Distinction between ‘conditions’ and ‘obligations’).
Sometimes, the
term ‘undertakings’ is also used as a synonym of commitments. This happens less
frequently, perhaps because of the obvious risk of confusion with undertakings
in the sense of the economic units that are the subject of competition law.
Sometimes specific parts of commitments are denoted as ‘undertakings’.
2.2
Legal framework
2.2.1
Remedies in Phase II
Under the EU
Merger Regulation, the Commission must prohibit concentrations that would
significantly impede effective competition.[59] The merging parties can avoid such a prohibition by
making commitments. These commitments modify the concentration and, if the
modified concentration would no longer significantly impede effective
competition, the Commission must approve the concentration, subject to
compliance with the commitments. Such a decision is known as a ‘conditional
clearance decision’ or an ‘approval with remedies’.
The legal basis
for such decisions in Phase II is Article 8(2) of the EU Merger Regulation.
Article 8(2) essentially provides that the Commission shall approve
concentrations which, following modifications by the undertakings concerned,
would not significantly impede effective competition. These modifications are
in principle brought about by commitments and the Commission makes[60] the commitments binding on the parties by attaching
them to the decision as ‘conditions and obligations’.
2.2.2
Remedies in Phase I and the requirement of ‘clear-cut’
remedies
The Commission
can also approve a concentration with commitments in Phase I. In that case, the
dynamics and legal standard are slightly different. In Phase I, the Commission
does not determine whether a concentration would significantly impede effective
competition. Instead, it has to determine whether the concentration raises
serious doubts as to its compatibility with the internal market. If the
concentration does raise serious doubts, the Commission opens an in-depth
investigation.
The ‘serious doubts’ standard is lower than the ‘significant impediment to
effective competition’ standard, meaning the Commission’s level of confidence
that the merger harms competition does not need to be as high as when it finds
a significant impediment to effective competition in Phase II.
Just as parties
in Phase II can avoid a prohibition decision, they can avoid a decision raising
serious doubts by offering commitments that modify the concentration. If the
modified concentration no longer raises serious doubts, the Commission will
approve the concentration subject to remedies. The legal basis for such a
conditional clearance decision with commitments in phase I is Article 6(1)(b)
combined with Article 6(2). A decision clearing a merger in Phase I with
remedies is often referred to as an ‘Article 6(1)(b) decision with conditions
and obligations’ or as a decision based on ‘Article 6(1)(b) in conjunction with
Article 6(2)’.[61]
Recital 30 of
the EU Merger Regulation explains that ‘it is also appropriate to accept
commitments before the initiation of proceedings [i.e. before the opening of
Phase II] where the competition problem is readily identifiable and can easily
be remedied’. The General Court has also made clear that commitments in Phase I
‘must constitute a direct and sufficient response capable of clearly excluding
the serious doubts expressed.’[62]
This implies
that remedies in Phase I have to meet a higher standard than in Phase II. That
is in any event the position taken in the Commission’s Remedies Notice, which
explains that, for commitments to be accepted in Phase I, ‘the competition
problem needs to be so straightforward and the remedies so clear-cut that it is
not necessary to enter into an in-depth investigation and that the commitments
are sufficient to clearly rule out ‘serious doubts’.[63]
2.3
Basic criteria for assessing remedies
This section
discusses the basic conditions which remedies must meet in order to be
acceptable. In addition to these basic conditions, there are more specific
requirements for specific types of remedies. For instance, a divestiture must
include all assets to ensure its viability and competitiveness. Those more
specific conditions are discussed later, when I discuss each type of remedy.
2.3.1
The remedy must entirely eliminate the competition
problem
The Merger
Regulation, case law and the Remedies Notice all make clear that the Commission
can only accept remedies if they entirely remove the competition concerns
raised by the merger.[64] Some
court judgments have formulated this in a slightly different manner: the remedy
must ‘be comprehensive and effective from all points of view’.[65]
2.3.2
The remedy must be proportionate
The principle of
proportionality is one of the general principles of EU law. The EU courts have
specified that ‘the principle of proportionality requires measures adopted by
[EU institutions] not to exceed the limits of what is appropriate and necessary
to attain the objectives pursued; when there is a choice between several
appropriate measures recourse must be had to the least onerous, and the
disadvantages caused must not be disproportionate to the aims pursued.’[66]
As the principle
of proportionality is a general principle of EU law, Commission decisions in EU
merger control, including decisions imposing remedies, must respect this
principle.[67]
However, the precise implications of this principle will depend on the specific
context.[68] The
question is therefore what the principle specifically implies when the
Commission assesses merger remedies. In that context, the proportionality
principle implies that “commitments should be proportionate to the competition
problem and entirely eliminate it”.[69]
At first sight,
some tension appears to exist between the requirement that remedies are
effective, i.e. the requirement that they entirely remove the competition
problems, and the requirement that they are proportionate to the competition
problem. Imagine, for instance, a merger where competition problems arise on a
market for product A. Product A is manufactured in a plant together with
products B and C, and it is impossible to extract the production equipment for
product A from the plant. To remove the competition concerns, must the entire
plant be divested, including the production assets for products B and C? If the
requirement of proportionality were to be applied in isolation, that is without
also taking into account the requirement of effectiveness, the answer would be yes.
By contrast, if remedies first and foremost need to be effective, it is clear
that the entire plant must be divested.
The Commission
has consistently taken the view that the requirement of effectiveness takes
precedence over the requirement of proportionality. In other words, the
principle of proportionality cannot be used to force the Commission to accept a
commitment that would not be effective. This stance finds support in the case
law of the General Court, and particularly the Cementbouw judgment. That
case involved an acquisition of joint control over an entity (CVK), which the
Commission approved subject to the admittedly far-reaching commitment that the
parties would dissolve CVK. The parties argued before the court that this
commitment was disproportionate and that the initial commitments they had
offered – an arrangement to end their joint control – were sufficient. The
Commission’s defence was that the concentration not only gave the parties
(Cementbouw and Haniel) joint control over CVK but had also created CVK’s
dominant position. This was because the concentration consisted of two parts:
the acquisition of joint control over CVK and, in an interrelated transaction,
the acquisition by CVK of control over several companies that used to be member
of CVK but existed independently. The General Court rejected Cementbouw’s
argument based on proportionality, as the initial commitments would have
removed the competition problems arising from joint control but would not have
removed CVK’s dominant position. In what is perhaps the most well-known
paragraph of the judgment, the General Court stated that ‘the parties’
commitments must not only be proportionate to the competition problem
identified by the commission in its decision but must eliminate it entirely’.[70]
On appeal, the
Court of Justice confirmed the General Court’s analysis, noting that ‘when
reviewing the proportionality of conditions or obligations which the Commission
may, by virtue of Article 8(2) of Regulation No 4064/89, impose on the parties
to a concentration it is necessary (...) to be satisfied that those conditions
and those obligations are proportionate to and would entirely eliminate the
competition problem that has been identified’.[71]
The Commission’s position that proportionality cannot
be used to justify ineffective remedies is also expressed in the Remedies
Notice. It states that, if this is necessary to ensure the viability of the
divested business and thus create an effective competitor, ‘it may be necessary
to include activities which are related to markets where the Commission did not
identify competition concerns.’[72]
In line with this, in many cases, commitments have
included elements that are not directly related to the competition concerns
identified but have nonetheless been included to make the remedy
effective.
This is not to
say, however, that the proportionality principle is a toothless tiger. Parties
regularly invoke the principle, and it can play a role in different
constellations.
First, the
principle of proportionality comes into play when two possible remedies exist,
each of them effective. In that case, the Commission is obliged to accept the
remedy that is less burdensome for the parties. This may result in a remedy
that is smaller in scope, for instance a divestiture has to include fewer
businesses or product lines. It may also result in a remedy that has a smaller
territorial scope. If a territorial limitation does not dampen or undermine the
effectiveness or viability of a remedy, this limitation is justified by the
principle of proportionality.[73]
Second, the
principle of proportionality implies that the commitments have to address the
competition problems caused by the merger but no more than that. Here, the
principle of proportionality meets the requirement of merger-specificity, i.e.
the idea that the Commission can only challenge a merger based on competition
problems caused by the merger. Likewise, the remedy must only remove the
problems caused by the merger. This use of the principle of proportionality was
echoed in Advocate General Mazák’s opinion in Odile Jacob v. Commission.[74]
2.3.3
The remedy must be capable of being implemented in a
short period of time
In order to be
acceptable, commitments must be ‘capable of being implemented effectively
within a short period of time.’[75] The
remedies notice explains that this is because ‘conditions of competition on the
market will not be maintained until the commitments have been fulfilled’.[76]
This requirement
reflects the fact that, as long as the commitments are not implemented, they
are unlikely to have any remedial effect. The word ‘implemented’ in this
context therefore refers to the commitment becoming effective, i.e. starting to
have its effect felt on the market. If it takes more than ‘a short period of
time’ for those effects to be felt, the remedies will not prevent a significant
impediment to effective competition and will therefore be inadequate. In line
with this, the Remedies Notice provides that access commitments aimed at
fostering new entry will only be acceptable if they ‘actually make the entry of
sufficient new competitors timely and likely’.[77]
In practice, the
requirement means that commitments whose implementation will depend on an
uncertain event or an event that will take considerable time to materialize,
may be unacceptable.
In Siemens /
Alstom, for instance, the Commission rejected Siemens’ commitment to offer
a software license to address competition concerns in the markets for mainline
signalling. In that case, the beneficiary of the licence would have to transfer
the software to its own platform, something which would likely take several
years.[78] This
part of the commitments was therefore considered to fall short of the
requirement that remedies must be capable of being implemented in a short
period of time.[79]
Likewise, in Ryanair
/ Aer Lingus (I), the Commission rejected the remedies proposed by Ryanair
to make Aer Lingus’ slots at Heathrow available, in part because certain
minority shareholders of Aer Lingus held veto rights over slot transfers.[80] This, the Commission concluded, ‘cast serious doubts
on Ryanair’s capability of delivering this remedy in time’.[81]
The requirement
that commitments must be capable of being implemented in a short period of time
does not mean that commitments must necessarily be a one-off intervention, i.e.
a divestiture. As explained in section 4.2.1 (The Commission’s preference for
divestitures), in some cases, non-divestiture remedies may be acceptable. It is
common for such non-divestiture remedies to be in place for some time. Although
this long duration may certainly raise problems in terms of effective
implementation – which is why divestitures are preferred – they may nonetheless
be considered effective in some circumstances. In line with this, the
Commission has accepted commitments with a duration of several years (e.g.
eight years[82] or
ten years[83]). Up
until the 2000s, commitments of unlimited duration were not uncommon,[84] but no such remedies have been approved in recent
years.
2.4 The burden
to submit remedies is on the parties but the burden of proof is on the Commission
Although the
Commission is available to give the parties informal guidance on draft
remedies, the onus is ultimately on the parties to submit remedies that are
sufficient to remove the competition concerns.[85] They also have a duty to supply the Commission with
the information necessary to assess the remedies.[86] Particularly important in this respect is the duty to
submit the so-called Form RM and accompanying documents.
On the other
hand, the Commission bears the burden of proof, regardless of whether it
concludes that the commitments are adequate or not. This flows from the
Commission’s double-sided burden of proof in merger control: it bears the
burden of proof both when prohibiting a concentration[87] and when approving one.[88] These rules on the burden of proof also apply when
the parties submit commitments.[89]
Indeed, as the General Court has held, ‘in so far as the burden of proof is
concerned, a concentration modified by commitments is subject to the same
criteria as an unmodified concentration’.[90]
In practice,
this means that, if the Commission rejects the commitments validly offered by
the parties and wants to prohibit the concentration, it must show that those
commitments do not render the concentration, as modified, compatible with the
internal market.[91] Conversely, if the Commission accepts the commitments it must show
that they eliminate the competition concerns raised by the merger.
3
Designing the remedy
3.1
Key documents
Apart from the
EU Merger Regulation, the most important document guiding parties and the
Commission is undoubtedly the Remedies Notice issued in 2008.
Also very
important in practice is the Commission’s Model Text for Divestiture
Commitments, last updated in 2013.[92] Although the title of this document suggests that it
only serves as a model for divestiture commitments, in practice, it serves as a
model for all commitments, mutatis mutandis. This means that the opening
paragraphs, most of the definitions, most of the paragraphs regarding the
trustee, the review clause and the paragraph regarding the entry into force of
the commitments will normally also be included in non-divestiture commitments.
3.2
Practical aspects of remedies discussions between the
Commission and parties
The Commission
is keen to point out that the search for an adequate remedy is not a bargaining
process.[93]
Rather than negotiations, parties can expect a ‘constructive dialogue’[94], in which the parties and the Commission explore
which remedies could adequately address the competition concerns identified.
It is in the
parties’ interest to start remedies discussions early. This is because it often
takes several iterations before a commitments text stands a chance of being
acceptable. In principle, parties could even submit proposals for commitments
prior to notification.[95] In some
cases where the competition problems were particularly self-evident, parties
have done so.[96] This
can contribute to making a conditional clearance in Phase I possible but is
usually only meaningful if the competition concern is obvious and the remedies
are clear-cut structural remedies, since in the prenotification stage the
Commission has not yet conducted a market investigation and therefore has a
very incomplete understanding of the potential competition problems and how to
fix them.[97]
3.3
Market test of proposed remedies
The Remedies
Notice explains that, when considered appropriate, the Commission will consult
third parties on the remedies that have been submitted by the merging parties.[98] This is known as a market test of the proposed
remedies.
A market test
allows the Commission to obtain information and views from market participants
as to whether the proposed remedies will be workable and effective in removing
the competition concerns. It is an opportunity for the Commission to hear from
those who know the market best. This can partly mitigate the information
asymmetry between the parties and the Commission. Competitors, customers and
suppliers of the merging parties will often be able to spot shortcomings in a
remedy that are hidden for non-insiders. For instance, in Deutsche Börse /
London Stock Exchange, the market test revealed that the business proposed
for divestiture was vitally dependent on the London Stock Exchange's trading
platform MTS[99],
which had not been included in the proposed divestiture. This led the
Commission to conclude that the proposed divestiture would simply not be
viable. The Commission therefore rejected the proposed commitments and
prohibited the transaction.
The third
parties that are consulted may include competitors, customers, suppliers and
other interested parties. The questions can relate to anything that is relevant
to assess the proposed remedies. In case of divestitures, questions typically
seek to ascertain whether the scope and scale of the proposed divestiture is
sufficient, whether the divested business will be viable, whether transitional
agreements are needed, and whether specific purchaser requirements are
warranted.
In case of a
divestiture, another important goal of the market test is to gauge whether the
proposed divestiture will attract buyers. For this purpose, potential buyers
are usually directly asked whether they would be interested in acquiring the
business that is being proposed as divestiture and, if not, which modifications
would have to be made to make the business attractive.
To ensure that
third parties can comment meaningfully on the commitments, the notifying
parties must make available a non-confidential version of the commitments.[100] That version must allow third
parties to fully assess the workability and effectiveness of the proposed
remedies. Excessive redactions will make this impossible, which in turn makes
it impossible for the Commission to assess the adequacy of the commitments.[101]
The Commission
has discretion on whether to conduct a market test of merger remedies.[102] If the proposed remedies are
clearly inadequate, the Commission will normally refuse to market test them.[103] In such a scenario, there is
simply no reason to ask third parties to parse through the often lengthy
commitments and reply to questions, only to reach the inevitable conclusion
that the remedies are inadequate. Conversely, it is also conceivable that
proposed commitments are so clear and comprehensive that the Commission can
confidently decide, without market test, that they are suitable. This is,
however, exceedingly rare.[104]
Remedies submitted after the Phase II deadline will normally not be market
tested[105],
although exceptionally they are.[106]
The replies to
the market test form part of the evidence on the basis of which the
Commission assesses whether the remedies are adequate. Assessing the replies to
the market test is not simply a matter of counting favourable or unfavourable
views.[107] It
is not a popularity vote on the remedies. Although it is of course relevant if
a large number of the respondents point out a particular flaw in the
commitments or consider the divested business viable, numbers alone are not
decisive. Instead, the Commission reviews all individual responses, and its
assessment of the market test is based on the totality of the replies.[108] In assessing the replies, the
Commission weighs them based on elements such as the consistency and relevance
of the reply, the expertise of the respondent, how well the reply is
substantiated, and the possibility of replies being guided by self-interest.[109] Competitors in particular may have
a hidden agenda, either in favour or against the merger. They may also see
themselves as a potential buyer of a divestiture.[110] Their replies may therefore be
strategic. In those cases, the weight given to their replies will depend on how
well their reply is substantiated and whether it is echoed by other
respondents.
Apart from
consulting market participants through a market test, the Commission also
consults the authorities of the Member States, who receive a copy of the
commitments.[111] This
allows the Commission to benefit from the experience and expertise of national
competition authorities, who may have dealt with the relevant markets or
similar commitments in prior cases.[112] The Commission also frequently
obtains feedback on commitments from national regulators with expertise on the
specific sector in which the merger takes place. For instance, in case of a
merger between telecommunications operators, national telecom regulators may be
consulted,[113]
while in a merger between two train makers, national rail regulators may be
consulted.[114]
3.4
Modifying proposed remedies and the issue of ‘late
remedies’
If the
Commission’s assessment shows that the proposed remedies are not sufficient to
remove the competition concerns raised by the merger, the parties will be
informed of this.[115] If
time allows, parties can then modify their proposed remedies and submit revised
remedies.
However, since
in Phase I, the Commission may only accept remedies that ‘provide a clear-cut
answer to a readily identifiable competition concern,’ ‘only limited
modifications can be accepted to the proposed commitments’[116] and such modifications may only be
accepted ‘in circumstances where it is ensured that the Commission can carry
out a proper assessment of those commitments.’[117] In practice, this means that when
submitting remedies in phase I, the parties must make a genuine effort to
propose their ‘best offer’ for a clear cut solution to the competition concerns
identified by the Commission, rather than putting forward an ‘opening gambit’
with the idea that they can always improve the remedies later. The latter is a
high risk strategy in view of the limited time and scope available to consider
or modify remedies in phase I.
In Phase II,
there is in principle no limitation on the type of modifications that can be
made, at least prior to the deadline of 65 working days. After that deadline,
the merger process is running towards its end and this limits the type of
modifications that can be made. Commitments submitted after day 65 are known as
‘late commitments’ and are subject to a stricter legal standard. The General
Court has found, in a case decided under the old Merger Regulation, which also
had a deadline for submission of remedies in Phase II, that there is ‘no
obligation on the Commission to accept commitments submitted after the
deadline’.[118]
However, in its Remedies Notice, the Commission has voluntarily agreed to examine
modified commitments submitted after the deadline under certain circumstances.
More specifically, the Commission will accept modified commitments after day 65
‘where it can clearly determine - on the basis of its assessment of information
already received in the course of the investigation, including the results of
prior market testing, and without a need for any other market test - that such
commitments, once implemented, fully and unambiguously resolve the competition
concerns identified’.[119] In
addition, there must still be ‘sufficient time to allow for an adequate
assessment.’[120]
4
Types of remedies
4.1
Labels and their relevance
4.1.1
Structural and behavioural remedies
Remedies can be
categorized in several ways, but the most commonly used distinction is the one
between structural and behavioural remedies.[121] This distinction is also the most
relevant, since it plays an important role in the Commission’s remedies policy.
Behavioural remedies are also referred to as conduct remedies or non-structural
remedies.
Structural
remedies require that the merging parties divest, i.e. sell, a
business or assets to a third party. The underlying idea is that the third
party will compete with the business or the assets, thereby replacing the
competition that is lost because of the merger. The divestiture will either
strengthen an existing player or allow a new entrant to compete. Divestitures
therefore essentially rely on a third party, independent from the merged
entity, to maintain competition in the market, based on that third party’s own
incentive to maximize its profits.
Structural
remedies derive their name from the fact that they have a direct impact on the
structure of the market, because a business or assets change hands. In essence,
this transfer restructures the market, thereby remedying the harm generated by
the merger, which itself is also a structural change in the market.
Behavioural or
non-structural remedies, by contrast, require certain conduct by the merging
parties (other than divesting a business which is of course also a type of
conduct, albeit a very specific type). They either modify or constrain the
merged entity’s conduct and typically last for some time. Usually, these
remedies require medium-term or long-term monitoring.
These two categories
are not defined in the EU Merger Regulation, but they nonetheless constitute an
important distinction. The Remedies Notice expresses a preference for
‘commitments which are structural in nature, such as the commitment to sell a
business unit’ because ‘such commitments prevent, durably, the competition
concerns which would be raised by the merger as notified, and do not, moreover,
require medium or long-term monitoring measures’.[122]
Although the
distinction seems straightforward, semantic discussions occasionally arise.
4.1.2
Structural remedies: only divestitures?
A first question
is whether the category of structural remedies coincides exactly with the
category of ‘divestiture remedies.’ Put differently: are there some remedies -
other than divestitures – that also qualify as structural remedies?
The easy answer
is to reply that the question is irrelevant because the Remedies Notice’s
preference for structural remedies is, upon closer reading, actually a
preference for divestitures. Hence, the most relevant distinction from the
perspective of the Remedies’ Notice is not the distinction between structural
and behavioural remedies but between divestitures and non-divestiture remedies.
The Remedies Notice’s preference is explained in greater detail in section
4.2.1 (The Commission’s preference for divestitures).
A more thorough
answer is to acknowledge that the dividing line between structural remedies and
behavioural remedies is less sharp than the one between divestiture remedies
and non-divestiture remedies.
The root of the
problem lies in the fact that the label ‘structural’ in structural remedies
refers to the impact of the remedy (a remedy is structural if it changes
the structure of the market), while the label ‘behavioural’ in behavioural
remedies refers to how the remedy is implemented (a remedy is behavioural if it
requires behaviour, other than a divestiture, over a certain time
period).
Some behavioural
remedies are aimed at changing the structure of the market. The main example
are access remedies, in which the merging parties grant third parties access to
key infrastructure, networks, airport slots, etc.[123] These remedies are aimed at
lowering barriers to entry and their goal is often to allow new entrants to
come into the market, using the assets to which the remedy ensures access. If
successful, such remedies can ultimately change the structure of the market,
although it is clear that the impact on market structure is less direct and
certain than in case of a divestiture. However, because these access remedies
may impact the structure of the market, they have sometimes been put in the
structural box, i.e. they have been qualified as ‘structural remedies’ or –
acknowledging the fact that they remain essentially behavioural – ‘behavioural
remedies with structural elements’ or ‘quasi-structural remedies’.
This tendency –
to put access remedies in the ‘structural’ box – may have been triggered by a
finding of the General Court in the ARD judgment.[124] That case involved a third party
challenging the remedies approved by the Commission. The remedies were access
remedies. They did not entail a divestiture but required the merged entity to
give competitors access to certain assets (programming interface, technology,
etc.). The third party argued that the remedies were insufficient, among
others, because they were ‘mere promises not to abuse dominant positions’.[125] The General Court rejected the
third party’s challenge and, in doing so, held the following: ‘although the commitments
appear to be rather behavioural in nature, they are nevertheless structural
because they are aimed at resolving a structural problem, namely market access
by third parties.’ [126] The
General Court then found that the commitments would ‘consistently provide for
and strengthen competition’ and, hence, could not be categorized as ‘mere
behavioural commitments unsuitable for resolving the competition problems
identified by the Commission’.[127] In
line with this approach, the Remedies Notice mentions, in a single paragraph,
‘granting access to key infrastructure or inputs on non-discriminatory terms’
as an example of a structural remedy.[128]
In the author’s
view, it would be clearer to qualify access remedies as behavioural remedies,
while acknowledging that, within the category of behavioural remedies, some
remedies may have more of a structural impact than others. Ultimately, the
reason why competition authorities prefer structural remedies over behavioural
remedies is because behavioural remedies (1) are not a durable solution, (2)
rely on the merging parties behaving in a way that is at odds with their
incentive to maximize profit, and (3) are difficult to monitor and enforce over
a long period of time. Access remedies are not free from these challenges. They
require one of the merging parties to provide access, although that party
usually has no incentive to do so, since the better access they provide, the
more competition they will face. In addition, the conditions under which access
has to be granted will have to be monitored and enforced over a long period of
time. These features put access remedies squarely in the behavioural box. At the
same time, third parties who obtain access under an access remedy will have
their own incentive to compete in the market. In this sense, access remedies do
somewhat harness the incentives of third parties to compete, just as
divestitures do. This makes them potentially more effective than other types of
behavioural remedies.
The Remedies
Notice reflects these subtle distinctions. It distinguishes between
divestitures – the gold standard for effective remedies – and non-divestiture
remedies. However, within non-divestiture remedies, it again distinguishes
between access remedies – which may be suitable if they are as effective as
divestitures – and other non-divestiture remedies, such as promises to abstain
from certain commercial behaviours (e.g. bundling). The latter type of remedies
are arguably the purest form of behavioural remedies and the Remedies Notice
reserves its most sceptical language for this type of remedies. It states that
such commitments relating to the future behaviour of the merged entity may be
acceptable only exceptionally in very specific circumstances[129], will not eliminate horizontal
competition concerns,[130] and
that ‘it may be difficult to achieve the required degree of effectiveness of
such a remedy’.[131]
Another type of remedy discussed in the Remedies Notice is the ‘change of
long-term exclusive contracts’, which may help in remedying concerns of
foreclosure, and which ‘will normally only be sufficient as part of a remedies
package’.[132]
Figure 2 shows the different types of remedies discussed in the Remedies Notice
and how they can be classified.
Figure 2: Types
of remedies – classification used in the Remedies Notice
4.1.3
All divestiture remedies include ancillary behavioural
remedies
A second source
of confusion is the fact that divestitures will normally be accompanied by some
ancillary behavioural remedies, such as the obligation to preserve the business
until it has been sold. Arguably, therefore, all remedies are a mix of
structural and behavioural elements. However, in practice, the label structural
or behavioural is applied based on what is at the core of the remedy. If the
remedy entails a divestiture, it will be qualified as a structural remedy, even
though ancillary behavioural remedies may also be included in the remedy.
4.2
Divestiture remedies
4.2.1
The Commission’s preference for divestitures
In EU merger
control, divestiture remedies are the preferred remedy and also the benchmark
against which to assess the effectiveness of other types of remedies.
The Remedies
Notice explains that divestitures constitute ‘the most effective way to
maintain effective competition, apart from prohibition’, because they ‘create
the conditions for the emergence of a new competitive entity or for the
strengthening of existing competitors’.[133] Although other types of remedies
may be acceptable in some cases, ‘divestitures are the benchmark for other
remedies in terms of effectiveness and efficiency.’[134] It follows, according to the
Remedies Notice, that the Commission may only accept other types of commitments
‘in circumstances where the other remedy proposed is at least equivalent in its
effects to a divestiture’. [135]
In short,
divestitures are the gold standard of remedies according to the Remedies
Notice: ‘divestiture commitments are the best way to eliminate competition
concerns resulting from horizontal overlaps, and may also be the best means of
resolving problems resulting from vertical or conglomerate concerns’.[136]
At the same
time, the Remedies Notice makes clear that non-divestiture remedies are not
automatically ruled out. Whether a remedy is suitable to eliminate the
competition concerns is ultimately examined ‘on a case-by-case basis’,[137] and the Commission has accepted
remedies other than divestitures in a significant number of cases. Figure 3
shows the number of cases where non-divestiture remedies have been accepted.
