New EC Guidance On Merger Remedies

This week, the European Commission (EC) published its

long-awaited new Remedies Notice, explaining its current policies

and procedures on merger remedies. The guidance contains no major

surprises for experienced EU merger practitioners, who will already

be familiar with the recent more rigorous approach adopted by the

EC, but it does signal publicly that the EC does not intend to be a

"soft touch" on remedies.

The EC's own Remedies Study in 2005 was salutary reading. Most

"access" remedies, for example, the release of airport

slots, the making available of infrastructure, or the grant of IP

licenses, justified on the basis of their effect in lowering entry

barriers, had proved generally ineffective in practice, while even

many business divestitures were found to have failed to recreate

effective competition for a number of reasons: delays in

implementation; the approval of inappropriate purchasers; and the

loss of essential ingredients to ensure a viable, competitive

business, such as key management or R+D support. In many cases, the

Study shows, effective competition and consumer welfare were not

being adequately protected. Indeed, in 18 years of EC merger

control, there have been only 20 outright prohibitions, and only

two of these have occurred since 2001. But admittedly the full

picture must take account of some 120 further transactions which

have been abandoned by the companies involved ? usually a

sure sign that they are unwilling to pay the EC's price for a

clearance decision, or are facing an outright prohibition.

The Remedies Notice emphasizes the EC's strong preference for

clear-cut divestitures of a company or business to remedy

competition concerns. While the EC does not, and cannot reject

"access" remedies out of hand it has recognized that, in

the past, there has been a mismatch between the level of comfort

and certainty achieved by divestitures as compared with that

achieved by "access" remedies. In...