EC could revamp use of 'fix it first' merger remedies - DG Comp official
‘Fix it first’ solutions very common in US
FTC preparing report in study on merger remedies
'Too early' for impact assessment of EC mobile cases in Austria, Germany, Ireland
The European Commission (EC) could revamp its use of 'fix it first' remedies in merger review following their recent use in BASE/Liberty Global, said Michele Piergiovanni, who heads the EC's telecoms mergers unit at DG Comp.
The official was speaking today (20 May) at a conference in Brussels hosted by King's College London and Crowell Moring.
Little has changed in the use of remedies in EC merger reviews in recent years, Piergiovanni said. Structural remedies continue to be the preferred option, with 70% of merger remedies between 2011 and 2015 having a structural component, he said. The EC also prefers the divestment of an existing business rather than piecemeal solutions, he added.
But after a long period of time in which 'fix it first' was not used, in the last year alone the remedy has been applied in two cases, the EC official noted.
In Europe, a 'fix it first' is when the EC signs off on a deal with an approved divestment buyer already in place. In an 'upfront buyer' solution, the EC gives a conditional greenlight but parties cannot complete their deal until they find a buyer which is then approved by the authority.
Recent cases in which a 'fix it first' remedy was used in Europe were GE/Alstom and BASE/Liberty. While in GE/Alstom the buyer was named with the decision and technically approved later on, BASE/Liberty stood out as the first occasion in years in which the EC’s clearance decision named the approved buyer of divestments.
"We are looking carefully at the remedy implementation in BASE to see whether to use this type of commitment more often,” Piergiovanni said.
Terminology - but not substance - varies on the two sides of the Atlantic. A 'fix it first' remedy would be named 'upfront buyer' in the US, noted Terrell McSweeny, commissioner at the US Federal Trade Commission (FTC), also speaking on the panel. Upfront buyer remedies - divestments with an identified buyer - are extremely common in deals reviewed by the US authority, the official said.
The preliminary findings of an ongoing FTC study on past merger remedies show that the choice of the buyer really matters to ensure the remedy is successful, the US official said.
The report, which follows a previous similar exercise carried out in 1999, should be ready by the end of this year, McSweeny said.
The EC has not performed such an exercise so far, Piergiovanni said. But it has published an ex post assessment of two telecoms merger cases, T-Mobile/tele.ring and T-Mobile/Orange in the Netherlands.
As for more recent "four to three" mobile telecoms cases in Austria (2012), Germany and Ireland (both 2014) - it is still early to see how the remedies played out, Piergiovanni said, adding he did not think that what happened in previous cases had any impact on more recent EC decisions.
Earlier this month, the EC blocked Hutchison's proposed takeover of O2 in the UK and was ready to prohibit Telenor and Teliasonera's tie-up in Denmark last year, before the companies abandoned the deal.
Cooperation between the EU and US agencies goes as far as the remedy stage, the two agency representatives said. Agencies have cooperated in detail on remedy design and approval of the purchaser, Piergiovanni said. This includes holding joint calls and meetings with the potential buyer, he added.
This is what happened, for example, in NXP/Freescale, where the FTC and EC synchronised not only in timing but also on remedies, with common interviews with the potential purchaser. The result was that one global divestiture was agreed, and at the end the Chinese authority MOFCOM was also on the same page, they said.
Both officials were speaking in a personal capacity.