Figure
3: Types of remedies (2011-2019): type, number of cases, percentage of total
There is a clear
correlation between the type of competition concerns and the type of remedies
that are accepted. Horizontal competition concerns are almost always addressed
through divestitures.[138] Vertical and conglomerate competition concerns are more frequently
removed through non-divestiture remedies,[139] although divestitures are also
sometimes used.[140]
In the early
years of the (old) EU Merger Regulation, the Commission’s stance on behavioural
remedies was stricter. In Gencor / Lonrho, the parties had proposed
behavioural remedies to clear the creation of their joint venture in the mining
sector. The Commission rejected these, writing in its decision that ‘[t]he
commitment offered is behavioural in nature and cannot therefore be accepted
under the Merger Regulation.’[141]
Gencor subsequently appealed and, on appeal, the General Court stressed that
what mattered was not so much whether the commitments can be categorized as
behavioural or structural but whether they were capable of rendering the
notified concentration compatible with the common market.[142] While it was true, according to
the Court, that structural commitments are, as a rule, preferable, behavioural
commitments cannot be automatically ruled out:
The categorisation of a proposed commitment as behavioural or structural
is therefore immaterial. It is true that commitments which are structural in
nature, such as a commitment to reduce the market share of the entity arising
from a concentration by the sale of a subsidiary, are, as a rule, preferable
from the point of view of the Regulation's objective, inasmuch as they prevent
once and for all, or at least for some time, the emergence or strengthening of
the dominant position previously identified by the Commission and do not,
moreover, require medium or long-term monitoring measures. Nevertheless, the
possibility cannot automatically be ruled out that commitments which prima
facie are behavioural - for instance, not to use a trade mark for a certain
period, or to make part of the production capacity of the entity arising from
the concentration available to third-party competitors, or, more generally, to
grant access to essential facilities on non-discriminatory terms - may
themselves also be capable of preventing the emergence or strengthening of a
dominant position.[143]
The position of
the General Court in Gencor was later confirmed in several other
judgments, including the Court of Justice in Tetra Laval,[144] and it was ultimately incorporated
in the Remedies Notice as the Commission’s policy stance on remedies.[145] It is less strong than an outright
rejection of behavioural remedies as such. At the same time, it puts the bar
high for behavioural remedies by requiring that they are ‘at least equivalent
in [their] effects to a divestiture’.[146]
The Commission’s
preference for structural remedies in merger control is sometimes contrasted
with the situation in the field of Articles 101 and 102, where the applicable
legal framework is said to impose a preference for behavioural remedies.[147] However, this interpretation of
Regulation 1/2003 is not self-evident, and several commentators have argued
that Regulation 1/2003 does not prefer or prioritise behavioural remedies over
structural remedies.[148] This
being said, it is true that Regulation 1/2003 – unlike the Remedies Notice - certainly
does not express a preference for structural remedies. In addition, in reality,
structural remedies are much rarer in the field of Articles 101 and 102 than in
merger control.[149]
4.2.2
The structural vs. behavioural debate
The Commission’s
preference for structural remedies reflects a stance that is shared by many
competition authorities across the world. In the United States, the
Department of Justice and the FTC have historically shown a strong preference for
structural remedies. In the early 2010s, behavioural remedies (usually referred
to as conduct remedies in the U.S.) seemed to gain increased acceptance,[150] especially in vertical mergers,[151] but this revival was short-lived.
The Department of Justice’s 2020 Merger Remedies Manual states that ‘structural
remedies are strongly preferred in horizontal and vertical merger cases’ [152] and then goes on to severely limit
the circumstances in which it may accept a conduct remedy. More specifically,
conduct remedies are only acceptable as an ancillary remedy, i.e. to facilitate
structural relief, or when all of the following conditions are met:
1)
a transaction generates significant efficiencies that cannot be achieved
without the merger;
2)
a structural remedy is not possible;
3)
the conduct remedy will completely cure the anticompetitive harm, and
4)
the remedy can be enforced effectively.[153]
In Germany,
the Bundeskartellamt has an ever stricter stance on behavioural remedies
than the Commission. Its guidance not only expresses a ‘clear preference for
divestments’
[154] but
points out that, under German law, a certain type of behavioural remedies,
namely those that ‘require a constant control of the merging parties’ conduct’
is excluded by law.[155] As
an example, the Bundeskartellamt’s guidance mentions the maintenance of
Chinese walls. The UK’s Competition & Markets Authority’s guidance
on merger remedies likewise expresses a preference for structural remedies.[156]
France is a
jurisdiction where behavioural remedies are relatively frequently used in
merger control. The Autorité de la Concurrence nonetheless generally
favours structural remedies, albeit with more nuance than many other
authorities. In a recent study of its behavioural remedies, the Autorité concluded
that ‘although behavioural remedies are generally not the remedies favoured by
the Autorité in merger control, they nevertheless play no small role in
its decisional practice’[157]
Perhaps the most
accurate summary of the global stance on structural remedies is found in the
Remedies Guide of the International Competition Network, which embodies a
compromise text agreed upon by over 140 competition authorities. It states that
‘competition authorities generally prefer structural relief in the form of a
divestiture to remedy the anticompetitive effects of mergers, particularly
horizontal mergers.’[158] At
the same time, the guide acknowledges that ‘[n]on-structural remedies (…) can
be an effective method to remedy likely anticompetitive effects, particularly
in respect of a vertical merger or in other circumstances where a structural
remedy is not appropriate’.[159]
Although the
preference for structural remedies is widespread, there are also voices calling
for more frequent use of behavioural remedies. Some scholars and practitioners
have done so[160] but,
in recent years, Member State governments have been the most vocal advocates.
In 2019, in the wake of the Commission’s prohibition of the Siemens / Alstom
merger, the French, German and Polish government called on the Commission to
encourage behavioural remedies, praising them as ‘more flexible than structural
ones’, although also acknowledging that ‘such behavioural remedies should be
subject to proper monitoring’.[161]
Shortly thereafter, Italy joined these three Member States in calling on the
Commission ‘to consider, on a case by case approach, the effectiveness and
viability of behavioural remedies, especially if competition conditions may
change in the short run’.[162]
The call was
seen as a direct response to the Commission’s prohibition in Siemens /
Alstom, a deal that had the support of both the French and German
governments. In that case, the commitments proposed by the parties had been
rejected, in part because they were very complex and behavioural.[163] One of the parties’ arguments was
that the merger should be cleared because a Chinese train manufacturer (CRRC)
would soon enter the market and mitigate any anticompetitive effects of the
merger between Siemens and Alstom. However, the Commission found that CRRC’s
entry was unlikely to occur in the coming few years, and therefore rejected the
argument based on future competition from a Chinese rival. This background may
explain why behavioural remedies seemed particularly attractive to the
governments who supported the Siemens / Alstom deal. They see them as a way to
preserve competition in the interim (i.e. in the case of Siemens / Alstom until
competition from China has materialized), while allowing the merging parties’
businesses to remain intact.
4.2.3
Divestitures are preferred but not risk-free either
Although the
Commission has a preference for structural remedies, because they are generally
more effective than behavioural remedies, this is not to say that divestiture
remedies are free from problems. On the contrary, ‘the potential for things to
go wrong is high’[164], as the
divested business may lack certain essential assets, it may be sold to the
wrong purchaser, or it may deteriorate during the divestiture process.
Some of these
issues are inherent in any M&A deal. Any merger or acquisition will indeed
face the challenge of post-acquisition integration and there is no shortage of
examples of failed M&A deals. However, in the case of divestitures, the
risks are exacerbated because the incentives of the three parties involved are
fundamentally misaligned.
The competition
authority wants the divestiture to restore competition, by creating a new
competitive player or strengthening an existing one. By contrast, the merged
entity, i.e. the seller in the divestiture process, has exactly the opposite
goal, as it will remain a competitor in the market and will benefit if
competition is reduced in the market. It therefore has every incentive to
divest less than a viable business and divest it to a buyer that will not
compete vigorously with the divested business. The buyer, from its side, may at
first sight share some of the competition authority’s goals. One would indeed
expect the buyer to be keen on acquiring a viable business. However, it obtains
the divested business as a result of a bargaining process, in which the price it
has to pay for the divestiture is negotiated. This allows for a trade-off: the
seller can sell a less than competitive business and compensate the buyer by
reducing the purchase price.[165]
Complicating
matters further are the very significant information asymmetries between the
merging parties and competition authorities. While the party divesting the
business knows every nook and cranny of the divested business, the competition
authority will usually be wholly unfamiliar with the divested business, until
the remedy is proposed.
These inherent
risks are not merely theoretical but lead to actual issues in actual cases. DG
COMPs 2005 Merger Remedies Study analysed the outcome of 68 remedies that had
been aimed at transferring a market position, a category which included
divestitures of a stand-alone business, divestitures of a stake in a joint
venture, divestitures of assets and divestitures or grants of a long-term
exclusive licence of IP rights.[166] These 68 remedies led to 59
serious design and/or implementation issues that had remained unresolved.[167] The inadequate scope of the
divested business was the most frequent issue, followed by situations where an
unsuitable purchaser had been approved. [168]
Issues with the carve-out of assets and the transfer of the divested business
were also frequent. [169]
Notwithstanding
these potential and actual problems, it is important not to lose sight of the
fact that the few ex post assessments of remedies show that most
divestiture remedies are in fact effective. The FTC published a study in
January 2017, which included an in-depth case study of 50 remedies.[170] That study showed that all
divestitures of an ongoing business had been successful. Divestitures of more
limited packages of assets fared less well, but still achieved a success rate
of 70%. Likewise, DG COMP’s Merger Remedies Study, published in 2005, also
found that the majority of divestitures had in fact been effective.[171]
4.2.4
Scope of the divested business
4.2.4.1
Divestiture of a viable business
The Remedies
Notice requires the divestiture of a ‘viable business that, if operated by a
suitable purchaser, can compete effectively with the merged entity on a lasting
basis and that is divested as a going concern’.[172] To ensure the viability of the
divested business, ‘it may also be necessary to include activities which are
related to markets where the Commission did not identify competition concerns
if this is required to create an effective competitor in the affected markets’.[173]
There are many
examples of cases where the divestiture included products or territories in
relation to which the Commission did not raise competition concerns, but which
had to be included to ensure the viability of the divested business.[174] In Dow / DuPont, for
instance, the parties ensured the viability of the divestment business by
divesting DuPont’s entire global crop protection R&D organisation, although
the concerns related to a number of specific ‘innovation spaces’ (early
pipeline products and lines of research focused on finding crop protection
products for specific crops-pest combinations).[175]
The Remedies
Notice in principle requires the business to be divested to be ‘viable as such’[176], meaning the resources of a
possible or even presumed future purchaser are not taken into account by the
Commission at the stage of assessing the remedy. An exception to this principle
applies in case of a fix-it-first remedy, where the parties have already
entered into an agreement with a specific buyer before a decision on the merger
is issued. In that case, the Commission can take into account the future
buyer’s assets.[177] For
instance, in Bayer / Monsanto, the parties had already identified and
entered into an agreement with a purchaser (BASF). This allowed the Commission
to assess the remedies taking into account BASF’s resources and assets.
If later, once a
purchaser has been identified after adoption of the Commission decision
approving the transaction, it turns out that some of the assets or personnel
included in the divested business will not be needed by the proposed purchaser,
‘the Commission may, upon request by the parties, approve the divestiture of
the business to the proposed purchaser without one or more assets or parts of
the personnel’, provided that ‘this does not affect the viability and
competitiveness of the business to be divested’.[178] This is sometimes colloquially
referred to as ‘giving back assets’ or ‘waiving assets’, as some assets which
the merging parties had already committed to transfer ultimately are not
needed, and therefore can be kept by the merging parties.
A viable business
normally implies that the divestment business is economically profitable or, at
the very least, bound to become economically profitable in the near future. In
some cases, all or part the proposed divestment business was loss-making and
needed investments. Such divestitures entail a risk that the purchaser acquires
the divestment business and subsequently shuts it down or lets it languish. In
some of those cases, attempts were made to ensure that the necessary
investments would be made, for instance through a commitment by the seller to
make funds available to the purchaser for investing in a plant.[179] However, it seems doubtful that
such techniques can truly remove the risk that the purchaser ultimately
abandons what is a loss-making business.[180]
4.2.4.2
Divestiture of a stand-alone business
The Remedies
Notice explains that a viable business is normally ‘a business that can operate
on a stand-alone basis, which means independently of the merging parties as
regards the supply of input materials or other forms of cooperation other than
during a transitory period.’[181]
From this flows
a ‘clear preference’ for the divestiture an existing stand-alone business, i.e.
a pre-existing company or group of companies, or of a business division which
was not previously legally incorporated as such.’[182] Many divestitures are of this
type.
In most cases,
the divestiture of a stand-alone business entails the sale of one or more legal
entities. The divestiture of a stand-alone business will therefore normally
take the form of a share deal. This is usually the cleanest way to
transfer a business, as, in most legal systems, the sale of the shares results
in the transfer of all rights and obligations (except for rights or obligations
subject to a change of control clause).
By contrast, an asset
deal is by nature less comprehensive, as only the rights and obligations
specifically listed will be transferred. In addition, in case of an asset deal,
it will typically be more difficult for contracts to be transferred. The
Remedies Notice nonetheless acknowledges that, sometimes, a business division
within a company that is not legally incorporated as such can be clearly
distinguished and constitute a stand-alone business.
In accordance
with the principle that the divested business has to be viable as such already at
the design stage, the Remedies Notice provides that the divested business must
contain ‘all the assets which contribute to the operation of the business or
which are necessary to ensure its viability and competitiveness.’[183] Likewise, all personnel which is
currently employed, or which is necessary to ensure the business’ viability and
competitiveness will normally have to be transferred.[184]
An issue that
often causes some friction with the merging parties is how to deal with shared
assets and employees. The Remedies Notice tries to reduce the risks to the
viability of the divested business by stating clearly that ‘personnel and
assets which are currently shared between the business toe divested and other
businesses of the parties, but which contribute to the operation of the
business or which are necessary to ensure its viability and competitiveness,
also have to be included’.[185] This
implies that personnel and assets owned or allocated to other non-divested
business units will also have to be included to some extent. Among others, the
‘personnel providing essential functions for the business such as, for
instance, group R&D and information technology staff’ should be included
‘at least in a sufficient proportion to meet the on-going needs of the divested
business’.[186]
If the proposed
divestiture is dependent on the merged entity for the supply of an input, this
affects its independence and, hence, its suitability as a divestiture. In Novelis
/ Aleris, a merger between two producers of rolled aluminium, the parties
proposed to divest Aleris’ plant in the Belgian town of Duffel.[187] The plant could produce most of
its input needs itself, but it did source “a not insignificant part” from other
Aleris entities.[188] The
Commission concluded that the Duffel plant was not fully independent and
rejected an initial remedies proposal partly on this basis. Ultimately, to
resolve this issue, the merging parties committed to divest the plant together
with the money to fund the capital expenditures that would make Duffel a
stand-alone business. These funds were placed on a blocked escrow account,
which could only be used for investments to make the plant independent from the
merged entity’s inputs.[189]
4.2.4.3
Carve-outs and divestitures of assets
Although the
divestiture of a stand-alone business is the rule, the Commission has accepted
more complex types of divestitures in a number of cases. These divestitures
entail the transfer of businesses that have existing strong links or are
partially integrated with businesses retained by the parties.[190] They therefore need to be ‘carved
out’.
Such carve-outs
present many risks. Support systems have to be split, employees that are shared
between the carved out business and the retained business may not be willing to
move with the divested business, IT systems have to be cut off, lines of supply
have to be renegotiated, etc.[191]
Carve-outs are
therefore usually accompanied by a number of safeguards to mitigate these risks
as much as possible. Whenever possible, parties should consider a ‘reverse
carve-out’, meaning a stand-alone business is divested but the parties retain
certain assets or employees, carving them out from the business that is
divested.[192]
In some cases,
the Commission has accepted that parties do not divest a business but mere
assets. This is relatively rare because ‘[s]uch an approach may be accepted by
the Commission only if the viability of the business is ensured notwithstanding
the fact that the assets did not form a uniform business in the past’.[193]
If the assets
come from different entities – typically the acquirer and the target – the
divestiture is a so-called ‘mix-and-match’ divestiture. The Commission is
sceptical of such divestitures as ‘a combination of certain assets which did
not form a uniform and viable business in the past creates risks as to the
viability and competitiveness of the resulting business.’[194]
Although a
divestiture of assets is disfavoured by the Commission as a remedy, there are
nonetheless sectors where they are accepted with some frequency. Mergers in the
pharmaceutical sector, for instance, have on several occasions been cleared
subject to divestitures that consisted of mostly assets.[195] At the core of these divestitures
are usually intellectual property rights related to certain drugs or
treatments, such as patents, market authorisations, brands and relevant studies
and data.
4.2.5
Third party rights in relation to the divestiture
Sometimes,
cooperation of a third party is essential to the success of a divestiture. A
third party may have veto rights over the transfer or it may be a particularly
important partner of the divested business. The Remedies Notice explicitly
mentions ‘third party rights in relation to the business’ as one of the risks
that may accompany a divestiture.[196]
A
straightforward way for the parties to deal with this risk is to obtain, during
the merger review process, the necessary consent or cooperation from the third
party. This will normally remove the uncertainty resulting from the third party
rights, in turn allowing the Commission to accept the commitments without
excessive risks.[197]
If this is not
possible, parties frequently propose to include an upfront buyer clause or a
fix-it-first solution in their commitments. The Remedies Notice explicitly
mentions this safeguard as a way to deal with third party rights that may
constitute a considerable obstacle for a divestiture.[198] The underlying idea is that, since
parties cannot close their own deal until the uncertainty surrounding the
commitments is lifted, they have a strong incentive to resolve the issue. HeidelbergCement
/ Italcementi[199] is
an example of a case where this method was used.
Another
alternative mentioned in the Remedies Notice is a so-called ‘crown-jewel’
commitment, under which the parties commit to a second alternative divestiture
that is at least as good as the proposed first divestiture and does not involve
any uncertainties. The Remedies Notice sets out a number of conditions for such
alternative commitments,[200] and,
in recent years, this type of remedy has not been frequently used.
4.2.6
Finding a suitable purchaser of the divestiture
Divestitures
need to end up in the hands of a buyer that will compete vigorously with the
divested business. In the words of the Remedies Notice, the divested business
needs to ‘become an active competitive force in the market’.[201] If the buyer does not maintain and
develop the divested business, the remedial power of the divestiture is lost,
and the remedy does not achieve its purpose.
Various
safeguards are aimed at ensuring that the divested business is transferred to a
suitable purchaser. Remedies will invariably set certain minimum requirements
for the purchaser, known as purchaser criteria. In addition, arrangements such
as upfront buyer clauses and fix-it-first remedies are used to decrease the
risk that no suitable purchaser is found.
4.2.6.1 Purchaser criteria
The Remedies
Notice lays down three ‘standard’ purchaser requirements, which are also part
of the model divestiture text.[202] The
precise formulation can be found in the Remedies Notice.
The language of
the standard purchaser criteria is relatively broad and therefore a potent tool
for the Commission to reject unsuitable purchasers. Among others, the standard
criteria require, that the purchaser ‘have the incentive and ability to
maintain and develop the divested business as a viable and active competitive
force in competition with the parties and other competitors’.
Although
together, these criteria provide for a rather comprehensive set of safeguards,
the Remedies Notice acknowledges that these requirements ‘may have to be
supplemented on a case-by-case basis.’[203] In fact, many commitments contain
additional purchaser criteria. For instance, in Abbott / Alere, based on
feedback from the market test, the purchaser was required to have ‘an
established presence, including distribution and sales capabilities, in the In
Vitro Diagnostics (IVD) sector in the EEA with a geographic footprint
comparable to Alere prior to the concentration’.[204] Likewise, in Wabtec / Faiveley,
also based on feedback from the market test, the purchaser was required to
have the ‘ability to sell internationally to railway customers’.[205]
It is also quite
common for language to be added to the standard purchaser criteria, to make the
broad language in the standard criteria more specific. For instance, the
requirement that the purchaser ‘possess proven relevant expertise’ may be made
more specific by requiring relevant expertise in a specific sector or market.[206]
Although one could
argue that such additions are not strictly necessary, given the broad scope of
the standard criteria, they nonetheless give the Commission additional
assurances that only a suitable purchaser will obtain the divested business.
They also provide transparency to third parties who may be interested in the
divested business.
4.2.7
Standard arrangement, upfront buyer clause,
fix-it-first remedy
The Remedies
Notice distinguishes between three different ways in which a divestiture can
take place. The difference between these three arrangements is not what happens
in substance, as in all three scenarios similar steps have to be taken. The
difference lies in the order (chronology) in which the steps in the divestiture
process are taken.
All mergers cleared
with a divestiture remedy will normally result in the following five steps
being taken at some point:
1) the Commission
clears the main transaction, subject to a divestiture remedy;
2) the parties
‘close’ their main transaction[207];
3) the parties find
a purchaser and sign a divestiture agreement with that purchaser,
4) the Commission
approves the purchaser and the divestiture agreements as suitable;
5) the divesting
party and the purchaser of the divestiture ‘close’ the divestiture deal.
To understand
how the three arrangements (standard, upfront and fix-it-first) differ, it is
important to be aware that the parties are usually keen on closing their merger
as soon as possible. In other words, they have a strong incentive to accomplish
step 2 in the above list. Once step 2 is accomplished, the parties’ main goal
has been accomplished. In addition, the merger’s impact on competition will
start to be felt, as the parties have now combined their businesses. A key
issue is therefore whether step 2 can take place immediately after step 1 or
whether the parties first have to accomplish steps 3 and 4.
In theory, one
could also consider postponing the closing of the main deal (step 2) until the
divestiture deal has closed (step 5). This is, however, rarely done.
In what follows
we first explain what the three different arrangements entail. Next, we discuss
how to determine which of these three arrangements is appropriate in a specific
case.
4.2.7.1
Standard arrangement
Under the
standard arrangement, the parties are allowed to close their merger, i.e. the
main transaction, before a suitable purchaser has been identified by the
parties and approved by the Commission. The parties are of course not obliged
to close their deal before the purchaser approval. Hence, it is possible that
the parties close their deal only after the Commission has approved a suitable
purchaser. However, in practice, the parties are usually keen on closing their
merger quickly and so, under a standard arrangement, they will often close
their deal soon after the Commission’s conditional clearance decision and prior
to the Commission approving a suitable purchaser. Because of this, the standard
arrangement is sometimes also referred to as a ‘post-closing divestiture’, as
the divestiture is approved and closed after the main transaction has closed.[208]
In short, under the
standard arrangement, the Commission’s clearance decision is usually followed
by the closure of the main transaction, which is then followed by the
Commission’s purchaser approval decision. Finally, as last step in the process,
the party making the divestiture and the purchaser need to close their
divestiture deal.
Figure 4 –
Typical timeline in case of a ‘standard arrangement’
This arrangement
is the most common arrangement. The Remedies Notice explains that ‘this
procedure is likely to be appropriate in the majority of cases, provided that a
number of purchasers can be envisaged for a viable business and that no
specific issues complicate or stand in the way of the divestiture’.[209]
The fact that
parties can close their merger prior to having identified a purchaser and this
purchaser having been approved, does not mean that parties are not obliged to
seek a suitable purchaser as soon as possible. The commitments will set a
precise time period within which the parties have to find a suitable purchaser.
This time period has to be, in the words of the Remedies Notice, ‘as short as
feasible’, because ‘short divestiture periods contribute largely to the success
of the divestiture as, otherwise, the business to be divested will be exposed
to an extended period of uncertainty.’[210] The Remedies Notice mentions six
months as a period that is normally considered appropriate.[211] For the trustee divestiture
period, which starts if the parties have not managed to find a suitable
purchaser and get the Commission’s approval during the initial divestiture
period, the Remedies Notice suggests three months.[212]
After the
approval of the purchaser, the parties still have to close the divestiture
transaction. Here too, the commitments will set a time period, to avoid that
parties needlessly drag this period, thereby damaging the divested business and
delaying its competitive impact. The Remedies notice explains that this period
is normally three months.[213]
Figure 5 -
Deadlines for the divestiture process (example based on periods mentioned in
the Remedies Notice)
4.2.7.2
Upfront buyer clause
The key feature
of a divestiture with an upfront buyer arrangement is that the parties are not
allowed to close their merger before they have entered into a binding agreement
with a purchaser and the Commission has approved this agreement and the
purchaser.[214]
In practice, this
is accomplished by inserting an upfront buyer clause in the commitments. The
Commission’s model divestiture text contains a model upfront buyer clause,
which provides that ‘the proposed concentration shall not be implemented before
[the undertaking that will divest its business] or the Divestiture Trustee has
entered into a final binding sale and purchase agreement for the sale of the
Divestment Business and the Commission has approved the purchaser and the terms
of sale (…)’.[215]
Figure 6 –
Typical timeline in case of a divestiture with an upfront buyer clause
4.2.7.3
Fix-it-first remedy
In case of a
‘fix-it-first remedy’ the parties find a suitable purchaser for the divested business
and sign an agreement with that purchaser even before the Commission’s merger
review process has ended, i.e. before the Commission issues its conditional
clearance decision. They then propose the purchaser and the agreement to the
Commission, again before the conditional clearance decision has been issued. If
the purchaser and the agreement are suitable (and if sufficient time remains
for the Commission to assess this), the Commission can approve the purchaser
and the agreement in the same decision that clears the merger.
Since part of
the divestiture process – namely the identification and approval of the
purchaser – occurs in parallel to the merger review process, a fix-it-first
usually results in a more expedited divestiture.
Figure 7 – Typical
timeline in case of a fix-it-first divestiture
4.2.7.4
Which arrangement in which case?
The different
arrangements have an impact on when the parties can close their merger. This is
usually an important element for the parties, for instance because delayed
closing means financing has to remain in place for longer, leading to higher
costs. Parties therefore tend to favour the ‘regular arrangement’ and disfavour
an upfront buyer clause. The Commission, by contrast, is under a duty to reduce
the risks that remedies entail and to maximize the chance that remedies are
effective. These differing objectives can lead to intense discussions between
the parties and the Commission on which arrangement is most appropriate.
Ultimately, this will be determined by a number of factors, including the
attractiveness of the divested business, the interest expressed by the market
in purchasing the divested business, the degree of certainty that the
divestment business can be transferred effectively, and the safeguards in place
to preserve the divested business.
4.2.7.4.1 Regular vs. upfront/fix-it-first
Upfront buyer
remedies and fix-it-first remedies are essentially a method to deal with
certain risks. They may allow the Commission to conditionally clear a merger in
spite of those risks. The three risks against which upfront buyer remedies and
fix-it-first remedies can provide a safeguard are the following:
1) Few buyers
appear interested or few buyers appear suitable.[216]
2)
Considerable obstacles for the divestiture exist, such
as third-party rights, the need to get approval from an authority, etc. [217]
3) The divested
business may suffer from degradation while a purchaser is being identified and
approved. [218]
In all of these
cases, a standard arrangement results in a significant risk to competition. The
parties will close their main transaction, thereby effectuating their merger,
but it may turn out that no suitable buyer is found (risk 1), that the divested
business cannot be properly transferred (risk 2) or that, by the time the
business is transferred, it has lost some of its competitive potential (risk
3).
Upfront buyer
clauses and fix-it-first remedies guard against these risks by preventing the
closing of the main transaction until the Commission is satisfied that a
suitable purchaser has been found. This has two important consequences. First,
if the parties ultimately do not find a suitable purchaser, the merger will not
take place, and the harm to competition will not occur. Put differently, the
parties bear the risk. Second, the need to get purchaser approval first will
give the parties a strong incentive to find a suitable purchaser quickly,
thereby speeding up the divestiture process and reducing the risk of
degradation. Once the main transaction is closed, the parties tend to be in
less of a hurry and, in fact, they have an incentive to slow down the
divestiture process, as this will delay the emergence of a competitor.
