trustees and merger remedies - jones day and merger remedies 10 september 2014 i jones day, brussels...

TRUSTEES AND MERGER REMEDIES10 September 2014 I Jones Day, Brussels

This lunch talk was organised by Concurrences Journal in cooperation with Jones Day and AdVolis Brussels. Panelists included Ulrich von Koppenfels, Case Handler, Mergers Case Support and Policy Unit, DG COMP, Antoni Vassileff, Director, AdVolis Brussels and Charlotte Breuvart, Partner, Jones Day. Bernard Amory, Partner, Jones Day, addressed the introductory remarks and moderated the panel.

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* Ulrich von Koppenfels is Case Handler, Mergers Case Support and Policy Unit, at the European Commission, DG COMP, Brussels. This synthesis has been prepared by Concurrences Journal. Views expressed cannot be regarded as stating an offi cial position of the European Commission.

THE TRUSTEE’S ROLE AND RESPONSIBILITIES ARE IMPORTANT IN ENSURING A SMOOTH IMPLEMENTATION OF COMMITMENTS, SINCE THE COMMISSION CANNOT CHECK EACH AND EVERY DIVESTMENT AND NEEDS THE TRUSTEE TO BE ITS ‘EYES AND EARS.’”

Ulrich von Koppenfels* DG COMP

Mr. von Koppenfels drew on his experience as a member of the Merger Case Support

and Policy Unit at DG COMP. He fi rst recalled that the Commission interve-ned in approximately 14% of all merger control decisions, either in the form of remedies or prohibitions. Divestiture remedies, which are by and large the Commission’s preferred remedy, serve as the benchmark for assessing the effectiveness of other types of remedies. Next to the clear-cut divestiture of an existing, stand-alone business, more complex types of divestitures can also be conceived of in specifi c cases (e.g., carve-outs, re-branding, divestiture of IPRs). He noted that the Commission is willing to consider access remedies (e.g., slot release) in appropriate cases, if they are as effective as structural remedies, and if they are likely to be taken up.

Mr. von Koppenfels insisted on the importance of the trustee’s role and responsibilities in ensuring a smooth implementation of commitments, since the Commission cannot check each and every divestment and needs the trustee to be its “eyes and ears”. That is especially relevant in the case of carve-outs, which need to be constrained by strict safeguards.

He then focussed on analyzing the changes brought by the Commission to the standard model texts for divestiture commitments and the trustee mandate. Among the main changes introduced in the new model texts, Mr. von Koppenfels emphasised the clarifi cations brought to the trustee’s role and inde-pendence, in the wake of the Odile Jacob case (T-452/04 and C-553/10 P). In addition, the new model texts contain a new defi nition of assets, a clarification of purchaser criteria, changes to the hold-separate obliga-tion, and a more precise scope for the non-reacquisition clause.

Commitments are not necessarily engraved in stone and may be modifi ed, on a case-by case basis. The unique features of each case make it a diffi cult task for the Commission to provide general guidance in this fi eld. Mr. von Koppenfels also emphasised that the examination of requests for waiver or modifi cation of commitments does not suspend the parties’ obligation to comply with the commitments, including any deadlines that would be foreseen in the commitments. Similarly, failure to proceed with divestiture will in principle not entitle the parties to have the Commission review the commitments.

One of the participants asked whether there was a rationale behind the Commission’s policy not to publish all decisions relating to the modifi cation of commitments. Mr. von Koppenfels explained that although no uniform line of conduct was set by the Commission in this regard, the publication of a deci-sion depended in particular on the type of remedy and the kind of modifi cation sought.

TRUSTEES & MERGER REMEDIES: THE EUROPEAN COMMISSION OVERVIEW


Antoni Vassileff AdVolis Brussels

Mr. Vassileff shared his expe-rience as a trustee in a number of cases, with a

specif ic focus on divestiture commitments.

In his view, the text of the commit-ments submitted by a notifying party provides a useful legal framework but cannot cover all potential and unanticipated issues. Companies therefore need to “expect the unexpected” and orga-nise accordingly.

The monitoring trustee is generally the person with the most expe-rience with the implementation of commitments. His knowledge can be used in order to advise the parties as well as the Commission. The hold separate manager also has a crucial role in preserving the value of the business and in “educating” the trustee, who in turn provides guidance to the hold separate manager. This results in a mult i- faceted relat ionship between the notifying party, the hold separate manager, the Commission and the monitoring trustee.

