Acting Director - Policy and Strategy The new merger remedies policy Carles Esteva Mosso Acting Director - Policy and Strategy DG Competition

The new merger remedies policy Remedies package adopted in October 2008: Amended Merger implementing Regulation (including new Form RM) Revised remedies Notice Objectives: Implement lessons from the Merger Remedies Study (2005) http://ec.europa.eu/comm/competition/mergers/studies_reports/remedies_study.pdf Incorporate recent jurisprudence Reflect experience gained in recent Commission practice Update with regard to changes introduced in 2004 Merger Review

General Principles Allocation of responsibilities Assessment standard Commission informs the parties of the competition concerns identified It is for the parties to propose remedies, Commission has to assess the effects of the operation, as modified by the remedies. Assessment standard Balance of probabilities standard to assess effects: prohibition only if it is more likely than not that the operation, as modified, significantly impedes effective competition Incumbent to the parties to remove uncertainties as to the implementation of the remedy Proportionality Parties do not need to submit remedies than go further than what is necessary to remove competition concerns. The Commission will review whether remedies submitted are necessary and proportionate. However, the Commission cannot reject them and impose different ones. Appropriateness of different types of remedies Divestitures, generally preferred, including for non-horizontal concerns Other structural commitments, such as access remedies, acceptable if same effect than a divestiture

Merger remedies study: issues on divestitures

Divestitures. Scope Insufficient scope of the divested business is the major source of remedy failure (remedies study).

Divestitures. Scope All assets and personnel necessary to ensure a viable and competitive business to be transferred Independent access to supply (Inco/Falconbridge; GDF/Suez; Evraz/Highveld), IP rights,… Shared assets (duplication, if necessary) and personnel to be transferred Modalities: Preference for stand-alone business Carve-outs acceptable Risks for viability and competitiveness to be limited by requiring transfer of a stand-alone business (carve out started in interim period) Reverse carve out as an option Alternative divestitures (“Crown jewels”) In case there are uncertainties in relation to the business to be divested, parties could propose an alternative divestiture, to be implemented if the first one does not take place in a short deadline.

Divestitures. Additional information requirement There is a clear asymmetry of information on the right scope of viable business; Commission has the burden of motivation to reject commitments New information obligation of the parties included in the Implementing Regulation: Form RM Nature and scope of commitments offered; Conditions for their implementation; and Suitability to remove any impediment to effective competition Deviations from Commission’s Model Texts For divestitures, in particular, detailed factual description required on how the business is currently operated; to be compared with scope of Divested Business as offered in the commitments

Divestiture. Purchasers Suitable purchaser to be agreed within fixed time-limit Normal procedure. Multitude of purchasers available (also including special purchaser requirements) No specific issues interfere with divestiture Up-front buyer Uncertainty of implementation Obstacles for divestiture, e.g. third party rights Uncertainty that Business will attract suitable purchaser Difficult interim preservation: If high risk of degradation Fix-it-first remedy Preferable where identity of purchaser is crucial for effectiveness of remedy E.g. if viability is ensured by specific assets of the purchaser (Inco/Falconbridge) or where purchaser needs to have specific characteristics (tele.ring)

Non divestiture remedies General benchmark: Acceptable if same effect than divestitures Access commitments: Granting of non-discriminatory access to infrastructure, networks, technology/IP rights or essential inputs. They may lower barriers to entry or eliminate foreclosure concerns, with same effect than divestitures (e.g. Lowering entry barriers: only if there will be actual entry of new competitors) Monitoring of such commitments Via market participants: self-enforcement of commitments (arbitration clauses) Via national regulators Other non-divestitures: Where market structure is affected only by future behavior of the merging parties, also other remedies may have to be assessed (Tetra). Commitments on future behavior, however, only exceptionally accepted. Certainty of implementation and effective monitoring particularly required.

Procedure: Phase I remedies Remedies have to rule out “serious doubts”. Only acceptable when competition problem is readily identifiable and can easily be remedied (recital 30 ECMR). To be submitted within 20 WD (extension 10 WD) Only limited modifications acceptable after deadline (Philips) Commission will offer the opportunity to withdraw remedies if concerns finally do not arise in one or more markets

Procedure: Phase II remedies Remedies must remove competition concerns They should be submitted before day 65 If submitted before day 55, no extension If submitted after day 55, or before day 55 but modified version submitted after, extension of 15 WD. Art 10.3 extension possible Late modified remedies in phase-II: Commission not obliged, but allowed to accept late remedies (i.e. modified remedies submitted after day 65). (Edp/GDP/Eni) Conditions described in Remedies Notice: Modified remedies fully and unambiguously remove competition concerns without need for further investigation or market test Commission must be able to properly consult with Member States, (i.e. to keep 10 WD deadline) No Art 10.3 extension will normally be granted after day 65