Although upfront
and fix-it-first remedies may mitigate these risks, this does not mean that
they can remove all risks. The Commission still has a duty to assess the risks
of the proposed divestiture and must reject a remedy if it comes with too high
a risk. If the Commission’s assessment of the remedies has shown that it is
unlikely that a suitable buyer can be found or that the obstacles for
divestiture are overwhelming, the Commission cannot be forced to approve the
merger, even if the parties propose an upfront buyer or fix-it-first solution.
Whether the
three above-mentioned risks are present depends in part on what is being
divested. Carve-out divestitures are particularly prone to the above-mentioned
risks, while divestitures of stand-alone business are less so. A stand-alone
business will normally more easily find a suitable purchaser, as it has
everything it needs to function within itself. By contrast, for a carve-out
divestiture to be successful, the purchaser will need specific assets to
complement the carved-out assets it is obtaining. Likewise, a carved-out
business is also more prone to degradation during the process, as it is more
difficult to keep it intact. Good employees may wish to leave the carved-out
business, knowhow may leak from the carved-out business, etc.
4.2.7.4.2 Upfront buyer clause vs. fix-it-first
Upfront buyer
clauses and fix-it-first remedies ultimately accomplish the same thing: they
shift the risk that no suitable purchaser is found or that the divested
business cannot be properly transferred to the parties. However, in case of a
fix-it-first remedy, the uncertainty as to whether a suitable purchaser can be
found is taken away at an earlier point in time, namely at the time the
Commission issues its conditional clearance decision.
The Remedies
Notice states that the Commission welcomes fix-it-first remedies in cases
‘where the identity of the purchaser is crucial for the effectiveness of the
proposed remedy’.[219] This
is the case, for instance, where ‘only very few potential purchasers can be
considered suitable’. [220] At the
same time, the Remedies Notice adds that, ‘in these situations, an upfront
buyer solution containing specific requirements as to the suitability of a
buyer will generally be considered equivalent and acceptable’.[221]
In recent years,
a fix-it-first remedy was adopted in Valeo / FTE Group,[222] AB InBev / SABMiller,[223] Liberty Global / BASE,[224] Boeringher Ingelheim / Sanofi
Animal Health[225] and Hutchison
3G Italy / Wind / JV .[226]
In all these
cases, the Commission approved the proposed purchaser, as well as the binding
agreement with the proposed purchaser, in the decision approving the merger
with remedies. This presupposes that the parties entered into a binding
agreement with a purchaser at a sufficiently early point in time, with enough
time left for the Commission to assess the suitability of the purchaser and
review the divestiture agreement, so it can approve the purchaser and the
agreements in the decision clearing the merger. Since the assessment of the
purchaser and the agreement has to happen in parallel to the substantive review
of the merger, it is difficult to imagine a fix-it-first remedy in phase I.[227]
In several
cases, the parties already proposed a specific purchaser in the commitments, but
the Commission did not yet approve that purchaser and the divestiture agreement
in the clearance decision. This was the case in Bayer / Monsanto[228] and GE / Alstom.[229] The Commission’s very first
decision with a fix-it-first remedy was also of this type: T-Mobile Austria
/ tele.ring.[230] In
these cases, the parties committed to sell to a specific purchaser and only to
that specific purchaser, although the Commission withheld its judgment on the
suitability of the purchaser.
In addition, in
these cases, the commitments contained an upfront buyer clause. The commitments
therefore combined an element of a fix-it-first remedy, namely the fact that
the merging parties had already identified a specific buyer and committed to
sell to that buyer, with an upfront buyer clause.[231] Such cases entail a certain risk
for the parties but presumably in these cases, it would have been impossible
for the Commission to approve the remedy package without taking into account
the identify of a specific purchaser.
4.2.7.4.3 Prevalence of each type of remedy.
Figure 8 -
Proportion of regular, upfront buyer and fix-it-first remedies as proportion of
total divestitures (2016-2019)
In some years,
commentators have observed that there is an increase in upfront buyer clauses,
suggesting the Commission became stricter.[232] This argument seems to ignore the
fact that the need for an upfront buyer clause is also partly determined by the
nature of the divestiture. As mentioned, carve-out remedies generally present
greater risk and therefore will more easily warrant an upfront buyer clause.
Hence, an increase in the number of upfront buyer remedies may suggest a
stricter stance by the Commission, but it could also suggest a more flexible
stance of the Commission vis-à-vis carve-out remedies, or an increase in more
complex remedies.
4.2.7.4.4 Different
terminology in the United States
Somewhat
confusingly, the terminology used in the United States relating to purchasers
is different from the terms used in the EU.[233] In the United States, when a buyer
of the divestiture is already identified in the remedies (or more accurately,
the settlement between the authority and the merging parties which includes the
remedies), this buyer is referred to as an ‘upfront buyer’. This means that
what the EU Commission calls a ‘fix-it-first buyer’ corresponds to an ‘upfront
buyer’ in the United States. In turn, the term ‘fix-it-first buyer’ in the
United States is used for the rather unusual case were the parties restructure
their transaction, for instance by already entering into agreement to sell part
of the merged entity, and then present a deal to the authorities which – they
hope – will not require any remedies.
4.3 Removal of
links with competitors
In some cases,
the links between the merging parties and competitors contribute to the
competition concerns raised by the merger. [234] In
those cases, severing those links may constitute a remedy or part of a remedy.
The most
straightforward scenario is a case where one of the merging parties holds a
non-controlling stake[235] in a
competitor. The merging party may remove that link by divesting its shares.
A slightly
different scenario occurs when one of the merging parties holds a stake in a
joint venture that competes with the merging parties. In such a case, the
parties can remove the link with their competitor by divesting their stake in
the joint venture[236],
resulting in an exit from the joint venture.
Remarkably, among
the remedies studied in the Commission’s 2005 Merger Remedies Study, existing a
joint venture turned out to be the most effective remedy, with 10 of 13
remedies considered as effective.[237] The study suggested this may be
because, unlike some remedies where a business or assets are divested, exiting
a joint venture does not raise any scope or carve-out issues. In addition, the
purchaser of the stake is often the joint venture partner, who knows the
business well and can effectively compete with it immediately.[238]
Although a
divestiture of the stake is the cleanest and most effective way to remove a
link with a competitor, in some cases, the Commission has accepted that the
parties remove their links with competitors in a more behavioural manner, i.e.
they keep their minority stake but commit not to use any rights linked to it.[239] The Remedies Notice explains that
this will only be possibly ‘exceptionally’, namely ‘where it can be excluded,
given the specific circumstances of the case, that the financial gains derived
from a minority shareholding in a competitor would in themselves raises
competition concerns’.[240]
Sometimes,
competition concerns result from agreements with companies supplying the
same products or providing the same service. In that case, a suitable remedy
may be the termination of the respective agreement.[241]
The termination
of an agreement with competitors is a common remedy in the shipping sector,
where companies are often linked though liner consortia and conferences.[242] The termination of such an
agreement by the merging party, i.e. the exit from the liner conference or
consortium, has been accepted in several mergers between shipping companies.[243]
4.4 Access
remedies
Access remedies
require the parties to grant access to key infrastructure, key technology
(including patents), know-how or other intellectual property rights, and
essential inputs.[244]
According to the Remedies Notice, the parties should normally grant such access
to third parties on a non-discriminatory and transparent basis.[245] In many cases, the remedy also requires
that the access to be given on fair and reasonable terms, resulting in a
commitment to grant access under FRAND (fair, reasonable and
non-discriminatory) terms.[246]
Access remedies
may prevent anticompetitive effects by facilitating market entry by
competitors.[247] The
Remedies Notice explains that they ‘may be acceptable to the Commission in
circumstances where it is sufficiently clear that there will be actual entry of
new competitors that would eliminate any significant impediment to effective
competition.’[248]
If an access
remedy can be expected to lead to new competitors entering the market, this is
a good start. However, the access remedy must still meet the overarching
requirement for all non-divestiture remedies, namely that it must be equivalent
in its effects to a divestiture.[249]
In Croatian
cement, the parties proposed to address the transaction’s anticompetitive
effects on the market for grey cement by offering to transfer a five-year lease
agreement giving access to a cement terminal. [250] This
would allow a competitor to start selling cement through the terminal. The
Commission rejected this remedy, concluding that it would not have had an
effect comparable to the divestiture of a stand-alone business. Instead, the
remedy offered a mere opportunity for a company to start its own cement
operations from scratch. The merger was ultimately prohibited.
Access remedies
are much less frequently used than divestiture remedies but they have
nonetheless been accepted in a significant number of cases, particularly in the
digital sector, the telecommunications sector, the media sector and in airline
mergers, where so-called slot remedies are common.
4.4.1 Digital
sector: interoperability remedies
Mergers in the
digital sector have frequently raised conglomerate or vertical concerns. In
several cases, the Commission had concerns that the merged entity would degrade
the interoperability between its products and those of competitors. Assume
company A acquires company B. The concern is that, after the merger, company A
will make it more difficult for B’s competitors to interact with A’s products,
while making sure that B’s product work seamlessly with A’s product. To remove
such concerns, a particular type of access remedy – a so-called
interoperability remedy – is sometimes used.
An early case
imposing an interoperability remedy was Intel / McAfee[251], a merger between chip maker Intel
and McAfee, known for its anti-virus software. In that case, a commitment
ensured that McAfee’s rivals would still be able to operate in the same way as
McAfee on computers that incorporate Intel’s chips.
In a more recent
case, Microsoft / LinkedIn,[252] Microsoft committed to ensure the
interoperability between social networks competing with LinkedIn and
Microsoft’s software such as Outlook. In Qualcomm / NXP Semiconductors,[253] the Commission was concerned that
Qualcomm would degrade the interoperability between its baseband chipsets –
found in many smartphones – and the chips of NXP’s rivals. NXP was a leading
supplier of chips for near field communications (NFC) and secure element (SE),
which enable mobile payment applications on mobile phones. In that case,
Qualcomm committed that NXP’s competitors would benefit from the same level of
interoperability between their chips and Qualcomm’s baseband chipset as NXP.
However, the commitment in question never became effective as Qualcomm
ultimately abandoned its acquisition.
Google / Fitbit was
another case in which interoperability remedies were a central part of the
remedy. The case related to Google’s acquisition of wearables manufacturer
Fitbit. The Commission was concerned that Google would disadvantage Fitbit’s
competitors by degrading the interoperability between their devices and
smartphones that run on Google’s Android operating system. To remedy this,
Google committed to continue to license the relevant Android APIs (application
programming interfaces) to smartphone makers for free.[254] Another concern was that Google
would restrict access to the health and fitness data provided by Fitbit. Some
companies providing digital healthcare services had access to this data, with
user consent, via a web-based interface. The Commission was worried that Google
would restrict that access after the merger. This concern was removed by
Google’s commitment to maintain access to Fitbit’s Web API.[255]
Other cases where an interoperability remedy was part
of the remedy package include Daimler / BMW / Car Sharing JV[256], Broadcom / Brocade[257] and ARM / Giesecke &
Devrient / Gemalto / JV.[258]
Crafting
interoperability commitments is not a particularly easy task. There are various
degrees of interoperability and checking compliance may raise intricate
technical questions.[259] In
case of interoperability between software applications, the core of the
commitment is usually an obligation to provide access to APIs (application
programming interfaces), the set of technical specifications that allow
different applications to communicate with each other.[260]
4.4.2 Telecoms
sector
In the telecoms
sector, a series of mergers between mobile network operators was cleared with
access remedies.[261] In
these cases, the merged entity committed to give one or more companies access
to its mobile network, so-called wholesale access. In turn, those companies
could then use that network to offer services to retail customers, acting as
mobile virtual network operators or MVNOs (virtual refers to the fact that they
do not own a network but use the network of another operator, i.e. the merged
entity’s network). The remedies in these cases been criticized as lacking in
effectiveness.[262] In
an early case, relating to the mobile market in Austria[263], the actual market entry of the
MVNO that was supposed to enter was significantly delayed and only occurred two
years after approval of the transaction. In later cases, relating to the Irish[264] and German[265] markets, the Commission tried to avoid
such delayed entry by requiring a signed agreement with an MVNO ‘upfront’, that
is before the closing of the main transaction. However, in spite of this
additional safeguard, entry took significant time. In addition, in the Irish
case, one of the two MVNOs that was supposed to enter the market, soon exited
the market. The other MVNO has only gained a negligible market share.[266]
Later decisions
seem to have tried to avoid the pitfalls of prior remedies. In a case relating
to the Italian mobile market[267], the
Commission imposed a more structural remedy, aimed at allowed a new mobile
network operator (as opposed to an MVNO) to enter the market.[268] In another decision, relating to a
mobile merger in the UK, the Commission rejected an access remedy aimed at
fostering the entry of an MVNO.[269] In its decision, it noted that
access remedies accepted in prior mobile merger cases had been ‘extremely
complex in terms of implementation and monitoring’.[270] The Commission decision was later
annulled by the General Court, which found that the Commission had erred in
finding a significant impediment to effective competition, and therefore did
not rule on the Commission’s position regarding the proposed remedies.[271]
An access remedy
was also used in a merger involving fixed telecommunication companies, as part
of a broader remedy package that also included a divestiture.[272] In that case, a third party
obtained, through a divestiture, a fibre-to-the-home network, and, in addition,
access to one of the parties’ ADSL network.
4.4.3 Media sector
In two recent
vertical mergers in the media sector, access remedies were imposed to remove
concerns of input foreclosure.[273] TV channels are an input for TV distributors, who bundle them and
distribute them to their subscribers as a package. In two mergers between TV
distributors and owners of popular TV channels, the European Commission was
concerned that the owner of the TV channels would refuse to supply the TV
channels or increase the price for the TV channels, thereby foreclosing TV
distributors that compete with the merged entity’s downstream TV distribution
business. In both cases, these concerns were removed by commitments under which
the owner of the TV channels and content committed to license these channels
under fair, reasonable and non-discriminatory terms.[274] The goal was to ensure that existing
TV distributors or new entrants that compete with the merged entity in the
downstream TV distribution market will continue to have access to important TV
channels.
A similar access
remedy, requiring the merged entity to license TV channels ‘on reasonable
commercial terms’, was imposed in a horizontal merger between two US-based
media companies.[275] Both
owned important TV channels in Poland, and the Commission was concerned that,
after the merger, the merged entity would increase the licensing fees it
charges to TV distributors.[276]
4.4.4 Airline
mergers: slot remedies
In several
mergers between competing airlines, the Commission raised horizontal
anticompetitive effects. Most of these problematic mergers have been cleared
with remedies, although some were prohibited.[277] For at least a decade now, the
most commonly used remedies in these cases has been the slot remedy.[278] At the core of such a remedy is
the commitment by the merged entity to release slots, i.e. the permission to
land and take off at a specific time at an airport. The idea is that, by
releasing slots airports where slots are scarce, competitors will be able to
schedule flights on the specific routes where the merger raises competition
concerns, thereby preventing any loss of competition. As slots at busy airports
are scarce, they constitute a barrier to entry, perhaps the main one.[279] The slot remedy is essentially
aimed at lowering that entry barrier, to make entry or expansion by competitors
more likely.
In line with the
requirements for access remedies,[280] slot release remedies will only be
acceptable where it is sufficiently clear that actual entry by new competitors
would eliminate any significant impediment to effective competition.[281]
Crafting
effective remedies in airline mergers has been a challenge for competition
authorities around the world[282] and
this has not been different for the European Commission. Commitments have not
always been effective, as the slots that were made available under the
commitments have not always attracted competitors. In turn, this has led to
changes in the approach and the commitments accepted by the Commission have
evolved considerably over the years.[283] It is customary for slot release
commitments to include various elements to make the slots more attractive for
competitors. Grandfathering rights, for instance, can be considered as a
‘reward’ for airlines that have used the remedy’s slots for some time on the
route where competition concerns arose. They allow the competitor who has used
the slots on the routes for which they were intended, i.e. the routes where the
Commission found competition concerns, for a number of consecutive seasons to
finally use the slots at its discretion, i.e. for any route it chooses. Slot
commitments also frequently include a commitment to enter into a so-called
special pro-rate agreement, which enables other airlines to have access to feed
traffic at both ends of the route of concern. This helps to sustain competing
non-stop services on that route.[284] Other additions include access to
frequent flyer programmes and the possibility to combine fares (e.g. outgoing
flight with the new entrant using the slots and return flight with the merged
entity).
4.5 Other
behavioural remedies
This category of
remedies essentially comprises binding promises by the parties to abstain from
certain commercial behaviour (e.g. bundling products). The Remedies Notice
treats this type of remedies with the greatest scepticism. Such remedies will
‘generally not eliminate the competition concerns resulting from horizontal
overlaps’.[285]
Hence, it would seem that the Commission can only contemplate them as a remedy
for vertical or conglomerate anticompetitive effects. The Remedies Notice also
highlights the difficulty in effectively monitoring this type of remedies, as
‘it may be impossible for the Commission to verify whether or not the
commitment is complied with and even other market participants, such as
competitors, may not be able to establish at all or with the requisite degree
of certainty whether the parties meet the conditions of the commitment in
practice.’[286]
Although the
Remedies Notice views this type of remedies with great scepticism it does not
contain an outright ban on these remedies. Such a position would be difficult
to reconcile with the Court of Justice’ ruling in Tetra Laval. In that
case, the Commission had rejected behavioural remedies ‘as a matter of
principle’.[287] The
Commission’s theory of harm was that, although the market structure would not
have been immediately and directly affected by the merger, some abusive conduct
(leveraging) would take place, which could in turn affect the market structure.[288] In that context, the Court of
Justice held that the Commission was wrong in rejecting the behavioural
remedies offered by Tetra Laval outright and should have treated them as ‘a
factor which the Commission had to take into account when assessing the
likelihood that the merged entity would act in such a way as to make it
possible to create a dominant position on one of the relevant markets’.[289]
Purely
behavioural remedies are rare but have sometimes been accepted, either as part
of a package with other commitments, or on their own. Examples include ASL /
Arianespace[290],
PRSfM / GEMA / STIM / JV[291] and Chiquita
/ Fyffes.[292]
5
Implementing the remedy
5.1
Interpretation of the remedy
Implementing a
remedy often requires some degree of interpretation of the commitments text.
When interpreting the commitments, the normal rules regarding the
interpretation of EU acts apply. This means commitments must be interpreted
based on their text (textual interpretation), their context (systematic
interpretation) and objectives (teleological interpretation).[293]
The Commission’s
model commitments text contains a provision designed to assist the Commission
and the parties in interpreting the commitments text. It specifies three
sources that should guide the Commission and the parties in interpreting the
text of the remedy.
First and
foremost, the commitments have to be interpreted in light of the Commission’s
clearance decision. That decision may indeed shed light on the precise meaning
of the terms and phrases used in the commitments. In addition, and perhaps most
importantly, the decision will normally shed light on the purpose of the commitments.
This, in turn, allows for a purpose-driven or teleological interpretation of
the commitments.
The Commission tends
to put great weight on the purpose of the commitments in interpreting the
commitments.[294]
Sometimes a literal interpretation of the commitments’ text would make the
commitments ineffective, and such an interpretation will understandably be
resisted by the Commission. The weight attached to a teleological
interpretation appears justified in light of the great asymmetry of information
between the Commission and the parties. If a literal interpretation were always
to prevail, it would be very easy for the parties to craft their commitments
text in a way that ultimately makes them ineffective.
The parties may
of course resist a teleological interpretation, arguing that they have no
control over how the Commission describes the purpose of the commitments in the
body of the decision[295] and
should only be bound by the text they have submitted as part of the
commitments. However, such argument seems to clash with the fact that the
parties have accepted, in the text of the commitments, that they will be
interpreted in light of the Commission’s decision.
A purpose-based
or teleological interpretation also accords with a method of interpretation
frequently used in EU law generally, as the EU courts’ interpretation is often
inspired by the need to give effet utile.[296] In the same way, commitments
should be interpreted in a way that will achieve their purpose. In line with
this, the General Court, in a case relating to the interpretation of the
purchaser criteria in the commitments.[297]
The model
commitments also provide that the commitments have to be interpreted in light
of ‘the general framework of European Union law, in particular in light of the
Merger Regulation’ and in light of the Commission Remedies Notice.
5.2
Appointment of a monitoring trustee
The Implementing
Regulation provides that commitments may require the parties to appoint a
monitoring trustee to assist the Commission in overseeing the compliance and
implementation of their commitments.[298] In practice, the Commission
virtually always requires the appointment of a monitoring trustee, as his or
her assistance is considered essential to ‘guarantee the effectiveness of
commitments.’[299] Very
exceptionally a commitment may be so simple that it is not necessary for a
monitoring trustee to be appointed.[300]
The monitoring
trustee functions as the Commission’s ‘eyes and ears’ and, in case of
divestiture commitments, also serves as the ‘guardian that the business [that
will be divested] is managed and kept properly on a stand-alone basis in the
interim period’.[301] Its
main tasks are set out in the Remedies Notice[302] and in the model commitments text.
These tasks are further specified in the trustee mandate that is entered into
between the merging parties and the monitoring trustee, and for which the
Commission has provided a model.[303]
The monitoring
trustee is normally appointed by the merging parties, after its identity has
been approved by the Commission, although in theory the Commission may also
appoint the trustee.[304] The
procedure for appointment is explained in the Remedies Notice [305] and set out in the commitments. [306] The Commission has discretion to approve or reject one
or more of the proposed candidates.[307]
It is of the
essence that the monitoring trustee starts his work immediately after the
Commission’s conditional clearance decision.[308] The model commitments text
provides that the notifying party shall propose one or more trustees ‘no later
than two weeks’ after the decision is rendered[309] but, in practice, a trustee is
often proposed and approved by the Commission more quickly. As the merger
review process draws to a close, parties may already prepare the implementation
of a – at that point still hypothetical - conditional clearance decision and
discuss possible trustees with the Commission’s case team.[310]
In an
exceptionally complex case, involving fix-it-first remedies, a trustee-like
party (called “independent adviser”)[311] was even appointed during the merger
review process, i.e. before the Commission issued its decision.[312] The parties had appointed the
“independent adviser” after approval by the Commission and his or her role was
to provide advice and assistance to the Commission regarding the suitability of
proposed purchaser and the adequacy of the commitments to restore effective
competition. Normally, the proposed purchaser is assessed after the
Commission’s conditional clearance decision, with the assistance of a trustee,
but in case of a fix-it-first remedy, the purchaser is proposed during the
merger review process, when no trustee has been appointed yet. By appointing an
independent adviser, the parties hoped to expedite the Commission’s assessment,
as he or she can assist the Commission in assessing the purchaser, in the same
way as the trustee does in a regular post-decision purchaser assessment.
The trustee must be independent of the parties,
possess the necessary qualification to carry out its mandate and shall not be,
or become, exposed to a conflict of interests.[313]
The trustee’s
fees are paid by the merging parties.[314] The fee structure, i.e. the way
the fees will be calculated, has to be specified in the trustee mandate.[315] Although it is up to the parties
and the trustee to agree on the fees, the Commission will review the fee
structure, together with the other provisions in the trustee mandate.[316] The remuneration structure must be
such as to not impede the trustee’s independence and effectiveness in
fulfilling the mandate.[317] A
common fee structure is an hourly fee, which means the total fee will depend on
the number of hours worked. If a trustee mandate were to cap the trustee’s fees
at a certain level, this would jeopardize the trustee’s effectiveness. In such
a case, the trustee could be expected to work less zealously once the fee cap
comes near or has been reached, as any additional work no longer generates any
fees.
5.3
Approval of a suitable purchaser
The procedure to
approve a purchaser is described in paragraphs 101 to 106 of the Remedies
Notice. The corresponding paragraph in the Commission’s model commitments text
is paragraph 18.
5.3.1 The parties’
search for and negotiations with a purchaser
The merging
parties must identify a suitable purchaser and negotiate a divestiture
agreement with that purchaser. In this phase, the parties are in the driving
seat, but the Commission and the trustee follow the process closely. The
parties therefore have an obligation to keep the Commission and monitoring
trustee informed of all steps in the process. Among others, they have to inform
the Commission and trustee of all potential purchasers that have expressed an
interest in acquiring the divestment business, and forward offers made by
potential purchasers.[318] They
also have to demonstrate to the trustee and Commission that potential
purchasers are receiving sufficient and correct information relating to the
divestment business, for instance by sharing the information memorandum that is
sent to prospective buyers to make them interested in the divestment business.[319]
It is the
parties’ prerogative to select a purchaser and propose it to the Commission.
However, it is the Commission’s obligation to assess the suitability of that
purchaser and, if it does not meet the purchaser criteria, to reject it. This
gives rise to a subtle dynamic between the parties and the Commission when it
comes to selecting a purchaser. Parties will often seek informal guidance from
the Commission as to whether a particular purchaser would meet the purchaser
criteria. This avoids that they ultimately reach agreement with and propose a
purchaser that is rejected by the Commission. The latter scenario is usually
disfavoured by the parties as it will often lead to a situation where not
enough time is left for the parties to find a new purchaser in the first
divestiture period (a period of a few months[320] during which the parties have
responsibility for finding a suitable purchaser). Once the first divestiture
period has ended, the so-called trustee divestiture period starts. During this
period, a divestiture trustee will be in charge of the divestiture process and
sell the divestment business at no minimum price.[321]
The parties are
obliged to provide potential purchasers with the necessary information for them
to conduct a due diligence, as well as access to the personnel.[322]
5.3.2
Submission of the purchaser proposal
When the parties
have reached a final agreement with a purchaser, they have to submit a reasoned
and documented proposal to the Commission and the monitoring trustee.[323] The model commitments text
specifies that this has to happen within one week of the agreement.[324]
The parties also
have to submit all ancillary agreements.[325] Any agreement entered into between
the parties and the proposed purchaser, including transitory agreements, will
have to be submitted.[326] The
idea is to provide the Commission with an accurate and complete picture of what
has been agreed with the proposed purchaser of the divestiture, in all its
aspects.
The parties
normally submit a fully documented and reasoned memorandum in support of their
proposed candidate to expedite the assessment of the proposed purchaser by the
Commission and the trustee. The reasoned memorandum will explain why the
proposed purchaser meets the purchaser criteria and why the agreement reached
is consistent with the text of the commitments, including their objective to
bring about a lasting structural change in the market.
The monitoring
trustee will then issue a reasoned opinion on the proposed purchaser and the
manner in which the divestment business is sold.[327] The opinion must address the
suitability and independence of the proposed purchaser and the viability of the
divestment business after the sale, as well as whether the business is sold in
a manner consistent with the commitments.[328] The model text provides that this
opinion should be issued within one week after receipt of the documented
proposal.[329] This
is a challenging timeline, given that an analysis of the suitability of the
proposed purchaser will require an analysis of the purchaser’s financial
situation, business strategy, independence, and the ever increasing number of
documents that are generated by M&A deals.[330]
One of the
lessons from the 2005 Merger Remedies Study was that, in order to properly
assess the suitability of the purchaser, the trustee should be in contact with
the purchaser.[331]
5.3.3
Assessment of the purchaser proposal
5.3.3.1
Does the purchaser meet the purchaser requirements?
To be approved,
the purchaser must satisfy the purchaser criteria set out in the commitments.
In what follows, we discuss the three standard purchaser criteria.
5.3.3.1.1 The purchaser must be independent from and unconnected
to the parties
This is an
essential requirement without which it is unlikely or less likely that the
proposed purchaser will have the incentive and ability to develop the divested
business actively in competition with the parties. Subsisting ownership
interests, be they legal or equitable, actual or contingent, in the divested
business or the proposed purchaser are ipso facto incompatible with
this
requirement, because of the structural links, potential for contacts and
coordination of competitive behaviour that they would create.