Mr. Vassileff then turned to discuss the supervision of monitoring trustees. Although trustees are an important enforcement tool for competition authorities, there is little supervision of trustees’ practice, in contrast with other regulated activi-ties – such as statutory auditors. This is partly due to the fact that case teams may have varying degrees of supervision over their work: case-handlers may move to other cases, or do not necessarily have all the required skills and know-how to supervise the monito-ring trustee. This begs the question of whether DG COMP should recreate a unit dedicated to remedies.

Further tasks could be delegated to the monitoring trustee, including the definition of key personnel. Under the current practice, the Commis-sion tends to characterize as “key” most of the personnel, which enlarges the scope of employees targeted by the very strict provisions of the commitments (in particular the “non-poaching” clause) and creates unease and sometimes instability.

Lastly, there seems to be a growing trend towards the requirement for an “upfront buyer”, i.e. the obliga-tion for the notifying party not to

close the notified transaction before a buyer for the Divestment Business is approved by the Commission. The new template for divestiture commitments includes that require-ment, and several recent cases seem to have been subject to such a clause. Mr. Vassileff warned that, while it is clearly bad news for companies, it is not necessarily good news for the Commission: first, the Commission’s services may paint themselves into a corner, as they then have to assess the proposed buyer under strong pres-sure. Second, allowing the notifying party enough time to find a buyer usually yields good results both in terms of value but also market competition, and the interests of the notifying party and the Commission are most of the time aligned. Third, the trustee is less in a position to provide an informed opinion on the buyer.

Mr. Vassileff concluded his remarks with a comment on the case team: there is always room for interpreta-tion with the implementation of commitments and it is up to the monitoring trustee and the notifying party to understand the priorities of the case team to ensure a smooth execution.

THE MONITORING TRUSTEE IS GENERALLY THE PERSON WITH THE MOST EXPERIENCE WITH THE IMPLEMENTATION OF COMMITMENTS. HIS KNOWLEDGE CAN BE USED IN ORDER TO ADVISE THE PARTIES AS WELL AS THE COMMISSION.”

TRUSTEES & MERGER REMEDIES: THE TRUSTEE’S POINT OF VIEW

TRUSTEES AND MERGER REMEDIES10 September 2014 I Jones Day, Brussels


Charlotte BreuvartJones Day

The presentation focused on the modification and waiver of EU merger

remedies. Since the submission of merger remedies is inherently based on a prospective compe-titive analysis, companies are in need of an efficient tool to adapt remedies to shifting market circumstances.

Ms. Breuvart first recalled the existing legal framework set out in the Commission Remedies Notice of 2008. A review clause is now systematically inserted in commitments, based on the standard review clause found in the model text for divestiture commitments. Although the Commission may interpret the clause quite narrowly, that clause provides parties with a basis to seek the extension of deadlines or the modification of remedies.

Any request for a deadline exten-sion must be based on proof of a “good cause”, which occurs where the parties demonstrate that their inability to meet the deadline is due to reasons

outside the scope of their responsibility, and that they will subsequently manage to divest the business within a short time-frame. A few Commission deci-sions have accepted to extend divestiture deadlines on a case-by-case basis.

When requesting the modifica-tion of remedies, a company must not only prove its good cause, but also establish “excep-tional circumstances”. That can arise either in case of a signifi-cant and lasting change in market circumstances, or if the objective pursued by the remedy would be better achieved by changing the modalities of the commitment. Practice shows that the Commission may accept to modify both divestiture and behavioural remedies.

The presentation then touched upon specific issues raised by the Commission’s approach. First, in view of the very small number of published decisions, some have criticized a lack of transparency, which makes it difficult to understand the general line of reasoning underlying the Commission’s practice. While a certain degree of opacity may be

justified, the public interest calls for publication of more decisions than is now the case. Second, it is regrettable that the Commission has not set a clear procedural framework governing the review of commitments. For example, the Commission is not constrained by deadlines when dealing the review of commitments. This lack of a procedural framework comes in striking contrast with the strict procedural framework surrounding the filing process.

By way of conclusion, in order to “expect the unexpected”, to use Mr Vassileff’s words, companies should take a proactive approach of three inter-related steps: first, carefully craft remedies at the time of their submission; second, implement the remedies in a proactive way; third, when diffi-culties arise, prepare to request an extension or modification of remedies. The monitor ing trustee can also play a crucial role, and a good working rela-tionship with him may ease contacts with the Commission along the process.

THE MONITORING TRUSTEE CAN ALSO PLAY A CRUCIAL ROLE, AND A GOOD WORKING RELATIONSHIP WITH HIM MAY EASE CONTACTS WITH THE COMMISSION ALONG THE PROCESS.”

TRUSTEES & MERGER REMEDIES: THE LEGAL POINT OF VIEW

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