27 Mar 2014

European Commission’s simplified procedure Consultation underway

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On 27 March 2013, the European Commission (Commission) launched a consultation on simplifying some of the procedural aspects of the EU's merger control regime. Responses to the consultation must be submitted by 19 June 2013.

Background

The Commission's simplified merger control procedure allows merging parties that meet certain criteria from having to submit a full merger notification to the Commission (i.e. Form CO). Instead, the merging parties may submit a ""Short Form CO"", which requires less information and economic market analysis than a full merger filing.

Generally, transactions that fall under the simplified procedure are considered unlikely to result in a significant impediment to effective competition in the EU. The merging parties can also normally obtain a clearance decision within a slightly shorter timeframe than the usual 25 working days of the Phase I investigation stage.

Proposals

The proposals aim to further streamline the EU simplified merger review system in order to make it even more business-friendly by cutting red tape and minimizing the financial, administrative and procedural burdens for the merging parties when notifying a merger to the Commission.

The proposed changes could allow up to 70% of all notified mergers that are considered unproblematic to qualify for review under the Commission's simplified procedure (which would be approximately 10% more than today).

The proposals would involve mainly technical changes to the Notice on the simplified procedure (rather than the EU Merger Regulation), and if adopted, could cut lawyers’ fees up to one half and reduce preparatory in-house work.

The proposed changes include:

* Raising the "safe harbour" thresholds for horizontal and vertical transactions, thereby widening the scope of application of mergers treated under the simplified procedure. This will allow the Commission to clear more cases without extensive market investigations. The thresholds for mergers between firms competing in the same market (i.e. horizontal) would increase from 15% to 20% and for mergers between firms active in upstream and downstream markets (i.e. vertical), the thresholds would increase from 25% to 30%.
* Reducing the amount of information required in the merger notification forms. In particular, in cases that do not fall under the simplified procedure, merging firms would only have to submit detailed information for those markets where the market share actually exceeds the thresholds for applying the simplified procedure.
* Introducing the possibility for simplified treatment of certain categories of horizontal mergers that exceed the safe harbour thresholds but where the combined market share of the merging parties is still less than 50% on any plausible market definition and where the increase in market share resulting from the merger is very small (i.e. increment delta of the Herfindahl-Hirschman Index (HHI) is below 150) (HHI is calculated by summing the square of the individual market shares of all the firms in the market).
The consultation documents are available online >

Conclusion

Although the changes to the Commission’s EU simplified procedure may appear small, they are indeed likely to result in ensuring the Commission only catches those arrangements that have a real impact on competition. It should also reduce external legal fees as well as the time of lawyers, management and even economists in preparing merger notifications. This is a welcome modification to the current rules on the simplified procedure. Later this year, the Commission is also expected to consult on more radical possible changes to the EU Merger Regulation including ways to address the perceived "enforcement gap" affecting acquisitions of minority shareholdings.
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Marta Garcia

Marta Garcia
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