1
The Commissionâs Remedies Policy
1.1 Introduction
1.1.1 Merger Remedies
This book explores the policy and practice on merger remedies developed by the European Commission (the Commission) within the framework of Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (the Merger Regulation).1 The Commission has enjoyed powers to remedy mergers since 19902 and over the past two decades its policy has undergone substantial changes from being virtually unregulated and characterised by an ad-hoc approach to arguably the most guided and regulated area in merger control enforcement.
The procedural mechanism behind remedies under the Merger Regulation is that the merging parties3 propose, in response to competition problems raised by the Commission after an initial investigation, amendments to their notified concentration and, if deemed acceptable, the Commission makes such amendments enforceable by imposing them as conditions and obligations when approving the merger.4 Such remedial measures are typically implemented post-clearance and are generally referred to as commitments, undertakings or remedies.5
The possibility of proposing and accepting remedies is paramount in merger proceedings where competition concerns have been identified, as it is the only way for the respective transaction to proceed.6 Thus, remedies allow for a restructuring of the problematic and typically non-core part(s) of a proposed merger in order for the overall transaction to materialise. A restructuring may range from a âtraditionalâ divestiture of assets or businesses of one (or both) of the merging parties to more innovative transitional arrangements allowing for competitors to access capacity or infrastructure on certain conditions. In many cases remedies packages contain a combination of several remedial measures.
The âart of remediesâ is to find the right balance between, on the one hand, preserving competition in the best possible way through adequate remedies in the given problematic market and, on the other hand, retaining the overall commercial and financial incentives and benefits that facilitated the merger in the first place. If the remedies are inadequate, competition problems may not be (fully) addressed and that may cause substantial economic losses for competitors in the given market to the ultimate detriment of consumers. If the remedies are excessive, the parties may conclude that the anticipated benefits and synergies of the merger will be jeopardised with the result that they abandon their planned transaction altogether.7 This scenario may not only be a case of âmissed commercial opportunitiesâ for the companies involved but competition may also ultimately suffer if the overall benefits of the transaction could have promoted competition in core areas.8
Not surprisingly, several commentators have considered the remedial aspect of merger enforcement paramount in past practice.9 Indeed, the nature and complexity of the negotiation, design, assessment, implementation and enforcement of remedies have posed many challenges to competition authorities over the years as experience has shown that numerous individual aspects of a remedy must be successful in order for the overall remedy to succeed. Also, what makes the topic of remedies particularly challenging and at times also slightly frustrating for all parties involved is that, while the negotiation, design and assessment are based on a prospective analysis, the ultimate success â or failure â of a remedy can be determined only several years post-clearance when the effects of the remedies are visible in the given market.10
Moreover, unless the Commissionâs decision is successfully challenged before the Court of Justice of the European Union (the EU Court),11 either by the parties or third parties with standing, through an action for annulment, the Commission cannot reverse or unilaterally amend its conditional clearance decisions unless fraudulent circumstances, on which the decision was based, can be proven.12 From a general policy point of view the Commission is thus faced with the dilemma of wishing to pursue a dynamic and flexible remedies policy while at the same time being aware that its approach must be sufficiently âtried-and-testedâ in order to minimise the risk of unforeseen regulatory misjudgements, as any unfortunate effects thereof cannot be subsequently impeached.
By way of introduction, the Commissionâs current policy and practice are based on the following remedies-specific measures and initiatives: (i) the Commission notice on remedies acceptable under the Merger Regulation (the Remedies Notice) from October 2008;13 (ii) the Commissionâs Best Practice Guidelines for divestiture commitments (Best Practice Remedies Guidelines) from April 2003, consisting of two standard model texts relating to the submission of commitment proposals and trustee mandates together with an explanatory note;14 and (iii) the Commissionâs in-house study of merger remedies (the Remedies Study) from October 2005.15 This framework should be considered in the context of nearly 320 conditional clearance decisions adopted by the Commission over the past two decades16 as well as jurisprudence from the EU Court. Also a considerable number of guidance and studies from other jurisdictions, international organisations, academia as well as other Commission bodies have influenced the Commissionâs evolving remedies policy and practice.17
1.1.2 This Book
1.1.2.1 Objectives and Limitations
This book seeks to identify and examine as many as possible of the most important and interesting merger remedies aspects, which have emerged and developed in the Commissionâs policy and practice over the past 20-plus years. Indeed, in order to fully understand and appreciate the current remedies framework it is necessary to draw on past experiences and initiatives where the Commission has gone through phases of learning, acceleration and consolidation of its remedies policy. Along the way, the Commission has accomplished numerous successes but inevitably it has also faced some not insignificant obstacles and shortcomings in its enforcement.