However, not all
links between the parties and the proposed purchaser will compromise the
purchaser’s independence. What may constitute a compromising link will have to
be assessed in the light of the characteristics of the industry or sector in
question. In certain industries and sectors, certain commercial relationships
between competitors are common business practice. The types of links with which
the Commission will be most concerned are those which render the divested
business reliant on the parties for essential inputs or distribution channels
without which it cannot compete effectively with the parties.
Nevertheless,
this requirement is applied pragmatically. Thus, commercial links which are
designed to ensure that the divested business receives start-up support from
the parties for an interim period in order to give the purchaser time to seek
alternative sources of inputs or outlets are acceptable. In some cases, such
arrangements may even have to continue on a more long-term or permanent basis.
This is particularly the case, where the divested business is too small to
sustain its own sources of inputs or outlets independently of the parties,
which may arise where the divested business operates in a small Member State or
a local market within a Member State. In such cases, the Commission will seek
to ensure, insofar as possible, that the terms of the relationship necessarily
created between the parties and the purchaser are not such as to render the
purchaser so overly reliant on the parties, that the purchaser’s ability and
incentives to compete actively with the parties are hampered.
A more difficult
issue is whether and when common ownership may affect the independence of a
purchaser. Institutional investors (banks, pension funds, investment funds such
Blackrock, Vanguard, etc. ) may own shares in both the merged entity and the
purchaser of the divestiture. Usually, they hold small minority shareholdings
of 5% or less, but recent studies have raised concerns that such common
shareholdings may blunt the competition between firms.[332]
5.3.3.1.2 The purchaser must have the financial resources
required to maintain and develop the divested business viably in active
competition with the parties and others
The purchaser
must have access to sufficient financial resources to operate and develop the
divested business viably. According to the Remedies’ Notice, this has certain
implications for the way the acquisition is financed by the proposed purchaser.
More specifically, the Commission will normally not accept any financing of the
divestiture by the seller and, in particular, any arrangement under which the
seller gets a share in the profits of the divested business in the future.[333] It is indeed easy to imagine that
a share in the profits would blunt the incentive for the seller and the
purchaser of the divestiture to compete, which is precisely the opposite of
what the commitments try to achieve.
By the same
token, it would seem problematic for the seller and the purchaser to agree on a
purchase price for the divestiture that varies depending on the performance of
the divested business. Although such variable component is common in regular
M&A transactions, it may blunt the incentives of the seller and purchaser
to compete.
ArcelorMittal /
Ilva is an example of a case where the Commission objected
to a specific financing arrangement.[334] The seller of the divestment
business (ArcelorMittal) and the purchaser (Liberty House Group) had initially
agreed on a financing structure that relied primarily on borrowed money. In
addition, part of this money would be provided by the seller itself through
so-called vendor loan notes.[335] The
purchase price had also been made partly contingent on the performance of the
divestiture business.[336] The Commission
rejected this financing arrangement. The parties subsequently modified their
agreement, by removing the seller financing and the performance-related
purchase price, paving the way for a purchaser approval decision.[337]
5.3.3.1.3 The purchaser must have the proven relevant expertise
and have the incentive and ability to maintain and develop the divested
business viably in active competition with the parties and others
The purchaser’s
ability to compete may be concomitant upon its past track record in the
relevant industry or sector. This track record may have been acquired in the
same or another geographic market. Where the experience of the purchaser is
acquired in another geographic market, there is always the risk that it may not
be able to apply it to the business environment prevailing in another
geographic market. However, when assessing the proposed purchaser, this risk
will have to be balanced against the risk that a potential purchaser from the
same geographic market may either not be available or pose prima facie
competition concerns.
Where the
purchaser is a completely new entrant in the industry or sector concerned, it
will have to demonstrate to the Commission that it is able to procure the
relevant expertise from another source. In case of a financial investor, the
investor could meet the requirement of ‘proven expertise’ by financing a
management buy-out.[338]
In Petrolessence
and SG2R v Commission, the General Court found that where the Commission
had to assess whether or not a candidate is capable of maintaining or
developing effective competition on the market in question, it ‘could rightly,
and even should, take into account the fact that an applicant was a newcomer to
the market for the retail sale of fuels, in spite of the fact that activity in
the petroleum sector is not expressly required by the commitments.’[339]
The proposed
purchaser’s incentives are closely linked to the other purchaser criteria. A
prospective purchaser that is independent of the parties, with ample financial
resources and a proven track record in the same industry or sector as the
divested business, may be expected to have the requisite incentives to maintain
and develop the divested business.
To establish
this, the Commission may assess, together with the monitoring trustee, the
proposed purchaser’s business plan.[340] Among others, the Commission will
‘analyse whether the underlying assumptions of the purchaser appear plausible
according to the market circumstances’.[341] Although such business plans are
never binding nor irreversible, and may turn out to be misguided with the
benefit of hindsight, nonetheless, at the time of the divestment, they provide
the best available indication of the proposed purchaser’s intentions vis-à-vis
the divested business.
5.3.3.1.4 The acquisition by the purchaser should not create prima
facie competition concerns nor give rise to a risk that the implementation
of the commitments will be delayed
5.3.3.1.4.1 Prima facie competition concerns
The purpose of
this criterion is to ensure that when accepting remedies to address the
Commission’s competition concerns in the case at hand, the Commission does not
inadvertently create some other competition problem through the divestiture.
Such other competition problems may not be apparent when the remedy was
accepted by the Commission, since the identity of the purchaser is normally
unknown at that stage.
The divestiture
arising from the remedy may well be subject to review under EU or national
merger control. Indeed, the divestiture deal may be a very large transaction in
its own right. This has been the case in several divestitures generated by
exceptionally large global deals such as AB InBev / SABMiller,[342] Holcim / Lafarge[343], Dow/ DuPont[344] and Bayer/Monsanto.[345]
The requirement
that the acquisition by the purchaser does not create prima facie competition
concerns means that, based on the information available to the Commission and
without the need to conduct a market investigation, it can already be safely
concluded that the acquisition will not raise competition concerns. In other
words, it is quite obvious that there are no competition concerns. Even so, the
Commission’s assessment of possible competition concerns in the context of a
purchaser approval decision will be ‘without prejudice’ to the merger control
jurisdiction of national authorities, meaning national authorities will conduct
their own assessment, without being bound by the Commission’s prima facie assessment
in the context of its purchaser approval decision.
The Remedies Notice
states that the Commission will normally reject the proposed purchaser ‘[w]ere
it can be foreseen, in the light of the information available to [it], that
difficulties in obtaining merger control clearance or other approval may unduly
delay the timely implementation of the commitment’.[346]
It is extremely
rare for a divestiture to raise competition problems, as it is far from ideal
if a transaction that was meant to remedy a competition concern in turn needs
to be remedied. However, in the recent past, two exceptionally large deals in
the agrochemical sectors entailed exceptionally large divestitures which, in
turn, required remedies. These two cases were Dow / DuPont[347] and Bayer / Monsanto.[348] In these cases, the Commission
approved the purchaser only after the divestiture transaction had been cleared
(albeit with remedies), and in both cases, the parties were prevented from
closing the main transaction before the Commission had approved the purchaser.[349]
5.3.3.1.4.2 Other regulatory concerns
Apart from competition
concerns, divestiture deals may also raise other regulatory concerns and be
subject to various approvals. An increasing number of deals are subject to
reviews based on national security. The U.S.’s screening process, conducted by
the Committee on Foreign Investment (CFIUS), is well known but an increasing
number of EU Member States also have screening mechanisms.[350] Such screening may make a
divestiture to a specific purchaser deal impossible or unduly delay the implementation
of the divestiture. In such a case, the proposed purchaser would not meet the
requirement that the purchaser should not give rise to a risk that the
implementation of the commitments will be delayed.[351]
In NXP/
Freescale, the acquirer had identified Jianguang Asset Management Co., a
subsidiary of a Chinese State-owned enterprise, as the purchaser of the
divestment business.[352]
However, the acquisition of the divestment business by the Chinese purchaser
was subject to CFIUS approval in the U.S. Given the uncertainty surrounding the
outcome of that process and since possible remedial measures imposed by CFIUS
(e.g. a ban on selling in the United States) could affect the viability of the
divested business, the Commission rejected a fix-it-first remedy, in which the
merging parties would have committed to divest to Jianguang.[353] Instead, an upfront buyer clause
was included in the commitments, meaning the buyers had to identify a suitable
buyer before they were allowed to close their deal. Ultimately, the Chinese
purchaser obtained CFIUS approval quickly after the Commission’s conditional
clearance decision and, with the CFIUS uncertainty lifted, was subsequently
approved as purchaser.[354]
5.3.3.2
The divestiture agreement: is the divestiture being
sold in a manner consistent with the commitments?
The parties or
the divestiture trustee not only need to demonstrate that the proposed
purchaser meets the purchaser requirements but also that the business is sold
in a manner consistent with the commitments.[355]
This requirement
entails that the monitoring trustee and the Commission review the substance and
impact of the bargain struck between the parties and their proposed purchaser,
to ensure that the transfer of the divested business will allow the purchaser
to compete effectively. The necessity of this review is confirmed by the
findings of DG COMP’s Merger Remedies Study. The study found that sellers have
engaged in strategic behaviour designed to limit the purchaser’s ability to
strike a bargain that maximises its potential payoff from the divested
business.[356] From
their side, purchasers may be prepared to trade off some of their future
ability to run the divested business in active competition with the parties, in
return for a reduced price.[357]
Even if the
purchaser is not unsuitable per se, the terms of the sales agreement may
render it unsuitable or weaken the conditions of effective competition
post-divestment by creating on-going links between the purchaser and the
parties, or by rendering one side (or indeed both sides) reliant on the other,
or by obliging them to disclose certain commercially sensitive information to
one another. Therefore, the Commission must examine the sales agreement for
anything that may be inconsistent either with the purchaser requirements or with
the objective of a divestiture to bring about a lasting structural change in
the market.
5.3.4
The Commission’s decision on the suitability of the
purchaser
The Commission
will communicate its view as to the suitability of the proposed purchase to the
parties.[358] This
is particularly relevant in case the Commission intends to reject the proposed
purchaser, as it allows the merging parties to be heard and possibly to
withdraw their proposal.
In the vast
majority of cases, the Commission approves the purchaser proposed by the
Commission. This is mostly due to the fact that, throughout the purchaser
selection process, the parties communicate closely with the Commission and the
trustee about possible purchasers and their likely suitability. Parties
therefore have some insight into which purchasers will likely be approved.
If the
Commission concludes that the proposed purchaser does not meet the purchaser
requirements, it will adopt a decision rejecting the proposed purchaser.[359] By contrast, if the Commission
considers the purchaser suitable but identifies a problem in the transaction
documents, the parties will normally be given a chance to resolve this problem.[360]
Purchaser
approval decisions are notified to the parties. The trustee and Member States
also receive a copy.
In recent years,
the Commission has made the purchaser approval decisions publicly available for
the sake of transparency.[361] They
also constitute a separate category in the case search tool on DG COMP’s
website, allowing one to quickly retrieve all published purchaser approval
decisions.
5.4 Duration of
remedies
5.4.1 Divestiture
remedies
Divestiture
remedies are implemented in a short period of time, usually a matter of months.[362] The parties will have implemented
the remedies once the divestment business has been sold to a suitable
purchaser, approved by the Commission, and the divestiture deal has closed, all
within the short periods fixed by the remedies.[363] Once the parties have implemented
the remedy in this way, the monitoring trustee can be discharged, although the Commission
may at any time require the reappointment of the monitoring trustee if it
subsequently appears that the remedies might not have been fully and properly
implemented.[364] In
addition, the parties remain bound by several long-tail commitments that
typically accompany divestiture remedies, such as a prohibition to reacquire
the divested business during a ten-year period,[365] and a commitment not to solicit
the key personnel that was transferred with the divested business.[366]
5.4.2 Access and
behavioural commitments
Access
commitments and other behavioural commitments often remain in place for a long
period of time. The Commission has accepted commitments with a duration of
several years (e.g. eight years[367] or ten years[368]).
Up until the
2000s, commitments of unlimited duration were not uncommon.[369] However, in recent years, remedies
have always been put in place for a limited duration. It is no easy task to set
the right duration of access and behavioural commitments. In some cases, the
duration can be based on a prediction as to when a specific technology at the
core of the remedy will have lost its relevance for competition. For instance,
a remedy requiring a TV broadcaster to give FRAND access to linear TV channels
(TV channels which require viewers to sit in front of their TVs at a specific
time to watch a specific program), may be put in place for the period during
which linear TV – as opposed to on-demand or non-linear viewing - is expected
to remain relevant.
In some recent
cases, the remedies were put in place for a fixed time, but with the possibility
of an extension. In Daimler / BMW / Car Sharing JV[370], a case where the parties
committed to ensure interoperability with their car sharing app, the remedies
have a duration of three years, but the Commission can extend that period with
two years if no meaningful entry has taken place in the relevant markets.[371]
In Google /
Fitbit, the Commission accepted behavioural commitments with a duration of
ten years. However, for some of the commitments (Google’s commitment not to use
Fitbit’s data for advertising), the Commission reserved the right to extend
that period by up to another ten years, after ‘having justified the necessity
for such an extension.’[372]
5.5
Modifying the remedies
Commitments
usually include a general review clause, allowing for changes to the
commitments.[373] The
Commission’s practice for at least a decade has been to systematically include
such a clause. Older commitments sometimes lack a review clause but even those
commitments can be modified or waived.[374]
The standard
review clause distinguishes between two types of modifications: extensions of
the deadlines in the commitments on the one hand, and waivers, modifications or
substitutions of the commitments on the other.
The procedure
and conditions for extending deadlines are set out in paragraph 72 of
the Remedies Notice. The parties must show ‘good cause’. For an extension of
the deadline of the first divestiture period, this means parties must show that
they were not able to meet the deadline for reasons outside the responsibility
and that it can be expected that the parties subsequently will succeed in
divesting the business within a short time-frame.
Waivers,
modifications or substitutions of the commitments will only be
accepted ‘in exceptional circumstances.’[375] Given the large variety of market
situations and unforeseeable developments that can take place, it is probably impossible
to delineate the concept of ‘exceptional circumstances’ with great precision.
The Remedies
Notice explains that ‘exceptional circumstances’ may be accepted if market
circumstances may have changed significantly and permanently. To show this, a
sufficiently long time-span, ‘normally at least several years’ must have
elapsed between the Commission decision and the request for modification.[376] Second, exceptional circumstances
may be present if the parties can show that the experience gained in the
application of the remedy demonstrates that the objective pursued by the
commitments can be better achieved if the modalities of the commitments are
changed.[377]
The Commission
has also accepted exceptional circumstances in other situations. In 2019, it
suggested that Brexit could constitute an exceptional circumstance justifying a
waiver, modification or substitution of commitments that exclusively address
competition issues in UK markets. This was made clear in a notice dealing with
the competition law related issues raised by Brexit, issued for stakeholders.[378]
In Vivendi /
Telecom Italia the Commission waived a divestiture commitment.[379] The facts underlying the case were
rather exceptional. The Commission had cleared an acquisition of de facto control
by Vivendi, subject to a divestiture commitment.[380] However, as a result of unforeseen
circumstances, Vivendi lost de facto control not long after the
clearance decision. It therefore sought a full waiver of its commitment to
divest. The Commission granted the waiver, finding that a ‘significant, stable
and unforeseeable change in market circumstances’ had occurred and that the
competition concerns laid out in the decision no longer arose.[381]
In Takeda /
Shire, the Commission also waived a divestiture commitment.[382] In that case, Takeda had committed
to divest one of Shire’s pipeline drugs. However, both Takeda and a divestiture
trustee were unable to sell the drug, in part because tests on animals were
showing abnormal death rates in infants born from animals receiving the drug.
Takeda then requested a full waiver from its commitments. After conducting a
market investigation, the Commission found that (1) market conditions had
changed significantly and permanently, (2) the changes could not have been foreseen
at the time of the decision, sand (3) the commitments are no longer required to
address the competition concerns.[383]
These cases
illustrate that, although the Remedies Notice explains that a waiver of
commitments will ‘very rarely’ be relevant for divestiture commitments,[384] exceptionally, a waiver may also
be relevant for a divestiture commitment.
In Bayer /
Monsanto, the Commission modified the remedies to ensure consistency with
the remedies accepted by the U.S. Department of Justice.[385]
Although the
Commission has a certain discretion in the assessment of a waiver request, it
must nonetheless conduct a careful examination of the request and, if
necessary, carry out an investigation.[386] In Deutsche Lufthansa AG v
Commission, the General Court faulted the Commission for failing to conduct
such a careful examination and it therefore partially annulled the Commission
decision rejecting Lufthansa’s waiver request.[387]
Apart from the
general review clause in commitments, which requires ‘exceptional
circumstances’, a more specific review clause exists in relation to the
non-reacquisition clause in commitments, i.e. the ban on the notifying party to
acquire influence over the divested business during a ten year period.[388] In Nidec / Whirlpool (Embraco
business), Nidec requested and obtained a partial waiver of the
non-reacquisition clause on the basis of this specific review clause.[389] This allowed Nidec to re-acquire a
plant that it had divested under the commitments.
6 Enforcing
the remedy
6.1
Commission’s powers to investigate compliance
The Commission can
use all of its normal fact-finding and investigative powers to investigate the
parties’ compliance with their commitments.[390] Non-compliance could be detected ex
officio, via the monitoring trustee, or based on complaints from third
parties.
6.2 Complaints
from third parties
Complaints from
third parties are a frequent channel through which the Commission becomes aware
of possible non-compliance.[391] This
is particularly true in case of access commitments. Third parties are the
beneficiaries of such commitments and they may for instance complain about the
terms and conditions of access provided by the merged entity. In divestiture
cases, complaints may come from the purchaser, for instance because certain
assets or personnel that should have been included in the divestiture have not
been transferred.
Third parties
will typically first address their grievances to the monitoring trustee, who is
specifically appointed to monitor compliance with the commitments and acts as a
contact point for any requests by third parties.[392] In case of a possible breach of
the commitments, the trustee will consult with the Commission’s case team on
how to deal with the complaint. Complaints from third parties differ greatly in
level of seriousness, urgency, and technicality, so there is no
‘one-size-fits-all’ procedure to deal with complaints. In many cases, queries
or requests by the monitoring trustee to the merging parties, supported by the
Commission’s case team, are sufficient to ensure the parties comply.
The General
Court has held that third parties do not have a right to lodge a formal
complaint with the Commission for breach of commitments.[393] They may of course complain to the
Commission about what they consider to be a violation of the commitments, but
they cannot force the Commission to take a formal decision on the complaint,
which could then be challenged in court.[394] The position of third parties in
merger control is therefore different from the position of complainants in
cases relating to Articles 101 and 102 and State aid cases, where the
Commission has a legal duty to take a decision on formal complaints that meet
certain conditions.[395]
The General Court’s
holding originated in a case brought by a third party in relation to the
commitments in Telefónica Deutschland / E-Plus. [396] The third party had complained to
the Commission and the monitoring trustee about an alleged breach of
commitments by the merged entity. The Commission’s case team had examined the
complaint but found no breach.[397] That
position – expressed in an e-mail - was challenged by the third party before
the General Court. The Court held that the third party did not have an
individual right to force the Commission to adopt a decision in which it finds
a breach of commitments and takes remedial action.[398] Hence, the Court concluded, the
Commission is not under a duty to respond to complaints from third parties with
a formal decision that is subject to an action for annulment.
6.3
Breach of the remedies
6.3.1
Distinction between ‘conditions’ and ‘obligations’
The consequences
of breaching commitments vary depending on whether the part of the commitments
that is breached constitute a ‘condition’ or an ‘obligation.’ The Merger
Regulation itself makes this distinction, but it does not define the two terms.
The Remedies Notice provides some guidance, although the formulation used is
somewhat cryptic. A condition is defined as ‘the requirement for achievement of
the structural change of the market.’[399] In Commission decisions, this is
often rephrased as ‘the fulfilment of a measure that gives rise to a structural
change of the market’.[400] This
denotes the parts of the commitments that gives rise to the structural change
of the market, such as the obligation to divest the business in a given
timeframe, and the prohibition to re-acquire it.[401] Obligations are ‘the implementing steps
that are necessary to achieve this result [the structural change]’.[402] As an example of an obligation,
the Remedies Notice mentions the appointment of a divestiture trustee with an
irrevocable mandate to sell the business.
Commission
decisions accompanied by commitments will normally specify which paragraphs in
the commitments constitute obligations and which constitute conditions. The
exact parts of the commitments that ‘give rise to the structural change of the
market’ will indeed vary from case to case, and, hence, the parts to which the
labels ‘condition’ and ‘obligation’ are attributed, will also vary from case to
case.
In case of a
divestiture, the paragraphs that contain the commitment to divest are normally qualified
as conditions. This corresponds to Section B in the Model Text. The relevant
schedules – which typically describe the divestment business in greater detail
- are usually considered to be intrinsically linked to this part of the
commitments. Hence, they are usually also qualified as conditions.[403] All other paragraphs of the
commitments are qualified as obligations.
In case of
access commitments, the part of the commitments that may give rise to a
structural change in the market is the part in which a commitment to provide
access is made, as the access commitment is usually aimed at lowering entry
barriers which, in turn, may impact the structure of the market. Hence, the
access commitment at the core of the commitments will normally be qualified as
a condition.[404] In
case of behavioural remedies, with no or a limited impact on market structure,
it is not always clear which parts of the commitments should be qualified as
conditions and which parts as obligations. Arguably, the core part of the
behavioural commitment should be qualified as a condition, while other
paragraphs should be obligations. Alternatively, one could argue that, in those
cases, all paragraphs should be qualified as ‘obligations’, as none of them
give rise to a structural change of the market. This approach has indeed been
taken in some decisions.[405]
6.3.2
Breach of an obligation
If the merged
entity breaches an obligation contained in the commitments, the Commission may
– but is not required to – revoke the conditional clearance decision.[406] If the Commission does revoke the
decision, it may replace the revoked decision either with a new decision on the
basis of Article 6(1) or, in case the revoked decision is a Phase II decision,
a new decision on the basis of Articles 8(1) to (8)(3). In doing so, it will
not be bound by any time limits.[407]
The Commission
may also impose fines of up to 10% of the undertakings’ worldwide turnover,
when the failure to comply with the remedies is either negligent or
intentional.
[408] It can
also impose periodic penalty payments of up to 5% of the undertaking’s average
daily worldwide turnover.[409]
6.3.3
Breach of a condition
In case of a
breach of a condition, the ‘compatibility decision is no longer applicable’.[410] In other words, it is as if there
was never a Commission decision authorising the merger. This happens
automatically. The merger is therefore treated ‘in the same way as a
non-notified concentration implemented without authorisation.’[411] The Commission does not need to
revoke the authorisation decision, as it would have to do in case of breach of
an obligation. This principle was applied in Novelis / Aleris. The
notifying party (Novelis) had committed to divest a plant. It found a
purchaser, which was approved by the Commission, but subsequently failed to
close the divestiture deal within the deadline specified in the commitments.
This resulted in a breach of a condition and, as a result, the clearance
decision became inapplicable, prompting the Commission to issue interim
measures and, after the plant was finally divested, final measures to ensure
the safeguards for the divesture, originally laid down in commitments, would
remain applicable.[412]
When a condition
is breached, the Commission can take interim measures to maintain conditions of
effective competition,[413] followed by appropriate measures to ensure that the merging parties
dissolve the concentration or take other restorative measures.[414] In addition, the Commission may impose
fines of up to 10% of the undertakings’ worldwide turnover when the breach is
negligent or intentional.[415]
6.3.4 Examples
Until present,
the Commission has never issued a formal decision finding a breach of commitments.
One possible explanation for this is that breaches are either detected when
they are still in their incipiency and then rectified or never detected at all.
For instance, if a third party that seeks access based on an access remedy is
faced with an unreasonable demand and complains to the monitoring trustee, the
merged entity has a strong incentive to modify its terms and thereby avoid that
a breach actually occurs. This incentive to comply stems from the formidable
sanctions in case of breach and the prospect of possibly having to dissolve the
merger.[416]
In 2019, the
Commission issued a statement of objections for breach of the commitments in Telefónica
Deutschland / E-Plus.[417]
The alleged breach related to a behavioural component of the commitments,
under which Telefónica committed to offer wholesale 4G services to all
interested players at ‘best prices under benchmark conditions’, [418] a commitment which had been
qualified as an obligation in the decision. The Commission ultimately closed
the proceedings without finding a breach of the commitments, after Telefónica
amended its wholesale 4G offer.
6.4
Arbitration and expert determination as a parallel
enforcement mechanism
6.4.1 Arbitration
Non-divestiture
remedies often remain in place for several years and can be quite complex. This
makes it more difficult to effectively monitor and enforce these remedies. They
often require the monitoring trustee and the Commission to engage in detailed
fact-finding in relation to the day-to-day operation of the merged entity’s
business, which in turn may tie up significant Commission resources.
To mitigate
these issues, the Commission often requires parties to include an arbitration
mechanism in their remedies. This allows third parties to enforce the remedies
through arbitration, the essential rules of which are specified in the
remedies. The underlying idea is to allow third parties to enforce the remedies
themselves, with minimal intervention of the Commission.[419] The fact that an arbitration
mechanism has been included in remedies does not, however, deprive the
Commission of its powers to enforce the remedies. Arbitration therefore
provides third parties with a means of enforcing the remedies, on top of the
enforcement by the Commission and the monitoring trustee.[420]
The Remedies
Notice explain that the Commission ‘will often require (…) the establishment of
a fast-track arbitration procedure in order to provide for a dispute resolution
mechanism and to render the commitments enforceable by the market participants
themselves.’[421]
Arbitration
clauses are often included in remedies where the merged entity commits to grant
access to important infrastructure or assets.[422] They are also frequently used in
remedies that require the parties to license IP or provide interoperability
information.[423]
Remedies involving the release of airline slots have also occasionally
included arbitration clauses.[424]
In recent years,
even a couple of divestiture remedies have included arbitration clauses.[425] In those cases, the remedies gave
the purchaser of the divested business the possibility to initiate arbitration
against the notifying party for breach of the commitments and, in one case,
also for breach of any of the agreements implementing the commitments.[426] Those clauses add a layer of
complexity to divestiture commitments[427] and one can question whether the
benefits outweigh the costs.[428] In
any event, arbitration clauses have only rarely been included in divestiture
commitments.
The first
remedies that included an arbitration mechanism date back to 1992[429] but the practice only became more
widespread in the 2000s. By now, arbitration clauses have been included in
commitments in over eighty cases.[430] However, as will be explained (see
section 6.4.5), actual arbitration cases have been extremely rare, i.e. third
parties have very rarely used arbitration as a mechanism to seek compliance.
In many cases,
the arbitration mechanism in the remedies can be used by an open-ended group of
third parties. For instance, the remedies may provide that arbitration can be
used by any third party seeking access to the network to which the remedies
guarantee access. Such arbitration clauses have sometimes been qualified as an erga
omnes offer to arbitrate or, perhaps more fashionably, as ‘arbitration
without privity’, reflecting the fact that third parties can initiate
arbitration even though they have never entered into an arbitration agreement
with the notifying party. [431] In
other cases, the remedies provide for an arbitration mechanism in a specific
relation, i.e. the relationship between the merged entity and a specific third
party, for instance the specific company that obtains certain assets or access.
In those cases too, the clause can best be qualified as an offer to
arbitrate, not as an arbitration agreement, as the commitments do not bind
third parties.
