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THE LATEST: Behavioral Remedy Satisfies European Commission in Rolls-Royce’s €720M Agreement to Purchase the Rest of ITP

WHAT HAPPENED: Rolls-Royce and SENER have a 47 percent/53 percent joint-venture in Industrial de Turbo Propulsores (ITP)–an aircraft engine components manufacturer. Rolls-Royce announced it would buyout its partner’s 53 percent interest in ITP on July 11, 2016.  Rolls-Royce supplies the engine for Lockheed Martin’s C-130J (turboprop military transport aircraft). Rolls-Royce, together with ITP, MTU and Safran, are members of a military engine consortium–Europrop International (EPI)–that supplies the engine to the Airbus’ A400M, the primary competitor to the Lockheed Martin C-130J. The European Commission (EC) had concerns that Rolls-Royce’s full ownership of ITP would increase its influence in EPI such that Rolls-Royce could undercut the competitiveness of the EPI engine, and consequently subvert Airbus’ competitiveness vis-à-vis Lockheed Martin. The EC and Rolls-Royce agreed to a behavioral remedy focused on EPI’s governance rules that would eliminate the...

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Rolls-Royce Proposed Acquisition of Spanish Rival Industria de Turbo Propulsores. The European Commission Invites Interested Third Parties to Submit Comments

On 4 March 2017, the European Commission (Commission) published a notice concerning the notification of the proposed acquisition of the Spanish aircraft company Industria de Turbo Propulsores SA (Spain, ITP), by Rolls-Royce Holdings plc. (UK, Rolls-Royce). Interested third parties, such as competitors, suppliers or customers can provide the Commission with their observations on the likely impact of the proposed transaction on competition in order to facilitate its substantive assessment. Interested third parties’ observations must reach the Commission no later than 14 March 2017. Rolls-Royce is active in the development and manufacture of aircraft engines and power systems for civil aerospace, defense aerospace, marine and energy applications. ITP is a joint venture between Rolls-Royce and Sener Grupo de Ingenieria SA, and it is active in the design and manufacture of aircraft engine components.

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Antitrust M&A Snapshot: October – December 2016 Update

McDermott’s Antitrust M&A Snapshot is a resource for in-house counsel and others who deal with antitrust M&A issues but are not faced with these issues on a daily basis. In each quarterly issue, we will provide concise summaries of Federal Trade Commission (FTC), Department of Justice (DOJ) and European Commission (EC) news and events related to M&A, including significant ongoing investigations, trials and consent orders, as well as analysis on the trends we see developing in the antitrust review process. Read the full report here.  

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Overview of the Proposed Reforms of the EU Merger Control Regime

In October 2016, the European Commission launched a public consultation to continue the process of identifying possible areas of the EU Merger Regulation suitable for refinement, improvement and simplification. In the past couple of years, the European Commission has decided to review and evaluate the functioning of different aspects of the EU merger control regime regulated by EU Regulation No. 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EU Merger Regulation), its implementing regulation and related notices and guidelines. The process started in 2014 when the Commission adopted a White Paper titled “Towards More Effective EU Merger Control” (the White Paper), which presented the Commission’s view that EU merger control worked well and that no fundamental overhaul of the system was needed. The Commission did, however, identify specific amendments to the EU Merger Regulation to make it more effective. In the wake of...

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Antitrust M&A Snapshot: July – September 2016 Update

UNITED STATES: Continuing an active first half of 2016, the Federal Trade Commission (FTC) and US Department of Justice (DOJ) have challenged several large mergers and acquisitions. In fact, trials for the two national health insurer deals are slated to begin Q4 of 2016 in Washington, DC, where the agencies have had success in obtaining preliminary injunctions this year. Adding to the regulators’ successes in Q3 was a victory for the FTC on appeal in the Penn State Hershey Medical Center/PinnacleHealth System transaction, in which the Third Circuit overturned the district court’s formulation of the geographic market. Indeed, with another appeal in a hospital merger outstanding in the Seventh Circuit, Health Care M&A is an active sector to monitor. In addition to the agencies’ operations, the upcoming US presidential election has also propelled antitrust policy into a national discussion. For the first time in a few decades, antitrust has appeared on the...

