alerts & publications
Towards a More Business-Friendly European Merger Review ProcessDecember 5, 2013
On December 5, 2013, following a public consultation initiated in spring 2013, the European Commission (the “EC”) adopted a package of measures that simplify the EC’s merger review procedures. This package, applicable as of January 1, 2014, will increase the number of transactions that can benefit from the so-called "simplified procedure" whereby parties can notify a transaction using a simplified form (Short Form) rather than the full form used for standard notifications (Form CO). The package will also reduce the amount of information requested in each of the EU notification and referral forms (Form CO, Short Form and Form RS) for all merger cases. Lastly, the package will streamline the pre-notification process.
Extending the scope of the simplified procedure
One of the main elements of the EC’s simplification process is to raise the “safe harbour” thresholds for horizontal and vertical transactions that may be notified under the simplified procedure. The simplified procedure will now apply to three types of transactions:
- transactions with horizontal overlaps where the combined market share of the parties does not exceed 20%;
- transactions with vertical relationships (i.e. mergers between firms active in upstream and downstream markets) where the market share of one of the parties does not exceed 30%; and
- transactions with horizontal overlaps where the combined market share of the parties is between 20% and 50% and where the increase in market share resulting from the merger is very small (i.e. increment delta of the Herfindahl-Hirschman Index (“HHI”) is below 150) (HHI is calculated by summing the square of the individual market shares of all the firms in the market)
The EC believes that this reform will allow it to treat between 60 to 70 percent of cases under the simplified review process.
Reducing companies’ burden of supplying extensive information
The EC has also decided to cut red tape and reduce the workload for notifying parties by simplifying the merger filing forms (Form CO and Short Form) as well as the form used by parties to request a referral of the case from the Member State level to the EC, or vice versa (Form RS). In a Form CO, for example, the EC has eliminated requests for information on cross-directorships and HHI calculations. The EC has also made other sub-questions that are generally not crucial to the regulator’s review, such as the detailed questions on imports from outside the EEA territory and quantitative data on the parties' largest independent customers, less onerous.
In addition, certain information requests have been tailored to address different types of transactions. For instance, a "super-simplified notification" has been introduced for joint ventures which will be active entirely outside the European Economic Area whereby the parties only need to describe the transaction and their business activities, and provide the turnover figures which the EC needs in order to establish jurisdiction.
Finally, the package makes it simpler for merging companies to approach the EC during the pre-notification phase with a request to waive the obligation to provide certain information in their notification.
Streamlining pre-notification contacts
It is anticipated that the overall reduction of information requirements that result from the EC’s simplification package will shorten the time needed for pre-notification contacts. While the EC still encourages companies to engage in pre-notification discussions to identify the scope of the information which is required to assess the merits of a transaction or whether it qualifies for the simplified procedure, the EC now identifies certain simplified merger cases that can be notified without pre-notification contacts (i.e. transactions without horizontal or vertical relationships).
Conclusion - Time and resources saved
While the EC considers that its current regime is broadly successful, through the adoption of this simplification package, the EC seeks to streamline the review of straightforward transactions in an effort to reduce the administrative burden on businesses. As many businesses are acutely aware, the preparation of merger control notifications to the EC in respect to M&A transactions requires a considerable amount of effort by in-house teams and external legal advisers, and results in significant costs in terms of professional fees and management time.
Overall, this simplification package is intended to simplify and lessen the filing requirements for the increasing number of M&A transactions. This package is likely to result in ensuring that the EC only reviews those transactions that have a real impact on competition, and reducing external legal fees as well as time spent by lawyers, management and even economists in preparing merger notifications.
This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Riccardo Celli, an O'Melveny partner licensed to practice law as an Avocat in Belgium, as a Solicitor in the Supreme Court of England and Wales,and as an Avvocato in Italy, Christian Riis-Madsen, an O'Melveny partner licensed to practice law as an Avocat in Belgium and as an Advokat in Denmark, and Philippe Noguès, an O'Melveny counsel licensed to practice law as an Avocat in Belgium and as an Avocat à la Cour in France, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.
Portions of this communication may contain attorney advertising. Prior results do not guarantee a similar outcome. Please direct all inquiries regarding New York's Rules of Professional Conduct to O’Melveny & Myers LLP, Times Square Tower, 7 Times Square, New York, NY, 10036, Phone:+1-212-326-2000. © 2011 O'Melveny & Myers LLP. All Rights Reserved.
Thank you for your interest. Before you communicate with one of our attorneys, please note: Any comments our attorneys share with you are general information and not legal advice. No attorney-client relationship will exist between you or your business and O’Melveny or any of its attorneys unless conflicts have been cleared, our management has given its approval, and an engagement letter has been signed. Meanwhile, you agree: we have no duty to advise you or provide you with legal assistance; you will not divulge any confidences or send any confidential or sensitive information to our attorneys (we are not in a position to keep it confidential and might be required to convey it to our clients); and, you may not use this contact to attempt to disqualify O’Melveny from representing other clients adverse to you or your business. By clicking "accept" you acknowledge receipt and agree to all of the terms of this paragraph and our Disclaimer.