The EU Commission adopted measures on 5 December 2013 to simplify its merger notification process under the EU Merger Regulation, Council Regulation EC No. 139/2004.
These reforms represent good news for business. They usher in a lighter touch policy by the Commission for non-problematic merger cases which will result in a simpler notification process, help reduce costs, and may in practice enhance the chance of quicker clearance decisions within the statutory framework. The merger simplification package will be effective from 1st January 2014.
The more controversial proposals to extend the scope of the EU Merger Regulation to vet the acquisition of minority shareholdings have been postponed.
The Commission’s package of reforms consists of the following:-
- measures to widen the scope of the use of the Commission’s simplified procedure used in cases of unproblematic mergers
- a reduction of the amount of information required when notifying merger transactions in all cases
- pre-notification of merger notifications may not be required for very straightforward cases
- revised standard model texts for commitments to speed up the clearance of merger transactions under the EU Merger Regulation
Changes to the Simplified Procedures
The proposed changes will lead to an amendment to the Commission’s Notice on Simplified Procedures under Council Regulation No. 139/2004 (see 2005/C56/04). The simplified procedure is designed for mergers which are unlikely to raise competition problems but yet meet the thresholds for notification under the EU Merger Regulation. Under the procedure companies use a shorter notification form and the Commission may clear such cases without a market investigation.
Having used the simplified process for some years now the Commission feels that with the benefit of its experience it can now expand the scope of the simplified procedure if the following conditions are satisfied:-
- for markets in which two merging companies compete (horizontal mergers) mergers below a 20% combined market share will qualify (instead of 15% at present)
- for vertically related mergers namely those where one of the companies sells an input to a market where the other company is active, mergers below a 30% combined market share will be covered (instead of 25% at present)
- The simplified procedure can now be used if the combined market share of the two merging companies are between 20-50% but the increase in market share due to the merger is small.
The Commission estimates that this will allow them to review between 60-70% of merger cases under the simplified review process. This represents a 10% increase on the number of mergers currently looked at under that procedure.
The beneficial effects of these reforms for the Business Community are likely to be a reduction of information burden on companies, help reduce costs and particularly legal fees. In addition it may in practice enhance the chances of quicker clearance decisions with the statutory framework.
Amendments to the EU Merger Implementing Regulation
The reforms will also result in the amendment of the EU Merger Implementing Regulation, Commission Regulation No. 802/2004, which sets out detailed procedures in relation to the form and content of notifications required under the EU Merger Regulation itself. Under the reforms the information required to notify a merger to the Commission will be reduced not only for cases under the simplified procedures but also all other cases as well.
The reforms will make it simpler for merging companies to ask the Commission for waivers of the notifying parties’ obligations to produce certain information which may not be required in the context of a particular case. Also reduced is the information required from companies that are seeking referral of a case within the ambit of the EU Merger Regulation from the Commission to a particular Member State or vice versa.
The Commission hopes the changes will simplify the exchanges between companies and the Commission in the pre-notification period reducing the time needed for pre-notification dialogue.
In another significant move the Commission has also proposed that parties using the simplified procedure may not need to pre-notify their merger notifications in very straightforward cases.
Although the Commission emphasises that it is the parties’ duty to submit a full and complete merger notification, the Commission believes that there are certain cases in which the parties should be able to elect not to file a pre-notification draft. These cases are those that do not give rise to horizontal overlaps or vertical links. Based on 2008-2010 figures the Commission believes that around 25% of the cases that qualify for simplified review fall within this category. The removal of a pre-notification phase for such cases should streamline the merger control process.
Standard Commitment Texts
Parties can offer commitments to the Commission to address a competition issue inherent in a particular merger to gain conditional clearance. To assist in this process the Commission has just published a number of model commitment texts designed to assist parties in securing merger clearance faster for mergers where there may be one or more outstanding competition issues which can be resolved by way of commitments. These update texts were previously proposed by the Commission in 2003.
These new commitments are designed to be used by parties offering to divest assets and for the establishment of a mandate for a trustee who will monitor the implementation of the commitments. The use of these model texts are voluntary but it is hoped that it will make it easier for parties to design commitments that effectively address competition concerns.