European Community Merger Control: A Practitioner's Guide

Name: European Community Merger Control: A Practitioner's Guide | A Practitioner'S Guide
Brand: Kluwer Law International
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A Practitioner'S Guide

Barry E. Hawk Henry L. Huser(Author)

Kluwer Law International (Publisher)

Published on 1. June 1996

530 pages

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978-90-411-7172-6 (ISBN)

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Cover
Half Title Page
Title Page
Copyright Page
Table of Contents
CHAPTER I INTRODUCTION
1. Overview
2. Historical Development of EEC Merger Regulation
3. Summary of the Merger Regulation and Contents of This Treatise
CHAPTER II CONCENTRATIONS
1. Introduction
2. Sole Control Transactions
2.1 Mergers
2.2 Stock Acquisitions
2.2.1 Majority Interests
2.2.2 Public Bids
2.2.3 Sole Control Via Minority Acquisitions
2.2.4 Stock Options
2.3 Asset Acquisitions
2.4 Control By 'Any Other Means' (e.g., 'Casting' Votes)
2.5 'Sole' Control Where Joint Control is Clearly Temporary
3. Joint Control Transactions
3.1 Overview
3.2 'Unilateral Rights' Test
3.2.1 What Activities Constitute 'Strategic Commercial Behavior?'
3.2.1.1 Appointment of Senior Management and Approval of Budgets and Business Plans
3.2.1.2 Rights Merely Protecting Investment of Minority Shareholder
3.2.1.3 Other 'Plus Factor' Veto Rights
(a) Approval of Acquisitions, Divestitures and Investments
(b) 'Market-Specific' Veto Rights
(c) True Stock Options (Puts/Calls)
3.2.2 'Prior Consultation' Versus Prior Approval/Veto Rights
3.3 'Shifting Alliances' Test
3.3.1 General Principles
3.3.2 'Flexible' Shifting Alliances Test?
3.4 'Indirect' Joint Control?
3.5 One Party 'Joint' Control?
3.6 'Changes in the Quality' of Joint Control?
3.7 Joint Control Not Defeated By Structure That Allows Each Parent To Exercise 'Sole' Control Over Part of the Overall Joint Venture
3.8 No Minimum 'Safe Harbor' Threshold Below Which Joint Control Can Be Conclusively Presumed Not to Exist
4. No Change in Control
4.1 De-Mergers and Spin-Offs
4.2 Intra-Group Transactions
5. 'Concentrative' Joint Ventures
5.1 Overview
5.2 History of the Concentrative-Cooperative Distinction
5.3 The Concentrative-Cooperative Distinction Today
5.3.1 Structural 'Autonomy' Condition
5.3.1.1 Activities and Resources Sufficient For a 'Full Function' Joint Venture
5.3.1.2 Vertical Relationships Between Parents and JV
5.3.1.3 Duration of the JV
5.3.2 'Risk of Coordination' Condition
5.3.2.1 Two or More Parents Remain Substantially Active in the Joint Venture's Market(s)
5.3.2.2 Two or More Parents Remain Active in the Same 'Spillover' Market
(a) 'Spillover' Product Markets
(b) 'Spillover' Geographic Markets
(c) Other 'Spillover' Collusion Factors
5.3.2.3 Concept of 'Parent-to-JV Coordination' Rejected
5.4 Policy Analysis of the Evolving Concentrative-Cooperative Distinction
6. Statutory and Notice Exclusions
6.1 'Investment-Only' Exclusion
6.2 'Financial Holding Company' Exception
6.3 'Bankruptcy' Exclusion
6.4 Stock Options
6.5 Acquisition of Control by Individuals
6.6 Formation of Jointly Controlled Bidding Consortium
7. 'Multi-Part Transactions' (One 'Concentration' or More?)
7.1 Transactions Between the Same Buyer and Seller
7.2 Separate Transactions That are Conditioned On Each Other
