The European Commission ("Commission") has adopted a package of revised legal texts aimed at simplifying the EU merger review process. The package expands the categories of cases that may be eligible for the simplified procedure, and streamlines the review of simplified cases. It also reduces certain information requirements in notifications subject to the ordinary (non-simplified) review procedure. The package includes a revised set of filing forms (Form CO, Short Form CO, Form RS and Form RM), applicable as of 1 September 2023. The revisions include a number of welcome changes that will reduce the burden on notifying parties in transactions with no substantive concerns. However, some of the issues with the previous information requirements remain and, contrary to its aim, the package also introduces additional requirements for notifying parties even in cases with no substantive concerns.
Background
The vast majority of transactions filed with the Commission under the EU Merger Regulation1 do not raise any competition concerns.2 Yet, the EU merger review process is a significant burden on merging parties in terms of the time, work and expense involved. The simplified procedure – available for certain categories of obviously non-problematic cases – is designed to reduce this burden. The Commission first extended the simplified procedure's application in 2013 as part of a previous simplification package.3 However, in 2021, the Commission's evaluation concluded4 that, while the 2013 simplification package had been effective in extending the application of the simplified procedure, (i) a number of transactions with no issues still fell outside the simplified procedure's scope; and (ii) information requirements were still too extensive in certain cases.5
To address this, in March 2021, the Commission launched an Impact Assessment,6 which included gathering information through an open public consultation7 and two stakeholder consultations.8 Almost one year after the launch of the consultation, the Commission has now published the final version of the revised Merger Implementing Regulation ("Implementing Regulation"), the Notice on Simplified Procedure ("Notice"), and a Communication on the Transmission of Documents ("Communication"). The package is applicable as of 1 September 2023.9 As with the 2013 package, the current package seeks to bring more cases within the scope of the simplified procedure, while reducing information requirements for all notifications. It also introduces electronic notifications as the default, and provides for the use of electronic signatures (provided that these meet certain criteria).
Expansion of the simplified procedure and more flexibility in its use –welcome changes but with room for misuse
Expansion of the simplified procedure
The Notice has broadened the application of the simplified procedure to two new categories of vertical cases. A simplified review is now also available where, under all plausible market definitions, (i) the individual or combined upstream market share of the merging parties is below 30%, and their combined purchasing share is below 30%; or (ii) the individual or combined upstream and downstream market shares of the merging parties are below 50%, the market concentration index ('HHI delta') is below 150, and the company with the smaller market share is the same in the upstream and downstream markets. This is a welcome expansion of the simplified procedure to additional categories of cases that are unlikely to be anticompetitive.
Flexibility Clause
The Notice introduces a flexibility clause, which allows the Commission to switch to the simplified procedure even where the criteria for a simplified procedure are not met. This is the case where one of the following conditions is met: (i) the combined market shares of the parties is 20-25% (for horizontal transactions); (ii) the individual or combined upstream and downstream market shares of the parties are 30-35% or do not exceed 50% in one market and 10% in the other vertically related market (for vertical transactions); or (iii) the annual EEA turnover and value of EEA assets transferred to a joint venture is less than EUR 150 million. The introduction of the flexibility clause brings some much needed room for manoeuvre for the Commission to review cases under the simplified procedure where the (still limited) criteria for a simplified procedure are not met but where the transaction clearly raises no competition issues.
Safeguards and exclusions
The Notice expands and clarifies the "safeguards and exclusions" that allow the Commission to review a transaction that qualifies for a simplified procedure under the ordinary procedure:
- For transactions involving a joint venture with negligible activities in the EEA, the ordinary procedure may be appropriate where there are horizontal overlaps or vertical relationships between the parties based on which competition issues cannot be excluded. The language is broad and, if applied too readily, may water down the presumption that such transactions do not raise any competition concerns.10
- The Commission "will not apply the simplified procedure where it is difficult to define the relevant markets or determine the market shares of the parties to the concentration".11 It is arguably often difficult to define the relevant markets, especially since the Commission typically leaves market definition open in its published decisions, which could unnecessarily push no issue cases into the ordinary procedure. But there will be many cases where the market definition (however difficult) is irrelevant because there would be no overlaps or vertical relationships on any plausible markets, and the simplified procedure should remain available for such cases.
- The Commission may also revert to the ordinary procedure in cases where a party to the concentration may have significant non-controlling shareholdings in companies active in the market(s) where another party to the concentration is active. While the Commission has considered bringing the review of non-controlling minority shareholdings within the framework of assessment under the EU Merger Regulation,12 they are currently not reviewable (unlike in numerous jurisdictions, including the United Kingdom and the United States) and do not currently play a major role in the assessment under the Guidelines on Horizontal Mergers13 or the Guidelines on Non-Horizontal Mergers.14 So the relevance of non-controlling minority shareholdings to the question of whether a transaction is subject to the simplified or ordinary procedure remains questionable.
Other categories of transactions that the Commission may exclude from the simplified procedure include transactions that combine competitively valuable assets (raw materials, IPR, infrastructure, user base, data inventory), transactions where the parties operate in closely related neighbouring markets, transactions involving circumstances set out in the Commission's Guidelines on the assessment of horizontal and non-horizontal mergers and other special circumstances,15 certain transactions involving a change from joint to sole control,16 transactions where substantiated concerns are raised by a Member State or third party, and transactions subject to a referral request, including under Article 22 EUMR.
“Super-simplified” procedure
The Notice introduces a "super-simplified" procedure where the parties notify directly, without engaging in pre-notification contacts, and where clearance may be received earlier than within the usual timeframe of 25 working days. The procedure may be applicable for extra-territorial joint ventures and in cases with no overlaps between the parties. These categories should clearly not be problematic from a competition law perspective, so any reduction in the amount of time and resources that parties need to spend on notifying transactions falling within these categories is more than welcome.
