On 5 December, the European Commission published a package of measures to reduce the administrative burden of EU merger control, which will apply as of 1 January 2014.
The package extends the scope of the simplified procedure for non-problematic cases. This means that more transactions may be notified using the Short Form CO, which will reduce the burden notwithstanding the fact the “Short” Form CO is still a fairly lengthy document. The European Commission considers that its proposed changes could allow up to 60-70% of all notified mergers to qualify for review under the simplified procedure, which is about 10% more than today.
The European Commission has also introduced various amendments to all its notification forms, aimed at streamlining the information which notifying parties are required to provide in these forms.
The changes are welcome news for business and should reduce the workload and costs involved in seeking clearance for most transactions which require notification to the European Commission but do not raise competition law issues.
What is the simplified procedure?
A simplified procedure was introduced by the European Commission in 2000 for the assessment of transactions which are not expected to raise significant competition concerns. The simplified procedure is in principle available for certain categories of transactions, although its use always requires the consent of the Commission which should not automatically be assumed. Under this procedure transactions can be notified using a Short Form CO, which involves the provision of less extensive information than the standard notification form, the Form CO. The simplified merger procedure may also lead to a quicker review process. The European Commission states that it “will endeavour” to adopt a short-form decision as soon as practicable after 15 working days (it generally has a total of 25 working days to decide whether to grant approval or open a Phase II in-depth investigation).
Expansion of scope for simplified procedure
At present, the simplified procedure is available in cases where the parties’ combined market shares are below 15% for horizontal overlaps and 25% for vertical relationships, and for joint ventures, which have no, or de minimis, actual or foreseen activities within the European Economic Area (EEA).
As from 1 January 2014, the Commission will increase the market share limits and add a new category of transaction that may benefit from the simplified procedure. The European Commission’s Notice on a simplified procedure for the treatment of certain concentrations under Council Regulation (EC) No 139/2004 (the “Notice”), will thus be amended so that it covers:
On this last point, however, the European Commission notes in the revised Short Form CO that it will “decide on a case-by-case basis whether, under the particular circumstances of the case at hand, the increase in market concentration level indicated by the HHI delta is such that a Short Form CO can be accepted. The Commission is less likely to accept a Short Form CO if any of the special circumstances mentioned in the Commission’s guidelines on the assessment of horizontal mergers are present; for instance – but not limited to – where the market is already concentrated, in the case of a concentration that eliminates an important competitive force, in the case of a concentration between two important innovators, or in the case of a concentration involving a firm that has promising pipeline products“.
Amendments to merger notification forms
The European Commission has introduced a number of amendments to all the notification forms, namely the Form CO, the Short Form CO, and Form RS (the form in which parties can request a referral back to one or more EU member states or for the European Commission to consider the case rather than individual EU member states).
Amendments to the Form CO include:
The new Form requests:
“copies of the following documents prepared by or for or received by any member(s)of the board of management, the board of directors, or the supervisory board, as applicable in the light of the corporate governance structure, or the other person(s) exercising similar functions (or to whom such functions have been delegated or entrusted), or the shareholders’ meeting:
(i) minutes of the meetings of the board of management, board of directors, supervisory board and shareholders’ meeting at which the transaction has been discussed, or excerpts of those minutes relating to the discussion of the transaction;
(ii) analyses, reports, studies, surveys, presentations and any comparable documents for the purpose of assessing or analysing the concentration with respect to its rationale (including documents where the transaction is discussed in relation to potential alternative acquisitions), market shares, competitive conditions, competitors (actual and potential), potential for sales growth conditions;
(iii) analyses, reports, studies, surveys and any comparable documents from the last two years for the purpose of assessing any of the affected markets with respect to market shares, competitive conditions, competitors (actual and potential) and/or potential for sales growth or expansion into other product or geographic markets.”
Amendments to the Short Form CO include:
Whilst the package is a welcome cut in red tape for EU merger clearance, it is yet to be seen whether in practice the initiative will radically reduce overall information requirements and expenses. The European Commission retains a wide discretion whether to accept information waiver requests, and to revert to a full notification process.
Extra-territorial joint ventures that have no actual or foreseeable effects within the EEA still require notification. This is because under the current EU Merger Regulation, the turnover thresholds can be met solely on the basis of two joint-controlling parent companies’ turnover. This is the case, irrespective of the geographic location of the joint venture, its size and whether the joint venture could raise competition concerns within the EEA. The European Commission has chosen not to tackle the issue at this stage by amending the turnover thresholds of the EU Merger Regulation. Instead, it has chosen to reform around the edges by maintaining the notification requirement but reducing the quantity of information that is required in the notification form for these transactions. These transactions can now be notified using an abbreviated Short Form, which is called by the Commission in its accompanying press release to the package a “super-simplified notification”. This essentially requires a description of the transaction, business activities and turnover of the parties without a description of markets or the provision of supporting documentation.
This post originally appeared on the Kluwer Competition Law blog.