EU Mergers

Phase I Mergers

  • M.8301 GE / ATI / JV (2 June 2017)

EU Competition

Commission opens formal investigation into clothing company Guess. On 6 June 2017, the European Commission (Commission) opened a formal investigation into the distribution agreements and practices of clothing manufacturer and retailer, Guess. In particular, the Commission will investigate whether Guess' distribution agreements restrict authorised retailers in one EU Member State from selling online to consumers or to retailers in other EU Member States. The Commission will also investigate whether Guess’ contractual arrangements with its wholesalers restrict those wholesalers from selling to retailers in other EU Member States. The agreements under investigation may breach Article 101 of the Treaty on the Functioning of the European Union (TFEU) which prohibits agreements which prevent, restrict or distort competition. This investigation follows the final report on the e-commerce sector inquiry in which the Commission found that more than one in ten retailers experienced restrictions on cross-border sales in their distribution agreements.

General Court awards compensation to Guardian Europe Sàrl for delays. On 7 June 2017, the General Court awarded Guardian Europe Sàrl (Guardian) €654,523.43 in compensation for delays in how the judges handled their appeal. On 12 February 2008, Guardian brought an action against the Commission’s decision to fine them €148 million for their participation in a cartel. Guardian requested the decision to be annulled in so far as it applied to them or for the fine to be reduced. On 27 September 2012, the General Court dismissed the appeal. On appeal to the European Court of Justice (ECJ) in November 2014, the fine was reduced to €103.6 million. In its present action, Guardian claims compensation for the damage sustained due to the General Court’s failure to adjudicate within a reasonable time. This claim was against the European Union, represented by the Commission and by the ECJ. Guardian pointed to a period of unjustified inactively of 26 months and claimed this caused material and non-material damage, including loss of profit, additional bank guarantee costs and damage to its reputation. The General Court upheld the action in part and ordered the European Union to pay compensation of €654,523.43 to Guardian for the material damage sustained due to the infringement of the obligation to adjudicate within a reasonable time. The compensation was in relation to Guardian paying additional bank guarantee costs as there was a direct link between the infringement and the loss. The claims for loss of profits and non-material damage to reputation were dismissed.

Commission conditionally approves Johnson & Johnson’s acquisition of Actelion. On 9 June 2017, the Commission approved the proposed acquisition of Actelion Pharmaceuticals (Actelion) by Johnson & Johnson, subject to conditions. Both parties develop and sell pharmaceutical products and, whilst their activities are largely complementary, they compete in medicinal products and research programmes for the treatment of multiple sclerosis and for the treatment of insomnia. The Commission’s investigation therefore focussed on these two areas. The Commission did not have any concerns in relation to the treatments for multiple sclerosis, however, the Commission had concerns that there would not be a sufficient level of competition if either of the parties discontinued their research and development programme in relation to insomnia. The transaction, as notified, transferred Actelion's insomnia research programme to Idorsia, a newly created company in which Johnson & Johnson would have a 32% shareholding. As an important shareholder, Johnson & Johnson would be able to influence Actelion's strategic decisions and the Commission believed they may have the ability or incentive to discontinue or delay the research programmes. In order to address the Commission’s concerns, Johnson & Johnson offered remedies to ensure that they did not influence Idorsia’s strategic decisions and to remove any incentive to negatively influence the development of Idorsia’s insomnia research programme. The Commission concluded that these commitments addressed its competition concerns.

State Aid

Commission approves new Croatian broadband scheme. On 6 June 2017, the Commission approved a new €101 million Croatian broadband scheme under EU state aid rules. Croatia’s current broadband is characterised by high prices and low take-up rates, so the new Next Generation Network (NGN) Broadband aims to improve the situation and help Croatia meet the targets set by the Commission in relation to the EU Digital Single Market. The scheme will also help provide fast internet access for rural areas where it is not currently available. It will run until December 2023. In assessing the scheme, the Commission found that the positive effects on competition in the Croatian broadband market outweigh the possible negative effects on established operators and so concluded the scheme was in line with EU state aid rules.    

Commission approves rescue aid to Italian airport. On 7 June 2017, the Commission approved €7.28 million rescue aid to Marche Ancona airport in Italy under EU state aid rules. The rescue aid consists of a repayable loan and will meet the airports liquidity needs for the next six months. The Commission found that many businesses in the region depend on the activity of the airport and that the airport was important for international civil protection operations. The Commission also found that the planned measure was limited in time and scope. The Commission therefore concluded that the measure complied with EU state aid rules and, in particular, with the Guidelines on state aid for rescuing and restructuring companies in difficulty. 

UK Competition

CMA publishes full text of its decision on JD Sports’ acquisition of Go Outdoors. On 7 June 2017, the Competition and Markets Authority (CMA) published the full text of its decision on the completed acquisition by JD Sports Fashion Plc (JD Sports) of Go Outdoors Topco Limited (Go Outdoors). The parties overlap in the retail supply of outdoor clothing, outdoor footwear and outdoor equipment in the UK. The CMA therefore assessed the impact of the merger on the supply of outdoor clothing, footwear and equipment on a national level as well as in local areas in the UK. The CMA considered competition between bricks-and-mortar retailers and online retailers separately. In assessing the merger at national level, the CMA found that the parties had a relatively modest share of supply and face a significant number of credible competitors. Moreover, the parties were not particularly close competitors. In terms of local areas, the CMA found that there would be sufficient post-merger constraints. Consequently, the CMA concluded that the merger did not give rise to a realistic prospect of a substantial lessening of competition as a result of horizontal effects. As JD Sports is 57% owned by Pentland Group Plc (Pentland), a wholesale supplier of branded outdoor products to outdoor retailers, the merger also involved a vertical relationship. The CMA therefore considered whether the merger could result in input foreclosure or customer foreclosure. However, the CMA found that due to Pentland’s low market share, the merged entity would not have the ability or incentive to do this, so there was no realistic prospect of a substantial lessening of competition as a result of vertical effects. For the above reasons, the CMA decided not to refer the merger for a more detailed analysis under section 22(1) of the Enterprise Act 2002.     

CMA revokes initial enforcement order in respect of GLO Dutch’s acquisition of Mallinckrodt. On 7 June 2017, the CMA published a revocation order to revoke the initial enforcement order made in relation to the completed acquisition by GLO Dutch BidCo (GLO) of Mallinckrodt Netherlands Holdings BV and Mallinckrodt Nuclear Medicine LLC (Mallinckrodt). The CMA made the initial enforcement order to prevent pre-emptive action pending the conclusion of their Phase 1 investigation, and, even though the investigation is ongoing, the CMA now considers it appropriate to revoke the initial enforcement order based on the evidence received to date.      

Commission accepts undertakings given by SSCP Spring Topco. On 9 June 2017, the CMA accepted undertakings in relation to the completed acquisition by SSCP Spring Topco Limited (SSCP Spring), a holding company in the National Fostering Agency Group (NFA), of the entire issued share capital of Acorn Care 1 Limited (Acorn). The CMA believed the transaction may lead to a substantial lessening of competition in relation to the provision of fostering placement services to local authorities in Wales, Norfolk and Luton, and therefore decided to refer the merger to an in-depth Phase 2 investigation unless undertakings were offered in lieu. In order to address the CMA’s competition concerns, SSCP Spring agreed to divest the Wales, Norfolk and Luton businesses to BSN Social Care Limited (BSN). The CMA considered that these undertakings were sufficient to remedy, mitigate or prevent any substantial lessening of competition and therefore decided not to refer the transaction to a Phase 2 investigation.