The new EU merger remedies policy Carles Esteva Mosso Head of Merger Control Policy Unit

1. The new EU merger remedies policy Carles Esteva Mosso Head of Merger Control Policy Unit DG Competition

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

3. Conclusions of the Remedy Study on divestitures

4. General Principles • Allocation of responsibilities(EDP/GDP/ENI) • 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(GE/Honeywell) • 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”) • Proportionality (Cementbow) • Parties do not need to submit remedies than go further than what is necessary to remove competition concerns. If they do so, however, 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 • 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.

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

6. 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.

7. 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 to be 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

8. 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)

9. Divestiture process • Short divestiture two-step process (normally 6+3 months) • Interim preservation and hold separate obligations • Monitoring Trustee: • Timely appointment as up-front trustee • Trustee explicitly responsible for third party complaints • Publication of identity and tasks • Hold-separate manager: • Clear definition of role in commitments • Immediate, up-front appointment • Supervision/removal by Trustee

10. Non divestiture remedies • Removal of links with competitors • Divestiture of minority shareholding or, exceptionally, waiving rights related to minority stakes • Termination of distribution or other contractual arrangements • 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 than a divestiture (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) • By national regulators • Other non-divestitures: • To be assessed on a case-by-case basis (Tetra), • Difficulty of monitoring and risks of effectiveness: they may only amount mere declarations of intentions

11. 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 opportunity to withdraw remedies if concerns finally not arise in one or more markets

12. 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

13. Next steps • Public consultation on draft open until 29 June 2007. • Commission’s adoption of definitive version expected by end of 2007