Remedies In Cross-Border Merger Cases 2013 - OECD
Remedies in Cross-Border Merger Cases2013The OECD Competition Committee discussed Remedies in cross-border merger cases inOctober 2013. This document includes an executive summary of that debate and thedocuments from the meeting, an analytical note by the OECD Secretariat, writtensubmissions from Australia, Brazil, Canada, the European Union, Ireland, Japan, Korea,Mexico, the Russian Federation, Spain, Ukraine, the United States and BIAC and asummary of the discussion.The roundtable topic was agreed as a follow-up discussion to the approval by the Competition Committee ofthe implementation Report on the 2005 Recommendation on Merger Review [C(2013)72]. The discussionfocussed in particular on the challenges for agencies when designing, enforcing and monitoring cross-borderremedies, and on issues arising when such remedies may need to be revised.Cross-border mergers raise specific challenges for the different competition authorities reviewing thetransaction in multiple jurisdictions. This type of transactions requires a high degree of co-ordination and cooperation between the reviewing authorities in order to ensure consistent outcomes across jurisdictions. Cooperation benefits particularly the discussion on remedies.Experience of competition authorities indicates that co-operation is more efficient (i) if the merging partiesallow the agencies to engage in effective communication early on in the review process by grantingconfidentiality waivers, and (ii) if the timing of the different national merger reviews are aligned as much aspossible.Investigations of Consummated and Non-notifiable Mergers (2014)Definition of Transaction for the Purpose of Merger Control Review (2013)Impact Evaluation of Merger Decisions (2011)Economic Evidence in Merger Analysis (2011)Remedies in Merger Cases (2011)Cross-Border Merger Control: Challenges for Developing and Emerging Economies (2011)OECD Recommendation concerning Merger Review (2005)Merger Remedies (2003)
UnclassifiedDAF/COMP(2013)28Organisation de Coopération et de Développement ÉconomiquesOrganisation for Economic Co-operation and Development27-Jan-2015English - Or. EnglishDIRECTORATE FOR FINANCIAL AND ENTERPRISE AFFAIRSCOMPETITION COMMITTEEDAF/COMP(2013)28UnclassifiedCancels & replaces the same document of 20 January 2015REMEDIES IN CROSS-BORDER MERGER CASESEnglish - Or. EnglishJT03369771Complete document available on OLIS in its original formatThis document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation ofinternational frontiers and boundaries and to the name of any territory, city or area.
DAF/COMP(2013)28FOREWORDThis document comprises proceedings in the original languages of a Roundtable on Remedies inCross-Border Merger Cases held by the Competition Committee (Working Party No. 3 on Co-operationand Enforcement) in October 2013.It is published under the responsibility of the Secretary General of the OECD to bringinformation on this topic to the attention of a wider audience.This compilation is one of a series of publications entitled "Competition Policy Roundtables".PRÉFACECe document rassemble la documentation dans la langue d'origine dans laquelle elle a étésoumise, relative à une table ronde sur la détermination des opérations constituant des "fusions" aux fin decontrôle des fusions qui s'est tenue en octobre 2013 dans le cadre du Comité de la concurrence (Groupe detravail n 3 sur la coopération et l'application de la loi).Il est publié sous la responsabilité du Secrétaire général de l'OCDE, afin de porter à laconnaissance d'un large public les éléments d'information qui ont été réunis à cette occasion.Cette compilation fait partie de la série intitulée "Les tables rondes sur la politique de laconcurrence".Visit our Internet Site -- Consultez notre site Internethttp://www.oecd.org/daf/competition/2
DAF/COMP(2013)28TABLE OF CONTENTSFOREWORD.2EXECUTIVE SUMMARY .5BACKGROUND NOTE .9CONTRIBUTIONS BY DELEGATIONSAustralia .15Brazil .27Canada .33European Union .41Ireland .45Japan .51Korea .59Mexico .67Russian Federation .71Spain .77Ukraine .79United States.85BIAC .99SUMMARY OF DISCUSSION .113***PRÉFACE .2SYNTHÈSE.121NOTE DE RÉFLEXION .125COMPTE RENDU DE LA DISCUSSION .1313
