European Commission adopts merger control reform package

On 11 December 2002, the European Commission adopted a package encompassing the most extensive reforms to EU merger control since the entry into force of the EU Merger Control Regulation in 1990. The texts will shortly be available on the Commission’s website.

The main changes proposed by the Commission are:

Proposal for a revised Merger Regulation

• Substantive test clarified. This will clarify the substantive standard by which mergers are analysed on competition grounds. It will ensure that the Regulation can be applied to oligopoly situations which may raise competition issues.
• More flexible timetables for notifications. Parties will be able to notify the Commission prior to the conclusion of a binding agreement. The requirement to notify the Commission within a week of concluding a transaction will also be abolished. More flexible timetables for investigations (especially for complex cases). Three weeks will be added to the timetable following the submission of a remedy offer. Up to four weeks could be added, with the agreement of the parties, for the purpose of ensuring a thorough investigation.
• Simplified system for the referral of cases from the Commission to the Member States and vice versa to ensure that the best placed authority will deal.
• Higher fines for supplying incorrect or misleading information. This means an increase to 1% of aggregate turnover (from a current level of Euro 50,000) for companies.
• The Council and the European Parliament will consider the proposal during 2003. The revised Merger Regulation is expected to enter into force on 1 May 2004.

Draft notice on horizontal mergers and efficiencies

• Guidelines. The draft Notice sets out guidelines on how the Commission will assess horizontal mergers and, in particular, how the Commission will apply the concept of dominance in oligopolistic markets.
• Mitigating factors.The guidelines also deal with mitigating factors, such as buyer power, ease of market entry, the fact that the merger may be the only alternative to the demise of the target, and efficiencies.
• Efficiency claims. The Commission will accept efficiency claims, provided that the efficiencies generated will enhance the incentive of the merged entity to act to the benefit of consumers. Thus, efficiencies would have to be of direct benefit to consumers, substantial, timely and verifiable.
• Submissions on the draft Notice are invited before the end of March 2003.

A series of non-legislative measures to improve the decision-making process

• New Chief Economist. DG Competition will have a Chief Competition Economist (who will be involved in merger, other competition and State aid cases).
• Phase 2 Mergers – additional due process. All Phase 2 merger cases will be assigned a Peer Review Panel (composed of experienced officials who will scrutinise the investigating team’s conclusions at key points of the enquiry). In addition, the merging parties will have an earlier opportunity to review the contents of the Commission’s file, and an early opportunity to review third party concerns about the impact of the merger on competition. “State-of-play” meetings will be held between the Commission and the merging parties at decisive points.
• Additional personnel. Additional support staff are being allocated to the Commission’s Hearing Officers. A Consumer Liaison Officer is being appointed within DG COMP so as to ensure the consumer voice will be better heard.

If you have any questions on the Commission’s merger reform package, please do not hesitate to contact Dick Taylor, David Marks or Sue Hankey by telephone on 020 7367 3000 or by email at competition@cms-cmck.com.