National competition regulators should co-operate on merger investigations, says Commission group

The European Commission has published a set of draft guidelines aimed at helping national competition authorities to work together to review cross-border mergers.

They should co-ordinate their efforts when a merger's impact will affect more than one country and where solutions are needed to cross-border merger issues, the Commission's EU Merger Working Group has said.

It has published best practice draft guidance outlining how national authorities and merging companies can work together to speed up the merger review process across Europe.

National competition authorities across the EU look into company mergers and acquisitions to judge whether the move lessens competition and adheres to European competition law.

Major merger or takeover deals involving companies with big turnovers are ruled on by the European Commission using its Merger Regulation. In some cases though decision-making powers are handed back to national regulators so they can find suitable solutions to avoid an uncompetitive market.

The Working Group was made up of representatives of the European Commission. national competition regulators from across the EU, and observers from regulators in other European countries.

National regulators might tell one another whether a company transaction should be looked into under merger control laws, the Working Group draft said.

Collaboration would be useful when a merger's impact will affect more than one country and where solutions are needed to cross-border merger issues, the proposals said.

"It is noted that although jurisdictional rules and practices differ across jurisdictions, cooperation may assist the NCAs (national competition authorities) in reaching an informed view," the EU Merger Working Group draft (5-page / 167KB PDF) said.

"Remedies in a merger that is reviewable in more than one jurisdiction may differ across jurisdictions depending on the competition concern identified in each one; indeed, remedies may not be necessary in every jurisdiction. Nevertheless, a remedy accepted in one jurisdiction may have an impact on another jurisdiction.

Cooperation can therefore contribute to obtaining coherent remedies and to avoiding inconsistent remedies," the draft said.

The best practice guidance could help make it easier for national regulators  to identify merger cases that could be dealt with in a 'one stop shop' ruling under the European Commission's Merger Regulation or where Commission should investigate a merger, the draft said.

"Where NCAs are contemplating [a]... referral request, contacts between them can facilitate the referral, and ... can also assist merging parties in forming a view whether it is appropriate for them to speed up the referral process by themselves making [a] ... referral request," the draft said.

Cooperation benefits NCAs, merging companies and third parties, the draft said.

NCAs that are provided with "full and consistent information ... can reduce burdens on merging parties and third parties by facilitating ... the alignment of timing and the overall efficiency, transparency and effectiveness of the merger review process," the draft guide said.

"In cases where serious concerns or difficult analytical issues do arise, cooperation can be invaluable in helping to reach informed and consistent or at least non-conflicting outcomes. In such cases, it will ensure that NCAs are in a better position to exchange views on, for example, possible counterfactuals and theories of harm, types of empirical evidence and so on," the draft said

NCAs involved in the same merger will update each other with the timings and decisions it reaches in its own merger investigation and might liase more closely if necessary, the draft said.

"Such discussions may relate to market definition, assessment of competitive effects, efficiencies, theories of competitive harm, and the empirical evidence needed to test those theories. Views on necessary remedial measures or submitted remedies may also be discussed," the Working Group proposals said.

Merging companies are encouraged to be pro-active and identify where their deal might be subjected to scrutiny, the draft said.

"Where a transaction is expected to fulfil the requirements for notification or investigation in more than one jurisdiction, the merging parties are encouraged to contact each of the NCAs concerned as soon as practicable and provide them with the ... name of each jurisdiction in which they intend to make a filing; the date of the proposed filing in each jurisdiction; the names and activities of the merging parties; the geographic areas in which they are active; the sector or sectors involved," the Working Group proposals said.

"The information provided by the parties will simply assist the NCAs concerned at an early stage to decide whether there might be a need for cooperation in the particular case," it said.

The best practice guidance suggests that merging companies should provide the information as early as possible so that NCAs can align the timing of their investigations.

Merging companies can also advise where they think inconsistencies may occur in how different countries propose solutions to their merger.

"It is ... clearly in the interest of the merging parties to coordinate the timing and substance of remedy proposals to the NCAs concerned, so as to minimise the risk of inconsistent results," the Working Group best practice draft guide said.

Merging companies should consider giving up their rights to the confidentiality of evidence relating to their merger investigation, the draft said. This would "enable more effective communication between the NCAs concerned," the Working Group draft said.

"The merging parties are encouraged to be proactive and to provide waivers of confidentiality to all NCAs where the merger is reviewable, including, where appropriate, at the pre-notification phase. For the same reasons ... third parties are also encouraged to provide waivers of confidentiality," the Working Group suggested.

It will not always be "efficient" or "necessary" for NCAs to follow the best practice guidance, the draft says, particularly "where it is clear during the early stages of an investigation that the merger does not raise any significant competition or procedural issues in any Member State, or where such issues are not decisive for the outcome of any of the different merger reviews," the draft said.

In a footnote the Working Group said NCAs do not support joint investigations of mergers but were advocating a "non-binding reference framework" to help the authorities work together.

"These best practices are intended to provide clarity to merging parties and others on how cooperation among NCAs will operate in merger cases that meet the requirements for notification or investigation in more than one member state," the best practice draft said

The proposals are open to consultation until 27 May 2011.