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DAF/COMP(2013)28EXECUTIVE SUMMARYBy the Secretariat*Considering the discussion at the roundtable, the Note by the Secretariat as well as the delegates’written submissions, several key points emerge:(1)Cross-border mergers raise specific challenges for competition authorities reviewing thetransaction in multiple jurisdictions. This type of transaction may require a high degree of coordination and co-operation between the reviewing authorities in order to ensure if not anidentical outcome, certainly a consistent one. Co-operation benefits the discussion of andapproaches to remedies in particular.Consultation and co-operation between authorities are crucial for designing and enforcingeffective remedies in cross-border mergers. The remedy should address the concerns identifiedby the agency and at the same time it should be consistent with the remedies imposed by otherjurisdictions. A lack of communication may result in different and sometimes conflictingoutcomes, which may encourage the merging parties to adopt strategic behaviour aiming atstriking an agreement on a remedy with one jurisdiction and leverage that agreement in thenegotiations with other authorities. Co-operation can be very helpful even in cases in which thereviewing authorities reach different conclusions concerning the need for a remedy. While this isoften due to differences in the contexts in which the merger is assessed, co-operation can ensurethat the differences are justifiable.(2)Experience of competition authorities indicates that co-operation is more efficient (i) if themerging parties allow the agencies to engage in effective communication early on in the reviewprocess by granting confidentiality waivers in appropriate cases, and (ii) if the timing of thedifferent national merger reviews is aligned as much as possible.Today, an increasing number of notified mergers have a cross-border effect and are thereforesubject to review in multiple jurisdictions. The risks and costs for businesses stemming frommultiple regulatory reviews have increased exponentially. The main risk occurs when a remedy isnecessary in more than one jurisdiction as it is imperative to ensure consistency of regulatoryinterventions. Agencies’ experience indicates that in these situations communication andcollaboration among competition authorities is most effective if it begins in an early stage of theinvestigation. Some agencies have also stressed that if another jurisdiction identifies a remedywhich addresses satisfactorily the competition concerns of their jurisdiction, they may notnecessarily need to take a remedial action. Co-operation can be instrumental in creating remediesthat may address the concerns of multiple agencies.*This Executive Summary does not necessarily represent the consensus view of the CompetitionCommittee. It does, however, encapsulate key points from the discussion at the roundtable, the delegates’written submissions, and the Secretariat’s background paper.5
DAF/COMP(2013)28The lack of alignment of timing in parallel merger reviews can create difficulties for thereviewing agencies. Non-alignment can be inadvertent or the result of a strategic decision of themerging parties. While the merging parties have a concurrent interest in aligning the proceduresto facilitate co-operation and avoid incompatible remedies, managing multiple reviews may leadinevitably to the staggering of notifications and to the non-alignment of the investigations. Inpractice, when authorities become aware of a merger that would be of concern to them, theyshould “encourage” the parties to time their filing obligations in the concerned jurisdictions in away that allows for the reviewing agencies to cooperate at key stages of their reviews. Thisallows co-operation to start in the early stages of the review process and to limit the risk ofinconsistent outcomes later on.(3)The level of co-operation between competition authorities in cross-border merger cases hasincreased significantly also thanks to the wide use of confidentiality waivers, which make theexchange of confidential information between enforcers possible. Another instrument which hasfacilitated co-operation is the appointment of common enforcement and monitoring trustees. Thisallows agencies to rely on a common set of information about the enforcement of the remedy andto avoid inconsistent approaches.Over the years co-operation between competition authorities in merger reviews has improvedsignificantly. A wider use of confidentiality waivers played an instrumental role in this trend.Waivers can be particularly useful when agencies need to discuss remedies, as they allow for theexchange of confidential information and documents which are necessary to ensure that theremedies adopted in one jurisdiction are compatible with the remedies adopted by others. The useof waivers however has its limits. The target company in a hostile merger, for example, isunlikely to grant a waiver. Similarly, the incentives of third parties to grant waivers may not be asstrong as those of the merging parties. Information provided by third parties, however, can bevery important especially when designing an effective remedy package to address cross-bordereffects of mergers.After an appropriate remedy is designed, authorities must determine the best means of monitoringits implementation by parties. Cross-border structural remedies are difficult to enforce (e.g. ifassets are outside the