The European Commission is currently considering responses received to its consultation on draft Best Practices for Cooperation Among EU National Competition Authorities in merger cases (“draft Best Practices”). The consultation period was launched on the back of publication in April 2011 of the Commission’s draft Best Practices document which set out guidance as to how NCAs could better cooperate on their review of mergers which fall short of the EU Merger Regulation (“EUMR”) thresholds, but which are notifiable in multiple EU jurisdictions at the national level.
One of the most notable aspects of the Commission’s draft Best Practices is that they appear to place the onus not only on NCAs, but also on merging parties for ensuring that multijurisdictional merger reviews are coordinated and that there is a consistent result in all relevant jurisdictions. While companies engaged in notifiable transactions falling short of the EUMR thresholds will undoubtedly welcome moves towards a more cooperative process among NCAs, some have already highlighted the barriers to more effective cooperation that arise from the complex patchwork of filing thresholds, waiting periods and notification requirements that are in place across different Member States. Consequently, there have been some calls not only for better cooperation but for increased convergence of diverse national merger review procedures and we consider whether truly effective cooperation between NCAs in merger cases can be achieved in the absence of an initiative in favour of greater convergence of the merger review procedures followed at Member State level.
The Commission’s proposals
The Commission’s best practices guidelines were prepared by the Merger Working Group and are intended to facilitate information sharing between NCAs, particularly when it comes to information related to timing of the review process, substantive assessment and, if applicable, remedies. In the press release accompanying the draft Best Practices, the Commission notes that cooperation is most likely to be beneficial in those cases which have the potential to affect competition in more than one Member State. The Commission acknowledges that cooperation is not inevitable or desirable in all multijurisdictional mergers, and it suggests that NCAs should cooperate with each other in respect of multijurisdictional mergers which raise similar or comparable issues in relation to jurisdictional or substantive questions. The Commission draft envisages three instances in particular when cooperation between NCAs could be particularly useful:
- assisting NCAs to reach a view as to whether a transaction qualifies for notification in a particular Member State;
- helping NCAs to assess mergers which may have an impact on competition in more than one Member State (especially where affected markets may cover more than a single Member State); and
- in mergers where remedies need to be designed or examined in more than one Member State, or where a remedy adopted in one Member State may have cross-border effects.
The draft Best Practices set out some relatively concrete suggestions as to how cooperation between NCAs may be improved, including informing each other on timing issues, including for example any decision to commence second-phase proceedings. The draft Best Practices also go so far as to suggest that NCAs could discuss issues such as market definition, efficiencies, empirical evidence requirements and remedial measures. The guidance is relatively vague, however, when it comes to how exactly more effective cooperation can be achieved in the context of the array of procedural differences which exist between different NCAs.
The role of merging parties and convergence issues
One element of the draft Best Practices which has been subject to more comment than others is the section that is devoted to the role that merging parties should play in facilitating better cooperation among NCAs. The Commission notes in its draft that effective cooperation at the NCA level requires the ‘active assistance’ of merging parties. Examples of ways in which merging parties can assist include providing details of a proposed merger to NCAs ‘as soon as practicable’, ensuring that any remedy proposals are consistent across different Member States and being proactive in the use of confidentiality waivers. However, the ability of merging parties to assist inter-NCA cooperation could be limited in practice by the divergent procedures in place in different Member States. These potential limitations are not addressed directly in the draft Best Practices. Indeed, the Commission appears to be signalling in this consultation that it expects that more effective cooperation between Member States on multijurisdictional mergers can come about chiefly as a result of efforts by NCAs and merging parties.
Beyond the action of actually publishing the draft Best Practices, it is less clear what role the Commission envisages for itself in fostering greater cooperation at Member State level. In a speech to delegates in Brussels at a celebration of the 20th anniversary of EU merger control, Competition Commissioner Joaquin Almunia tried to strike a balance between trumpeting what he sees as the success story of EU competition policy, while emphasising the continuing importance of the role played by NCAs. Commissioner Almunia specifically acknowledged that many companies have been calling not only for enhanced cooperation between authorities in different Member States, but also for more convergence between the different procedures maintained in each jurisdiction.
