The European Commission's Merger Simplification Package
On 14 December 2013, the Commission's Merger Simplification Package ("Simplification Package") was published in the EU's official journal (OJ 2013 L 336/1; eur-lex.europa.eu/LexUriServ/LexUriServ.do ). The Simplification Package amends the Merger Implementing Regulation and the official forms for merger notifications (Form CO; Short Form CO) and referral requests (Form RS) and enters into force on 1 January 2014.
It aims at simplifying the EU merger review process by (i) widening the scope of the simplified procedure, (ii) reducing the information requirements and (iii) streamlining the pre-notification process. This blog entry summarizes the major changes introduced by the Simplification Package.
First, and most importantly, the Commission has raised the market share thresholds for candidate cases for the simplified procedure:
- For markets in which two merging companies compete ("horizontal overlap markets"), the threshold when a "full" Form CO notification is required has been raised from 15 % to 20% while for "vertical relationships" the threshold has been raised from 25 % to 30 %;
- Mergers however may also qualify for a simplified review when the companies' combined market shares are between 20% and 50 % and when the increase in market share after the combination of their activities is limited (i.e. HHI delta resulting from the concentration is less than 150).
The Commission estimates that the new thresholds will allow 60-70 % of all notified transactions to qualify for the simplified procedure (an increase of approximately 10 %). As comparable market share thresholds for "simplified proceedings" also exist in some Member States (which have "copied" Form CO to some extent), the raised thresholds may also contribute to future changes/simplifications on a national level in those Member States.
Secondly, some relatively "formalistic" information requirements have been removed from the official forms (e.g. copies of the most recent annual reports and accounts are only required in case these documents are not publicly available on the Internet while the provision of complete subsidiary lists and certain HHI calculations has been abolished). While these changes, aimed at cutting red tape for businesses, are certainly welcome, on some occasions it appears that the Commission has not gone far enough: For example, in most cases, one may question the importance of submitting the final/most recent transaction documents (e.g. SPA, public bid) for the competitive assessment of a concentration.
What is even more striking is that the Commission has at the same time introduced new information requirements in the Simplification Package:
- Submission of internal documents: In addition to existing disclosure obligations with respect to internal documents, Form CO now also requires copies of (i) the minutes of board and shareholder meetings at which the transaction has been discussed, (ii) internal documents for the purpose of assessing potential alternative acquisitions and (iii) internal documents for the purpose of assessing any of the affected markets in the last two years; in the simplified procedure, in case of horizontal or vertical overlaps (ie "reportable markets"), copies of all presentations prepared by/for or received by the board and shareholder meetings analysing the notified concentration have to be provided.
- Plausible alternative product and geographic market definitions: Notifying parties must not only submit information on the markets which they consider to be relevant but also on all plausible alternative product and geographic markets (such markets can be identified on the basis of previous Commission decisions and judgments of the Union Courts and (in particular where there are no Commission or Court precedents) by reference to industry reports, market studies and the notifying parties’ internal documents). While this requirement is not entirely new (such a requirement already existed under the "old" Short Form CO and was also contained in DG Comp's Best Practices), its "codification" and the additional guidance will rather increase the notifying parties costs and resources rather than reducing them, especially taking into account that the majority of Commission decisions in merger cases leave the exact market definition open.
The new information requirements contained in the Simplification Package will thereby certainly increase the requests for "waivers" submitted to the Case Teams in the pre-notification phase (which in itself may even increase the burden for all stakeholders involved rather than reducing it).
Thirdly, although the Simplification Package also aims to streamline the pre-notification phase, no substantive amendments have been introduced in this area (compared to the existing practice). The Simplification Package however identifies (a) certain categories of information that may be particularly suited for waiver requests and (b) cases where the prior submission of a draft notification during the pre-notification phase may not be "necessary" (i.e. cases with no horizontal or vertical relationships).
Altogether, while the Simplification Package contains some major improvements (most notably the increase of the market share thresholds to identify cases suitable for the simplified procedure), in most cases it will – as is already the case today – depend on the individual Case Team's approach when it comes to the question of whether costs and burdens for businesses will indeed be significantly reduced.