Mergers in an economic crisis—EU merger control 2008/2009 By Andreas Weitbrecht Reprinted from European Competition Law Review Issue 7, 2010 Sweet & Maxwell 100 Avenue Road Swiss Cottage London NW3 3PF (Law Publishers) 276 WEITBRECHT: MERGERS IN AN ECONOMIC CRISIS—EU MERGER CONTROL 2008/2009: [2010] E.C.L.R. mix of horizontal and, in particular, vertical issues. The Mergers in an following section will be devoted the new Remedies Notice issued by the Commission in 2008; and a further economic crisis—EU section will describe the most important judgments from the Community courts, such as the landmark judgment by the ECJ in Sony/BMG relating to collective domi- merger control nance. The article will conclude with some thoughts on emerging trends in EC merger control and an outlook 2008/2009 for 2010/2011. Andreas Weitbrecht* Commission jurisdiction and procedure Statistics After the year 2007 had brought a new record with 402 Competition policy; Economic conditions; EU law; Merger control; Remedies mergers notified, the number of notifications dropped to 347 in 2008 and to 259 in 2009.1 As in previous years, the Commission in 2008 and The economic crisis that was triggered by the collapse of 2009 cleared approximately 90 per cent of mergers in the market for sub-prime mortgages in the United States phase I without remedies; of these 60 per cent were and the subsequent insolvency of US-based investment treated under the simplified procedure, a percentage bank Lehman Bros in September 2008 has significantly that has been steadily increasing ever since the simplified affected the European Commission’s merger control procedure was introduced in 2000. In 2008, 19 phase-I practice during 2008 and 2009: the number of merger clearances included commitments, whereas that number notifications in 2009 was down by 35 per cent compared fell to 13 in 2009. to the bumper year 2007. Much of this fall-off was due Especially noteworthy is the number of phase- to the decline in transactions involving private-equity II clearance decisions the Commission adopted in firms. Apart from sheer numbers, the crisis has also 2008 and 2009: in 2008, such decisions without affected the kind of transactions that came before the remedies (nine)2 outnumbered clearance decisions with Commission: transactions in the banking sector required remedies (five),3 a very high number of phase-II speedy clearance in order to keep systemically relevant banks from going under. And in other industries, such as 1 All statistics according to the Commission’s website air transport, the crisis accelerated the consolidation in http://ec.europa.eu/competition/mergers/statistics.pdf [Accessed the industry. However, the Commission also reviewed March 23, 2010]. many mergers in industries that were far less affected 2 Decision of 23 January 2008 declaring a concentration com- patible with the common market and the functioning of the EEA by the crisis, such as the energy, pharmaceutical or Agreement (COMP/M.4781-Norddeutsche Affinerie/Cumerio); high-tech sectors. Decision of 30 January 2008 declaring a concentration com- This article will focus on the most relevant devel- patible with the common market and the functioning of the EEA Agreement (COMP/M.4734-Ineos/Kerling); Decision of 5 opments: it first looks at developments in the field of March 2008 declaring a concentration to be compatible with jurisdiction and procedure, including statistical data. the common market and the functioning of the EEA Agreement Secondly, it will analyse how mergers triggered by the (COMP/M.4747-IBM/Telelogic); Decision of 11 March 2008 declaring a concentration compatible with the common market economic crisis in the financial services industry have and the functioning of the EEA Agreement (COMP/M.4731- been handled by the Commission. Thirdly, it will look Google/DoubleClick); Decision of 14 May 2008 declaring a at horizontal mergers in established industries, most concentration compatible with the common market and the func- tioning of the EEA Agreement (COMP/M.4854-TomTom/Tele notably in the pharmaceutical and aviation fields. The Atlas); Decision of 5 May 2008 declaring a concentration com- next section will describe mergers in the IT and high- patible with the common market and the functioning of the tech industries which in 2008/2009 have presented a EEA Agreement (COMP/M.4956-STX/Aker Yards); Decision of 2 July 2008 declaring a concentration to be compatible with the common market and the functioning of the EEA Agree- * Dr Andreas Weitbrecht is a partner at the Brussels and ment (COMP/M.4942-Nokia/NAVTEQ); Decision of 4 August Frankfurt offices of Latham & Watkins LLP and teaches 2008 declaring a concentration to be compatible with the com- competition law at the Universities of Trier and Osnabruck.