The European Commission (Commission) has issued a package of measures (the Reform Package), the rationale for which is to simplify and streamline EU merger control. The Reform Package does this by extending “simplified” treatment to more transactions, reducing the information that parties to a notifiable transaction have to submit and streamlining the pre-notification process. The reforms take effect on 1 January 2014.
The Reform Package
The Reform Package is comprised of a revised Merger Implementing Regulation, a Notice on Simplified Procedures and revised notification forms, namely a revised Form CO, a revised Short Form CO and a revised Form RS.
The main features of the Reform Package are as follows.
Extension of the Simplified Procedure
At present, transactions that do not present competition concerns are eligible for simplified treatment. Parties to these transactions are entitled to use the Short Form CO, which requires less information and generally requires less time because a market investigation is not necessary.
The Reform Package expands the simplified procedure to apply it to more transactions. Specifically:
The Commission estimates that, under the Reform Procedure, between 60 and 70 per cent of notifiable transactions will be eligible for simplified treatment, representing a 10 per cent increase over current levels.
The Reform Package introduces several changes in respect of the provision of information in connection with EU merger procedures. Some of these changes will reduce the overall amount of information that parties to notifiable transactions will have to provide to the Commission.
These changes will reduce the overall information requirements, although the Commission’s case team retains significant discretion to determine which information requirements can be dispensed with in practice.
The Commission has, however, also introduced new categories of information that will need to be provided.
The Commission has indicated that parties may ask the Commission case team to dispense with some of these requests. The Commission has also noted that it only wishes to review those documents that analyse the transaction in relation to alternative acquisitions. Nevertheless, the new scope of documents to be provided is clearly very broad.
Joint Ventures Active Outside the EEA
The Reform Package substantially streamlines the Commission’s approach to joint venture transactions that have no connection with the EEA.
The current jurisdictional thresholds of the EU Merger Regulation as applied to joint ventures has resulted in a large number of joint ventures that have no connection to the EEA being subject to merger control in the EU solely as a result of their parents’ EEA revenue.
The Reform Package therefore introduces a “super-simplified” notification for joint ventures active entirely outside the EEA. For these transactions, parties only need to describe the transaction, their business activities and sufficient revenue information to establish jurisdiction.
Pre-notification contacts are a necessary part of EU merger procedures, but the European Commission has faced criticism over the length of these procedures.
The Reform Package partly addresses this problem, mainly through the expanded use of the simplified procedure. By enabling more parties to be able to use the simplified procedure, it reduces the information that needs to be provided to the Commission when compared with a full procedure. Since less information is required, the Reform Package is expected to lead to shorter pre-notification contacts for these cases.
Parties to transactions benefiting from the simplified procedure may also be able to file without any pre-notification discussions where their activities do not horizontally overlap and they have no vertical relationship. There does however, remain a risk in this situation that notification could be considered incomplete. This could act as a disincentive to notify without engaging in even brief pre-notification discussions.
The Reform Package will clearly enable more transactions to benefit from the simplified procedure, which should reduce the burdens on companies in relation to transactions notifiable in the European Union. The creation of a super-simplified procedure for transactions involving joint ventures having no link to the EEA is particularly welcome.
With that said, the overall reduction in burden may be offset by the potentially significant increase in the information that parties to transactions under both the simplified procedure and the full procedures are expected to provide. This may be mitigated if information requirements will be increasingly waived, but this remains subject to the discretion of the Commission case team and therefore introduces some uncertainty into the process.
The extent to which pre-notification contacts will be streamlined is also unclear, since this is primarily linked to the greater use of the simplified procedure. Parties to transactions that are eligible for notification with no pre-notification contacts at all may not choose to take advantage of this option as they will continue to run the risk that the Commission case team will require more information to confirm that the transaction actually qualifies for simplified treatment. In this case, the Commission case team could simply issue a determination that the notification is “incomplete”, which would essentially start the process over again.