The Commission’s draft Best Practices consultation appears to be responsive to the call for increased cooperation, but not the appeal for greater convergence. It is surely not a coincidence that many of those who have called for enhanced cooperation have also spoken in favour of increased convergence, given the extent to which the success of moves towards better cooperation between NCAs is linked to the issue of convergence. Where a cross-border transaction is subject to review by three or four NCAs, the reviewing authorities can only cooperate with each other insofar as their different merger control rules will allow. There would seem to be little advantage, for example, in Authority A, which has a two-month waiting period and no provision for a pre-notification procedure, coordinating the timing of its review with Authority B, which has a one-month waiting period and which supports pre-notification talks. In such a situation, notifying parties may have already engaged in pre-notification discussions with Authority B, setting out substantive proposals on approach to market definition and perhaps even identifying potential remedies, before Authority A has even begun its review of the transaction. The parties could therefore find themselves in a position where they have prepared a possible remedy that they understand would satisfy the concerns of one NCA, but without the option of trying to coordinate the design of that remedy with another NCA, even though the remedy may affect the market in the jurisdiction covered by that other NCA.
Candidates for convergence
There are some aspects of Member States’ filing procedures that appear to be natural candidates for some element of harmonization. These tend to be those elements where differences between Member States’ procedures can have a real, potentially negative impact on transaction certainty and on merging parties more generally in terms of financial, taxation and human resources planning.
Obvious targets would include differing information requirements: the amount and type of information that needs to be submitted as part of a merger notification varies greatly by Member State, with some notification forms setting out relatively onerous requirements in terms of describing competitive dynamics in markets which, on the face of it, bear little relation to the issues raised (if any) by the notified transaction, while other notification forms ask for much less detail. Some respondents to the Commission’s draft Best Practices consultation suggest the introduction of a uniform notification form for use in every Member State. This was a proposal that also surfaced during the Commission’s Merger Regulation review in 2008.
The differences between review periods can also have a considerable impact on companies, given that notifying parties must suspend closing of their transaction until the NCA with the longest review period has concluded its examination of the deal. The length of review periods ranges from around four weeks or one month, as in Germany and Ireland, up to around three months for a first phase clearance, as in Slovakia. Although the length of time needed to consider the potential impact of a single transaction in different Member States can vary depending on the impact of the transaction on the market in that particular jurisdiction, the automatic application of a three-month waiting period in one jurisdiction and a one-month waiting period in another, for a substantively uncontroversial transaction, can mean something of a transaction planning headache for merging parties.
There are a number of other aspects of the merger review process which differ greatly between the Member States, including the existence of market share thresholds in a few countries, as opposed to the purely revenues-based thresholds in the majority of jurisdictions. Even the concept of a “concentration” for merger control purposes is subject to differing interpretations between Member States, with Austria, Germany and Lithuania maintaining rules which mean that the acquisition of pure minority interests without any element of control may still be notifiable to the relevant authorities, although the vast majority of Member States have a concept of concentration that is closely aligned with the EU approach.
Concern as to a lack of convergence between national review procedures is not a novel phenomenon: at the time of the Commission’s consultation on the functioning of the Merger Regulation in 2008, several consultation respondents called for the Commission to take into consideration the challenges posed for businesses by the patchwork of procedural requirements at Member State level, and to consider how increased convergence might be achieved. The Commission declined at the time to engage in any overt moves towards increased convergence at NCA level: one possible reason for this reticence could be that, given the extent of procedural differences between some Member States’ merger control requirements, any attempt to move towards greater convergence could be a formidable logistical challenge. Aside from questions as to the degree of convergence that NCAs and Member State governments would be willing to countenance, any concerted effort to introduce more convergence could be technically challenging, particularly given the lack of formal powers on the part of the Commission to require changes to national merger review procedures, as well as a general need to respect the principle of subsidiarity.
The Commission is currently considering the submissions that it received in response to its consultation, with a final version of the guidance expected to be issued in Autumn 2011. While it is possible that some of the concerns expressed in relation to a lack of details in the draft Best Practices may be addressed, it is unlikely that the Commission will use the final version of the Best Practices to address calls for increased convergence between Member States’ merger review procedures. While some would argue that such a move is a necessary accompaniment to any initiatives designed to improve coordination among NCAs, it is more likely that if any moves are made towards encouraging convergence in the immediate term, they will manifest themselves in a more low-key approach, perhaps via initiatives of the European Competition Network. In any event, merging parties can expect to wait, at least until the impact of the new Best Practices can be assessed, before the idea of pursuing not only cooperation but convergence makes its way on to the priorities lists of NCAs and the Commission alike.