jurisdiction, the national competition authority may not have the power toenforce the remedy in case of non-compliance or partial compliance). On the other hand, forbehavioural cross-border remedies, the challenge lies in the access to information to monitor theon-going compliance with the behavioural commitment; this may require assistance from thelocal jurisdiction that may not have an interest to do it (e.g. it did not impose the remedy, hencehas no monitoring obligations). The appointment of common enforcement and monitoringtrustees may help authorities overcome some of these challenges. The use of a common trusteereduces duplication and allows the agencies to have the same information set when assessing thecorrect enforcement of the remedy.(4)The degree to which competition authorities need to cooperate may vary according to thecircumstances. In cases in which multiple jurisdictions are involved, close collaboration mayonly be required between those agencies whose jurisdiction is most directly affected by themerger.6
DAF/COMP(2013)28Jurisdictions where the merger has a greater likelihood of generating (anti)competitive effects arethose that will likely engage in the more extensive review of the transaction. Those agencies willneed to engage in much closer co-operation and possibly will need to help each other on thedesign and enforcement of the remedy package. The other jurisdictions can participate in thisdialogue but this might not require a similar degree of co-operation. Experience shows that thekey factor to ensure a smooth and effective co-operation process is establishing a good dialogueamong sister agencies. This dialogue may have different intensities, and may includeparticipating in joint conference calls with the parties or with third parties organised by otherauthorities, discussing the industry context and background, comparing substantive approaches tomarket definition and to the effects of the transaction, sharing and discussing documents andother information obtained from merging parties or from third parties, as well as coordinating onmerger remedies.(5)Designing appropriate remedies whose expected effects last over time can be difficult. Marketsaffected by the remedy evolve and it is possible that changes to the remedy might becomenecessary after the remedy has been agreed with the competition authority. For this reasonremedies may need to be revised after a certain period of time to take into account anycontingency or change of circumstances. If this occurs, it is very important to co-ordinate anyamendment with the other agencies originally involved in the review of the merger, since thechanges may have an effect on their remedies too.The roundtable indicated that it might be desirable to have some means of seeking themodification of a remedy, either to reflect changes in circumstances or problems in the initialdesign of the remedy. The importance of such mechanisms increases with the duration of theremedy. If the merger regime of a country does not provide for tools to revise remedies after themerger decision is taken, the possibility to include a “review clause” in the remedy package canbe useful. Review clauses in remedy packages allow agencies to extend the periods specified inthe commitments for the implementation of the remedy in case unforeseen circumstances affectthe successful implementation of the agreed remedy. They also allow the agency to waive ormodify the undertakings in case an unexpected change in market circumstances requires it. Theseclauses can also be relied upon by the merging parties if they can show good cause.7
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DAF/COMP(2013)28BACKGROUND NOTEBy the Secretariat*1.Introduction“Cross-border merger remedy” is a situation where a competition authority is seeking a remedy in amerger case, but the merging parties and/or their assets are located abroad. These types of remedies requirethe sale of assets or certain conduct of the merged entity in another jurisdiction from the one that isdeciding about the merger. In such cases, competition authorities may face considerable challenges indifferent steps of the remedy process: First, it is possible that two or more competition authorities reviewing the same merger reachconflicting conclusions concerning the need for remedies, especially if the “centre ofgravity/nexus” of the merger1 is located in a jurisdiction which has decided not to take actionagainst the merger. Second, it is possible that two competition authorities could identify competitive concerns withrespect to different aspects of the same merger, in which case the remedies deemed necessary byone authority might not match the remedies sought by the other authority, and they may beinconsistent with one another. Finally, even if the competition authorities involved agree on the competitive