On October 14 2011 the Federal Trade Commission, the Department of Justice Antitrust Division and the European Commission published revised best practices for cases where the commission and a US agency are reviewing the same merger.
The best practices document updates a previous 2002 version to reflect the current cooperation and experiences of cooperation. Although the document is a reflection of the steps that the US agencies and the commission have been taking to achieve lower costs, faster merger reviews and greater consistency for merging parties, cooperation between the United States and the European Union raises potential strategic issues that companies should consider carefully when executing deals with both US and EU dimensions.
The best practices establish a key objective that "when the US agencies and the European Commission are reviewing the same merger, both have an interest in reaching, insofar as possible, consistent, or at least non-conflicting, outcomes".
The best practices set out procedures in four distinct areas.
Communications between reviewing agencies
The reviewing agencies should contact one another "promptly upon learning of a merger that appears to require review in both the US and EU". Where it appears that substantial cooperation may be beneficial, a tentative timetable for regular inter-agency consultations should be set up. This should provide for consultations at key stages (eg, before the issue of the second request in the United States, or no later than three weeks after the European Commission initiates a Phase I investigation). Each agency should designate a contact person for communication between the agencies.
Coordination on timing
Merging parties are encouraged to discuss timing with the reviewing agencies as soon as feasible, and to provide the anticipated dates for filing in each jurisdiction:
"The reviewing agencies and the merging parties should be prepared to discuss ways to coordinate the timing of the US and EU investigations, to the extent possible under US and EU law respectively."
The best practices also do the following:
They encourage parallel filings in the United States and the European Union, but note that if filings in the two jurisdictions are not made in parallel, meaningful cooperation can still be achieved if the timing of the filings allows for cooperation of the agencies at key decision-making stages of their respective investigations.
They note that facilitation by the parties of the coordination of investigations is particularly important:
"in cases in which the merging parties anticipate that the US agency will issue a second request and will seek remedies, and the merging parties are seeking a Phase I clearance decision with commitments from the European Commission."
They state that:
"after the issuance of a second request in the US and the opening of a Phase II investigation in the EU, the parties can further facilitate coordination of the investigation by using the timing flexibility provided for in the respective procedures, eg negotiating a timing agreement with the reviewing US agency, or in the EU requesting to extend the review period by up to 20 working days."
They actively warn against filing and gaining a decision in one jurisdiction before the other:
"If the timing of the filings in the US and the EU is such that a final decision in one jurisdiction is reached before filing has taken place in the other, any possibility for meaningful cooperation between the agencies will have been excluded."
Collection and evaluation of evidence
Coordination may start in the European Commission's pre-notification phase, and includes:
sharing publicly available information;
discussing the respective analyses at various stages of an investigation (eg, market definitions, assessment of competitive effects and efficiencies, theories of competitive harm and empirical evidence to test those theories); and
considering remedial measures and relevant past investigations and cases.
In addition, the reviewing agencies may discuss and coordinate information or discovery requests to the merging parties and third parties, including exchanging draft questionnaires to the extent permitted by local law.
As soon as feasible after the parties inform the reviewing agencies of a merger that requires review by both the US agencies and the European Commission, the staff of the reviewing agencies should enter into discussion with the merging parties with a view to receiving confidentiality waivers from the merging parties, usually at the commission's pre-notification stage. The reviewing agencies may also request that third parties waive confidentiality.
Remedies and settlements
The reviewing agencies should strive to ensure that the remedies do not impose inconsistent or conflicting obligations on the parties. They should share draft remedy proposals and participate in joint discussions with the merging parties, prospective buyers and trustees.
Merging parties must carefully consider their interests in facilitating coordination between the US and EU agencies, and should not leap forward reflexively in the interest of perceived expediency. It is critical that US and EU counsel work together closely to formulate strategies dealing with multiple reviews that are in the interests of merging companies on a case-by-case basis.
While the best practices state that the US and EU authorities will seek to cooperate with other authorities around the world (pursuant to relevant Organisation for Economic Cooperation and Development recommendations, bilateral cooperation agreements and principles developed by the International Competition Network for interagency cooperation), the practical reality is that merging parties can face a bewildering number of merger regimes with very different procedures, substantive assessments and timetables. It is therefore imperative that merging parties in global transactions take early strategic advice on how to navigate the different regimes as expeditiously and as cost-effectively as possible.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.