CHAPTER III COMMUNITY DIMENSION
1. Introduction
2. 'Aggregate Turnover'
2.1 'Net' Sales Revenues
2.2 Most Recently Completed Year
2.3 'Ordinary' Activities
2.4 Acquisitions and Divestitures Completed Since the Last Financial Year
2.5 'Two-Year Aggregation' Rule For Transactions Between The Same Parties
2.6 Conversion Rates Into 'ECUs'
3. Turnover 'In' the Community
3.1 General 'Point of Delivery' Rule
3.2 Exceptions to the General 'Point of Delivery' Rule
3.2.1 Financial Institutions
3.2.2 Insurance Companies
3.2.3 Airlines
3.2.4 Telecom Operators
3.2.5 Projects in International Territories
3.2.6 'Centralized Purchasing' Exception
3.3 Treatment of Turnover in Recently Acceded Countries
4. Special Turnover Calculation Rules For Insurance, Credit and Other Financial Institutions
4.1 Insurance Companies
4.2 Credit and Other Financial Institutions
4.2.1 General Rules
4.2.2 'Credit and Other Financial Institutions' Broadly Defined
5. Identifying the 'Undertakings Concerned'
5.1 Merger/Sole Control Acquisition
5.2 Joint Control Acquisitions
5.3 Acquisition of (Sole) Control By a Joint Venture
5.4 Hybrid Situations
5.4.1 Swaps
5.4.2 Joint Bid and Immediate Break-Up
5.4.3 Preexisting Joint Venture Buy-Outs and Break-Ups
5.4.4 Changes in Parental Composition of Preexisting Joint Ventures
5.5 Other Participating Parties Not Acquiring or Retaining Sole or Joint Control
5.6 De-Mergers
6. Entities Included in the 'Group'
6.1 Overview
6.2 The Text of Article 5 and the Commission's Practice Before Implementation of the Turnover Calculation Notice
6.2.1 Article 5(4)
6.2.2 Article 5(5)
6.3 The New Notice
6.4 Special 'Group' Rules for State-Owned Entities
CHAPTER IV JURISDICTIONAL ISSUES
1. Introduction
2. Exceptions to the 'One-Stop Shopping' Principle
2.1 Distinct Market Exception (German Clause)
2.2 Legitimate Interests Exception
2.3 Article 223(1)(b) Exception
2.4 ECSC Article 66 (Coal and Steel)
2.5 Member State Referrals (Dutch Clause)
3. Extraterritorial Jurisdiction Issues
3.1 Generally
3.2 EEA Agreement
CHAPTER V RELEVANT MARKET DEFINITION
1. Product Market
1.1 Overview
1.2 Homogeneous Products in Separate Relevant Markets
1.2.1 Different Customer Groups and End Use Segments
1.2.2 Captive Production
1.2.3 Channels of Distribution
1.2.4 Branded v. Private Label Products
1.3 Different (Non-Homogeneous) Products in the Same Relevant Market
1.3.1 Direct Substitutability
1.3.2 Indirect Competition
1.3.3 'Full Line', 'Cluster' or 'Systems' Markets
1.4 Evidence Used to Determine Demand-Side Substitutability
1.4.1 Price Information
1.4.2 Customers' Views Regarding the Feasibility of Switching
1.5 Supply-Side Substitutability
1.6 'Technological Innovation' or 'Research and Development' as a Relevant Product Market
2. Geographic Market
2.1 Overview
2.2 Local v. National v. Broader Markets
2.3 Criteria Used to Define Relevant Geographic Markets
2.3.1 Dynamic, Not Static Analysis
2.3.2 Historical Shipment Patterns and Trade Flows
2.3.3 Centralized Production and Centralized Purchasing
2.3.4 History of Successful or Failed Imports
2.3.5 Barriers to Incremental Imports
2.3.5.1 Regulatory Barriers
2.3.5.2 Transportation Cost Barriers
2.3.5.3 Distribution or Marketing Barriers
2.3.6 Price Differences Between Different Areas
2.3.7 Non-Price Differences Between Different Areas
CHAPTER VI SINGLE-FIRM DOMINANCE
