On January 1, 2014, newly adopted revisions to the EU Merger Regulation went into effect. The Merger Regulation applies EU competition (antitrust) law to mergers and related transactions. The stated purpose of the revisions, which were announced in Brussels on December 5, 2013, was to make rules and procedures less burdensome for business. In reality, however, the revisions are a mixed blessing.

On the plus side, the European Commission (Commission) has expanded the scope of the simplified merger procedure whereby companies can notify the Commission of non-problematic mergers that the Commission may clear without a market investigation. A simplified notification form, asking for considerably less information than is called for in the standard form (Form CO), will now be available for a broader universe of transactions. That is accomplished by raising market share thresholds (from 15 percent to 20 percent for horizontal mergers and from 25 percent to 30 percent for vertical mergers) that are eligible for the more streamlined procedure. In addition, the simplified form (Short Form CO) may be used for transactions satisfying both prongs of a new two-part test:

  • The combined market share of the merging companies is between 20 percent and 50 percent.
  • The increase in concentration measured by the Herfindahl-Hirschman Index (the same test used by U.S. antitrust regulators, which calculates market concentration by adding up the squares of the market shares of each firm competing in the relevant market) is less than 150 points.

The Commission expects these revisions to allow up to 60 to 70 percent of notified transactions to benefit from the streamlined procedure, an increase of approximately 10 percent in filings using the simplified form.

In addition, the scope of the simplified procedure was expanded for joint ventures. Now, joint ventures will not be prevented from using the simplified procedure because of overlaps in activities between the parent companies.

On the minus side, revisions to Section 5(4) of Form CO seem to introduce additional burden and delay for transactions that raise potential significant competition concerns and that are therefore ineligible for the simplified procedure. Here are some of the more significant changes:

  • There will be an increase in the volume of internal documents required to be submitted by the inclusion of documents generated over the prior two years that relate to the markets affected by the transaction, even if they were not prepared in connection with the proposed transaction but were generated in the ordinary course of business.
  • Excerpts from the minutes of meetings at which the transaction was discussed must be submitted.
  • Even in the Short Form CO, parties using the simplified procedure (other than joint ventures active entirely outside the European Economic Area) are subject to a new requirement of submission of copies of all presentations analyzing the transaction that were prepared by or for or received by the board of management, board of directors, supervisory board, or shareholders meeting.
  • In addition to the pre-existing requirement of providing information identifying the relevant product and geographic markets, the revised forms now require parties to identify, and provide information in relation to, “all plausible alternative” market definitions.

In sum, while the Commission’s “Simplification Package” contains some useful streamlining, it is uncertain, on the whole, whether the claimed reduction of burden on business will materialize.

Ballard Spahr’s Mergers and Acquisitions/Private Equity Group advises clients on a host of transactional, antitrust, and regulatory issues. For further information on the subject matter of this bulletin, please contact Keith R. Fisher at 202.661.2284 or fisherk@ballardspahr.com.

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Mergers and Acquisitions/Private Equity