Public consultation on EU merger control

Transcription

1 Public consultation on EU merger control Tony Woodgate Koen Platteau Martin Gramsch Geneviève Borremans 07 December 2016

2 Background Ongoing evaluation of the functioning of procedural and jurisdictional aspects of EU merger control 2013 Simplification Package Extension of simplified procedure s scope 2014 White Paper Proposals for review of minority shareholdings Further simplification of EU merger control Simplification of referral mechanisms 1 / L_LIVE_EMEA2: v1

3 Public consultation Until 13 January 2017 Areas covered Complementary jurisdictional thresholds Potential for further simplification Referral mechanisms Technical aspects But excluding minority shareholdings 2 / L_LIVE_EMEA2: v1

4 Complementary jurisdictional thresholds EU merger control thresholds are purely expressed on the basis of turnover Potential enforcement gap in relation to highly valued transactions where target does not meet jurisdictional turnover thresholds Industry sectors affected by potential gap Digital economy sector M.7217 Facebook/WhatsApp Facebook s US$ 19 billion purchase of messaging service WhatsApp The transaction did not have an EU dimension, given the limited EU turnover that could be allocated to WhatsApp Based on the fact that the transaction could be reviewed under the national competition laws of at least three Member States, the concentration was referred to the Commission The Commission cleared the transaction in Phase 1 3 / L_LIVE_EMEA2: v1

5 Complementary jurisdictional thresholds Industry sectors affected by potential gap Pharmaceutical sector M.7872 Novartis/GSK The transaction involved Novartis acquisition of GSK s rights to develop, manufacture, promote and market ofatumumab for auto-immune indications Although the drug was still at the stage of clinical trials, the Commission considered that the acquisition amounted to a concentration as it related to assets that were already in phase III clinical trials and can be reasonably assumed to be capable of generating turnover in the foreseeable future The transaction did not exceed the jurisdictional turnover thresholds but was notified to the European Commission because it took place within two years of the oncology transaction (M.7275) between the same undertakings The Commission cleared the transaction in Phase 1 Other sectors? most obviously, lengthy R&D generating IPRs 4 / L_LIVE_EMEA2: v1

6 Complementary jurisdictional thresholds Motivation to extend jurisdiction is to intervene: NB April 2016 Competition Policy Brief on EU merger control and innovation Clear statement of intent, that under SIEC test, likely loss of innovation as serious as reduction in price competition or output Commission may force the divestiture of pipeline products years from market with tough remedial conditions covering IPR, continued supply of inputs, manufacturing equipment, scientific and regulatory materials, and key personnel and research facilities all to a suitable buyer E.g. M.7326 Medtronics/Covidien 5 / L_LIVE_EMEA2: v1

7 Complementary jurisdictional thresholds How to effectively and efficiently close the gap Deal-size threshold Appropriate level for deal-size threshold? How to ensure local nexus? E.g. asset value in pharmaceutical sector, user numbers in digital sector Need for additional criteria to ensure efficiency of a deal size threshold? E.g. minimum level of aggregate worldwide turnover, ratio between value of transaction and worldwide turnover of target Alternative ideas? 6 / L_LIVE_EMEA2: v1

8 Germany The new threshold A notification shall become necessary if: 1. The combined worldwide turnover of the participating undertakings is more than EUR 500m 2. At least one participating undertaking had turnover of more than EUR 25m in Germany but no other participating undertaking had turnover of more than EUR 5m in Germany 3. The value of the consideration for the concentration is more than EUR 400m; and 4. The undertaking to be acquired according to No. 2 is active in Germany to a significant extent 7 / L_LIVE_EMEA2: v1

9 Germany Value calculation The value of the consideration includes: all payments and other monetary benefits received by the seller from the acquirer in connection with the concentration; and the value of the debt taken over by the acquirer Open questions: In connection Valuation of debt Accounting rules? 8 / L_LIVE_EMEA2: v1

10 Germany Reasons for the new threshold Perceived gap such as the Facebook/WhatsApp case Merger control also in dynamic markets where the turnover would otherwise not justify a notification Turnover not always an indicator of the market presence Protection of innovation high purchase price as indication of innovative business practice Data driven businesses try to buy up competitors Same in pharma and technologies markets 9 / L_LIVE_EMEA2: v1

11 Germany Local effects General local effects requirement under German law Additional requirement in the new test What is active to a significant extent? Qualitative and not a quantitative criterion Will exclude marginal activities Market Share of 5% Know How/IP as source of market presence No bright line; case law and experience needed What if the target meets the EUR 25m threshold instead of the acquirer? 10 / L_LIVE_EMEA2: v1

12 Simplified procedure A company acquires sole control of an undertaking over which it already has control A joint venture that has no or negligible activities within the EEA (turnover < EUR 100 million) Merging parties are horizontal competitors with combined market share of < 20% or Merging parties do not have shares > 30% on any market upstream, downstream or neighbouring Eligible for Simplified Procedure Merging parties are not horizontal competitors or active on upstream, downstream or neighbouring markets 11 / L_LIVE_EMEA2: v1

13 Potential for further simplification Feedback on several potential options for further simplification of the current procedures Exempting certain categories of simplified cases from notification In those cases, the Commission would not adopt a decision Introduction of lighter information requirements Notification form would be replaced by an initial short information notice on the basis of which the Commission would decide whether or not to examine the case If the Commission does not examine the case, no notification would need to be filed and the Commission would not adopt a decision Introduction of a self-assessment system with the possibility of a voluntary notification Merging parties would decide whether or not to notify a transaction Commission would have the possibility to start an investigation on its own initiative or further to a complaint Excluding extra-eea joint ventures (located and operated outside the EEA and without any effects on EEA markets) from the scope of the EU Merger Regulation Additional categories of cases that typically do not raise competition concerns? 12 / L_LIVE_EMEA2: v1

14 Referral mechanisms The Commission has exclusive competence over concentrations that have an EU dimension Member States may not apply national merger control rules to concentrations notifiable under the EUMR Correspondingly, the Commission has no competence to review concentrations that do not have an EU dimension By way of exception, companies and Member States may request to transfer cases from the national level to the Commission or vice versa System of case referrals to the Commission or to national competition authorities Articles 4(4), 4(5), 9 and 22 EUMR 13 / L_LIVE_EMEA2: v1

15 Referral mechanisms Case referral prior to notification to competent authority/authorities Art. 4(4) EUMR: Parties to a concentration may make a reasoned submission to the Commission that a concentration may significantly affect competition in a market within a Member State that presents the characteristics of a distinct market and should therefore be examined by that Member State Proposal: removal of requirement pursuant to which parties have to assert that the transaction may significantly affect competition in a market in order for a case to qualify for a referral Art. 4(5) EUMR: Parties to a concentration that does not have an EU dimension, but is capable of being reviewed in at least three Member States, may make a reasoned submission requesting that the Commission examines that concentration Proposal: abolish two-step procedure (Form RS + Form CO) 14 / L_LIVE_EMEA2: v1

16 Referral mechanisms Case referral after notification to competent authority/authorities Art. 22 EUMR: One or more Member States may ask the Commission to examine a concentration that lacks an EU dimension, but which affects trade between Member States and threatens to significantly affect competition within the territory of the Member State(s) making the request Commission only obtains jurisdiction in those Member States that join the referral request If a Member State refuses to join the referral request, parallel procedures at EU and national level Proposal: Expansion of the Commission s jurisdiction to the entire EEA, if it accepts a referral request; and Renouncement of jurisdiction by the Commission over the entire EEA, if one or several Member States oppose the referral request 15 / L_LIVE_EMEA2: v1

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