1. Hunting for the quick fix? Phase I remedies in UK merger control Simon Pritchard Director, Mergers BIICL 7 th Annual Transatlantic Antitrust Dialogue London, 1 May 2007

2. Agency best practice Learning from peer agencies  Ex post studies – CC (2006), DGCOMP (2005), and FTC (1999)  Policy guides, notices – 2004 DOJ guide, 2007 EC materials Learning from DIY experience  Beware of misplaced faith in behavioural remedies – National Express/Prism (2000, reviewed in 2006)  Beware contingencies and scarcity of suitable purchasers in divestiture cases – Tesco/Co-op Slough (2004, referred in 2007)

3. OFT merger remedies cases 2006-7  Boots / Alliance Unichem – divestiture of pharmacies  Gala / County – divestiture of bingo hall  Pendragon / Reg Vardy – divestiture of car dealerships Inchcape / EMH (authorized repair services)  Co-op / Fairways – divestiture of funeral homes  Tetra Laval / Carlisle – IPR remedy in industrial cheese equip.  Aggregate Ind / Foster Yeoman – divestiture of asphalt plants  Flybe / BA Connect – release aircraft parking stand at SOU

4. Case study – Tetra Laval/Carlisle (2006)  First UK up-front buyer case  Rationale for transaction was target’s U.S. assets, but creates two 2:1’s and a 3:2 in markets for industrial cheddar-making equipment in UK and Ireland  Here, Phase II would not further the substantive analysis; key issue is remedies design and buyer  Only 5-10% of Carlisle UK plant devoted to overlap products; doubtful a buyer would want entire plant

5. Tetra Laval/Carlisle cont/…  Quasi-structural remedies package: ‘irrevocable, exclusive, perpetual’ EEA-wide licenses for IP rights  OFT presses pause on timetable; Tetra finds candidate buyer  OFT reviews FTC and DG Comp ex post studies; tests credibility of buyer and scope of package pre-CRM  Tetra closes on worldwide transaction outside UK  Post-decision, Tetra signs conditional S&PA with buyer; OFT consults on remedies package + buyer in tandem  Bonus: Irish had gone to Phase II; closed early due to UK fix

6. Process optimisation – parties  First-phase remedies are key to a sound two-phase merger regime, and to reducing frictional costs of UK system  Parties and advisers can assist the OFT with pinch-points  Parties control what they offer – and typically prefer not to engage early, fearing over-enforcement  Clear-cut standard: degree of confidence in defining scope of problem (e.g. which overlaps do / don’t raise concerns)  Clear-cut solution: risk and complexity factors – viability risk, deterioration risk, purchaser risk  Third party litigants – addressing above improves chances of defending a settlement on appeal – Celesio v OFT

7. Process optimisation – OFT  OFT will respond to early and candid engagement on a ‘without prejudice’ basis  Informal advice at confidential stage if parties ‘play ball’  Pre-notification dialogue  OFT indulges in ‘closed envelope’ devices to reassure clients  Plan to consult on a second-bite option for ‘near miss cases’ featuring a good faith offer prior to the Case Review Meeting  New head of remedies – creation of new senior position within OFT Mergers to consolidate know-how and produce guidance  Finally, OFT seeks optimal blend of empiricism and pragmatism: accepting parties’ divestment offer of all 3:2’s in Boots/Unichem