The European Commission has adopted a merger simplification package in pursuit of its stated goal of creating a more streamlined and flexible system for its procedures for reviewing concentrations under the EU Merger Regulation No. 139/2004 ("EUMR"), particularly towards alleviating administrative burdens on companies. The package comprises amended versions of the (i) Notice on Simplified Procedure and (ii) Commission Implementing Regulation and its accompanying Annex 1 (Form CO), Annex 2 (Short Form CO), and Annex 3 (Form RS).
These will become applicable as of 1 January 2014. The adoption of these new texts followed a public consultation on simplifying merger control procedures in the European Union ("EU"), to which Jones Day submitted comments (see also Jones Day Antitrust Alert of May 2013).
These procedural modifications to the EU merger control system are notable in that the changes raise the risk of actually increasing the scope of information required in certain cases. This issue, raised in the comments submitted by Jones Day and others, only partially swayed the Commission towards addressing such concern in its final texts.
This push for merger simplification is one of several key components of the Commission’s initiative to stimulate competitiveness. In parallel to merger simplification, the Commission has also launched consultations on extending its review powers to the acquisition of non-controlling minority shareholdings and streamlining the referral system between the Commission and national competition authorities (see Jones Day Antitrust Alert of June 2013).
The newly-adopted merger simplification modifications primarily address:
Broadening the availability of the simplified merger procedure for non-problematic cases (so-called "Short Form CO").
Amending the content required in the forms for the notification of concentrations (both the full-length "Form CO" and Short Form CO).
Enlarging the reach of the simplified merger procedure
In a welcome initiative to increase market share thresholds for relevant markets, the amended Notice on a Simplified Procedure extends the scope of the simplified procedure to non-problematic cases by a relaxing of market share thresholds:
- Increasing the market share thresholds from 15% to 20% for horizontal mergers and from 25% to 30% for vertical mergers.
- Expanding the availability of the simplified procedure for companies competing in the same markets, whose combined market shares are between 20%-50%, in cases where the merger would result in a low increase in market share.
The Commission's press release notes that these modifications are expected to lead to an increase of 10% of cases treated under the simplified procedure, with the total number of cases submitted using simplified procedure rising to some 60%-70% of all concentrations notified to the Commission.
Amended forms for notifying concentrations – widening of information requirements
In modifying the Implementing Regulation, a stated aim was to decrease the amount of information required in the notification forms. However, the information to be furnished upfront (and therefore subject to evaluation of the completeness of the form) is now at risk of expanding for both Form CO and Short Form CO:
Widened scope of information required for "supporting documentation" concerning the proposed concentration (Section 5), which requires in particular submissions of a broad range of data (e.g. reports, surveys, presentations, and "any comparable documents"):
- from the last two years, assessing any of the affected markets (previously, only information concerning the notified concentration was required, with no requirement of providing for the last two years),
- as received by (not only prepared by) any member of the board of management (not only board of directors or supervisory board).
Expanded provision of detailed information on relevant markets (Section 6), and in particular the following additional requirements (emphasis added):
- Market definitions must now include all plausible alternative product and geographic market definitions (in particular but not limited to alternative product and geographic market definitions as identified in previous Commission decisions and judgments of the EU courts and (particularly where no precedents) by reference to industry reports, market studies and the notifying parties’ internal documents) (previously, only market definitions considered relevant by the parties).
- Detailed market information must now be provided for each of the affected markets under all such plausible market definitions.
Regarding the requirement to submit information on "all plausible" alternative markets, it is true that in practice, as noted by the Commission, parties already were required to provide information on alternative market definitions. This requirement has now been extended (with little guidance) to all possible alternative relevant markets. Moreover, as set out in Jones Day’s comments, by formalizing such requirement, the Commission reduces the parties’ (limited) leverage to negotiate down the information requirements. The burden has now shifted to the parties to demonstrate the irrelevance or disproportionality of information to be provided in order to obtain waivers.
It may be true, as asserted by the Commission, that the net amount of information required to notify all mergers (aggregating full form and short form notifications) will diminish, since the number of transactions eligible for Short Form notification should increase. However, the potential end result of the Commission’s new approach is a material increase in parties’ obligations to supply various and upfront information.