EU Merger Control
Remedies in Merger Cases
© Łukasz Stępkowski
• A merger case may, during substantive assessment, invite doubts on part of the Commission as to compatibility of the prospective merger with the internal
market
• Not all those doubts are irrevocable
• It may be that the merging parties offer commitments to ensure that the merger will be compatible with the internal market
• Where the Commission accepts such commitments, they serve to „remedy” the plausible incompatibility
• As a general rule, there are :
• Structural remedies, ie those that influence the structure of the undertakings concerned (company structure, assets, branches, specific departments aimed at specific markets etc)
• Behavioural remedies, ie those that merely affect the way a given undertaking (esp the merged undertaking) conducts itself on the market
• The Commission has preference for structural remedies, as they are more thorough
• The notion of commitments may be found under Regulation no 139/2004
• Firstly, the matter is addressed by the statement of reasons
• Recitals 30, 31 and 35 address various issues related to commitments
• Thus, „commitments should be proportionate to the competition problem and entirely eliminate it”
• Commitments may be offered before the Commission starts its proceedings
(„pre-notification stage”) : where the competition problem is readily identifiable and can easily be remedied
• In addition, „Commission may attach to its decision conditions and obligations in order to ensure that the undertakings concerned comply with their
commitments in a timely and effective manner so as to render the concentration compatible with the [internal] market”
• The power for the Commission to make a decision on inter alia commitments is provided under Article 6(2) EUMR and Article 8(2) EUMR, second paragraphs
• In essence, the Commission may attach to its decision conditions and
obligations intended to ensure that the undertakings concerned comply with the commitments they have entered into vis-à-vis the Commission with a view to rendering the concentration compatible with the internal market
• Where an undertaking is served with a decision which includes commitments, failure to observe those commitments results in the concentration being
deemed incompatible with the internal market (recital 31 : „if the concentration is implemented, it should be treated in the same way as a non-notified
concentration implemented without authorisation”)
• Purpose of commitments
• Depending on the stage which the administrative procedure has reached, the commitments proposed must allow the Commission either to form the view that the notified concentration does not raise serious doubts as to its
compatibility with the common market at the stage of the preliminary examination (Article 6(2) of the Merger Regulation) or to respond to the objections sustained during the detailed investigation (Article 18(3), read together with Article 8(2) of the Merger Regulation). Those commitments therefore make it possible to avoid the initiation of a detailed investigation
phase or a subsequent decision declaring that the concentration is incompatible with the common market
• GC T-162/10 Niki Luftfahrt para 290
• https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1547510298082&uri=CE LEX:62010TJ0162
• In addition, breaching a commitment:
- allows the Commission to revoke a decision made in accordance with Article 6 EUMR („phase I decision”, Article 6(3)(b) EUMR)
- allows the Commision to use its powers under Article 8(4)(b) EUMR, ie to:
• - require the undertakings concerned to dissolve the concentration, in
particular through the dissolution of the merger or the disposal of all the shares or assets acquired, so as to restore the situation prevailing prior to the
implementation of the concentration; in circumstances where restoration of the situation prevailing before the implementation of the concentration is not
possible through dissolution of the concentration, the Commission may take any other measure appropriate to achieve such restoration as far as possible,
• - order any other appropriate measure to ensure that the undertakings
concerned dissolve the concentration or take other restorative measures as required in its decision
• Furthermore, breaching a commitment may allow the Commission to use interim measures (Article 8(5)(b) EUMR)
• Breaching a commitment may also lead the Commission to revoke a decision taken after conducting proceedings („phase II decision”), 8(6)(b) EUMR
• In addition, making a commitment extends the maximum duration of
proceedings; where an obligation entered into by commitment is breached, the Commission becomes unbound by procedural time-limits (8(7)(a) EUMR)
• There is guidance from the Commission on the notion of commitments
• Commission notice on remedies acceptable under Council Regulation (EC) No 139/2004 and under Commission Regulation (EC) No 802/2004
• https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:52008XC1022(01)
• The Commission’s approach to commitments is that it is up to the parties to propose commitments to remedy any competition concerns
• The Commission would indicate in its preliminary assessment whether there are any competition concerns, but it may not unilaterally impose any remedies (see para. 6 RN)
• Where the parties do not address the competition concerns raised by the Commission, only a negative decision is possible
• The parties should furnish the Commission with all necessary data
• An important feature of commitments is that they have to eliminate Commission’s concerns completely
• There is no gradation for commitments (ie it is not enough that such measures would partially alleviate such concerns)
• In addition, commitments have to be „comprehensive and effective from all points of view” and „capable of being implemented effectively within a short period of time as the conditions of competition on the market will not be
maintained until the commitments have been fulfilled” (See para. 9 RN)
• It is also important that there be an ability to monitor the commitments and their implementation, unless a divestitute (a structural commitment) is
concerned (para. 13 RN)
• Complex and extensive measures may be hard to monitor and therefore are unlikely to be accepted by the Commission
• Which remedies are appropriate?
• The RN states that, as a general rule, appropriateness of remedies has to be assessed on a case-by-case basis
• However, there is a certain order of preference under para. 17 RN
• The „best” remedy, according to the Commission, is divestiture
• In principle this means selling a unit that is able to compete as a going concern with the merged entity
• In addition, the Commission may consider „carve-outs” where a part of an undertaking’s business activities is sold
• Exceptionally, other possible structural remedies are divestiture of assets, licencing agreements, rebranding
• re-acquisition of the business would violate an implicit obligation on the parties under the commitments
• As a „second choice”, the Commision has accepted that the so-called access remedies may be introduced
• This includes „granting of access to key infrastructure, networks, key
technology, including patents, know-how or other intellectual property rights, and essential inputs. Normally, the parties grant such access to third parties on a non-discriminatory and transparent basis” (para 62 RN)
• Furthermore, cancellation of long-term exclusive supply agreements may function as a non-divestiture remedy exceptionally acceptable by the
Commission
• Can commitments be amended / waived after their introduction?
• Yes – the Commission may not be expected to foresee every possible event during implementation of the commitments
• In addition, the Commission has discretion to require commitments in the first place
• T-712/16 Deutsche Lufthansa, para 34
• https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1547510298082&uri=CE LEX:62016TJ0712
• Para 41: although the Commission has a certain discretion in the assessment of a waiver request, it is nonetheless obliged to carry out a careful examination of that request, to conduct, if necessary, an investigation, to make the appropriate enquiries and to base its conclusions on all the relevant information.
• Is there a rule requiring the Commission to refuse/accept commitments where it has refused/accepted similar commitments in earlier cases?
• No – according to the GC in Deutsche Lufthansa, „since all concentrations are assessed individually and in the light of the applicable factual and legal
circumstances (see, to that effect, judgment of 13 May 2015, Niki Luftfahrt v Commission, T 162/10‑ , EU:T:2015:283, paragraphs 142 and 144), the fact that commitments have been refused in some, or even most, cases does not prevent them being accepted in a particular situation provided that they serve to
resolve the competition problems identified (para 131)”
• Can commitments be proposed by one party to a merger?
• Yes, but with certain conditions
• Commitments proposed by one of the parties to a merger will meet that
condition only in so far as the Commission is able to conclude, with certainty, that it will be possible to implement them and that the remedies resulting from them will be sufficiently workable and lasting to ensure that the creation or
strengthening of a dominant position, or the impairment of effective
competition, which the commitments are intended to prevent, will not be likely to materialise in the relatively near future
• Niki Luftfahrt, p 264
• Thank you for your attention