Notifying parties can only hope that the "super-simplified" procedure (which "may be applicable" to relevant categories of cases – but its application is not guaranteed) will actually be available and work as planned. The Commission is used to frontloading information gathering into the pre-notification phase, and, presently, often uses this time to clarify non-material points (also in transactions that clearly raise no competition issues), so there may be an adjustment period before the "super-simplified" procedure (including no pre-notification) really works as hoped. Moreover, today, the average clearance timeframe for simplified cases is between 18 and 19 working days,17 and it is unlikely that this would be significantly reduced, even where the "super-simplified" procedure applies.
The Implementing Regulation and the new filing forms – a mixed bag of simplification and complication
The Implementing Regulation itself does not provide many changes with respect to the Commission's assessment of merger cases. The main innovation appears to be the electronic submission of documents, which is now compulsory – a welcome and long-awaited codification of the now longstanding practice of working (mostly) electronically.18 That said, further changes to the Commission's practice may still be seen in the future as evidenced, for example, by the Commission's recent decision to announce the issuance of the Statement of Objections in the context of Broadcom's acquisition of VMware to increase the transparency of the merger review procedure.19
Most of the changes introduced by the Implementing Regulation are contained in the annexes, which include the template Form CO, Short Form CO, Form RS and Form RM. The new Short Form CO introduces various sections to be filled in by ticking relevant boxes (on points such as basic jurisdictional details and details of the transaction). Both the Form CO and the Short Form CO also contain various tables and template language aimed at streamlining the information to be provided by the parties – including a template table for information on horizontal overlaps and vertical relationships. The revised templates appear visually streamlined, but many of the information requirements that caused issues for parties in the previous (Short) Form CO template still feature in the revised (Short) Form CO. In particular, parties still need to provide information on all "plausible" markets, which often involves dissecting the markets in a manner that is far removed from business reality, and may involve a difficult and highly burdensome information collection exercise. Moreover, parties still need to disclose information on pipeline products, including in vertically-related markets. This does not acknowledge that questions on pipeline products, while relevant in certain industries, are not particularly relevant for many transactions, so information collection in many cases remains disproportionately burdensome. Parties often struggle to identify the exact future application of products that have not yet been marketed, and to classify them into specific relevant markets. And gathering information on pipeline products can lead to undue risk, as acquirers are unable to verify the target's information due to confidentiality and competition law concerns but ultimately have to sign-off on the completeness and correctness of the information provided in the filing form.
The Short Form CO also incorporates a box-ticking exercise to identify whether the case falls within the safeguards and exclusions identified in the Notice (described above – though the list is not identical). Again, the format is streamlined, i.e., parties will first tick a box on whether the relevant safeguard or exclusion applies and, if it does, the parties provide additional information. But the information to be completed (including information on non-controlling shareholdings and cross-directorships, capacity shares, innovation and pipeline – including information on pipeline-to-pipeline or pipeline-to-marketed product overlaps – and forward-looking information on expansion plans and joint venture growth projections) is potentially burdensome for parties to gather or may not be readily available for disclosure. It is regrettable that many concentrations with limited overlaps will require the parties to provide such extensive information – especially where issues (such as non-controlling shareholdings and cross-directorships) are currently disregarded under the framework for substantive merger assessment, or only have very limited effect. Moreover, the parties may be inclined to note that their transaction would not meet the safeguards and exclusions simply because they would not have, in the time available, the information to confirm the relevant statements (e.g., the lack of non-controlling shareholdings and cross-directorships). As the Commission's review has found, none of the cases that were switched from a simplified procedure to an ordinary procedure between 2014 and 2020 resulted in an intervention by the Commission. Put simply, there is little added value in requiring merging parties to gather and provide the extensive information on safeguards and exclusions in clear no issues cases.
1 Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings ("EUMR"), here.
2 More than 90% of all cases are resolved in Phase I.
3 Commission Notice on a simplified procedure for treatment of certain concentrations under Council Regulation (EC) No 139/2004 (2013/C 366/04), here.
4 EC Staff Working Document, Evaluation of procedural and jurisdictional aspects of EU merger control, March 26, 2021 ("Staff Working Document"), here.
5 Staff Working Document, point 271.
6 Impact Assessment, here.
7 Open public consultation from 26 March 2021 to 18 June 2021, here.
8 Consultation of stakeholders from 6 May 2022 to 3 June 2022, here and Consultation of stakeholders from 5 October 2022 to 19 October 2022, here. The purpose of the first public consultation was to gather feedback on the draft revised Merger Implementing Regulation and draft revised Notice on Simplified Procedure. The second public consultation was a short targeted consultation concerning a proposed modification to Article 9 of the Implementing Regulation.
9 Article 25 of the Implementing Regulation.
10 Notice, point 5(a).
11 Notice, point 14.
12 Staff Working Document, point 7.
13 Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings (2004/C 31/03), here.
14 Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of concentrations between undertakings (2008/C 265/07), here.
15 These include various circumstances relevant to the Commission's substantive assessment (e.g., the market is already concentrated; market share thresholds for a simplified procedure are exceeded based on capacity shares; one of the parties is a recent entrant; etc.).
16 Including where a former joint venture is integrated into the group or network of its remaining single controlling shareholder or where the prior acquisition of control of the joint venture in question was not reviewed by the Commission or national competition authorities of Member States.
17 Staff Working Document, point 189.
18 Article 22 of the Implementing Regulation.
19 See Commission Press Release of 12 April 2023, Mergers: Commission send Broadcom Statement of Objections over proposed acquisition of VMware, here.
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