On May 30, 2017, The Bundeskartellamt released a note entailing a comprehensive overview and summary of the Federal Cartel Offices (FCOs) standing remedies practice, as well as of related jurisprudence. The Guidance Document on Merger Remedies serves to bolster transparency in the merger control process and enable companies and their lawyers to assess their individual situations and rectify any identified impediments to competition that may prevent merger clearance. Furthermore, it contains explicit criteria used as the basis for assessment, outlines the procedure for the proposal, the implementation of remedies, and the tasks of trustees, which often play an important role in the implementation of remedies. The core elements of the document are listed below.
As an important instrument in merger control practice, divestiture remedies are often the best way to prevent a reduction in competition and are clearly preferred by the FCO. The guidelines elucidate that while German law allows only structural remedies, behavioral remedies can be administered if they are of structural nature. Furthermore, the guidelines allude to behavioral remedies that have been accepted in Germany in individual cases in the past, but distinguish these cases from instances where the FCO (and courts) have rejected remedies that create "Chinese walls", shutdown of capacity, or limit the exercise of corporate influence. In comparison to EU legislation, German law expressly disallows obligations that mandate the FCO to continuously control the conduct of the parties post-proceedings. This concept has significant bearing on Germany as it may provide grounds for appeal against clearance with commitments.
From the outset, an up-front-buyer solution is available to prevent any negative effects of the merger on competition, and the guidelines clarify that this solution requires not only entering into a binding agreement with a buyer (approved by the FCO), but also having completed the divestiture (including transfer of owner-ship) prior to closing of the merger, per German law. This can be distinguished from the European Commission's practice, where a binding agreement with an authorized buyer is rendered sufficient.
Furthermore, the guidelines deal with fix-it-first solutions. If the viability of a divestiture is not clear, the guidelines state that it may be helpful to enter into a binding divestiture agreement during the merger proceedings. There is generally no need for the FCO to separately approve the buyer. However, the FCO's position toward fix-it-first solutions is starkly different than the EU approach, in which fix-it-first solutions are a rather welcomed practice in order to obtain clearance in complex scenarios.
Finally, distinguishing the EU practice, the guidelines affirm that the FCO cannot clear mergers subject to phase I proceedings, only phase II proceedings. Merging parties are prompted to submit commitments.
The parties' offering of such commitments extends the regulatory deadline in phase II by one month (to four months in total). The guidelines acknowledge that in many cases such extension is not sufficient to conduct a requisite market test, which may result in the need for additional investigation. Thus, the guidelines make explicit reference to the possibility to further extend the deadline with the parties' consent.
In terms of the requirements for commitments, the guidelines refer to the existing model divestiture texts and confirm that the merging parties must identify any deviation from the model texts and explain the reasons for this deviation. In addition, the guidelines also point out that following a first proposal by the parties, the FCO may provide a "cornerstone paper", substantiating requirements for appropriate commitments and their respective implementation.