¨ mon market and the EEA Agreement (COMP/M.4874-Itema He thanks Laura Baudenbacher, Jan Komossa and Annegret Holding/Barcovision Division); Decision of 17 December 2008 Struck for invaluable contributions in the drafting and finalizing declaring a concentration compatible with the common market of this article. All views are personal. Overviews of developments and the functioning of the EEA Agreement (COMP/M.5141- in EU merger control in 2004, 2005, 2006 and 2007 have been KLM/Martinair). published at [2005] E.C.L.R. 67, [2006] E.C.L.R. 43, [2007] 3 Decision of 19 February 2008 declaring a concentration to E.C.L.R. 125 and [2008] E.C.L.R. 341 respectively. be compatible with the common market and the functioning [2010] E.C.L.R., ISSUE 7 2010 THOMSON REUTERS (LEGAL) LIMITED AND CONTRIBUTORS WEITBRECHT: MERGERS IN AN ECONOMIC CRISIS—EU MERGER CONTROL 2008/2009: [2010] E.C.L.R. 277 decisions by historical standards4 and a high number competition authorities on the basis of art.4(4) ECMR— of unconditional clearances. On the other hand, in remained scarce, with approximately 40 such cases 2009, there were only three5 phase-II decisions in total, between 2004 and 2008. all with remedies, equalling the record low of phase- The report also makes reference to the two-thirds rule, II decisions of 1993. Again there was no prohibition which has kept some controversial cases with NCAs over decision; thus between 2002 and 2009 only two mergers which the Commission would have preferred to exercise were prohibited.6 jurisdiction. Finally, the public consultation suggested that multiple filings, as a result of differences in standard of review between Member States, still may lead to Commission report on the functioning of the ECMR contradictory results.9 In June 2009, little more than five years after the entry into force of Regulation 139/2004 of ¤20 million fine against Electrabel for failure to notify a January 20, 2004 on the control of concentrations merger between undertakings (the EC Merger Regulation; ‘‘ECMR’’),7 the Commission issued its report to the Article 7(1) ECMR prohibits parties from implement- Council on the application of the Regulation.8 The ing a merger that falls under the ECMR before having preceding public consultation and the report focused received clearance from the Commission. This prohibi- in particular on the referral mechanisms, which had tion is often referred to as the standstill obligation, the 10 been expanded with the 2004 Merger Regulation. exact delineation of which is not always clear. Not surprisingly, the report considers that the referral Parties violating the standstill obligation, according mechanisms have worked well, noting that between to art.14(2) of the ECMR, can be fined up to 10 per 2004 and 2008, referrals pursuant to art.4(5) ECMR cent of their annual turnover. This provision, which resulted in 150 notifications to the Commission; has remained unchanged since the coming into force of substituting for approximately 1,000 notifications to the first Merger Regulation 4064/89 [1989] OJ L395/1, national competition authorities. Referrals in the has rarely been used and prior to 2009 there were only other direction—i.e. from the Commission to national two cases where the Commission had assessed fines against companies on this basis; the fines were in the low six-digit euro range.11 of the EEA Agreement (COMP/M.4726-Thomson Corpora- tion/Reuters Group); Decision declaring a concentration com- In a marked departure from its previous practice, the patible with the common market and the functioning of the Commission in June 2009 assessed a fine of ¤20 million EEA Agreement (COMP/M.4513-Arjowiggins/M-Real Zanders against Electrabel France for failing to notify and for Reflex); Decision of 23 September 2008 declaring a concentra- tion compatible with the common market and the functioning of putting into effect without clearance the acquisition the EEA Agreement (COMP/M.4980-ABF/GBI Business); Deci- of de facto control over Compagnie Nationale du sion of 21 October 2008 declaring a concentration compatible Rhoneˆ (CNR).12 According to the undisputed facts, in with the common market and the functioning of the EEA Agree- ment (COMP/M.4919-Statoilhydro/Conocophillips); Decision of December 2003, Electrabel, part of the Suez group, 17 December 2008 declaring a concentration compatible with acquired slightly less than 50 per cent of CNR’s shares. the common market and the functioning of the EEA Agreement CNR has the task of developing the Rhoneˆ valley (COMP/M.5046-Friesland/Campina). 4 Only 2000 and 2001 brought a higher number of phase-II decisions with 17 and 19 respectively. 9 See, e.g. the prohibition by the German Federal Cartel 5 Decision of 9 January 2009 declaring a concentration com- Office in Cargotec, where on the basis of a Europe-wide patible with the common market and the functioning of the market, the merger was cleared in Spain and in Austria and EEA Agreement (COMP/M.5153-Arsenal/DSP); Decision of 22 prohibited by Germany: Cargotec/CVS Ferrari (B5-51/07) August June 2009 declaring a concentration compatible with the com- 24, 2007, available on the homepage of the Federal Cartel mon market and EEA Agreement (COMP/M.5335-Lufthansa/SN office at: http://www.bundeskartellamt.de/wDeutsch/download/ Airholding); Decision of 28 August 2009 declaring a concentra- pdf/Fusion/Fusion07/B5-51-07.pdf [Accessed March 23, 2010].