1. Overview of Merger Regulation's 'Dominance' Liability Test
2. Market Shares/Concentration Levels
2.1 Presumption of Dominance Created by High Market Shares
2.2 Market Share Calculation Principles
2.2.1 Captive v. 'Free' Output
2.2.2 Value v. Volume v. Capacity Based Market Shares
2.2.3 Private Label Production
2.2.4 Market Shares of Entities Linked to a Concerned Undertaking By a Minority Interest
2.3 Factors That Warrant 'Discounting' Market Shares
2.3.1 Declining or Fluctuating Market Shares
2.3.2 'Lumpy' Demand
2.3.3 'Second Bite' Demand/Supply Substitutability
2.3.4 Rapid Technological Evolution
2.3.5 Minimal Geographic Overlap
2.3.6 Other Market Share Adjustment Factors
3. Competitive Advantages/Disadvantages of the Combined Firm Relative to Remaining Competitors
4. Countervailing Customer Bargaining Power (Power Buyers)
5. Supply-Side Flexibility ('Potential Competition') Analysis
5.1 Increased Output Via Utilization of Excess and Debottlenecked Capacity In the Relevant Market
5.2 Direct Imports Into the Relevant Market and Other Forms of Geographic Expansion
5.3 Product Line Expansions
5.4 Other Forms of Supply-Side Flexibility (De Novo Entry, Toehold Acquisitions, etc.)
5.5 Barriers Impeding Supply-Side Flexibility
5.6 Timing, Sufficiency and Certainty of Supply-Side Flexibility
6. Other 'Dominance' Criteria
6.1 Product Homogeneity v. Heterogeneity
6.2 Static v. Evolving Market Conditions (Demand Growth & Technological Evolution)
6.3 Conduct/Performance Evidence
6.4 Third Party Views (Customers and Competitors)
6.5 Noncompetition Criteria
CHAPTER VII OLIGOPOLISTIC (COLLECTIVE) DOMINANCE AND OTHER SUBSTANTIVE LIABILITY THEORIES
1. Oligopolistic ('Collective') Dominance
1.1 Introduction
1.2 Historical Development of the Oligopolistic Dominance Theory
1.3 Oligopolistic Dominance Criteria
1.3.1 High Post-Merger Concentration Ratio
1.3.1.1 Two-Firm Duopolies
1.3.1.2 Multi-Firm Oligopolies
1.3.2 High Barriers to Entry/Expansion
1.3.3 Structural or Other Links
1.3.4 Market Demand Characteristics
1.3.4.1 Inelastic Demand
1.3.4.2 Stagnant Demand
1.3.4.3 'Lumpy' or Fluctuating Demand
1.3.5 Industry Fixed-to-Variable Cost Ratio
1.3.6 Excess Capacity
1.3.7 Symmetry in Characteristics of Oligopoly Members
1.3.7.1 Market Shares
1.3.7.2 Cost Structures
1.3.7.3 Production Capacities
1.3.7.4 Financial Size
1.3.8 Market Transparency
1.3.8.1 Relative Homogeneity or Heterogeneity
1.3.8.2 Mechanisms Facilitating Transaction-Specific Information Exchanges
1.3.8.3 'Bid Markets' and Market Transparency
1.3.9 Countervailing Customer Bargaining Power ('Power Buyer')
1.3.10 Recent Market Performance
1.3.10.1 Negative Performance
1.3.10.2 Positive Performance
1.3.11 Market Characterized by Non-Price Competition
1.3.12 Concentrations Involving 'Maverick' Firms
1.3.13 Multi-Market Contact
1.4 Standard of Proof for Oligopolistic Dominance
2. Potential Competition
3. Vertical and Conglomerate Merger Issues
3.1 Vertical Foreclosure Analysis
3.2 'Conglomerate' Analysis
3.3 Doctrinal Limitations to the Commission's Vertical and Conglomerate Analyses
3.3.1 Direct Versus Indirect Vertical Foreclosure
3.3.2 Article 86 'Conduct Only' Defense?
4. Monopsony/Oligopsony
CHAPTER VIII AFFIRMATIVE DEFENSES
1. Development of Technical and Economic Progress (Efficiencies, Other Benefits)
1.1 Case Law
1.2 The Debate: Are Efficiencies a Defense or an Attack Under the Merger Regulation?