Although doubts
were initially expressed about the validity of arbitration in merger remedies,[432] the EU courts seem to have
approved arbitration as a mechanism to monitor merger remedies. In ARD v.
Commission, a third party argued that the access commitments in that
case ‘required permanent monitoring’ and that this ran counter to the Remedies
Notice applicable at the time.[433] The
General Court rejected the argument because of the possibility for third
parties to rely on arbitration.
(295)
As to the applicant's argument that the commitment at issue entails permanent
monitoring of conduct, which would run counter to the Notice on remedies, it is
sufficient to observe that all disputes concerning compliance with commitment
must be subject to arbitration, which guarantees sufficient monitoring.
Moreover, third parties who are not satisfied with the implementation of the
commitment may make use of an arbitration procedure under which the burden of
proof is placed on the Kirch group. Thus, although compliance with the
commitment is subject to monitoring, it is not the Commission which is
responsible for that monitoring.
The joint
venture leading to ARD v. Commission dates back 20 years[434] and, in that case, the commitments
did not provide for a monitoring trustee. Arbitration was the only mechanism to
monitor the commitments. The General Court nonetheless accepted this as
sufficient, noting that, in the specific type of arbitration provided for by
the commitments, the burden of proof was placed on the merging parties to show
compliance.[435]
Additional
confirmation regarding the validity of arbitration in merger remedies came in easyJet
v. Commission.[436] In
that case, the applicant easyJet argued that the slot release remedies (a type
of access remedy) offered by Air France and KLM would not be effective, among
others because the commitments did not provide for the revocation of the
clearance decision in case of non-compliance. The court rejected that
challenge, because ‘the contested decision lays down a fast-track procedure for
resolving disputes’ in case the third party relying on the commitments ‘has
reason to believe that the merged entity is not complying with the terms
of the commitments made vis-à-vis that party’.[437]
6.4.2 Expert
determination
Although
arbitration is by far the most frequently used mechanism, some remedies provide
for expert determination, or a combination of expert determination and
arbitration.[438] Expert
determination is a dispute resolution mechanism in which an independent expert
– not arbitrators – makes a determination on a dispute or issue.[439] Unlike arbitration, it does not
result in an arbitral award that can be enforced via the national courts.
Parties can agree to be bound by the expert’s determination, but the expert’s
opinion cannot be declared enforceable by national courts and subsequently
enforced as if it were a court judgment. In business settings, this is
sometimes considered a drawback of expert determination but, in the context of
merger commitments, this appears to be less of an issue, as the Commission can
ensure that the notifying party abides by the expert’s determination using its
powers to enforce the commitments.
Expert determination
is particularly well-suited for resolving technical issues or specific
questions which require expert knowledge. This type of issues is often at the
core of disputes relating to access remedies. Rather than legal issues,
disputes may arise over whether specific conditions are ‘in line with market
practice’, whether a fee is ‘fair and reasonable’, whether the interoperability
information provided by the notifying party is ‘complete and accurate’, whether
the notifying party is justified in refusing interoperability based on security
concerns, etc. In such cases, expert determination by specialists with
technical knowledge may indeed be more appropriate than arbitration. In some
jurisdictions, it may even be problematic to provide for arbitration over such
narrow issues, as it may raise doubts about the arbitrability of the matter.[440]
Moreover, if the
issue at the heart of the dispute is technical, arbitrators would have to rely
on a technical expert in any event or witness a ‘battle of experts’, fielded by
the parties. In those cases, it is more effective to directly rely on a
technical expert as decisionmaker. Expert determination will normally also be
faster, less expensive and less formal than full-fledged arbitration. Indeed,
the key difference between arbitration and expert determination is that
arbitration must use adjudicatory procedures to resolve the dispute, i.e. it is
a quasi-judicial process, typically with the exchange of pleadings, evidence,
an oral hearing where each side is represented by counsel, and a reasoned
decision at the end.[441]
Although expert determination may also adopt some of these features, this is
not required.
On the other
hand, a drawback may be that the remedies will have to contain a rather
comprehensive set of rules governing the expert determination, as it will
otherwise be unclear how certain issues should be dealt with. In the case of
arbitration, the reference to an arbitral institution automatically
incorporates the rules of that institution, and these rules deal with a large
number of issues that may come up.[442]
In the few cases
where expert determination has been included in the remedies, the expert determination
is an optional mechanism for the third party relying on the commitments. The
expert determination clause in the commitments serves as an offer. However, if
the third party does opt to trigger the mechanism, it accepts this offer,
including the rules stipulated in the commitments. This means it will be bound
by the result of the expert determination, in the same way as the notifying
party. An appeal is only possible based on manifest error or fraud, and will be
dealt with through arbitration, also provided for by the remedies.
A difficult
issue is the selection of the expert. In two recent cases, the expert is to be
selected by the monitoring trustee, but from a list of experts which the
notifying party has drawn up and submitted shortly after the closing of the
merger.[443] This
may make expert determination less attractive to third parties, as they may
fear – rightfully or not – that the experts listed by the notifying party will
be favourably disposed towards the notifying party.
6.4.3
Safeguards to protect third parties relying on
arbitration
The arbitration
provisions incorporated in merger remedies differ from standard practice in
commercial arbitration in several respects. They usually include a number of
provisions aimed at making it easier for the claimants, for instance the third
parties seeking access under the commitments, to prevail. This is to enhance
the effectiveness and enforceability of commitments. These provisions
compensate for the inherent advantages which the merging parties have in these
proceedings. The merging parties have superior information, as most of the
information relevant to the dispute will typically be under their control. They
are also repeat players in the sense that they will already have faced other
third parties, giving them superior insight in how the commitments can be
applied, how to calculate the access fee and set the terms offered to third
parties.
The most
important feature to facilitate the use of arbitration for third parties is a
provision on the burden and standard of proof, which is included in most
arbitration commitments.[444]
The commitments
usually specify that it suffices for the third party to produce evidence of a prima
facie case. If the third party does so, the arbitrator must find in favour
of the third party, unless the merging party can produce evidence to the
contrary.[445] This
clause puts the burden of proof on the third party, in line with the general
principle of actori incumbit probation. However, by only requiring a prima
facie case, it sets a standard of proof that is lower than the ‘balance of
probabilities’ or ‘more likely than not’ standard which is normally applied in
commercial arbitration.[446]
Commentators
have welcomed this feature and argue it makes arbitration attractive for third
parties.[447] At
the same time, one must acknowledge that concepts such as prima facie case
and ‘balance of probabilities’ do not lend themselves to mathematical
precision. One can therefore wonder whether the prima facie language in
the commitments would actually make much difference in practice. Commentators
have also suggested a more far-reaching alternative, namely a reversal of the
burden of proof.[448] Such
a reversal of the burden of proof was provided for in the remedies in B Sky B / Kirch Pay TV,
[449] the
case that led to the ARD judgment, in which the General Court appears to
have affirmed the validity of such a clause.[450]
6.4.4
Other features of merger arbitration
To ensure timely
implementation, the commitments usually provide that the arbitration
proceedings must be ‘fast-track’. The arbitration clause also typically
includes several ambitious deadlines, in the hope that the arbitral tribunal
and parties will abide by them. For instance, it may provide that ‘the final
award shall be rendered within six months after confirmation of the arbitral
tribunal.’
Another notable
feature of arbitration in the context of merger remedies is the possibility for
the monitoring trustee and the Commission to play a role in the
dispute. The Commission may intervene as amicus curiae and attend any
oral hearings. It is entitled to receive all written submissions and documents
exchanged between the Arbitral Tribunal and the parties. The arbitral tribunal
may also ask the Commission for an interpretation of the Commitments, in which
case it will be bound by this interpretation.
Another peculiar
feature of arbitration clauses in merger remedies is the applicable law. The
remedies normally provide that the arbitral tribunal must decide the dispute
‘on the basis of the commitments and the Commission decision.’ There may of
course be issues that are not covered by the commitments and the decision. For
those, the arbitration clause normally refers to the Merger Regulation, EU law,
and, if neither of these deals with the issue, as last resort, either the law
of a particular Member State or the ‘general principles of law common to the
legal orders of the Member States.’
It is good
practice for arbitration clauses to specify the seat of the arbitration. The
seat or “legal place” determines the jurisdiction in which the arbitration is
legally based. This may be different from the physical location where the
actual arbitral hearings take place (seat versus venue for hearings). The seat
of the arbitration is important. It determines which courts have supervisory
powers over the arbitration, for instance to assist the arbitral tribunal in
ensuring that the interim measures they have issued are enforced. It also has
an impact on the enforceability of the award and it determines the country
where proceedings to set aside the award can be initiated.
The seat of the
arbitration should normally be in an EU Member State. A party dissatisfied with
an arbitral award can challenge it in the country where the arbitration has its
seat by instituting proceedings to annul or set aside the award. In such
annulment proceedings, the court reviews, among others, whether the award is
compatible with that particular country’s public policy. Since EU competition
law is a matter of public policy in EU Member States, it follows that an
arbitral award that disregards EU competition law will be set aside.[451] Courts outside of the EU are not
bound by the European Court of Justice’s case law affirming the public policy
nature of competition law and may have a notion of public policy that does not
include competition law, or its competition law may differ on significant
points.
Most merger
remedies specify the seat of the arbitration. Some do so by explicitly using
the term seat (‘the seat of the arbitration shall be…’)[452], while others refer to ‘the place
of arbitration’. In many cases, the arbitration clause simply provides that
“the arbitral proceedings shall be conducted in…”. Although one could possibly
argue that such phrase refers to the venue of the hearings, not the seat of the
arbitration, this seems to be a rather implausible interpretation. One can
therefore expect most arbitral tribunals to interpret the phrase as a reference
to the seat of the arbitration.
6.4.5
Actual arbitration cases
Although
arbitration is frequently included in commitments as a dispute resolution
mechanism, it is seldomly used. One can only speculate about the reasons for
this. Possibly, third parties perceive the monitoring trustee and the
Commission as more effective or in any event less costly alternatives. Indeed,
the cost of arbitration, particularly international arbitration, can be very
significant, and ‘cost’ has long been considered as arbitration’s worst
feature.[453] Another possible explanation is that the hurdles for prevailing in
arbitration against the merged entity – often well-resourced and with an
enormous information advantage – are perceived as too high, in spite of the
Commission’s efforts to facilitate access.
For a long time,
the only known case of arbitration under merger commitments was an award under
the rules of the International Chamber of Commerce (ICC) in relation to
commitments in Newscorp / Telepiù.[454]
More recently,
three additional arbitration proceedings have become public, all relating to
the commitments in Telefónica Deutschland / E-Plus,[455] a merger between two German mobile
network operators. The behavioural and access commitments in that case allowed
third parties to initiate fast-track arbitration to enforce the commitments.
Several third parties used this mechanism and initiated arbitration. More
specifically, the disputes related to a price review mechanism in the commitments,
and the price which Telefonica could charge for a so-called wholesale contract,
which, pursuant to the commitments, had been extended to 2025. The Commission
intervened as amicus curiae in two of the three proceedings[456] and all three awards were
published on the website of DG Competition.[457]
6.5 Enforcing
the remedy in national courts
There
seems to be no reason why third parties could not turn to the national courts
to enforce the rights that they derive from commitments. [458] After all,
commitments, once they have been made binding in the Commission’s decision,
become part of EU law.
The
General Court has confirmed that commitments may have erga omnes effects
and can be enforced in the national courts in Multiconnect / Commission.[459] The case related to behavioural commitments accepted in Telefónica
Deutschland / E-Plus. [460] The commitments in that case required the merged entity, among others,
to provide wholesale 4G services to interested parties. The General Court held
that those commitments indirectly created legal effects to the benefit of third
parties, and that these rights could be enforced before national courts.[461] The Court added that this right is without prejudice to the
Commission’s power to find a breach of the commitments and take remedial
measures itself. National courts therefore constitute an additional enforcement
method.
In
practice, enforcement of commitments in national courts has been extremely rare
until present. Possibly, third parties were not aware of this possibility. The
General Court issued its ruling in Multiconnect / Commission in October
2018. Prior to that, this possibility had rarely been discussed in the academic
literature and some authors had opined that no such possibility existed.[462] Another possibility is that, as is the case with arbitration, the
parties seem to perceive the Commission and the monitoring trustee as a more
effective or less costly avenue of enforcement.
[1] Any views expressed in
this chapter are those of the author, not those of any institution. The author
is indebted to an excellent prior work on remedies, which served as the point
of departure for this guide: Nadia de Souza and Julia Brockhoff, ‘Remedies’ in
Götz Drauz and Christopher Jones (eds), EU Competition Law – Vol. II – Mergers
and Acquisitions, Book one (2nd ed., Claeys & Casteels 2012) 647-809. The
author expresses his gratitude to Kato Van der Speeten for editorial
assistance.
[2] Council Regulation (EC)
No 139/2004 of 20 January 2004 on the control of concentrations between
undertakings [2004] OJ L24/1 (EU Merger Regulation), rec 5: ‘[I]t should be
ensured that the process of reorganisation does not result in lasting damage to
competition (…)’.
[3] Apart from formal
interventions, merger control also prevents harm to competition by deterring
anticompetitive mergers from being planned or ‘leaving the boardroom’. In
addition, some mergers are abandoned by the parties because competition
authorities raise competition concerns, but before the competition authority
can issue a formal decision.
[4] In Germany, the number
of approvals with remedies and the number of prohibition decisions is more
balanced. In recent years, the prohibitions have even outnumbered the number of
remedies decisions. In the ten-year period between 2010 and 2019, the Bundeskartellamt
prohibited 15 concentrations and approved 11 concentrations with remedies.
Own calculation based on ‘Wettbewerb 2020, XXIII. Hauptgutachten der
Monopolkommission gemäß § 44 Abs. 1 Satz 1 GWB’ (Monopolkommission,
2020). <www.monopolkommission.de/images/HG23/HGXXIII_Gesamt.pdf> accessed
4 December 2020, 156, Abbildung III.2 (counting ‘Untersagungen’ (prohibitions)
and ‘Freigaben mit Nebenbestimmungen’ (clearances with remedies)).
[5] John Kwoka, Mergers, Merger Control
and Remedies: A Retrospective Analysis of U.S. Policy (MIT Press 2015)
10-11.
[6] Alison Jones, Brenda Sufrin and Niamh
Dunne, EU Competition Law: Text, Cases, and Materials (7th edn, OUP
2019) 1174-1179.
[7] Ioannis Lianos, Valentine Korah, and
Paolo Siciliani, Competition Law: Analysis, Cases, & Materials (OUP
2019).
[8] See, e.g., Gunnar
Niels, Helen Jenkins and James Kavanagh, Economics for Competition Lawyers
(2nd edn, OUP 2016) ch 8, 359-393.
[9] To the author’s
knowledge, the most complete account is Nicholas Levy and Christopher Cook,
‘European Merger Control Law: A Guide to the Merger Regulation’ vol. 1
(LexisNexis, release 16, October 2019), chapter 18, p. 18-1 to 18-154.
[10] To the author’s knowledge, the only
monographs dealing with EU merger remedies and published in the past decade
are: Damien Gerard and Assimakis Komninos (eds), Remedies
in EU Competition Law: Substance, Process and Policy (Wolters Kluwer
2020); Dorte Hoeg, European Merger Remedies – Law and Policy
(Hart Publishing 2014).
[11] Carles Esteva Mosso and
Simon Vande Walle, ‘EU Merger Control: How to Remove Anticompetitive Effects?’
in Damien Gerard and Assimakis Komninos (eds), Remedies in EU
Competition Law: Substance, Process and Policy (Wolters Kluwer 2020) 41
(‘Enforcers of EU merger control devote a sizeable part of their daily work to
making sure that remedies are effective’).
[12] Thomas Hoehn,
‘Challenges in Designing and Implementing Remedies in Innovation Intensive
Industries and the Digital Economy’ in Damien Gerard and Assimakis Komninos
(eds), Remedies in EU Competition Law: Substance, Process and Policy (Wolters
Kluwer 2020) 121, 122 (noting the increase in merger remedies in innovation
intensive industries which are large and complex, ‘requiring more time and
resources to ensure effective implementation of any remedies’).
[13] See para. XXXX in
section 2.3.3 (The remedy must be capable of being implemented in a short
period of time).
[14] The name of the person
or firm acting as trustee in a particular case can be obtained easily on the
website of the European Commission, via the case search tool (in the section
‘Other case related information’, an item ‘Trustee details’ will be listed).
[15] ‘BASF closes
acquisition of businesses and assets from Bayer’ (BASF, 1 August 2018)
<www.basf.com/global/en/media/news-releases/2018/08/p-18-285.html>
accessed 4 December 2020.
[16] Alexandre Bertuzzi and others, ‘Bayer /
Monsanto - protecting innovation and product competition in seeds, traits and
pesticides’ [2018] Competition merger brief 6 (issue 2), 11; ‘Justice
Department Secures Largest Negotiated Merger Divestiture Ever to Preserve
Competition Threatened by Bayer’s Acquisition of Monsanto’ (U.S. Department
of Justice, 29 May 2018) <www.justice.gov/opa/pr/justice-department-secures-largest-merger-divestiture-ever-preserve-competition-threatened>
accessed 4 December 2020.
[17] M.7881 – AB InBev /
SABMiller, Commission decision of 24 May 2016.
[18] M.7932 – Dow /
DuPont, Commission decision of 27 March 2017.
[19] M.7278 – General Electric /
Alstom (thermal power - renewable power & grid business), Commission decision of
8 September 2015.
[20] M.7252 – Holcim / Lafarge,
Commission decision of 15 December 2014. A commentary on the case mentions that
the remedy was ‘a structural remedy of an unprecedented size’. See Daniele
Calisti and Jean-Christophe Mauger, ‘Holcim / Lafarge: paving the way to first
phase clearance’ (2015) Competition merger brief 20.
[21] M.7567 – Ball / Rexam, Commission decision of
15 January 2016.
[22] François Blanc, Les engagements
dans le droit français des concentrations (LGDJ 2015) 4-6 (writing, in
relation to remedies in French competition law: ‘Autrement dit, les engagements
se transforment en un acte administratif réglementant la concentration ;
cette opération devient alors le vecteur d'une configuration nouvelle des
marchés, imposée par l'administration et dans laquelle celle-ci interviendra à
de multiples reprises. En somme, les engagements mettent la concentration au
service d'une organisation administrative de l'économie.’).
[23] Commission’s pleadings cited in
Case C-551/10 P Editions Odile Jacob v Commission [2012] EU:C:2012:681, Opinion
of AG Mazák, para 74 .
[24] See, e.g., Answer by Ms Vestager to
parliamentary question P-003845/2019 from Othmar Karas, 6 January 2020
(addressing a question relating to job losses in a plant in Fürstenfeld,
Austria; the plant was divested in the context of a remedy and the purchaser
decided to discontinue the production of air compressors at the plant). See
also Case T-12/93 Comité Central d’Entreprise de la Société Anonyme Vittel
et al. v. Commission, EU:T:1995:78, para. 58. In that case, employee representatives
sought the annulment of a divestiture remedy arguing, among others, that the
divestiture would entail the loss of collective employee benefits and the loss
of jobs. The General Court rejected the action as inadmissible (para. 60),
noting that the Commission’s decision requiring the divestiture is not, in and
of itself, the direct cause of any job losses or a loss of collective benefits
(paras 58-59). The General Court did declare the action admissible to the
extent that it aimed at ensuring protection of the procedural guarantees of
employee representatives, but it found that the Commission had respected those.
[25] See section 4.2.2 (The structural
vs. behavioural debate), where the call from some governments for the more
frequent use of behavioural remedies is discussed. See also, e.g., Alain
Chatillon and Olivier Henno, ‘Rapport d’information fait au nom de la
commission des affaires économiques et de la commission des affaires
européennes sur la modernisation de la politique européenne de concurrence’,
French Senate, 8 July 2020 (arguing the Commission’s remedies policy should
change in order to reconcile it with a European industrial strategy);
Inspection générale des finances et Conseil général de l’économie, ‘Rapport sur
la politique de la concurrence et les intérêts stratégiques de l’UE’ (3 June
2019) 14 (reviewing EU competition policy from the perspective of the European
Union’s strategic interests and arguing that the prevalence of structural
remedies in EU merger control leads to ‘the risk of compelling European players
to withdraw from activities or dispose of strategic assets in favour of
competitors from outside Europe’).
[26] See, e.g., Margrethe Vestager, ‘The
future of EU merger control’ (International Bar Association’s 24th Annual
Competition Conference, 11 September 2020)
<https://ec.europa.eu/commission/commissioners/2019-2024/vestager/announcements/future-eu-merger-control_en>
accessed 4 December 2020.
[27] See, e.g., Pedro Pita Barros, Joseph A.
Clougherty and Jo Seldeslachts, ‘Remedy for Now but Prohibit for Tomorrow: The
Deterrence Effects of Merger Policy Tools’ (2007) CEPR Discussion Paper No.
DP6437, <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1138550>
accessed 4 December 2020.
[28] A meta-analysis is an
analysis of multiple prior studies to develop findings that have greater
statistical power than any of the individual studies alone.
[29] John Kwoka, Mergers,
Merger Control and Remedies: A Retrospective Analysis of U.S. Policy
(MIT Press 2015).
[30] To be more precise: 49
transactions, 42 of which were mergers; the others were either joint ventures
or airline ‘code shares’.
[31] John Kwoka, Mergers,
Merger Control and Remedies: A Retrospective Analysis of U.S. Policy,
120, table 7.9. The mergers remedied with a divestiture accounted for seven of
the 12 remedied mergers.
[32] Initially, Kwoka had found an average price
increase of 16%, based on five mergers with conduct remedies. However, Kwoka
later had to exclude three of those five mergers (the studies measuring the
price increases in those mergers had measured the price increase in years when
the remedy was not in force). This led Kwoka to revise the estimate to 13.33%,
based on two mergers only. Kwoka acknowledged that this was too few ‘for
reliable inferences about conduct remedies’. See John Kwoka, ‘Mergers, Merger
Control, and Remedies: A Response to the FTC Critique’ (2017)
<https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2947814> accessed 4
December 2020, 21.
[33] John Kwoka, Mergers,
Merger Control and Remedies: A Retrospective Analysis of U.S. Policy
(MIT Press 2015) 159.
[34] Michael Vita and F. David Osinski, ‘John
Kwoka’s Mergers, Merger Control, and Remedies: a Critical Review’ (2018)
82 Antitrust Law Journal 361, 363. This critique in turn triggered a response
from John Kwoka, ‘Mergers, Merger Control, and Remedies: A Response to the FTC
Critique’ (2017)
<https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2947814> accessed 4
December 2020.
[35] Peter Ormosi, Franco Mariuzzo and Richard
Havell, ‘A review of merger decisions in the EU: What can we learn from ex-post
evaluations?’ (European Commission, 2016)
<https://ec.europa.eu/competition/publications/reports/kd0115715enn.pdf>
accessed 4 December 2020.
[36] Ormosi, Mariuzzo and
Havell, ‘A review of merger decisions in the EU: What can we learn from ex-post
evaluations?’ 11.
[37] Ormosi, Mariuzzo and
Havell, ‘A review of merger decisions in the EU: What can we learn from ex-post
evaluations?’ 11.
[38] Richard Havell, Franco Mariuzzo and Peter
Ormosi, ‘A Review of Merger Decisions in the EU’ in Fabienne Ilzkovitz and
Adriaan Dierx (eds), Ex Post Economic Evaluation of Competition Policy: The
EU Experience (Wolters Kluwer 2020) 51. For unconditionally approved
mergers, the authors arrived at a price increase of 5%, similar to the EU
study.
[39] Ormosi, Mariuzzo and
Havell, ‘A review of merger decisions in the EU: What can we learn from ex-post
evaluations?’ 12.
[40] Ormosi, Mariuzzo and
Havell, ‘A review of merger decisions in the EU: What can we learn from ex-post
evaluations?’ 12.
[41] Ormosi, Mariuzzo
and Havell, ‘A review of merger decisions in the EU: What can we learn from
ex-post evaluations?’ 6, table 1. The case was M.3161 – CVRD / CAEMI, a
merger cleared subject to a divestiture remedy.
[42] The meta-analysis
published in 2020 by Havell, Mariuzzo and Ormosi included three mergers with
remedies approved by the European Commission. This number also seems to be too
limited to draw any conclusions. The three cases were M.3161 - CVRD / CAEMI
(divestiture), M.3916 - T-Mobile / tele.ring (divestiture of assets),
and M.4180 - GDF / Suez (divestiture remedy). For the data on M.3916 - T-Mobile
/ tele.ring, the meta-analysis relied on data drawn from European
Commission, ‘Ex-post evaluation analysis of two mobile telecom mergers:
T-Mobile/tele.ring in Austria and T-Mobile/Orange in the Netherlands’ (2015).
[43] See, e.g., M.8947
– Nidec / Whirlpool (Embraco business), Commission decision of April
2020. This acquisition was approved subject to Nidec divesting plants in
Austria, Slovakia and China. However, the purchaser of these plants
subsequently decided to discontinue a manufacturing line in Austria, and Nidec
ultimately re-acquired that part of the divestiture, after obtaining a waiver
from the Commission. M.7637 – Liberty Global / BASE Belgium, Commission
decision of 4 February 2016. This acquisition was approved subject to BASE
divesting mobile virtual network operators Mobile Vikings and Jim Mobile to a
new entrant in the retail mobile market. However, in December 2020, that new
entrant announced that it would sell the businesses it had acquired in the
divestiture process to the number one mobile retail operator in the market. As
explained in section 4.4.2 (Telecoms sector), remedies in several telecoms
cases have also been criticized as ineffective.
[44] The ICN’s Remedies
Guide, which embodies a compromise text agreed upon by over 140 competition
authorities, states that ‘competition authorities generally prefer structural
relief in the form of a divestiture to remedy the anticompetitive effects of
mergers, particularly horizontal mergers’. ‘Merger Remedies Guide’ (International
Competition Network, 2016) <www.internationalcompetitionnetwork.org/wp-content/uploads/2018/05/MWG_RemediesGuide.pdf>
accessed 4 December 2020, 9.
[45] European Commission, DG COMP, ‘Merger
Remedies Study’ (October 2005) (Merger Remedies Study).
[46] Merger Remedies Study,
167, para 1.
[47] Merger Remedies Study,
167, para 1.
[48] Merger Remedies Study, 133,
chart 26. ‘Effective’ remedies were defined as remedies that clearly achieved
their competition objective.
[49] Merger Remedies Study,
133, chart 26. ‘Partially effective’ remedies were defined as remedies that
experienced design and implementation issues which were not fully resolved
three to five years after the divestiture and which may have partially affected
the competitiveness of the divested business. For access remedies in this
category access was not granted to the extent determined in the Commission’s
conditional clearance decision and may have led to a situation where the
foreclosure concerns were not fully resolved. ‘Ineffective’ remedies were
defined as remedies that failed to restore competition as foreseen in the
Commission’s conditional clearance decision, either because the divested
business was no longer operating or did not even begin competing within three
to five years, or because market access was not granted during the evaluation
period.
[50] Merger Remedies Study,
134, charts 28 and 29.
[51] Peter Ormosi, Franco Mariuzzo and Richard
Havell, ‘A review of merger decisions in the EU: What can we learn from ex-post
evaluations?’ (European Commission, 2016)
<https://ec.europa.eu/competition/publications/reports/kd0115715enn.pdf>
accessed 4 December 2020; Richard Havell, Franco Mariuzzo and Peter Ormosi, ‘A
Review of Merger Decisions in the EU’ in Fabienne Ilzkovitz and Adriaan Dierx
(eds), Ex Post Economic Evaluation of Competition Policy: The EU Experience
(Wolters Kluwer 2020) 43-78.