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Listed Companies: Dealing with Reporting Obligations in the Context of Antitrust Proceedings

Financial regulatory authorities such as the US Security and Exchange Commission (SEC) and the French Autorité des marchés financiers frequently impose on companies that are listed on a stock exchange the obligation to disclose key information to investors to help them make informed investment decisions. The difficulties for companies lie principally in the nature of the information to be disclosed, the timing of the disclosure, and the balance of the obligation towards financial regulatory authorities on one hand, and competition authorities on the other. Read the full article here.

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US and EU Requirements for Pre-Merger Notification of an Acquisition of a Minority Shareholding Interest

In May, the Federal Trade Commission (FTC) required Hikma Pharmaceuticals PLC to divest its 23 percent interest in Unimark Remedies, Ltd. and its US marketing rights to a generic drug under manufacture by Unimark as a condition to allowing Hikma to complete its acquisition of Roxane Laboratories. The FTC was concerned that Hikma’s continued holding of a 23 percent interest in Unimark after consummation of its proposed acquisition of Roxane would create the incentive and ability for Hikma to eliminate future competition between Roxane and Hikma/Unimark in the sale of generic flecainide tablets (a drug used to treat abnormally fast heart rhythms) in the United States. The FTC’s divestiture requirement was unusual but not unprecedented. The Horizontal Merger Guidelines identify three theories of competitive harm associated with an acquisition or holding of a small but significant minority interest in a competitor. Minority ownership, and any associated rights,...

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The Concept of Full-Function Joint Venture in the EU

In the European Union (EU), at the inception of a joint venture (JV), parent companies must determine whether the newly created structure presents a full-functionality nature, which depends on its degree of autonomy. The answer to this question will determine the legal framework applicable to it. On the one hand, if the JV is full-function it will fall within the scope of the EU Merger Regulation (Council Regulation (EC) No 139/2004 of 20 January 2004), assuming that the turnover thresholds set out in the Regulation are met. Under these circumstances, the European Commission (EC) will assess the impact of the JV on competition on an ex ante basis. On the other hand, if the JV is not full-function and takes the form of a partnership formalized by a legal structure to a large extent dependent on its parent companies, the creation of a JV will not have to be notified but the EC may operate a control ex post, in the light of Article 101(1) of the Treaty on the...

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The European Commission Fines Truck Manufacturers a Record €2.93 billion for Cartel Conduct

On 19 July 2016, the European Commission (Commission) imposed fines totaling €2,926,499,000 on four truck producers (39824 – Trucks). The fine is the highest ever imposed on members of a cartel by the EU competition regulator. The case is also noteworthy because it is the first Commission prohibition decision following “Brexit” and could thus become a test case to see whether the UK remains a jurisdiction of choice for follow-on damages actions. The Trucks Cartel    The Commission found that MAN, Volvo/Renault, Daimler, DAF and others infringed Article 101 of the Treaty on the Functioning of the European Union by colluding for 14 years in the market for the manufacturing of medium (weighing between 6 to 16 tons) and heavy trucks (weighing over 16 tons). The infringement covered the entire EEA and lasted from 1997 until January 2011. The infringement consisted of the coordination of factory prices of trucks; the coordination of pricing for new emissions...

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McDermott’s Antitrust M&A Snapshot Published on July 17, 2016

McDermott’s Antitrust M&A Snapshot is a resource for in-house counsel and others who deal with antitrust M&A issues but are not faced with these issues on a daily basis. In each quarterly issue, we will provide concise summaries of Federal Trade Commission (FTC), Department of Justice (DOJ) and European Commission (EC) news and events related to M&A, including significant ongoing investigations, trials and consent orders, as well as analysis on the trends we see developing in the antitrust review process. United States: January – June Update The Federal Trade Commission (FTC) and US Department of Justice (DOJ) have been actively challenging mergers and acquisitions in the first half of 2016. In some instances, the parties abandoned their deal once the FTC or DOJ issued a complaint, in others, the parties entered into consent agreements with the agencies. In matters where a divestiture is an acceptable remedy, the FTC and DOJ have required robust...

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