The analysis in this book is structured in accordance with the âremedies lifecycleâ: the negotiation, submission, assessment, adoption, implementation and enforcement of remedies. Throughout the examination a number of critical remedies issues will be highlighted and, on this basis, the overall objective is to verify whether the current remedies framework provides an adequate regulatory response to the raised issues. It will be argued that the current sophistication and complexity of enforcement may in some instances risk weakening and even potentially undermining some of the enforcement successes accomplished throughout the years if the Commission does not consider further improvements or adjustments to its current remedies regime within the foreseeable future. Such areas include the need for enhanced procedural safeguards particularly in phase I proceedings, additional post-decision transparency and monitoring measures as well as in periodic re-evaluation of submission forms, guidance and decisional practice. Where possible, specific measures aimed at improving the Commissionâs remedies policy will be suggested and considered.
Needless to say, in view of the substantial scope of the Commissionâs remedies policy and practice over the past 22 years, the analysis in this book has had to give priority to (and by the same token, exclude) certain areas. Among other things, the main focus is on structural remedies as they continue to be considered the most important and frequently used remedial solutions, partly due to the Commissionâs clear preference for such remedies18 but also due to structural solutions being the most obvious and straightforward choice for the parties in many cases. Accordingly, non-structural remedies will be described only sporadically where appropriate in the context of main features of the Commissionâs remedies policy, especially in situations where such remedies may be more appropriate than structural solutions or where they are ancillary and supplementary to structural solutions.19 However, it is worth stressing that this priority does not imply that non-structural solutions are insignificant in the Commissionâs policy and, indeed, some of the most recent developments indicate that such remedies may prove increasingly prominent in future policy but for the present purposes it has been necessary to focus on structural solutions in order to devote sufficient resources and space to this aspect.
Furthermore, several remedies topics could easily warrant a dedicated book in their own right due to their scope, nature and complexity. Such topics will be limited to what is essential in order to reflect on the overall remedies discussions and identify successes and/ or failures in this respect. Arbitration is an example where such provisions in remedies cases could easily justify an in-depth analysis but where the topic in the current context has been strictly limited to what is necessary to assess the workability and impact of such clauses in a remedies package. Another example is the transatlantic cooperation in merger remedies cases where, although the policies of the Commissionâs US counterparts have proven highly relevant in EU contexts, such aspects will be mentioned only where they highlight particular similarities or differences in order to further enhance the understanding of the Commissionâs policy and practice.
Finally, it is worth pointing out that while remedies are a direct response to competition problems, a description and analysis of the latter in this book will be limited to what is strictly necessary for the understanding and discussion of the corresponding remedies. This priority should in no way be seen as a statement that the evaluation of the competition problems is less important but merely as a means of focusing the analysis on the remedies aspects.
1.1.2.2 Structure
This book is structured in the following way. The remainder of this chapter is devoted to an introduction to the Commissionâs past and present policy by providing a chronological overview of its remedies framework as developed over the past two decades. It will be explained how the Commissionâs policy has gone through the following three main phases: learning, acceleration and consolidation.20 In addition, certain remedies aspects, which may justify a possible re-evaluation within the foreseeable future, will be introduced. Furthermore, as a basis for the analysis in the following chapters, an overview will be provided of the current remedies framework, consisting of relevant provisions in the Merger Regulation, guidelines and standard model texts as well as relevant remedies reviews and studies not only from the Commission but also from the US competition authorities, the Organisation for Economic Co-operation and Development (OECD) and the International Competition Network (ICN). Finally, some introductory considerations ab...