1. BIIC London, 16 November 2007 The new EU merger remedies policy Dr Johannes Luebking Deputy Head of Unit, Directorate C-5, DG Competition The views expressed are personal and do not necessarily reflect the views of the European Commission nor those of DG COMP

2. Reasons and objectives of review  Reflect conclusions from Commission’s Merger Remedies Study (2005) http://ec.europa.eu/comm/competition/mergers/studies_reports/remedies_study.pdf  Incorporate recent jurisprudence n Important guidance in EDP/GDP, GE, Tetra, Cementbouw and easyjet judgements  Reflect experience gained in recent Commission practice n Relevant recent remedies cases such as Inco/Falconbridge or GDF/Suez  Update with regard to changes introduced in 2004 Merger Review n Mainly concerns options to extend deadlines to discuss and assess remedies  Planned adoption of the new texts early 2008

3. General Principles n Allocation of responsibilities (EDP/GDP/ENI, GE/Honeywell) n Commission informs the parties of the competition concerns identified n It is for the parties to propose remedies, Commission cannot unilaterally impose conditions n Commission has to assess the effects of the operation, as modified by the remedies n Commission has eventually to prove that remedies are not sufficient to remove competition concerns n Proportionality (Cementbouw) n Parties do not need to submit remedies that go further than what is necessary to remove competition concerns n If they do so, however, Commission cannot reject them and impose different ones

4. General Principles n Assessment standard (GE/Honeywell, easyjet)  Commitments have to eliminate competition concerns entirely and to be comprehensive and effective from all points of view  Certainty as to the implementation  Probability as to the assessment of the operation (“more likely than not that the operation modified significantly impedes effective competition”) n Appropriateness of different types of remedies n Divestitures generally preferred, including for non-horizontal concerns n Other structural commitments, such as access remedies, acceptable if same effect as divestiture – divestitures as “benchmark” n Where market structure is affected only by future behaviour of the merging parties, also other remedies may have to be assessed (Tetra) n Commitments on future behaviour, however, only exceptionally accepted. Certainty of implementation and effective monitoring particularly required (easyjet)

5. Divestitures. Additional information requirement n There is a clear asymmetry of information on the right scope of viable business; Commission has the burden of motivation to reject commitments n New information obligation of the parties 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

6. Divestitures. Scope n All assets and personnel necessary to ensure 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 n Modalities: – Preference for stand-alone business – Carve-outs acceptable n Risks for viability and competitiveness to be limited by requiring transfer of a stand-alone business >>>carve out started in interim period n Reverse carve out as option

7. Divestiture. Purchasers Divestiture only effective once business is transferred to suitable purchaser n Suitable purchaser to be agreed within fixed time-limit – Normal procedure. n Multitude of purchasers available (also including special purchaser requirements) n No specific issues interfere with divestiture n Up-front buyer – Uncertainty of implementation n Obstacles for divestiture, e.g. third party rights n Uncertainty that Business will attract suitable purchaser – Difficult interim preservation: n If high risk of degradation n 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)

8. Non divestiture remedies n Removal of links with competitors – Divestiture of minority shareholding or, exceptionally, waiving rights related to minority stakes – Termination of distribution or other contractual arrangements n Access commitments: – Granting of non-discriminatory access to infrastructure, networks, technology/IP rights or essential inputs. – Acceptable, to lower barriers to entry or eliminate foreclosure concerns, if same effect as divestiture – For lowering entry barriers  Ex.: pay-TV platforms; airport slots; gas release programs  Likely entry of new competitors – For foreclosure concerns  Access to pipelines, telecom networks, telematics networks  Likely use by competitors – For foreclosure concerns by IP rights or key technology  Granting of non-exclusive licenses  Ex.: GE/Instrumentarium; Axalto/Gemplus – Monitoring of such commitments  Self-enforcement of commitments via market participants  Via arbitration clauses (ARD, easyjet)  By national regulators

9. Non divestiture remedies n Other non-divestitures: – To be assessed on a case-by-case basis (Tetra) – May be accepted in specific circumstances, such as conglomerate concerns – Difficulty of monitoring and risks of effectiveness: they may only amount to mere declarations of intentions