01262015Mon
Last updateMon, 26 Jan 2015 11am

 

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CC consults on merger remedies

The Competition Commission is consulting on its new merger remedy guidelines.

The guidelines cover its approach to remedies where mergers are likely to lead to a substantial lessening of competition (SLC).

The draft guidelines provide a single source of guidance on merger remedies including divestiture, prohibition and behavioural measures.

The Commision said that the emphasis of the guidelines is on implementing remedies that are effective and yet minimise burdens on customers, suppliers and merger parties.

Commitment to a transparent and consistent approach

The document takes account of the Competition Commission's (CC) experience of implementing remedies in recent years under the Enterprise Act and research into the outcome of remedies. It is the latest in a series of guidance published by the CC under the Enterprise Act.

Peter Freeman, chairman of the CC, said that the guidelines clarify the CC's criteria, requirements and processes for merger remedies in the light of its experience over the past four years in implementing remedies under the Enterprise Act.

"These are part of the CC’s commitment to a transparent and consistent approach to the UK merger control regime. We would welcome any comment from interested parties on the guidelines," he added.

Comments on the consultation document can be sent by e-mail to: david.roberts@ cc.gsi.gov.uk.

Comprehensive solution 

The CC is an independent public body, which carries out investigations into mergers, markets and the regulated industries.

If a CC inquiry concludes that a merger is likely to result in an SLC, then the CC has to decide what actions it or other bodies should take to remedy, mitigate or prevent the SLC or any adverse effects resulting from it.

These actions can take a variety of forms including prohibition, divestiture or behavioural measures such as rights of access to facilities and price caps.

When selecting remedies, the CC is required by the Enterprise Act to ‘achieve as comprehensive a solution as is reasonable and practicable to the substantial lessening of competition and any adverse effects’ and may also take account of any relevant customer benefits resulting from the merger.

The CC implemented its first remedies under the Enterprise Act in 2004. In total, the CC has required remedies in 21 merger inquiries to date since the introduction of the Enterprise Act and has chosen divestiture or prohibition in 17 of these cases.

Competition risk 

The new guidelines will supersede the CC’s existing guidance on divestiture remedies (CC8), existing guidance on interim measures and guidelines on remedial measures in the CC’s general merger guidance (CC2).

The CC said that its approach in the new guidelines is consistent with these previous documents but had been clarified and extended.

The new guidelines also cover areas such as intellectual property remedies and behavioural remedies which are not covered in detail in existing guidance.

Stephen Rose, partner in the competition group at international law firm Eversheds, called the Competition Commission's guidelines a useful reminder of its policy on remedies in  merger cases, reinforcing the need for merging parties to consider the competition risks carefully at the outset of a deal.

Voluntary system 

He explained that the Commission's message was that it is concerned about the number of completed mergers that it is reviewing and having to unwind - at considerable cost to the merging parties and the public. 

Rose warned, however, that the Commission would always have to deal with completed mergers in the UK system of voluntary merger control.

“This in itself is not reason to dump the UK's voluntary system for a continental style mandatory system which does not allow parties to complete the deal until it has been cleared,” he added.

“UK business derives considerable benefit from being able to complete non-contentious deals without reference to the competition authorities, thus avoiding unnecessary delay and cost,” Rose concluded.

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