Bid to combat lengthy merger horse-trading

Date: 02/11/00

By Peter Chapman

COMPETITION Commissioner Mario Monti is set to spell out his approach to investigating mergers and the 'remedies' likely to be required from firms seeking approval for troublesome deals.

The decision to publish a formal 'notice' on the issue later this month is aimed at reducing the time companies spend horse-trading with the European Commission's merger task force as they search for ways to allay competition fears.

"It is becoming crucial in some merger cases to ensure that the parties submit adequate remedies that allow the recreation of the competitive conditions similar to those existing prior to the merger," said Monti in a recent speech. "It is also important that they do so in time to allow the Commission to examine the proposed remedies in detail and to give third parties an opportunity to comment."

Commission officials argue that companies and their lawyers should already have a good idea of what the ground rules are as they try to win clearance for mergers, especially since they can draw on hundreds of past decisions. But they say the new guidelines will end any nagging doubts over the institution's approach to such deals.

This, in turn, will enable merging firms, advisors and investors to plan for the future with more certainty and prevent their agreements from falling through unnecessarily.

In a draft notice circulated to companies in February, the Commission said it would continue to consider each deal "on a case-by-case basis". It added that, where concerns were raised by an overlap of activities in the same market, "the most effective way" to eliminate competition fears was to offer concessions aimed at "restoring the status quo" in the market before the deal was struck. These typically take the form of asset sales.

The paper stated, however, that other solutions might be found where asset sell-offs were not possible. If, for example, merged firms would benefit from "combinations of key patents" or trademarks, they could be called upon to refrain from using them for a certain period or to make production capacity available to rival companies.

Erik Berggren, competition expert with European employers' federation UNICE, welcomed the Commission's efforts to clarify its approach, adding that firms would appreciate more legal certainty.

The proposals are the latest in a series of measures aimed at making EU merger policy more transparent and updating existing rules. Monti and his officials are already hailing one of their initiatives to cut red-tape in the Union's merger control process as a huge success.

The Commission now automatically clears uncontroversial deals using a special 'fast-track' process. "It is working very well," said a spokeswoman, adding that the reform was giving officials more time to investigate potentially more troubling mergers.

Competition Commissioner Mario Monti is set to spell out his approach to investigating mergers and the 'remedies' likely to be required from firms seeking approval for troublesome deals.