concerns raised bythe merger, they may have different views as to how to address these concerns by way of aremedy.In his letter of 26 July 2013 calling for country contributions (COMP/2013.133) the WP3 Chairsuggested to focus the discussion on the monitoring and implementation of cross-border remedies, and onissues arising when such remedies may need to be revised. The issue of cross-border mergers has beendiscussed in several roundtables with respect to different aspects in recent years.2*This Background Note was written by Fiorenzo Bovenzi and Anna Pisarkiewicz, Senior and JuniorCompetition Policy Experts, respectively, in the Competition Division of the OECD.1The centre of gravity of the transaction may be determined by reference to the nationality of the parties,location of productive assets, or preponderance of sales.2See Merger Remedies in 2003 [DAF/COMP(2004)21], Cross-Border Remedies in Merger Cases in 2005(documents are available only on OLIS), Cross-Border Merger Control: Challenges for Developing andEmerging Economics in 2011 [DAF/COMP/GF(2011)13], and Remedies in Merger Cases in 2011[DAF/COMP(2011)13]. See also the 2012 OECD Competition Committee to the OECD Council on the2005 Merger Review Recommendation [C(2013)72].9
DAF/COMP(2013)282.Cooperation and coordination: benefits and challengesOver the last years, merger enforcement has become increasingly more cross-border, and whichremedial actions should be taken to counteract the anti-competitive effects of cross-border mergers is a keyelement of the decision-making process. Conflicts can arise at all stages of the remedy process; from thedecision on which remedy to impose (e.g. an agency may consider that it has not the power to order andenforce a remedy involving assets outside its jurisdiction) to its monitoring for compliance (e.g. an agencymay not have the legal tools to require the information it needs to monitor the implementation andcompliance with the remedy if the information is located outside its jurisdiction). Conflicts can also arise ifremedies are changed or reviewed after the transaction has been approved by all reviewing jurisdictions. Inthis case, the potential modification of remedies in one jurisdiction can result in inconsistencies withremedies applied in another jurisdiction, especially if there is no need to review the remedies previouslyagreed in this other jurisdiction.In cross-border merger enforcement, consultation and co-operation between competition authorities iscrucial. Lack of cooperation and communication between enforcers who are reviewing the sametransaction might lead businesses to restrict their merger activity to transactions that will be acceptable toall jurisdictions in which they are likely to be notified, potentially creating a chilling effect as procompetitive and other efficient mergers are not proposed. Co-operation and co-ordination are alsoimportant in order to avoid strategic gaming by merging parties reaching a settlement with one authorityand trying to use that commitment as leverage in settlement negotiations with other authorities. If theparties are aware that regular contacts between enforcers occur, it will be harder to play one authorityagainst another.Bilateral co-operation in these contexts brings a number of important benefits to both the competitionauthorities and the merging parties. The benefits to competition authorities are not limited exclusively tobenefits in administrative terms, but in practice, translate into benefits also for consumers and for localmarkets. This is the case when co-operation enhances the prospects for effective design andimplementation of a remedy in a particular case. Co-operation between competition authorities in theremedies phase is, therefore, of critical importance. This is especially so for the purposes of enhancingconsistency between these authorities. International discussions at the OECD and elsewhere haveconsidered different options3 for co-operation, most notably the idea of ‘work sharing arrangements’between competition authorities.3The ICPAC Report in 2000 examined the possibility of work sharing arrangements in the remedies phasein great detail and concluded that employing these cooperative approaches more frequently could havesignificant benefits. It considered different scenarios in which these arrangements could be used: (i) jointnegotiation, where each interested jurisdiction would identify its concerns regarding the likely anticompetitive effects of a proposed transaction, and separately implement jointly negotiated remedies; and(ii) designating one jurisdiction as “lead jurisdiction” which negotiates remedies with the merging partiesthat will address the concerns of the “lead jurisdiction” as well as other interested jurisdictions. The secondcase can include a situation in which the competitive concerns of all jurisdictions involved in the revieware identical, but also a situation in which the “lead jurisdiction” seeks remedies that go beyond what itnecessary to satisfy its own concerns in order to address competitive concerns of other cooperatingjurisdictions. ICPAC was the International Competition Policy Advisory Committee to the US AttorneyGeneral and the Assistant Attorney General for Antitrust. It was formed in November 1997 to address theglobal antitrust problems of the 21st century and concluded its works in June 2000. The ICPACrecommendations and conclusions are included in a report published on 28 February 2000. The full reportis available at 10