[52] See, e.g., Thomas
Hoehn, ‘Challenges in Designing and Implementing Remedies in Innovation
Intensive Industries and the Digital Economy’ in Damien Gerard and Assimakis
Komninos (eds), Remedies in EU Competition Law: Substance, Process
and Policy (Wolters Kluwer 2020) 121, 146; Dorte Hoeg, European Merger Remedies – Law
and Policy (Hart Publishing 2014) 206 (‘Disregarding the exact format, it
is considered that the time is ripe for the Commission to undertake further
ex-post evaluations, as they are instrumental to the formulation of possible
new initiatives and/or change of directions’).
[53] Margrethe Vestager,
‘The future of EU merger control’ (International Bar Association’s 24th Annual
Competition Conference, 11 September 2020)
<https://ec.europa.eu/commission/commissioners/2019-2024/vestager/announcements/future-eu-merger-control_en>
accessed 4 December 2020.
[54] The European Commission
frequently uses the term ‘antitrust’ to refer to enforcement activity in
relation to Article 101 TFEU, but without cartels, and Article 102 TFEU.
[55] Council Regulation (EC) No 1/2003 of 16
December 2002 on the implementation of the rules on competition laid down in
Articles 81 and 82 of the Treaty [2003] OJ L1/1, art 7(1) (giving the
Commission the power to impose ‘any behavioural or structural remedies which
are proportionate to the infringement committed and necessary to bring the
infringement effectively to an end’).
[56] Implementing Regulation, art 9(1).
[57] Implementing
Regulation, art 20(1a).
[58] EU Merger Regulation,
art 6(2), second sentence and art 8(2), second sentence.
[59] EU Merger Regulation,
art 2(3).
[60] EU Merger Regulation,
art 8(2) provides that the Commission may attach to its decision
conditions and obligations intended to ensure that the undertakings concerned
comply with their commitment (emphasis added). In practice, the Commission
invariably does so.
[61] The Commission
publishes these decisions on its website with a cover page that mentions
‘Article 6(1)(b) in conjunction with Art
6(2)’.
[62] Case T-119/02 Royal Philips
Electronics NV v Commission [2003] EU:T:2003:101, para 79.
[63] Commission, ‘Commission
notice on remedies acceptable under Council Regulation (EC) No 139/2004 and
under Commission Regulation (EC) No 802/2004’, [2008] OJ C 267/1 (Remedies
Notice), para 81.
[64] EU Merger Regulation, rec 30; Case
T-282/02 Cementbouw v Commission [2006] EU:T:2006:64, para 307
(commitments must not only be proportionate to the competition problem
identified but must eliminate it entirely); Remedies Notice, para 9.
[65] Case T-210/01 General Electric Company
v Commission [2006] EU:T:2005:456, para 52 (commitments must be
comprehensive and effective from all points of view); Case T-87/05, EDP –
Energias de Portugal v Commission [2005] EU:T:2005:333, para 105
(commitments ‘must be full and effective from all aspects’). This language is
also adopted in Remedies Notice, para 9.
[66] Case C-132/19 P Groupe Canal + v
Commission [2020] EU:C:2020:1007, para. 104 (repeating the first part of the
sentence, but omitting the second part); Case T-177/04 easyJet v Commission
[2006] EU:T:2006:187, para 133 (rejecting third party easyJet’s argument that
the Commission should have imposed broader remedies because easyJet did not
show that competition would not be maintained by the more narrow remedies);
Case T-704/14, Marine Harvest v Commission [2020] EU:C:2020:149, para
580 (restating the implications of the principle of proportionality in relation
to fines for procedural infringements of the EU Merger Regulation; on appeal
this point was not revisited).
[67] Case C-202/06 P Cementbouw
Handel & Industrie v Commission [2007] EU:C:2007:814, para. 52.
[68] See Case C-441/07 P Commission v
Alrosa [2010] EU:C:2010:377, para. 38 (finding, in the context of
commitments made binding under Article 9 of Regulation 1/2003, that the
principle of proportionality ‘has a different extent and content’, depending on
whether it is considered in relation to decisions based on Article 7
(infringement decisions) or Article 9 (commitments decision) of Regulation
1/2003).
[69] EU Merger Regulation, rec 30; Case C-202/06 P Cementbouw Handel & Industrie v
Commission [2007] EU:C:2007:814, para 54 (‘[i]t is necessary, when
reviewing the proportionality of conditions or obligations which the commission
may (…) impose on the parties to a concentration (…) to be satisfied that those
conditions and those obligations are proportionate to and would entirely
eliminate the competition problem that has been identified.”
[70] Case T-282/02 Cementbouw
v Commission [2006] EU:T:2006:64, para 307.
[71] Case C-202/06 P Cementbouw
Handel & Industrie v Commission [2007] EU:C:2007:814, para 54. On this
judgment, see: Gudrun Schmidt, Ulrich von Koppenfels and Vincent Verouden, ‘ECJ
upholds Commission decision in Dutch building materials case CVK’ (2008) 1
Competition Policy Newsletter, 70-75.
[72] Remedies Notice, para
23.
[73] See European Commission, ‘OECD Roundtable on the Extraterritorial Reach
of Competition Remedies - Note by the European Union’, DAF/COMP/WP3/WD(2017),
OECD Directorate For Financial And Enterprise Affairs Competition Committee,
4-5 December 2017, 5, para 12-13 (giving the example of M.8124 – Microsoft /
LinkedIn, Commission decision of 6 December 2016, where the behavioural
remedies were limited to the EEA, and M.8258 – Advent International /
Morpho, Commission decision of 19 April 2017, where the divestiture was
limited to France).
[74] Case C-551/10 P Editions Odile Jacob v
Commission [2012] EU:C:2012:681, Opinion of AG Mazák, para 74 .
[75] Remedies Notice, para
9.
[76] Remedies Notice, para
9.
[77] Remedies Notice, para
63.
[78] M.8677 – Siemens /
Alstom, Commission decision of 6 February 2019, para 1541 and following.
The Commission also found that ‘very few if any signalling suppliers would be
able to complete the migration within the four year period provided for under
the commitments’ (para 1667).
[79] M.8677 – Siemens / Alstom,
Commission decision of 6 February 2019, paras 1666-1667.
[80] M.4439 –
Ryanair / Aer Linugus (I) Commission decision of 27 June 2007, para
1227-1233.
[81] M.4439 – Ryanair / Aer
Linugus (I) Commission decision of 27 June 2007, para 1232.
[82]E.g., M.7000 – Liberty
Global / Ziggo, Commission decision of 30 May 2018, para. 57 of the
commitments (commitments not to restrict TV broadcasters’ ability to offer
their content over-the-top (OTT), i.e. via the internet, and to ensure
sufficient interconnection capacity).
[83] E.g., M.9064 – Telia
– Company / Bonnier Broadcasting Holding, Commission decision of 12
November 2019, commitments annexed to the decision, para. 80.
[84] E.g. M.3083 – GE /
Instrumentarium, Commission decision of 2 September 2003; M.4180 – Gaz de
France / Suez, Commission decision of 14 November 2006. The remedies in Gaz
de France / Suez were partly lifted in 2020 based on a request under the
review clause; ‘Contrôle des concentrations: La Commission lève en partie les
engagements pris par Gaz de France pour obtenir l'autorisation de son
acquisition de Suez en 2006’ (European Commission Daily News, 27 October
2020).
[85] Remedies Notice, para
8; Case T-210/01 General Electric Company v Commission [2006]
EU:T:2005:456, para 52 (‘It was for the parties to the merger to put forward
commitments which were comprehensive and effective from all points of view and
to do so in principle before 14 June 2001 [the last possible day on which
commitments could be proposed]’.
[86] Remedies Notice, para
8.
[87] See, e.g., Case
T-342/99 Airtours v Commission [2004] EU:T:2004:192, para 63; Case
T-87/05, EDP – Energias de Portugal v Commission [2005] EU:T:2005:333,
para 61; Case T-399/16 CK Telecoms UK Investments v Commission [2020]
EU:T:2020:217, para 107.
[88] Case T-87/05, EDP –
Energias de Portugal v Commission [2005] EU:T:2005:333, para 62; Remedies
Notice, para 8. See also Case C-413/06 P, Bertelsmann and Sony Corporation
of America v IMPALA [2008] EU:C:2008:392, para. 48-52 (rejecting the appellants’
argument that clearance decisions and prohibition decisions are subject to a
different burden and standard of proof, by finding that there is no general
presumption that a notified concentration is compatible with, or incompatible
with, the internal market).
[89] Case T-87/05, EDP –
Energias de Portugal v Commission [2005] EU:T:2005:333, para 62, in fine.
[90] Case T-87/05, EDP –
Energias de Portugal v Commission [2005] EU:T:2005:333, para 65;
Case T-342/07, Ryanair v. Commission [2010] EU:T:2010:280; Case
T-175/12, Deutsche Börse v Commission [2015] EU:T:2015:148, para 64.
[91] Case T-87/05, EDP –
Energias de Portugal v Commission [2005] EU:T:2005:333, para 65;
Case T-342/07, Ryanair v. Commission [2010] EU:T:2010:280; Case
T-175/12, Deutsche Börse v Commission [2015] EU:T:2015:148, para 64.
[92] ‘Mergers: Commission cuts red tape for
businesses’ (European Commission Press Release, 5 December 2013).
[93] Alexander Italianer,
‘Legal certainty, proportionality, effectiveness: the Commission's practice on
remedies’ (Charles River Associates Annual Conference, 5 December 2012)
<https://ec.europa.eu/competition/speeches/text/sp2012_07_en.pdf>
accessed 4 December 2020 (‘This is why discussions on remedies with the parties
are essential, though of course they are not a bargaining process.’).
[94] See, ‘DG Competition
Best Practices on the conduct of EC merger control proceedings’ (European
Commission, 20 January 2004)
<https://ec.europa.eu/competition/mergers/legislation/proceedings.pdf> accessed
6 December 2020, para 41: ‘a notifying party should contact DG Competition in
good time before the relevant deadline in Phase I or Phase II, in order to be
able to address comments DG Competition may have on the draft proposal.’
[95] Remedies Notice, para
78.
[96] M.7585 – NXP Semiconductors /
Freescale Semiconductor, Commission decision of 17 September 2015. The
remedies disucssions in pre-notification are mentioned in Salvatore De Vita,
Luca Manigrassi, Andreea Staicu and Teodora Vateva, ‘NXP / Freescale: Global
remedies in a 3 to 3 semiconductor merger’ [2015] Competition merger brief 15,
16 (‘[d]iscussing clear-cut structural remedies during pre-notification helped
the merging parties to obtain a quick phase I clearance’). Another example is
M.7252 – Holcim / Lafarge, Commission decision of 15 December 2014. On
this case see Daniele Calisti and Jean-Christophe Mauger, ‘Holcim / Lafarge:
paving the way to first phase clearance’, [2015] Competition
merger brief 20 (pointing out that the discussion of remedies in
pre-notification helped pave the way to a Phase I conditional clearance but
also highlighting that this approach is exceptional and was only possible
because the remedies were structural and clear-cut). See also M.7499 – Altice
/ PT Portugal, Commission decision of 20 April 2015 (initially proposed
commitments submitted on the same day as notification of the concentration).
[97] Salvatore De Vita, Luca Manigrassi,
Andreea Staicu and Teodora Vateva, ‘NXP / Freescale: Global remedies in a 3 to
3 semiconductor merger’ [2015] Competition merger brief 15, 16.
[98] Remedies Notice, para
80 (for remedies in Phase I) and 92 (for remedies in Phase II). The Commission
also consults the authorities of the Member States on the proposed remedies.
Particularly in cases where competition concerns affect national markets,
competition authorities.
[99] M.7995 – Deutsche Börse /
London Stock Exchange, Commision Decision of 29 March 2017, para 954 and
following.
[100] Implementing Regulation, Art. 20(2);
Remedies Notice, para. 79(d); para. 91(d).
[101] See, e.g., M.8677
– Siemens / Alstom, Commission decision of 6 February 2019, paras. 1559, 1601,
1695 (non-confidential version did not contain information about the role,
expertise and current function of key personnel and personnel, making it
impossible for the Commission to test the remedies on this point; the remedies
were rejected).
[102] Remedies Notice, para
80 (‘when considered appropriate’) and para 92 (which refers to para 80). By
contrast, in the field of Articles 101 and 102 TFEU, the Commission is obliged
to conduct a market test if it intends to adopt a decision making
commitments binding (own emphasis). Regulation 1/2003, art 27(4).
[103] See, e.g. M.8900 – Wieland /
Aurubis Rolled Products Schwermetall, Commission decision of 5 February
2019, para 734 (remedies submitted in Phase II (prior to the statement of
objections) were not market tested because they ‘were not sufficient to
eliminate the competition concerns’); M.7932 – Dow / DuPont, Commission
decision of 27 March 2017, para 17 (remedies submitted in Phase I were not
market tested); M.8084 – Bayer / Monsanto, Commission decision of 21
March 2018, para 14 (remedies submitted in Phase I were not market tested
‘because they did not address all the areas of serious doubts that had been
identified by the Commission’); M.7637 – Liberty Global / BASE Belgium, Commission
decision of 4 February 2016, para 426 (first set of remedies submitted in Phase
I were not market tested 'in view of the substantial shortcomings of the
commitments, which would not remove the serious doubts); M.8633 – Lufthansa
/ Certain Air Berlin Assets, Commission decision of 21 December 2017, para
293 (remedies initially proposed in Phase I ‘were not sufficiently clear to
allow for a market test, as respondents would not have been able to
sufficiently understand the scope of the proposed commitments’); M.6663 – Ryanair
/ Aer Lingus III, Commission decision of 27 February 2017, para 1702-1705
(Commission refuses to market test remedies submitted in Phase II (but prior to
a Statement of Objections) because they did not cover all routes for which
serious doubts had been raised).
[104] See, e.g., M.4066 – CVC / SLEC, Commission
decision of 20 March 2006, para 76 (‘Given the scope of the package, it
has therefore been considered that there is no need for a market test’).
[105] This flows from the requirements for
‘late remedies’ to be considered by the Commission. See Remedies Notice, para 94
(remedies submitted after the legal deadline are only acceptable if, among
others, there is no need for an additional market test). For an example, see
M.8677 – Siemens / Alstom, Commission decision of 6 February 2019, paras 1306
and 1308 (a second and third package of proposed commitments in Phase II were
submitted after the deadline and were not market tested).
[106] M.9076 – Novelis / Aleris, Commission
decision of 1 October 2019, para. 1027 (commitments submitted on day 67, two
days after the 65 working day deadline, were exceptionally market tested).
[107] Cf., in the context of commitments
in the field of Articles 101 and 102 TFEU, Céline Gauer, ‘Les tests de marché
dans les procédures d’engagements en droit européen des ententes et des abus de
position dominante’, [2013] Concurrences No. 1-2013, para. 15 (‘l’analyse des
résultats d’un test de marché ne peut se limiter à un exercise arithméthique
visant à établir la position d’une majorité de réponses, mais doit tenir compte
du contexte dans lequel elles ont été formulées’).
[108] See, e.g. M.8084 – Bayer
/ Monsanto, Commission decision of 21 March 2018, para 3094; M.8444 – ArcelorMittal
/ Ilva, Commission decision of 7 May 2018, para 1329 (assessment of
the market test is based on the totality of the replies, with a particular
focus on the replies that expressed a substantiated opinion); M.8900 –
Wieland / Aurubis Rolled Products Schwermetall, Commission decision of 5
February 2019, para. 792 (Commission cannot look at specific opinion – such as
those of competitors – in isolation, but must also attach the appropriate
weight to all responses to the Commission’s questionnaire, including the
submissions by industrial customers).
[109] See, e.g., M.8084 – Bayer / Monsanto, Commission decision of
21 March 2018, para 3094.
[110] See e.g. M.8900 –
Wieland / Aurubis Rolled Products Schwermetall, Commission decision of 5
February 2019, para 794 (Commission finds that replies of four competitors –
expressing a favourable opinion on the adequacy of the remedy - may have been
influenced by their interest in buying the remedy package).
[111] See EU Merger
Regulation, art 19(1); Remedies Notice, para 80.
[112] See, e.g., M.7612 –
Hutchison
3G UK / Telefonica UK, Commission decision of 11 May 2016, paras 3052-3055 (Commission takes
into account the comments from various national competition authorities on the
proposed commitments).
[113] See, e.g., M.6992 – Hutchison 3G UK /
Telefónica Ireland, Commission decision of 28 May 2014
(national telecom regulators were consulted on proposed remedies in relation to
a merger
between mobile network operators in Ireland); M.7612 – Hutchison 3G UK /
Telefonica UK, Commission decision of 11 May 2016, para 2619 (national telecom
regulators were consulted on proposed remedies in relation to a merger between
mobile network operators in the UK).
[114] M.8677 – Siemens / Alstom, Commission
decision of 6 February 2019 para 1302.
[115] Remedies Notice, para
83 (for Phase I remedies) and para 93 (for Phase II remedies).
[116] Remedies Notice, para
83, which also sets out what types of modifications can be accepted.
[117] Remedies Notice, para
83.
[118] Case T-87/05, EDP – Energias de
Portugal v Commission [2005] EU:T:2005:333, para 161.
[119] Remedies Notice, para
94.
[120] Remedies Notice, para
94.
[121] See, e.g. ‘Merger
Remedies Guide’ (International Competition Network, 2016) <www.internationalcompetitionnetwork.org/wp-content/uploads/2018/05/MWG_RemediesGuide.pdf>
accessed 4 December 2020, 7. Other classifications are possible. See, for
instance, Merger Remedies Study, 17. (classifying the remedies analysed in the
study into four types: (1) commitments to transfer a market position, (2)
commitments to exit from a joint venture, (3) commitments to grant access, and
(4) other commitments).
[122] Remedies Notice, para
15.
[123] These remedies are
discussed in greater detail in section 4.4.
[124] Case T-158/00 ARD v
Commission [2008] EU:T:2003:246.
[125] Case T-158/00 ARD v
Commission [2008] EU:T:2003:246 para 199 (first sentence).
[126] Case T-158/00 ARD v
Commission [2008] EU:T:2003:246, para 199 (first sentence).
[127] Case T-158/00 ARD v
Commission [2008] EU:T:2003:246, para 199.
[128] Remedies Notice, para
17.
[129] Remedies Notice, para
17.
[130] Remedies Notice, para
69.
[131] Remedies Notice, para 69.
[132] Remedies Notice, para
68.
[133] Remedies Notice, para
22.
[134] Remedies Notice, para
61
[135] Remedies Notice,
para 61.
[136] Remedies Notice, 17.
[137] Remedies Notice, para
16.
[138] Carles
Esteva Mosso and Simon Vande Walle, ‘EU Merger Control: How to Remove
Anticompetitive Effects?’ in Damien Gerard and Assimakis Komninos (eds), Remedies
in EU Competition Law: Substance, Process and Policy (Wolters Kluwer
2020) 48; Wei Wang and Matti Rudanko, ‘EU Merger Remedies
and Competition Concerns: An Empirical Assessment’, 2012 European Law Journal
555, 575 (on the basis of an analysis of competition concerns and remedies in
Phase II). See, also, at the international level, ‘Merger
Remedies Guide’ (International Competition Network, 2016), 9 (noting
competition authorities’ preference fo structural relief in the form of a
divestiture, ‘particularly for horizontal mergers’).
[139] Wei Wang and Matti Rudanko, ‘EU
Merger Remedies and Competition Concerns: An Empirical Assessment’, 2012
European Law Journal 555, 575 (on the basis of an analysis of competition
concerns and remedies in Phase II). See, at the international level, ‘Merger Remedies Guide’ (International Competition
Network, 2016), 9 (noting non-structural remedies can be an effective
method to remedy likely anticompetitive effects ‘particularly in respect of a
vertical merger’).
[140] See, e.g., M.7353 – Airbus /
Safran / JV, Commission decision of 26 November 2014 (to remove input and
customer foreclosure concerns, the parties committed to keeping Safran's
plasmic propulsion systems business out of the joint venture that they were
setting up).
[141] IV/M.619 – Gencor / Lonrho, Commission
decision of 24
April 1996, para 216.
[142] Case T-102/96 Gencor
v Commission [1999] EU:T:1999:65, paras 318-319.
[143] Case T-102/96 Gencor
v Commission [1999] EU:T:1999:65, para 319.
[144] Case C-12/03 P Commission v Tetra
Laval [2005] EU:C:2005:87, para 86; Case T-177/04 easyJet v Commission
[2006] EU:T:2006:187, para 182; Case T-158/00 ARD v Commission [2008]
EU:T:2003:246, para 193;
[145] Remedies Notice, para
15.
[146] Remedies Notice, para
61.
[147] Regulation 1/2003, art
7(1), third sentence (‘Structural remedies can only be imposed either where
there is no equally effective behavioural remedy or where any equally effective
behavioural remedy would be more burdensome for the undertaking concerned than
the structural remedy.’). Some commentators deduce from this provision that
there is a preference for behavioural remedies. See, e.g., Robert O’Donoghue
and Jorge Padilla, The Law and Economics of Article 102 TFEU (Hart 2nd
ed, 2013), 880 and 887.
[148] See, e.g., Cyril Ritter, ‘How Far
Can the Commission Go When Imposing Remedies for Antitrust Infringements?’ (2016) Journal of European Competition Law & Practice
587, 596; Benjamin Loertscher and Frank Maier-Rigaud, ‘On the Consistency of
the European Commission’s Remedies Practice’ in Damien Gerard and Assimakis
Komninos (eds), Remedies in EU Competition Law: Substance, Process
and Policy (Wolters Kluwer 2020) 53, 58-59; Frank P. Maier-Rigaud,
Behavioural versus Structural Remedies in EU Competition Law, in Philip
Lowe, Mel Marquis and Giorgio Monti (eds), European Competition Law Annual
2013, Effective and Legitimate Enforcement of Competition Law (Hart
Publishing 2016) 221 (referring to the ‘myth of a subsidiarity of structural
measures’).
[149] Benjamin
Loertscher and Frank Maier-Rigaud, ‘On the Consistency of the European
Commission’s Remedies Practice’ in Damien Gerard and Assimakis Komninos (eds), Remedies
in EU Competition Law: Substance, Process and Policy (Wolters Kluwer
2020) 53, 70.
[150] See ‘Antitrust Division Policy Guide to
Merger Remedies’ (U.S. Department of Justice, Antitrust Division June
2011) <www.justice.gov/sites/default/files/atr/legacy/2011/06/17/272350.pdf>
accessed 4 December 2020, 5-6 (‘[a]ccordingly, in appropriate vertical merger
matters the Division will consider tailored conduct remedies designed to
prevent conduct that might harm consumers while still allowing the efficiencies
that may come from the merger to be realized.’). This guidance was withdrawn in
September 2018, not long after Assistant Attorney General Makan Delrahim was
confirmed (September 2017).
[151] Conduct remedies were accepted in three
vertical mergers: Comcast/NBCU (consent decree approved in 2011; see Final
Judgment, United States v. Comcast Corp., No. 1:11-cv-00106-RJL (D.D.C.
June 29, 2011)); Ticketmaster Entertainment/Live Nation (consent decree
approved in 2010; see Final Judgment, United States v. Ticketmaster Entm’t,
Inc., No. 1:10-cv-00139- RMC (D.D.C. July 30, 2010))
and Google/ITA (consent decree approved in 2011 see
Final Judgment, United States v. Google, Inc., No. 1:11- cv-00688-RLW,
(D.D.C. Oct. 5, 2011)).
[152] ‘Merger Remedies Manual’ (U.S.
Department of Justice, Antitrust Division, June 2011)
<www.justice.gov/atr/page/file/1312416/download> accessed 4 December
2020, 13. The 2020 Merger Remedies Manual followed several speeches by
Assistant Attorney General Delrahim expressing strong scepticism towards
behavioural remedies. See, e.g., Assistant Attorney General Makan
Delrahim, ‘Keynote Address’ (American Bar Association’s Antitrust Fall Forum,
16 November 2017)
<www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-keynote-address-american-bar>
accessed 4 December 2020.
[153] ‘Merger Remedies
Manual’ (U.S. Department of Justice, Antitrust Division, June 2011), 16.
[154] ‘Guidance on Remedies
in Merger Control’ (Bundeskartellamt, May 2017)
<www.bundeskartellamt.de/SharedDocs/Publikation/EN/Leitlinien/Guidance%20on%20Remedies%20in%20Merger%20Control.pdf?__blob=publicationFile&v=4
para. 23> accessed 4 December 2020, para 23.
[155] ‘Guidance on Remedies
in Merger Control’ (Bundeskartellamt, May 2017), para 26.
[156] ‘Merger Remedies’ (Competition
& Markets Authority, 13 December 2018)
<https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/764372/Merger_remedies_guidance.pdf>
accessed 4 December 2020, 17, para 3.46 (in this context, ’structural remedies’
are defined as divestitures or prohibition).
[157] ‘Engagements comportementaux’ (Autorité
de la concurrence, 2019) <www.autoritedelaconcurrence.fr/fr/publications/engagements-comportementaux>
accessed 4 December 2020, 100 (‘Ainsi, si les engagements comportementaux ne
sont généralement pas les remèdes privilégiés par l'Autorité en droit des
concentrations, ils tiennent tout de même une place non négligeable dans sa
pratique décisionnelle’).
[158] ‘Merger Remedies Guide’
(International Competition Network, 2016) 9, section 3.2.1.
[159] ‘Merger Remedies Guide’
(International Competition Network, 2016) 9, section 3.2.1.
[160] Patrick Rey, ‘Economic Analysis and the
Choice of Remedies’, in François Lévêque and Howard Shelanski, Merger
Remedies in American and European Union Competition Law (Edward Elgar 2003)
124 (concluding that ‘some behavioral remedies, and in particular access
remedies, may be more effective tools for preserving competition’); Thomas
Wilson, ‘Merger remedies – is it time to go more behavioural?’ (Kluwer Competition
Law Blog, 21 February 2020)
<http://competitionlawblog.kluwercompetitionlaw.com/2020/02/21/merger-remedies-is-it-time-to-go-more-behavioural/?print=print>
accessed 6 December 2020.
[161] ‘Modernising EU
Competition Policy’ (Bundesministerium für Wirtschaft und
Energie, Ministère de l'Économie et des Finances & Ministerstwo
Przedsiębiorczości i Technologii, 4 July 2019) pt 7 (‘Encouraging behavioural
remedies’). The call followed a French-German proposal calling for EU merger
rules to be changed (though not specifically mentioning remedies) in order to
allow for the emergence of European champions (‘A Franco-German Manifesto for a
European industrial policy fit for the 21st Century’ (Bundesministerium
für Wirtschaft und Energie and Ministère de l'Économie et des Finances, 19 February 2019)).
[162] Letter of 4
February 2020
(Bundesministerium für Wirtschaft und Energie, Ministero delle Sviluppo
Economico, Ministère de l'Économie et des Finances & Ministerstwo
Przedsiębiorczości i Technologii, 4 February 2020)
<https://www.politico.eu/wp-content/uploads/2020/02/Letter-to-Vestager.pdf>
accessed 4 December 2020.
[163] M.8677 – Siemens / Alstom,
Commission decision of 6 February 2019, para. 1688 (complexity of the OBU (on board
unit) commitments) and para. 1705 (complexity of the ETCS Wayside commitments),
paras. 1730-1736 (behavioural promises are attached to several important
aspects of the ETCS Wayside commitments).