2. 'Failing Company' Defense
CHAPTER IX COLLATERAL RESTRICTIONS
1. Overview
2. Ancillary Restrictions
2.1 Noncompetition and Related Clauses
2.1.1 Noncompetition Clauses
2.1.1.1 Sole Control Transactions
2.1.1.2 Joint Control Transactions
2.1.2 Employee Nonsolicitation Clauses
2.1.3 Nondisclosure (Confidentiality) Clauses
2.1.4 Trademark Non-Use Provisions
2.2 Intellectual Property Licenses
2.2.1 Sole Control Transactions
2.2.2 Joint Control Transactions
2.3 Purchase/Supply Agreements
2.3.1 Sole Control Transactions
2.3.2 Joint Control Transactions
2.4 Other Collateral Restrictions
2.4.1 Pre-Closing Restrictions on Operation of the Target
2.4.2 Joint Bid Restrictions
2.4.3 Other JV Restrictions
3. Separability
CHAPTER X PROCEDURE
1. Preparation and Filing of Form CO
1.1 Timing and Duty to File
1.1.1 'Conclusion of the Agreement'
1.1.2 'Announcement of a Public Bid'
1.1.3 Waivers of One-Week Deadline
1.1.4 Who Must File?
1.2 Contents of Form CO
1.3 Prenotification Guidance
2. Investigation/Waiting Periods and Process
2.1 Applicable Periods
2.1.1 Investigation Periods
2.1.2 Waiting ('Suspension') Period
2.2 Commission's Investigatory Powers and Procedures
2.2.1 Discovery Powers
2.2.2 Phase I/II Procedures
2.3 Input By 'Interested' Third Parties
3. Confidentiality and Privilege Issues
3.1 Confidentiality
3.2 Privilege
4. European Commission: Internal Organization and Coordination With Other Antitrust Authorities
4.1 Organization
4.2 Coordination With EEA Competition Authorities
4.3 Coordination With Non-EEA Countries
CHAPTER XI ENFORCEMENT POWERS AND APPEALS
1. Remedial Powers
1.1 Prohibitions
1.2 Structural Remedies (Divestitures)
1.3 Quasi-Structural Remedies
1.4 Conduct Remedies
1.5 Timing of 'Fix-It' Settlement Offers
1.5.1 Phase I Settlements
1.5.2 Phase II Settlements
1.6 Compliance Monitoring of Settlement Commitments
2. Sanctions for Noncompliance
2.1 Tolling of Applicable Investigation/Waiting Periods
2.2 Fines
2.3 Revocation of Final Decisions
3. Allocation of Powers Within the Commission
4. Reopening and Modifying Commission Decisions
5. Appeals of Commission Decisions
CHAPTER XII APPLICATION OF ARTICLES 85 AND 86 TO STRUCTURAL TRANSACTIONS
1. Introduction
2. Acquisitions of Control
2.1 Sole Control
2.1.1 Article 86
2.1.2 Article 85
2.2 Joint Control (Cooperative JVs)
3. Acquisitions of Minority Interests Conveying 'Influence' or 'Some Influence', But No Control (Philip Morris and Gillette)
3.1 Philip Morris Influence
3.2 Gillette 'Some' Influence
4. Procedural Issues (Form A/B Notification)
APPENDIX I COUNCIL REGULATION (EEC)) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings OJ No L395 (December 30, 1989)
APPENDIX II Commission Regulation (EC) No 3384/94 of 21 December 1994 on the notifications, time limits and hearings provided for in Council Regulation (EEC) No 4064/89 on the control of concentrations between undertakings (OJ No L377 p. 1, 1994-12-31)
APPENDIX III Commission Regulation (EC) No 3385/94 of 21 December 1994 on the form, content and other details of applications and notifications provided for in Council Regulation No 17 (Text with EEA relevance) (OJ No L377 p. 28, December, 31, 1994)
APPENDIX IV Community Merger Control Green paper On the Review of the Merger Regulation
INDEX
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