DAF/COMP(2013)28Over the years, co-operation between competition authorities in merger investigations has increasedsignificantly, due to the increasingly more common practice of merging parties granting waivers allowingfor the reviewing authorities to share information (including confidential information) and discuss themerits of the case. The increased use of waivers has certainly helped agencies coordinating remedies in across-border context. When WP3 was dealing with Information Exchanges in International Cooperation inMerger Investigations in May 2003, it found that very few jurisdictions had had experience with waivers.Most of the jurisdictions had no experience at all with waivers and only the United States reported use ofwaivers to have been “common practice”. However by 2011, most OECD jurisdictions reported usingwaivers regularly.Box 1. Possible questions for discussion(1) Please briefly describe a few important mergers your agency has reviewed in the last 5 years that involvedcross-border remedies (e.g., remedies that include asset divestitures or conduct outside your jurisdiction, or involve amatter investigated by another authority).(2) Have you had any diverging views concerning the need for remedies with the jurisdiction that can beconsidered as the centre of gravity for the transaction?(3) Please share your agency’s experiences coordinating and cooperating with any other agencies in connectionwith these remedies, particularly with respect to:3. Whether waivers were obtained from parties, and if not, why; Coordination/cooperation mechanisms used if waivers were not available, and how well those mechanismsworked; Identifying or evaluating assets to be divested; Evaluating potential acquirers and market testing the proposed remedy; Designing behavioural remedies, if any: and Using or selecting divestiture/hold separate/monitoring trustees, including utilising a common trusteereporting to both agencies.Monitoring and implementation of cross-border remediesAfter an appropriate remedy is designed, authorities must determine the best means of monitoring itsimplementation by parties. Trustees and third party stakeholders can be called upon to assist in ensuringcompliance with merger remedies. Monitoring the implementation of remedies also differ according to thetype of remedy. Merger remedies are generally classified as either structural, if they require the divestitureof an asset or licensing of intellectual property rights, or behavioural (or conduct), if they impose anobligation on the merged entity to engage in, or refrain from, a certain conduct.For structural remedies, the use of hold separate arrangements and monitoring trustees, fix-it firstremedies, upfront buyer requirements and crown jewel provisions has helped the timely implementation ofthe remedy. For behavioural remedies, which require an on-going monitoring effort, the use of arbitrationclauses has proved useful in certain jurisdictions to alleviate the cost of monitoring the implementation.When a dispute on the implementation of the remedy arises, the arbitration panel is empowered to grant theaggrieved party private law remedies, while the authority maintains the power to impose sanctions such asfines. The possibility to resort to arbitration offers all potential beneficiaries an incentive to ensure the11
DAF/COMP(2013)28accurate implementation of the remedies by the merged entity. This could potentially be more effectivethat any monitoring activity by the competition authority.Cross-border structural remedies are difficult to enforce (e.g. if assets are outside the jurisdiction, thenational competition authority may not have the power to enforce the remedy in case of non-compliance orpartial compliance). On the other hand, for behavioural cross-border remedies, the challenge lies in theaccess to information to monitor the on-going compliance with the behavioural commitment; this mayrequire assistance from the local jurisdiction who may not have an interest to do it (e.g. it did not imposethe remedy, hence has no monitoring obligations).Box 2. Possible questions for discussion(4) What challenges can arise in the design or implementation of cross-border remedies, and how have agencies,on their own or through cooperation or coordination with one or more agencies, overcome them?