[164] Carles Esteva Mosso and
Simon Vande Walle, ‘EU Merger Control: How to Remove Anticompetitive Effects?’
in Damien Gerard and Assimakis Komninos (eds), Remedies in EU
Competition Law: Substance, Process and Policy (Wolters Kluwer 2020) 42.
[165] See, in this sense Joseph Farrell,
‘Negotiation and Merger Remedies: Some Problems’, in François Lévêque and
Howard Shelanski, Merger Remedies in American and European Union Competition
Law (Edward Elgar 2003) 95, 95-98 (arguing that ‘the buyer is a teammate
not of the agency but of the merging parties’).
[166] Merger Remedies Study,
18.
[167] Merger Remedies Study,
167, para 3.
[168] Merger Remedies Study,
167, chart 34.
[169] Merger Remedies Study,
167, chart 34.
[170] ‘The FTC’s Merger
Remedies 2006-2012, A Report of the Bureaus of Competition and Economics’ (Federal
Trade Commission, January 2017)
<www.ftc.gov/system/files/documents/reports/ftcs-merger-remedies-2006-2012-report-bureaus-competition-economics/p143100_ftc_merger_remedies_2006-2012.pdf>
accessed 4 December 2020.
[171] Merger Remedies Study,
134 (56% of remedies transferring a market position were effective; 25% were
partially effective; 6% were ineffective and for 13% it was unclear).
[172] Remedies Notice, para
23.
[173] Remedies Notice, para
23.
[174] See, for various
constellations, Maurice de Valois Turk, ‘Merger Remedies beyond the Competition
Concern: When Could You End up Giving More?’ (2012) 3 Journal of European
Competition Law & Practice 495.
[175] M.7932 – Dow /
DuPont, Commission decision of 27 March 2017.
[176] Remedies Notice, para
30.
[177] Remedies Notice, paras 30 and 57.
[178] Remedies Notice, para
31; European Commission Model Text for Divestiture Commitments, 5 December 2013
(Model Text for Divestiture Commitments), para 18, final sentence.
[179] See, e.g., M.8947
– Nidec / Whirlpool (Embraco business) Commission decision of 12 April 2019,
paras. 339 and 350 (mentioning ‘poor financial performance of the Austrian
plant’ and, to address concerns about viability, explaining that the notifying
party ‘commits to make available to the purchaser CAPEX funding’); M.7801
– Wabtec / Faiveley, Commission decision of 4 October 2016 (commitments
included a provision requiring the seller of the divestment business to include
an incentive scheme in the sale and purchase agreement, to incentivize the
purchaser to carry out the necessary R&D investments). See Réka Bernat and
others, Wabtec / Faiveley – Braking News: Commission conditionally
clears acquisition in train equipment sector, [2017] Competition merger brief,
issue 1, 7, at 10.
[180] In M.8947
– Nidec / Whirlpool (Embraco business), the purchaser subsequently
announced that it would sell a manufacturing line in the Austrian plant and
move another manufacturing line to a different plant.
[181] Remedies Notice, para. 32.
[182] Remedies Notice, para
33.
[183] Remedies Notice, para
25.
[184] Remedies Notice, para
25.
[185] Remedies Notice, para
26.
[186] Remedies Notice, para
26.
[187] M.9076 – Novelis / Aleris,
Commission decision of 1 October 2019, para. 1062.
[188] M.9076 – Novelis / Aleris, Commission
decision of 1 October 2019, para. 1062.
[189] M.9076 – Novelis / Aleris,
Commission decision of 1 October 2019, para. 1106. A transitional supply
agreement would ensure the viability of the divested business while the
investments in the Duffel plant are made.
[190] Remedies Notice, para
35.
[191] Carles Esteva Mosso and
Simon Vande Walle, ‘EU Merger Control: How to Remove Anticompetitive Effects?’
in Damien Gerard and Assimakis Komninos (eds), Remedies in EU
Competition Law: Substance, Process and Policy (Wolters Kluwer 2020) 46.
[192] Remedies Notice, para
35.
[193] Remedies Notice, para
37.
[194] Remedies Notice, para
37.
[195] See, e.g., M.9554 - Elanco
Animal Health / Bayer Animal Health Division, Commission decision of 8 June
2020 (divestiture of intellectual property rights in relation to pharmaceutical
products for animals); M.9517 – Mylan / UpJohn, Commission decision of
22 April 2020 (divestiture of market authorisations, contracts and brands,
coupled with transitory manufacturing and supply agreements); M.7275 – Novartis
/ GlaxoSmithKline Oncology Business, Commission decision of 28 January 2015
(divestiture of the rights to two pipeline cancer treatments of Novartis).
[196] Remedies Notice,
para 11.
[197] See, e.g., M.8150 – Danone
/ The Whitewave Foods Company, Commission decision of 16 December 2016, para.
161. In that case, Danone proposed to divest its ‘growing-up milk’ business in
Belgium but this business was dependent on the supply of the product by a third
party, who had to agree to the transfer of the supply contract. During the
merger review process, Danone obtained the consent of the third party to the
transfer of the contract, thereby removing this element of uncertainty.
[198] Remedies Notice, para
54.
[199] M.7744 - HeidelbergCement
/ Italcementi, Commission decision of 26 May 2016. In that case, the
consent of a third party (LafargeHolcim) was needed in order to include in the
remedy package a stake in the joint venture running the Antoing limestone
quarry. HeidelbergCement committed not to close its acquisition of Italcementi
until an agreement with LafargeHolcim had been reached on this point.
[200] Remedies Notice, paras
44-45.
[201] Remedies Notice, para
47.
[202] Model Text for
Divestiture Commitments, section D, para 17.
[203] Remedies Notice, para
49.
[204] M.7982 – Abbott / Alere,
Commission decision of 25 January 2017, para 272.
[205] M.7801 – Wabtec / Faiveley,
Commission decision of 4 October 2016, para. 512 and 523.
[206] See, e.g., M.7567 – Ball / Rexam, Commission
decision of 15 January 2016 (requiring ‘proven expertise in the packaging
sector’).
[207] Two important moments
in the M&A process are the ‘signing’ and ‘closing’ of the transaction. The
former is the moment when the definitive agreement between buyer and seller (in
case of an acquisition) is signed. The latter is the moment when title to the
business is transferred, i.e. the shares or assets are actually transferred to
the buyer, lo;/in return for the price. However, the term ‘closing’ is not used
in the Remedies Notice or in the Model Divestiture Commitments, which instead
talk about the concentration ‘being implemented’ or ‘completed’ (Remedies
Notice, para 53). Sometimes the term ‘consummated’ is also used.
[208] See ‘Merger Remedies
Guide’ (International Competition Network, 2016) 13.
[209] Remedies Notice, para
52.
[210] Remedies Notice, para
98.
[211] Remedies Notice, para
98.
[212] Remedies Notice, para. 98. ; Model Text for Divestiture Commitments, para. 1
[213] Remedies Notice, para 98;
Model Text for Divestiture Commitments, para. 1 (definition of ‘Closing
Period’)
[214] Remedies Notice, para
53.
[215] Model Text for
Divestiture Commitments, para 3.
[216] Remedies Notice, para
54. For an example, see M.8947 – Nidec / Whirlpool (Embraco business)
Commission decision of 15 May 2020, paras 344-345, 366 (parties include upfront
buyer clause after market test reveals limited interest in purchasing the
divestment business). But see M.9779 – Alstom / Bombardier Transportation, Commission decision
of 31 July 2020, paras 1326-1336. In that case, the Commission found that only
Hitachi would be a suitable purchaser (para. 1326), yet the commitments do not
contain an upfront buyer clause or fix-it-first arrangement. However, see para.
1334, stating that discussions between the parties and Hitachi were well
advanced, suggesting a deal was within reach.
[217] Remedies Notice, para
54. For an example, see M.7982 – Abbott / Alere, Commission decision of
25 January 2017, para. 251 (upfront buyer clause included ‘in view of inter
alia the need to get third party consents (…)’).
[218] Remedies Notice, para
55.
[219] Remedies Notice, para
57.
[220] Remedies Notice, para
57.
[221] Remedies Notice, para
57.
[222] M.8102 – Valeo / FTE
Group, Commission Decision of 13 October 2017 (fix-it-first in Phase I but after
the case had already been notified once, then withdrawn, and notified again).
[223] M.7881 – AB InBev / SABMiller, Commission
decision of
24 May 2016 (fix-it-first for one of the two divestiture packages, namely the divestment
businesses in Western Europe).
[224] M.7637 – Liberty
Global / BASE Belgium, Commission decision of 4 February 2016. On the
fix-it-first remedy in that case, see Fanny Dumont, Luca Manigrassi, Staffan
Martinsson and Simon Vande Walle, ‘Liberty Global/BASE: Fixing it first in the
Belgian mobile market’ [2016] Competition merger brief 10 (issue 2) 10-12.
[225] M. 7919 - Boeringher
Ingelheim / Sanofi Animal Health Business, Commission decision of 4 August
2016.
[226] M. 7758 - Hutchison
3G Italy / Wind / JV, Commission decision of 1 September 2016.
[227] M.8102 – Valeo / FTE
Group, Commission Decision of 13 October 2017 was a Phase I case with a
fix-it-first remedy but that case had already been notified once, then
withdrawn, then notified again.
[228] M.8084 – Bayer /
Monsanto, Commission decision of 21 March 2018.
[229] M.7278 – General Electric /
Alstom (thermal power - renewable power & grid business), Commission decision of
8 September 2015 (commitments define Ansaldo as purchaser but the Commissions’
clearance decision contains neither a final approval of the purchaser’s
identity nor of the agreements.
[230] M.3916 – T-Mobile
Austria / tele.ring, Commission decision of 26 April 2006.
[231] M.8084 – Bayer
/ Monsanto, Commission decision of 21 March 2018, para. 3077 (making this
explicit).
[232] See, e.g., Dominic
Long, Catherine Wylie and David Weaver, ‘ Rising tide of ‘Fix-it-first’ and
‘Up-front Buyer’ remedies in EU and UK merger cases’ (Competition Policy
International, 9 October 2016)
<www.competitionpolicyinternational.com/rising-tide-of-fix-it-first-and-up-front-buyer-remedies-in-eu-and-uk-merger-cases/>
accessed 6 December 2020.
[233] For a helpful comparison, see Patricia
Brink, Daniel Ducore, Johannes Lübking and Anne Newton McFadden, ‘A Visitor’s
Guide to Navigating US/EU Merger Remedies’ (2016) 12 Competition Law
International 85, 88.
[235] The stake is in
principle a non-controlling stake because, if the merging party exercised
control over the competitor, it would not be considered a competitor but part
of the same undertaking. In that case, a divestiture of the controlling stake
would amount to a straightforward divestiture, not a remedy that entails the
removal of links with competitors.
[236] See, e.g., M.6541 –
Glencore
/ Xstrata, Commission decision of 22 November 2012 (Glencore
divested its minority stake in zinc metal producer Nyrstar and terminated its
exclusive off-take agreement with Nyrstar, enabling Nyrstar to compete
effectively with Glencore); IV/M.942 – Veba / Desussa,
Commission decision of 3 December 1997, para 55 and following.
[237] Merger Remedies Study,
133-136 (of the remaining three remedies cases that involved the exit from a
JV, one was considered partially effective, and in two cases the effectiveness
was unclear).
[238] Merger Remedies Study,
135.
[239] Remedies Notice, para
59.
[240] Remedies Notice, para
59.
[241] Remedies Notice, para
60.
[242] Consortia are
cooperation agreements between shipping companies for one or more trade routes
for the provision of a joint service. The members jointly agree on the capacity
that will be offered by the service, on its schedule and ports of call.
Consortia below a 30% market share threshold benefit from a block exemption
regulation. Conferences go further and also entail fixing of prices.
[243] E.g., M.7268
–
CSAV / HGV / Kühne Maritime / Hapag-Lloyd AG, Commission decision of 11 September
2014. Merger between German shipping company Hapag Lloyd and rival Compañia Sud
Americana de Vapores S.A. (‘CSAV’) approved, subject to CSAV withdrawing from
consortia that were active on the two routes for which there were competition
problems. CSAV was prohibited from re-entering into those consortia for a
period of five years. CSAV also committed, for a period of two years, not to
enter into a consortium with another competitor (Maersk), which was not a party
to the merger but is one of the world’s largest container liner shipping
companies. for a period of two years.
[244] Remedies Notice, para
62.
[245] Remedies Notice, para
62.
[246] See, e.g., M.3998 – Axalto / Gemplus, Commission decision of 19
May 2006 (FRAND access to a patent portfolio); M.7194 – Liberty
Global / Corelio / W&W / De Vijver Media Commission decision of 24
February 2015 (FRAND access to TV channels); M.6800 – PRSfM / GEMA /
STIM / JV, Commission decision of 16 June 2015 (commitment to provide
copyright services and back-office services in relation to online music
licensing on FRAND terms); M.7873 – Worldline / Equens / Paysquare,
Commission decision of 16 February 2016 (commitment to grant a license to
software on FRAND terms to address concerns in Germany, in addition to a
divestiture to address concerns in Belgium); M.8665 – Discovery / Scripps, Commission
decision of 6 February 2018 (FRAND access to TV channels); M.9064
– Telia – Company / Bonnier Broadcasting Holding, Commission
decision of 12 November 2019 (FRAND access to TV channels).
[247] Remedies Notice, para
63.
[248] Remedies Notice, para
63.
[249] Remedies Notice, para
61
[250] Case M.7878 – HeidelbergCement
/ Schwenk / Cemex Hungary / Cemex Croatia, Commission decision of 5 April
2017. An appeal against the decision was rejected. Case T-380/17 HeidelbergCement
v. Commission [2020] EU:T:2020:471.
[251] M.5984, Intel / McAfee, Commission decision of
26 January 2011.
[252] M.8124 – Microsoft / LinkedIn, Commission
decision of 6 December 2016.
[253] M.8306 – Qualcomm /
NXP, Commission decision of 18 January 2018.
[254] M.9660 – Google / Fitbit,
Commission decision of 17 December 2020, Commitments annexed to the decision,
Section A.3 (Android APIs commitments).
[255] M.9660 – Google / Fitbit,
Commission decision of 17 December 2020, Commitments annexed to the decision,
Section A.2 (Android APIs commitments).
[256] M.8744 – Daimler /
BMW / Car Sharing JV, Commission decision of 7 November 2018.
[257] M.8314 – Broadcom /
Brocade, Commission decision of 12 May 2017.
[258] M.6564 – ARM /
Giesecke & Devrient / Gemalto / JV, Commission decision of 6 November
2012.
[259] In the field of
antitrust, interoperability remedies imposed on Microsoft led to a number of
disputes and ultimately a penalty for non-compliance was imposed on
Microsoft. COMP/C 3/37.792, Microsoft, Commission decision of
12 July 2006. For a discussion, see Nicholas Economides and Ioannis Lianos, ‘A
Critical Appraisal of Remedies in the EU Microsoft Cases’ (2010) Columbia
Business Law Review 347, 358.
[260] See, e.g., M.8744 –
Daimler / BMW / Car Sharing JV, Commission decision of 7 November 2018,
commitments, para 3 (commitment to provide API access to mobility apps, to
allow them to display information about the cars of the joint venture that can
be shared); M.8124 - Microsoft / LinkedIn, Commission decision
of 6 December 2016, commitments, para 5 (commitment to make available certain Microsoft
Office APIs to competitors of LinkedIn).
[261] M.6497 – Hutchison 3G Austria / Orange
Austria, Commission decision of 12 December 2012 (merger between mobile
network operators in Austria); M.6992 – Hutchison 3G UK / Telefónica
Ireland, Commission decision of 28 May 2014 (merger between mobile network
operators in Ireland); M.7018 – Telefónica Deutschland / E-Plus, Commission
decision of 2 July 2017 (merger between mobile network operators in Germany).
[262] BEREC Report on
Post-Merger Market Developments - Price Effects of Mobile Mergers in Austria,
Ireland, and Germany’ (BoR (18) 119, BEREC 15 June 2015).
[263] M.6497 – Hutchison
3G Austria / Orange Austria, Commission decision of 12 December 2012.
[264] M.6992 – Hutchison
3G UK / Telefónica Ireland, Commission decision of 28 May 2014.
[265] M.7018 – Telefónica
Deutschland / E-Plus, Commission decision of 2 July 2017.
[266] Elena Zoido, ‘Ex Post Assessment
of Merger Remedies: An Overview of the Recent Practice in the European Union’
in Damien Gerard and Assimakis Komninos (eds), Remedies in EU Competition
Law: Substance, Process and Policy (Wolters Kluwer 2020) 249.
[267] M.7758 – Hutchison
3G Italy / WIND / JV, Commission decision of 1 September 2016.
[268] M.7758 – Hutchison
3G Italy / WIND / JV, Commission decision of 1 September 2016.
[269] M.7612 – Hutchison 3G UK / Telefonica
UK, Commission decision of 11 May 2016.
[270] M.7612 – Hutchison 3G UK / Telefonica
UK, Commission decision of 11 May 2016, para 3051.
[271] Case T-399/16 CK
Telecoms UK v European Commission [2015] EU:T:2020:217.
[272] M.7421 – Orange / Jazztel , Commission
decision of 19 May 2015.
[273] M.7194
– Liberty Global / Corelio / W&W / De Vijver Media Commission
decision of 24 February 2015 (seven-year FRAND access commitment to prevent
input foreclosure of TV channels in Belgium); M.9064 – Telia – Company
/ Bonnier Broadcasting Holding, Commission decision of 12 November 2019
(ten-year FRAND access commitment to prevent input foreclosure of TV channels
in Sweden and Finland).
[274] In the Swedish case, the commitments have
given rise to complaints from rivals that the merged entity is not providing
FRAND access. See, Andrew Boyce, ‘Telia draws Tele2 complaint to EU regulator over
Bonnier deal commitments’ (MLex, 28 January 2020); Stuart Thomson, ‘EU monitor
orders Telia to revise streaming auction after Tele2 complaint’ (Digital TV
Europe, 6 February 2020)
<www.digitaltveurope.com/2020/02/06/eu-monitor-orders-telia-to-revise-streaming-auction-after-tele2-complaint/>
accessed 4 December 2020. In the Belgian case, a subsequent change of control
was reviewed by the Belgian authority, which imposed similar FRAND commitments.
See, Simon Vande Walle, ‘Sole Control: The Belgian Competition Authority Clears
a Vertical Merger in the Audiovisual Sector, Subject to Conditions’ [2019]
Concurrences Competition Law Review 120.
[275] M.8665
– Discovery / Scripps, Commission decision of 6 February 2018 (seven year
FRAND access commitment to prevent horizontal unilateral effects).
[276] M.8665 – Discovery /
Scripps, Commission decision of 6 February 2018, para 75.
[277] M.4439 – Ryanair / Aer Linugus
(I) Commission decision of 27 June 2007; M.5830 – Aegean / Olympic I,
Commission decision of 16 January 2011; M.6663 – Ryanair / Aer Lingus III,
Commission decision of 27 February 2013.
[278] Cases were slot
remedies were approved include, in reverse chronological order, M.9287 –
Connect Airways / Flybe, Commission decision of 5 July 2019; M.7541 – IAG
/ Aer Lingus, Commission decision of 14 July 2015; M.7333 – Alitalia /
Etihad, Commission decision of 14 November 2014; M.6607 – US Airways /
American Airlines, Commission decision of 5 August 2013; M.6447 – IAG /
bmi, Commission decision of 30 March 2012; M.5440 – Lufthansa / Austrian
Airlines, Commission decision of 22 August 2009; M.5364 – Iberia / Vueling /
Clickair, Commission decision of 9 January 2009; M.5335 – Lufthansa / SN
Airholding (Brussels Airlines), Commission decision of 22 June 2009; M.3940
– Lufthansa / Eurowings, Commission decision of 22 December 2005; M.3770
– Lufthansa / Swiss, Commission decision of 4 July 2005; M.3280 – Air
France / KLM, Commission decision of 11 February 2004. Slot remedies have
also been used in several antitrust cases,
[279] In this sense, Case T-177/04 easyJet v Commission [2006]
EU:T:2006:187, para. 166 (‘As the Commission has rightly demonstrated
(…), the main barrier to entry in the air transport sector is the lack of
available slots at the large airports.’).
[280] Remedies Notice, para
63, second sentence.
[281] See, e.g., M.9287 – Connect
Airways / FlyBe, Commission decision of 5 July 2019, para 620.
[282] Jonathan Faull and Ali Nikpay, The
EU Law of Competition (3d edn, OUP 2014) 1807.
[283] Jonathan Faull and Ali
Nikpay, The EU Law of Competition (3d edn, OUP 2014) 1807.
[284] See, e.g., M.7541 – IAG
/ Aer Lingus, Commission decision of 14 July 2015.
[285] Remedies Notice, para
69.
[286] Remedies Notice, para
69.
[287] Case C-12/03 P- Commission
v Tetra Laval [2005] EU:C:2005:87, para 88.
[288] Case C-12/03 P- Commission
v Tetra Laval [2005] EU:C:2005:87, para 83.
[289] Case C-12/03 P Commission
v Tetra Laval [2005] EU:C:2005:87, para 85; see also para. 89: ‘the
Commission ought to have taken a count of the commitments submitted by Tetra
with regard to that entity’s future conduct’. On the precise implications of
this judgment, see Götz Drauz, ’Conglomerate and vertical mergers in the light
of the Tetra Judgement‘ [2015] Competition Policy Newsletter, 35-39.
[290] M.7724 – ASL / Arianespace,
Commission decision of 20 July 2016 (commitment to implement firewall measures
and put in place measures restricting the mobility of employees between
companies). But see, European Commission, ‘Remedies in Merger Cases’,
Submission to OECD Working Party No. 3 on Co-operation and Enforcement, 28 June
2011, DAF/COMP/WP3/WD(2011)59, 6 (‘We have also found that firewalls are
virtually impossible to monitor’).
[291] M.6800
– PRSfM / GEMA / STIM / JV, Commission decision of 16 June 2015. The
concentration in that case was a joint
venture set up by three collecting societies to license music for
online use. The
Commission accepted a commitment by one of the parties, with a particularly
valuable collection of copyrights, not to bundle the granting of
a mandate to license those rights to other services. The commitment also
included a commitment to provide services on FRAND terms.
[292] M.7220 – Chiquita / Fyffes,
Commission decision of 3 October 2014 (commitment to release the shipping
company Maersk from an exclusivity clause and to refrain from agreeing similar
exclusivity provisions with shipping companies or incentivising shipping
companies to refuse to provide services for other banana companies).
[293] See, on the methods of interpretation of
EU law: Koen Lenaerts and José A. Guttiérrez-Fons, ‘To Say What the Law of the
EU Is: Methods of Interpretation and the European Court of Justice’, (2014) 20
Columbia Journal of European Law 3.
[294] See also, Remedies
Notice, para 102: ‘In assessing any proposed purchaser, the commission will
interpret the purchase requirements in the light of the purpose of the
commitments, to mediately maintain effective competition in the market where
competition concerns had been found and of the market circumstances except out
in the decision’).
[295] Perhaps to pre-empt that
argument, in some cases, the commitments text itself also specifies the purpose
of the commitments.
[296] Koen Lenaerts and José A.
Guttiérrez-Fons, ‘To Say What the Law of the EU Is: Methods of Interpretation
and the European Court of Justice’, (2014) 20 Columbia Journal of European Law
3, 31.
[297] Case T-342/00 Petrolessence and SG2R v
Commission [2003] EU:T:2003:97, para 118; see also paras 61-66; paras
104-121. This point is now explicitly set out in the Remedies Notice, para 102.
[298] Implementing
Regulation, art 20a(1).
[299] Remedies Notice, para
117.
[300] See, e.g., M.8633 – Lufthansa / Certain Air
Berlin Assets, Commission decision of 21 December 2017, in which Lufthansa committed to
amend its share purchase agreement, within 10 days of the Commission decision,
so as to acquire fewer slots. In these commitments, no monitoring trustee was
appointed.
[301] Remedies Notice, para
118.
[302] Remedies Notice, para
119.
[303] European Commission
Model Text for Trustee Mandate, 5 December 2013 (Model Text for Trustee
Mandate).
This is part of ‘Best Practice Guidelines: The Commission’s Model Texts for
Divestiture Commitments and the Trustee Mandate under the EC Merger Regulation’
(European Commission, 5 December 2013).
[304] Implementing
regulation, art 20a(1): ‘The trustee may be appointed by the parties, after the
Commission has approved its identity, or by the Commission.’
[305] Remedies Notice, para
123-126.
[306] Model Text for
Divestiture Commitments, para 19-26.
[307] Remedies Notice, para 124;
Model Text for Divestiture Commitments, para 24.
[308] Remedies Notice, para
123.
[309] Model Text for
Divestiture Commitments, para 23.
[310] See, e.g., M.8444, ArcelorMittal
/ Ilva, Commission decision of 17 April 2019 (purchaser approval decision),
para. 10. The decision states that ArcelorMittal proposed a monitoring trustee
on 4 May 2018. This was three days prior to the Commission’s conditional clearance
decision of 7 May 2018. The Commission approved the trustee on 8 May 2018.
[311] Although not a trustee,
the independent adviser was subject to substantially similar safeguards as a
monitoring trustee (independence, conflicts of interest, remuneration, etc.).
[312] M.8084 – Bayer /
Monsanto, Commission decision of 21 March 2018, para. 3086-3089
[313] Remedies Notice, para
124.
[314] Implementing
regulation, art 20a(1); Remedies Notice, para 126.
[315] Model Text for Trustee
Mandate, para 30.
[316] Remedies Notice, para
124 and para 126; Model Text for Divestiture Commitments, para 24.
[317] Remedies Notice, para
126.
[318] Model Text for
Divestiture Commitments, para 15.
[319] Model Text for
Divestiture Commitments, para 28(iv) (listing the review of the information
memorandum as one of the tasks of the monitoring trustee).
[320] On the duration of the
first divestiture period, see Section 4.2.7.1 (Standard arrangement).
[321] See, among others,
Remedies Notice, para 97; Model Text for Divestiture Commitments, para 20
(appointment of divestiture trustee) and para 30 (duty of divestiture trustee
is to sell at no minimum price).
[322] Model Text for
Divestiture Commitments, para 14.
[323] Remedies Notice,
para 101.
[324] Model Text for
Divestiture Commitments, para 18.
[325] Model Text for
Divestiture Commitments, para 18.
[326] See, Remedies Notice,
para 105 (stating that the Commission also needs to approve all the other
agreements).
[327] Remedies Notice, para
119 (third hyphen).
[328] Model Text for
Divestiture Commitments, para 28(viii).
[329] Model Text for
Divestiture Commitments, para 28(viii).
[330] It has been suggested
that this one week period is overly ambitious. See Thomas Hoehn, ‘Challenges in
Designing and Implementing Remedies in Innovation Intensive Industries and the
Digital Economy’ in Damien Gerard and Assimakis Komninos (eds), Remedies in
EU Competition Law: Substance, Process and Policy (Wolters Kluwer 2020)
121, 130.
[331] Merger Remedies Study,
97, Part II.H.3.c) at para 35.
[332] ‘Common Ownership by
Institutional Investors and its Impact on Competition, Background Note by the
Secretariat’ (DAF/COMP(2017)10, OECD Directorate For Financial And Enterprise
Affairs Competition Committee, 5-6 December 2017); Thomas Hoehn, ‘Challenges in
Designing and Implementing Remedies in Innovation Intensive Industries and the
Digital Economy’ in Damien Gerard and Assimakis Komninos (eds), Remedies in
EU Competition Law: Substance, Process and Policy (Wolters Kluwer 2020)
121, 132-134.
