Global Policy Forum

by Victorya Hong

European Union regulators launched a wide-ranging debate Dec. 11 that could result in an extensive overhaul of rules governing merger reviews.

European Competition Commissioner Mario Monti announced that the European Commission, the EU's competition watchdog, had adopted a paper that sets the stage for changes to the EU's Merger Regulation.

"The paper aims to launch a comprehensive and open debate on the merger regulation and whether it should take into account the challenges posed by globalization, and in Europe, the changing environment provided by the launch of the single market, the advent of the euro and the pending enlargement of the European Union," said Monti at a press conference in Strasbourg, France.

The 58-page document, which contains two annexes running an additional 53 pages, covers a broad range of issues. Most notably, it could extend the length of the EU's legally binding deadlines in so-called phase 1 and phase 2 reviews, to allow for more consultations with companies on concessions meant to allay antitrust concerns posed by a merger. Phase 1 investigations run four weeks to six weeks, while phase 2 probes last four months. Under the options included in the paper, companies could have an additional 10 days to 15 days to formulate and fine-tune concessions, with a further 10 days to 15 days for the Commission to examine the concessions offered.

Any extension of the deadlines would be triggered at the request of the companies, although the Commission could retain the final say over phase 1 reviews in order to limit extensions to those cases with a fair chance of winning early approval.

Requests for extensions, or "stopping the EU's merger clock," would have to be made within the first three weeks of phase 1 and the first three months of phase 2 or before the deadline for final concessions.

While these options are presented as possible amendments to the current procedure, the Commission appears to want to present itself as remaining open to discussion, especially following controversial decisions earlier this year. Brussels suffered criticism from the U.S. about its July veto of General Electric Co.'s proposed acquisition of Honeywell International Inc. and then felt political heat from France for blocking the proposed merger of electrical appliance makers Schneider SA and Legrand SA.

Other topics included in the paper concern simplifying the procedure for referring reviews to national competition authorities. This would mean automatically referring any deal affecting three EU countries to Brussels, including minority shareholdings and strategic alliances under the merger regulation, but automatically excluding the majority of purely financial transactions and introducing a bloc exemption for nonproblematic cases.

Another important amendment could align the EU's legal test with that of the U.S. The paper includes a debate on whether to change the wording of its substantive test - which analyzes deals in light of whether they would "create or strengthen a dominant position" - to the U.S. test of whether a merger would mean a "significant lessening of competition."

Any changes to the legal test are expected to herald a clarification on the EU's policy on efficiency defenses. The Commission currently does not have an explicit policy, but adopting a U.S.-style legal test would make it logical for the EU to outline it position on efficiencies.

The public has until the end of March to submit its comments on the paper, at which point the Commission will consider drawing up a proposal to amend the current regulation. Monti would not pin down a target date for completing the initiative but said he expected to have completed a proposal during the course of next year for final adoption by EU member states.

For more information, or to obtain a copy of the Commission's paper, see the Delegation of the European Commission to the United States.

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