(5) When it comes to implementation and monitoring, which type of remedy (structural or behavioural) ispreferable in the case of cross-border mergers?4.Revision of agreed remedies because of unforeseen circumstances or subsequentdevelopmentsIt is possible that changes to the remedy might become necessary after the remedy has been agreedwith the competition authority. When remedies are changed or reviewed after a cross-border merger hasbeen approved by all reviewing jurisdictions, conflicts could arise. The potential modification of remediesin one jurisdiction could result in inconsistencies with remedies applied in another, especially if there is noneed to review the remedies previously agreed in this other jurisdiction.As a general principle, it is desirable for a competition authority as well as the parties to have somemeans of seeking the modification of a remedy either to reflect changes in circumstances or problems inthe initial design of the remedy.4 The importance of such mechanisms increases with the duration of theremedy. If the merger regime of a country does not provide for tools to revise remedies after the mergerdecision is taken, the possibility to include a “review clause” in the remedy package can turn useful.Review clauses in remedy packages allow agencies to extend the periods specified in thecommitments for the implementation of the remedy in case unforeseen circumstances affect the successfulimplementation of the agreed remedy. They also allow the agency to waive or modify the undertakings incase an unexpected change in market circumstances requires it. The clauses can be relied upon by themerging parties if they can show good cause.54See the 2005 ICN report on Merger Remedies Review Project.5The European Commission Model Texts for Divestiture Commitments includes the following reviewclause:“34. The Commission may, where appropriate, in response to a request from [X] showing goodcause and accompanied by a report from the Monitoring Trustee:(i) Grant an extension of the time periods foreseen in the Commitments, or(ii) Waive, modify or substitute, in exceptional circumstances, one or more of the undertakings in theseCommitments.12
DAF/COMP(2013)28Some agencies can review the remedy package by amending the original merger decision. In this case,however, the authority’s discretion on how to shape the revised remedy will be limited. Third partiesopposing the decision must normally be consulted and the notifying parties will have the burden of proof tojustify that circumstances have changed to such a de
Impact Evaluation of Merger Decisions (2011) Economic Evidence in Merger Analysis (2011) Remedies in Merger Cases . Cross-Border Merger Cases held by the Competition Committee (Working Party No. 3 on Co-operation and Enforcement) in October 2013.
Overview of Cross-Border Payments 4 Scale of cross-border payments and international trade 4 How cross-border payments work today 5 Example of cross-border payment flow 6 Cross-Border Payment Challenges 8 1. Domestic infrastructures are not designed to handle cross-border payments 8 2. Lack of common message standards 9 3.
For an effective review of cross-border transactions, and to ensure consistent decisions, international co-operation between the competition authorities involved is essential. Increased co-operation should be encouraged between competition authorities particularly in the design of remedies in cross-border merger cases.
Holcim/Lafarge is an example of an exceptionally big case, both in terms of the merger itself and the remedies package, which was concluded in phase I thanks to clear-cut upfront remedies. The merger brief covers the Commission's merger cases straight from the s
which systematically reviews ex-post evaluations of the impact of merger decisions by EU competition authorities. Ex-post merger evaluations (or merger retrospectives) estimate . of merger decisions, introduce the relevant methodologies, and provide a framework for identifying errors in merger decisions.
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Cross-border M&A Springboard to global growth 05 Strong appetite for cross-border M&A Cross-border M&A in 2015 set records, with announced deal value exceeding 1.38 trillion1 and comprising more than 31 percent of the year’s total M&A deal value.2 The period between 2010 and 2015 witnessed cross-border
Merger Decision's Correctness Based on a LEAR study on ex-post merger evaluation for the UK Competition Commission (CC) - link We analyze the merger among two major book resellers in the UK Waterstone's and Ottakar's (Aguzzoni et al., 2013) It was cleared by the UK CC in 2006 We look at the price effect of the merger at different levels (local and
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