[333] Remedies Notice, para
103.
[334] M.8444, ArcelorMittal / Ilva,
Commission decision of 17 April 2019 (purchaser approval decision).
[335] M.8444, ArcelorMittal / Ilva,
Commission decision of 17 April 2019 (purchaser approval decision), para.
51(a).
[336] M.8444, ArcelorMittal / Ilva,
Commission decision of 17 April 2019 (purchaser approval decision), para.
52(a).
[337] M.8444, ArcelorMittal / Ilva,
Commission decision of 17 April 2019 (purchaser approval decision), para. 59(a)
(on the vendor loan notes) and para. 69 (on the performance-related part of the
purchase price). See also ‘Mergers: Commission
approves Liberty House Group purchase of ArcelorMittal's divestment businesses’
(European Commission Press Release, 17 April 2019).
[338] Explanatory note of
‘Best
Practice Guidelines: The Commission’s Model Texts for Divestiture Commitments
and the Trustee Mandate under the EC Merger Regulation’ (European Commission,
5 December 2013), para 27.
[339] Case T-342/00 Petrolessence
and SG2R v Commission [2003] EU:T:2003:97, para 65.
[340] Remedies Notice, para
102.
[341] Remedies Notice,
para 102.
[342] M.7881 – AB InBev / SABMiller, Commission
decision of
24 May 2016.
[343] M.7252 – Holcim /
Lafarge, Commission decision of 15 December 2014. A commentary on the case
mentions that the remedy was ‘a structural remedy of an unprecedented size’.
See Daniele Calisti and Jean-Christophe Mauger, ‘Holcim / Lafarge: paving the
way to first phase clearance’ [2015] Competition merger brief 20.
[344] M.7932 – Dow /
DuPont, Commission decision of 27 March 2017.
[345] M.8084 – Bayer /
Monsanto, Commission decision of 21 March 2018.
[346] Remedies Notice, para
104.
[347] M.7932 – Dow /
DuPont, Commission decision of 27 March 2017. The divestiture deal cleared
with remedies was M.8453 – FMC / DuPont Divestment Business, Commission
decision of 17 July 2017.
[348] M.8084 – Bayer /
Monsanto, Commission decision of 21 March 2018. The divestiture deal
cleared with remedies was M. 8851 - BASF / Bayer Divestment Business,
Commission decision of 30 April 2018.
[349] M.8084 – Bayer / Monsanto,
Commission decision of 21 March 2018, commitments annexed to the decision,
Section B, para. 3; M.7932 – Dow / DuPont, Commission decision of 27
March 2017, paras 4044, 4061.
[350] On 11 October 2020, a
regulation which created a cooperation mechanism between Member States and the
Commission screening foreign direct investments became applicable. Regulation
(EU) 2019/452 of the European Parliament and of the Council of 19 March 2019
establishing a framework for the screening of foreign direct investments into
the Union [2019] OJ L 79I/1.
[351] Cf. Remedies Notice,
para 104.
[352] M.7585 – NXP
Semiconductors / Freescale Semiconductor, Commission decision of 17
September 2015, para 233.
[353] M.7585 – NXP
Semiconductors / Freescale Semiconductor, Commission decision of 17
September 2015, para. 238.
[354] Salvatore De Vita, Luca
Manigrassi, Andreea Staicu and Teodora Vateva, ‘NXP / Freescale: Global
remedies in a 3 to 3 semiconductor merger’, [2016] Competition merger brief 15,
17.
[355] Remedies Notice, para
105; Model Text for Divestiture Commitments, para 18.
[356] European Commission, DG COMP, ‘Merger Remedies Study’ (October 2005),
Part II.E.2, 70-72.
[357] Merger Remedies Study, Part
II.I.4, 103-104, paras 20-21 (discussing cases where the purchaser had obtained
the divested business for free or at a negative price).
[358] Remedies Notice, para
106.
[359] Remedies Notice, para
106 (mentioning, as example, M.1628 – TotalFina / Elf, Commission
decision of 13 September 2000, rejecting the proposed purchaser). Another
example in the public domain is M.5355 – BASF / Ciba, Commission
decision of 18 December 2009, rejecting the proposed purchaser. See Case
T-105/10, BASF v Commission [2010] EU:T:2010:490 (this action for
annulment initiated by BASF against the rejection decision was discontinued by
BASF so there is no judgment in this case).
[360] Remedies Notice, para
106.
[361] For a critical view on this, see Deirdre
Carroll, ‘Purchaser Approval Decisions: A Practitioner's Guide to 'Phase III'
Merger Control in Europe’ [2017] The Antitrust Report 13, 19.
[362] As explained in section 4.2.7.1
(Standard arrangement), the parties usually have a fixed period during which to
find a suitable buyer (around six months, suggests the Remedies Notice),
followed by a short period in which they have to close the divestiture deal
(typically three months).
[363] Model
Text for Divestiture Commitments, para. 4.
[364] Model Text
for Divestiture Commitments, para. 42.
[365] Model
Text for Divestiture Commitments, para. 5.
[366] Model
Text for Divestiture Commitments, para. 13.
[367]E.g., M.7000 – Liberty
Global / Ziggo, Commission decision of 30 May 2018, para. 57 of the
commitments (commitments not to restrict TV broadcasters’ ability to offer
their content over-the-top (OTT), i.e. via the internet, and to ensure
sufficient interconnection capacity).
[368] E.g., M.9064 – Telia
– Company / Bonnier Broadcasting Holding, Commission decision of 12
November 2019, commitments annexed to the decision, para. 80.
[369] E.g. M.3083 – GE /
Instrumentarium, Commission decision of 2 September 2003; M.4180 – Gaz de
France / Suez, Commission decision of 14 November 2006. The remedies in Gaz
de France / Suez were partly lifted in 2020 based on a request under the
review clause; ‘Contrôle des concentrations: La Commission lève en partie les
engagements pris par Gaz de France pour obtenir l'autorisation de son
acquisition de Suez en 2006’ (European Commission Daily News, 27 October
2020).
[370] M.8744 – Daimler /
BMW / Car Sharing JV, Commission decision of 7 November 2018.
[371] M.8744 – Daimler
/ BMW / Car Sharing JV, Commission decision of 7 November 2018, para. 339;
Commitments annexed to the decision, para. 39.
[372] M.9660 – Google / Fitbit,
Commission decision of 17 December 2020, Commitments annexed to the decision,
paras 37-38.
[373] Model Text for
Divestiture Commitments, Section F, paras 43-44.
[374] E.g. M.950 – Hoffmann-La
Roche / Boehringer Mannheim, Commission decision of 3 May 2011, OJ C
189/31
(Commission waives commitments of unlimited duration after conducting a market
investigation in a case where the commitments ‘did not include any time
framework, deadline or review clause’).
[375] Remedies Notice, para
73.
[376] Remedies Notice, para
74.
[377] Remedies Notice, para
74.
[378] ‘Notice to Stakeholders, Withdrawal of
The United Kingdom and EU Competition Law’ (European Commission DG for
Competition, 25 March 2019) (after several extensions, Brexit ultimately
took place on 31 January 2020, followed by a transition period during which EU
competition law continued to apply in the UK until 31 December 2021).
[379] M.8465 – Vivendi /
Telecom Italia, Commission decision of 4 September 2018.
[380] M.8465 – Vivendi /
Telecom Italia, Commission decision of 30 May 2017.
[381] M.8465 – Vivendi /
Telecom Italia, Commission decision of 4 September 2018, paras 20-25.
[382] M.8955 – Takeda /
Shire, Commission decision of 28 May 2020.
[383] M.8955 – Takeda /
Shire Commission decision of 28 May 2020, paras 43, 100.
[384] Remedies Notice, para
73.
[385] M.8084 – Bayer / Monsanto, Commission decision of
21 March 2018.
[386] Case T‑712/16,
Deutsche Lufthansa v Commission [2018] EU:T:2018:269, paras 38, 41.
[387] Case T‑712/16,
Deutsche Lufthansa v Commission [2018] EU:T:2018:269, paras
136-139.
[388] Model Text for
Divestiture Commitments, para 5, in fine; Remedies Notice, para. 43.
[389] M.8947 – Nidec / Whirlpool (Embraco
business) Commission decision of 15 May 2020. A third party subsequently
appealed the Commission’s waiver decision: Case T-583/20: Action brought on 23
September 2020 — Italia Wanbao-ACC v Commission [2020] OJ C 378/41.
[390] These include requests
for information (EU Merger Regulation, art 11) and on-the-spot investigations
(EU Merger Regulation, art 13).
[391] Complaints rarely become public, although
some do. See, e.g., Andrew Boyce, ‘Telia draws Tele2 complaint to EU regulator
over Bonnier deal commitments’ (MLex, 28 January 2020) (reporting on a complaint
that Telia violated the FRAND commitments in M.9064 – Telia Company / Bonnier
Broadcasting Holding).
[392] See the definition of
‘Monitoring Trustee’ (a person ‘who has the duty to monitor [X’s] compliance
with the conditions and obligations attached to the Decision’), Model Text for
Divestiture Commitments, para 27. See also, Remedies Notice, para 119 (‘the
monitoring trustee shall act as a contact point for any requests by third
parties, in particular potential purchasers, in relation to the commitments’).
[393] Case T‑884/16,
Multiconnect v Commission [2018] EU:T:2018:665, para 38.
[394] Case T‑884/16,
Multiconnect v Commission [2018] EU:T:2018:665, para 39.
[395] Commission Regulation
(EC) No 773/2004 of 7 April 2004 relating to the conduct of proceedings by the
Commission pursuant to Articles 81 and 82 of the EC Treaty [2004] OJ L123/18,
art 7(2); Council Regulation (EU) 2015/1589 of 13 July 2015 laying down
detailed rules for the application of Article 108 of the Treaty on the
Functioning of the European Union [2015] OJ L248/9, art 12(1).
[396] M.7018 – Telefónica
Deutschland / E-Plus, Commision Decision of 2 July 2014.
[397] Case T‑884/16,
Multiconnect v Commission [2018] EU:T:2018:665, para 10-11 (citing the
precise reply from the Commission’s case team).
[398] Case T‑884/16, Multiconnect
v Commission [2018] EU:T:2018:665, Multiconnect v Commission, para
37.
[399] Remedies Notice, para
19.
[400] See, e.g., M.8444 – ArcelorMittal
/ Ilva, Commission decision of 7 May 2018, para 1442; M.8084 – Bayer /
Monsanto, Commission decision of 21 March 2018, para 3324.
[401] These examples are
found in the Remedies Notice, para 20.
[402] Remedies Notice, para
19.
[403] See, e.g., M.7567
–
Ball / Rexam, Commission decision of 15 January 2016, para. 1026.
[404] See, e.g., M.9064 – Telia
– Company / Bonnier Broadcasting Holding, Commission decision of 12
November 2019, para 1522 (qualifying as conditions Section B (various
commitments to license content, TV channels and related commitments) and parts
of Section A (definitions), namely to the extent that the definitions contain
operative provisions); M.8665 – Discovery / Scripps, Commission decision
of 6 February 2018, para. 141 (qualifying as conditions Section B (the
commitment to provide access to various TV channels)).
[405] See, e.g., M.8314 –
Broadcom / Brocade, Commission decision of 12 May 2017, para 283; M.8242 – Rolls-Royce / ITP, Commission decision of
18 April 2017, para 283; M.6800 – PRSfM / GEMA / STIM / JV,
Commission decision of 16 June 2015, para 390.
[406] Merger Regulation, art
8(6)(b) and art 6(3)(b).
[407] Merger Regulation, art
6(4) and art 8(7(b).
[408] Merger Regulation, art
14(2)(d).
[409] Merger Regulation, art
15(1)(c).
[410] Remedies Notice, para
20.
[411] Merger Regulation, recital 31.
[412] European Commission, Press release
of 18 February 2021, ‘Commission adopts final measures to preserve the
divestment of former Aleris plant in Belgium following Novelis' acquisition of
Aleris.’
[413] Merger Regulation, art
8(5)(b). The Commission issued a decision on this basis in M.9076 – Novelis / Aleris, Commission decision of after Novelis failed to divest a
plant within the timeframe set by the commitments. The measures were ‘aimed at
preserving competition as well as the plant’s viability and competitiveness.’
[414] Merger Regulation, art
8(4)(b). The Commission issued a decision on this basis in M.9076 – Novelis / Aleris,
Commission decision of 18 February 2021 (not yet published). According to the
Commission’s press release, the decision contained a number of measures to
ensure that the divestiture, which Novelis had ultimately but belatedly made,
would remain effective (ban on re-acquisition) and that the plant’s viability
and competiveness are protected (appointment of a monitoring trustee,
transitional agreements, and other parts of the commitments which had become
inapplicable because the clearance decision itself had become inapplicable as a
result of the breach of a condition.
[415] Merger Regulation, art
14(2)(d).
[416] See, e.g., Stuart
Thomson, ‘EU monitor orders Telia to revise streaming auction after Tele2
complaint’ (Digital TV Europe, 6 February 2020) <www.digitaltveurope.com/2020/02/06/eu-monitor-orders-telia-to-revise-streaming-auction-after-tele2-complaint/>
accessed 4 December 2020.
[417] M.7018 – Telefónica
Deutschland / E-Plus, Commission decision of 2 July 2014.
[418] ‘Mergers: Commission alleges Telefónica
breached commitments given to secure clearance of E-Plus acquisition’ (European
Commission Press Release, 22 February 2019).
[419] Johannes Lübking, ‘The European
Commission’s View on Arbitrating Competition Law Issues’ (2008) 19 European
Business Law Review 77, 78 (under Role of Arbitration in Access commitments).
[420] In this sense, see,
e.g. M.8084 – Bayer / Monsanto, Commission decision of 21 March
2018,
para 3180 (’The Commission notes that the fast track dispute resolution
procedure provides the purchaser with an additional mechanism to address
non-compliance with the commitments, but it does not remove the Commission’s
power to monitor and sanction compliance with the commitments.’); M.9064 –
Telia Company / Bonnier Broadcasting Holding, Commission decision of 12
November 2019, para. 1466. In the latter case, the commitments clarify – after
this issue was raised in the market test - that the fast track dispute
resolution mechanism is an additional option, but not an obligation, for a
third party seeking to enforce the commitments. In fac, there no doubt that,
even without such clarification, the inclusion of an arbitration mechanism does
not deprive the Commission of its powers to enforce the remedies.
[421] Remedies Notice, para
130.
[422] See Remedies Notice,
para 66 (describing arbitration commitments in the context of access
commitments). Recent examples include M.9064 – Telia Company / Bonnier
Broadcasting Holding, Commission decision of 12 November 2019; M.8665 – Discovery
/ Scripps, Commission decision of 6 February 2018; M.7194 – Liberty
Global / Corelio / W&W / De Vijver Media, Commission decision of 24
February 2015; M.7421 – Orange / Jazztel, Commission decision of 19 May
2015.
[423] See, e.g., M.8124 – Microsoft / LinkedIn, Commission
decision of 6 December 2016, Commitments annexed to the decision, Annex 1.
[424] See, e.g., M.9287 – Connect
Airways / FlyBe, Commission decision of 5 July 2019, Commitments annexed to
the Commission decision, Section 5.
[425] E.g, M.8084
– Bayer / Monsanto, Commission decision of 21 March 2018, Annex 3,
Section H; M.9779 – Alstom / Bombardier Transportation,
Commission decision of 31 July 2020, commitments annexed to the decision (first
annex), Section F, para. 44. The commitments in this case include both a
structural part (the divestiture of a train manufacturing platform called the
Zefiro V300 divestment business) and a behavioural part (a commitment to ensure
that Bombardier’s joint bid with Hitachi in the UK’s HS2 tender could
continue), and both are subject to the arbitration mechanism in this clause.
[426] M.9779 – Alstom / Bombardier
Transportation, Commission decision of 31 July 2020.
[427] This layer of complexity is not
without costs. First, the review of the clause by the Commission’s case team
and by stakeholders in the market test will require time and resources, which
can accordingly not be spent on other, more important, aspects of the
commitments, such as whether the proposed divestiture contains all the assets
and employees to be competitive. Given the compressed timeframe of merger
proceedings, especially in Phase I, this is a significant drawback. Second, the
divestiture agreements itself will normally also contain a dispute resolution
clause, agreed upon by the notifying party and the purchaser of the divestment
business, and reviewed by the Commission at the purchaser approval stage. Would
this clause not require the third party to use that particular dispute
mechanism? Can the notifying party file a counterclaim against the third party
in the arbitration based on the remedies?
[428] The benefits of including an
additional clause in the commitments would seem to be twofold. First, it
provides the purchaser with an additional mechanism to ensure that he gets the
full benefit of the divestiture commitment, which in turn may help to make the
divested business viable and competitive. Second, the arbitration provided for
by the commitments allows the Commission and the trustee to play a role in the
dispute, which may help ensure that the dispute is resolved in a manner that is
in line with the commitments’ text and its objective to bring about a lasting
structural change in the market. Of course, if the purchaser really wanted to
collude with the notifying party – for instance by foregoing assets that are
essential for the competitiveness of the divestiture in return for a lower
purchase price – it could easily do so even if an arbitration clause is in
place in the commitments.
[429] Case IV/M.235 – Elf
Aquitaine – Thyssen / Minol AG, Commission decision of 4 September 1992.
Until 2000, there were less than a handful of cases but, from 2000 onwards,
remedies including arbitration have become more frequent.
[430] Own count, partly
relying on Gordon Blanke and Phillip Landolt, EU and US Antitrust
Arbitration: A Handbook for Practitioners (Kluwer Law International 2011),
Annex II: Table on Conditional EU Merger Clearance Decisions Incorporating
Arbitration Commitments Over the Period 1992–2009.
[431] See, e.g., Arbitral Award of 14
March 2017, 1&1 Telecom GmbH v Telefónica Deutschland Holdingn AG,
DiS-SV-KR-665/16, paras. 73-79; Manuel Penadés Fons, ‘Beyond the prima facie
effectiveness of arbitration commitments in EU merger control’, Common Market
Law Review (2012) 1915, 1917, fn 12. The term ‘arbitration without privity’ was
originally used in relation to investor-State arbitration. See Jan Paulsson,
‘Arbitration Without Privity’ (1995) 10 ICSID Review – Foreign Investment Law
Journal, 232.
[432] Laurence Idot, ‘Une innovation
surprenante : l’introduction de l’arbitrage dans le contrôle communautaire des
concentrations’, Revue de l’arbitrage (2000) 591, 597-598, 603 (expressing
doubts about whether any legal basis exists for the Commission to ‘delegate
powers’ in this way).
[433] Case T-158/00 ARD v Commission
[2008] EU:T:2003:246, paras 286-287.
[434] Case No COMP/JV.37 – B
Sky B / Kirch Pay TV, Commission decision of 21 March 2000.
[435] Case T-158/00 ARD v
Commission [2008] EU:T:2003:246, paras 203, 295.
[436] Case
T-177/04 easyJet v Commission [2006] EU:T:2006:187.
[437] Case
T-177/04 easyJet v Commission [2006] EU:T:2006:187, para. 186.
[438] M.9779 – Alstom / Bombardier
Transportation, Commission decision of 31 July 2020. The commitments in
that case consist of two sets of commitments – commitments relating to rolling
stock and the OBU commitments - both of which provide for expert determination.
See, Commitments relating to rolling stock, Schedule 1, Annex 3 (providing for
‘fast-track dispute resolution’ by an expert to resolve issues relating to a
specific part of the commitments (the HS2 very high speed commitment)) and OBU
commitments, Section F (providing for a ‘fast track expert dispute resolution
mechanism’ to resolve issues relating to the OBU commitments); M.9674 – Vodafone
Italia / TIM / INWIT JV, Commission decision of 6 March 2020 (providing for
‘fast track expert dispute resolution’ as a mechanism to resolve disputes in
relation to a specific part of the commitments, while providing for arbitration
in relation to other parts of the commitments; the commitments oblige the joint
venture created through the concentration to rent out space on its
telecommunication towers); M.6497 – Hutchison 3G
Austria / Orange Austria, Commission decision of 12 December 2012, Annex
III, Section F (providing for a fast-track dispute resolution mechanism by a
panel of three experts for disputes arising between the notifying party (H3G)
and a party requesting wholesale access to H3G’s mobile network); M.5650
– T-Mobile / Orange, Commission decision of 1 March 2010, paras. (expert
determination process specified in the commitments to resolve disputes between
the merged entity and a competitor (H3G UK) in relation to a network
integration plan); M.5655 - SNCF/LCR/Eurostar, Commission decision of 17
June 2010, Commitments annexed to the decision, Section D . (expert
determination for disputes raised by railway operators with the trustee as
expert decision-maker and the possibility of an appeal to the national rail
regulator or the Commission).
[439] Gary B. Born, International
Commercial Arbitration – Volume I International Arbitration Agreements (2nd
ed., Wolters Kluwer, 2014) 261
[440] Perhaps to avoid any issue on this
point, merger remedies that include an arbitration mechanism (not expert
determination) usually define the scope of disputes that will be subject to
arbitration rather broadly, for instance as ‘any dispute with any third party
relating to the compliance by the notifying party with the commitments’. This
issue will depend on the particular jurisdiction in which the arbitration has
its seat. See, section 6.4.4., where the importance of the seat of the
arbitration is discussed.
[441] See Gary B. Born, International
Commercial Arbitration – Volume I International Arbitration Agreements (2nd
ed., Wolters Kluwer, 2014) 265-268.
[442] Many arbitral institutions have
enacted separate sets of rules governing expert determination and administer
such procedures. See, e.g., ICC Rules for Expertise (last revised in 2003).
However, including a reference to such rules and – this follows automatically –
entrusting the arbitral institution with the administration of the expert
determination could take away from the advantages of expert determination, by
making the process more formal, expensive and slower. In the merger remedies
that provide for expert determination, no reference to an institution has been
included so far.
[443] M.9674 – Vodafone Italia / TIM /
INWIT JV, Commission decision of 6 March 2020, Commitments annexed to the
decision, para. 26; M.9779 – Alstom / Bombardier Transportation,
Commission decision of 31 July 2020, rolling stock commitments annexed to the
decision, Schedule 1, Annex 3, paras. 4-5 and OBU commitments annexed to the
decision, para. 40. In an earlier case, M.5655 - SNCF/LCR/Eurostar,
Commission decision of 17 June 2010, the monitoring trustee itself was to act
as expert.
[444] The burden of proof determines
which party has to prove something or – this comes down to the same thing - which
party bears the risk of losing the case if something is not proven. The
standard of proof denotes the level of confidence or persuasion necessary to
demonstrate a fact. See Fernando Castillo de la Torre and Eric Gippini
Fournier, Evidence, Proof and Judicial Review in EU Competition Law
(Edward Elgar, 2017), 26, para. 2.002.
[445] See, e.g., M.9660 – Google / Fitbit,
Commission decision of 17 December 2020, Commitments annexed to the decision,
Annex 5 to the commitments, para. 15; M.9064 – Telia
– Company / Bonnier Broadcasting Holding, Commission decision of 12
November 2019, para 72; M.8864 – Vodafone / Certain Liberty Global Assets,
Commission decision of 18 July 2019, Commitments annexed to the decision (Annex
II), para. 71.
[446] Gary B. Born, International
Commercial Arbitration – Volume II International Arbitral Procedures (2nd
ed., Wolters Kluwer, 2014) 2314 (‘In general, although there is little
discussion of the issue, the burden of proof appears to be (or assumed to be) a
“balance of probabilities” or “more likely than not” standard’).
[447] Gordon Blanke, 'Chapter 46:
International Arbitration and ADR in Conditional EU Merger Clearance
Decisions', in Gordon Blanke and Phillip Landolt (eds), EU and US Antitrust
Arbitration: A Handbook for Practitioners (2011 Kluwer Law International)
1689, para. 46-139.
[448] Id, 1689-1690.
[449] Case No COMP/JV.37 – B
Sky B / Kirch Pay TV, Commission decision of 21 March 2000.
[450] Case T-158/00 ARD v
Commission [2008] EU:T:2003:246, 295.
[451] Case C-126/97 Eco Swiss China
Time Ltd v. Benetton International NV, EU:C:1999:269, para 37-39. The court
held that Art. 101 is a matter of public policy for the purposes of the
enforcement of an arbitral award. Although the judgment related only to Article
101, subsequent case law suggests that competition law as a whole pertains to
public policy. Case T-128/98 Aéroports de Paris v Commission, [2000]
EU:T:2000:290, para 241.
[452] E.g. M.9064
– Telia – Company / Bonnier Broadcasting Holding, Commission
decision of 12 November 2019, commitments annexed to the decision, para.
69; Vodafone Italia / TIM / Inwit JV, Commitments annexed to the decision,
para. 41.
[453] See, e.g., Queen Mary, University
of London, 2018 International Arbitration Survey: The Evolution of
International Arbitration (2018) 2 (‘”Cost” continues to be seen as
arbitration’s worst feature, followed by “lack of effective sanctions during
the arbitral process”, “lack of power in relation to third parties” and “lack
of speed”); Laurence Idot, ‘Arbitration and competition, Note submitted to the
OECD’, DAF/COMP(2010)40 (‘arbitration in the strict sense is expensive,
especially international arbitration (…)). The Commission’s merger remedies
often provide for arbitration under the rules of the International Chamber of
Commerce (ICC), which automatically makes the ICC’s International Court of
Arbitration the institution that administers and supervises the arbitration. It
is a well-respected arbitration institution, but ICC arbitration is also
considered as expensive. See, Queen Mary, University of London, 2010
International Arbitration Survey: Choices in International Arbitration
(2010), 21 (‘Cost remains an extremely important issue: amongst a majority of
interviewees there was a perception that ICC arbitration is too expensive
(especially beyond a certain monetary threshold of the amount in dispute) and
that arbitration institutions in general are costly.’).
[454] M.2876 –
Newscorp / Telepiù, Commission decision of 2 April 2003. The
award in that case, rendered in 2012, is analysed in Luca G. Radicati Di
Brozola, ‘EU Merger Control Commitments and Arbitration: Reti Televisive
Italiane v. Sky Italia’ (2013) 29 Arbitration International 223.
[455] M.7018 – Telefónica
Deutschland / E-Plus, Commission decision of 2 July 2014.
[456] Commission decision of
28.9.2018 to submit observations pursuant to Commitments given in Case M.7018 Telefónica Deutschland / E-Plus, in two sets of
proceedings for arbitration before the Deutsche Institution für
Schiedsgeritsbarkeit E.V. (DIS) between Drillisch v. Telefónica Deutschland
(DIS-SV-KR-849-18) and mobilcom-debital v. Telefónica Deutschland
(DIS-SV-KR-833-18, C (2018) 6408 final, recital 7.
[457] The awards were
published by DG COMP as part of the documents available in case M.7018
Telefónica Deutschland / E-Plus. They are accessible via the “case search” tool
on the website of DG Competition.
[458] See, in this sense, Luca G. Radicati Di
Brozola, ‘EU Merger Control Commitments and Arbitration: Reti Televisive
Italiane v. Sky Italia’ (2013) 29 Arbitration International 223, 226.
[459] Case T-884/16 Multiconnect
v Commission [2019] EU:T:2018:665.
[460] M.7018 – Telefónica
Deutschland / E-Plus, Commission decision of 2 July 2014.
[461] Case T-884/16 Multiconnect
v Commission [2019] EU:T:2018:665, para. 57.
[462] See, e.g., Lennart Ritter and W.
David Braun, European Competition Law: A Practitioner’s Guide (3d ed.
Kluwer Law International 2004), p. 663 (arguing that ‘commitments do not create
rights which may be enforced before the national courts with the means of
national civil law’).