The European Commission recently reaffirmed that industrial policy objectives have no role to play when it comes to applying the EU merger control rules. Despite unusually intense industrial and political pressure to get the Siemens/Alstom railway merger done, Competition Commissioner Vestager has forcefully reiterated that the substantive test under the EU Merger Regulation remains exclusively competition based.
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 the positive feedback it received during the consultation it organised following the publication of the White Paper, the Commission launched another public consultation in October 2016 on the “Evaluation of procedural and jurisdictional aspects of EU merger control”, through which it is seeking feedback from stakeholders on the effectiveness of certain additional procedural and jurisdictional aspects of EU merger control. Stakeholders have until 13 January 2017 to respond.
On 27 November, the Italian Competition Authority dawn raided a major South African company for alleged excessive pricing of its oncology products in Italy. According to a complaint by one of the most active consumer associations in Italy, the group would have required the Italian Medicines Agency (AIFA) to align the price of its products, which are covered by the National Health Service (NHS), with the higher prices applied in other European countries, threatening the withdrawal of the products from the Italian market.
This new investigation is just the latest of many dawn raids that have taken place in Italy throughout 2014 relating to alleged bid rigging and other antitrust and criminal law infringements by pharmaceutical companies, including their participation in public tenders for the supply of products to the NHS. The significant number of dawn raids this year shows increased antitrust and criminal law enforcement in Italy in the pharmaceutical sector.
Two good examples of this trend are the €182.5 million in fines imposed in February 2014 on two major international groups for alleged collusive conduct concerning the sale of drugs for treating eye illnesses, and the investigation started by the Authority in January 2014 into alleged infringements in the sale of octreotide acetate in Italy. In the first case, the NHS would have suffered an overall cost increase of over €45 million in 2012 and likely damages of approximately €540 million in 2013 and €615 million in 2014. The second case relates, as do many of the investigations started this year, to alleged collusive conduct in public tenders for the supply of products to the NHS.
As soon as a proceeding is started in one Member State, international groups should brace themselves for potential complaints and investigations in all other countries where they have a presence or do business. As a recent example, the February 2014 fines were followed in April 2014 by unannounced inspections by the French Competition Authority at the premises of the same two pharmaceutical groups. In May 2014, former EU Competition Commissioner Joaquín Almunia reportedly indicated that the European Commission was gathering more information on the conduct of the two companies and was in contact with the national competition authorities of several EU Member States to assess whether or not further action would be needed. On 25 November 2014, a Belgian consumer association filed a complaint before the Belgian Competition Authority against the two pharmaceutical companies concerning the same alleged conduct.
Closer Cooperation Between the Commission and National Competition Authorities
Since the entry into force of Regulation No 1/2003 and the European Commission Notice on Cooperation within the Network of Competition Authorities of 27 April 2004, the Commission and the national competition authorities within the European Economic Area can cooperate more easily and more closely. They can now
- Inform each other about pending cases, even during informal proceedings
- Exchange and use information, including documents, statements and digital information, collected by other national competition authorities
- At the latest, 30 days before the adoption of a decision applying Articles 101 or 102 of the Treaty on the Functioning of the European Union, send the Commission and national authorities a summary of the case, including the envisaged decision or any other documents indicating the proposed course of action.
Very often, when companies are active in several EU Member States, such cooperation results in multiple proceedings before two or more national competition authorities acting in parallel.
International pharmaceutical groups are well advised to take this trend of increased enforcement into account. They should set up bespoke antitrust audit and compliance programs, tailored for participation in public tenders, taking into account the particular features of all the jurisdictions where they have premises or do business. In doing so, they should build efficient global coordination structure across their various local teams and offices, under a single antitrust compliance strategy.
On 8 October 2013, the European Commission issued updated guidance for companies making oral statements in leniency applications. The Commission requests that the oral statement is clear, factual and to the point and is only accepted during working hours.
The European Union’s (EU) national competition authorities (NCA) and the European Commission have agreed upon best practices on cooperation in cross-border mergers. The best practices’ stated aim is to enhance cooperation in merger cases where the European Commission Merger Regulation does not apply and the merger needs to be notified in more than one EU Member State.The best practices follow a public consultation on draft best practices started earlier this year.
The best practices do not make cooperation between NCAs compulsory. The merging parties will not be able to insist that NCAs should cooperate in a multi-jurisdictional filing. Rather, NCAs will apply them in cases where they think cooperation could be beneficial for the NCAs, the merging parties and third parties, in particular where the merger raises similar comparable jurisdictional or substantive questions and concerns similar or the same product markets.
The best practices discuss a number of areas and instruments for facilitating a multi-jurisdictional merger review process, such as:
- Exchange of certain basic non-confidential information
- Aligning timelines in the review process and with regard to remedies
- Regular contacts and updates between NCAs with regard to timing and with regard to decisions to open in-depth investigations
- Dicussions of substantive analysis such as market definitions or possible anti-competitive effects of the merger
Merging parties are encouraged to contact each NCA where the merger will be filed and provide them with basic information, such as the jurisdiction where the merger will be filed, the date of the proposed filing and the sectors involved, to facilitate cooperation among the agencies. Also, the best practices support joint pre-notification contacts where useful. The best practices further highlight, that it will be for the merging parties to coordinate the timing and also the substance of possible remedies, e.g. where a remedy accepted in one Member State has an impact on the effectiveness of the remedy in another Member State.
Most important, the best practices clearly point out that it is fully within the merging parties’ respectively third parties’ discretion to provide waivers to the NCAs to exchange confidential information, that such information will be protected under national law in all Member States and that it will not be used for any purpose other than the review of the relevant merger. To this end a model waiver form can be found in the annex to the best practises. However, it should be noted that the best practice paper states that once a waiver has been provided, the parties will not be informed about the actual scope and timing of the exchange of the confidential information.
The best practices and its annex can be accessed here.
by Philipp Werner and Christoph Voelk
The European Commission started a public consultation on a draft document which seeks to establish best practices on cooperation between national competition authorities (NCAs) in the EU when reviewing mergers. Although cooperation between NCAs exists already, especially through the European Competition Network (ECN), the best practices seek to formalize the cooperation between NCAs and thus providing more security and predictability for the parties and their legal advisers.
The best practices should enhance cooperation between NCAs in cases where the same merger is assessed by several NCAs because it does not meet the thresholds for review under the EU Merger Regulation. The Commission considers cooperation between NCAs as beneficial not only for the authorities but also for the merging parties: it will speed up the investigation process, reduce burdens on the merging parties and may help NCAs in designing remedies. Particularly in cases where serious concerns about the post merger situation exist, close cooperation between competition authorities will secure a non-conflicting and coherent outcome.
The object of the Commission’s draft is twofold:
First, NCAs should keep each other informed of important developments related to their investigation into the merger. Also, NCAs should liaise in cases where closer cooperation is necessary and keep each other informed about their progress. Most importantly, the Commission proposes that NCAs should in future discuss market definition, theories of harm, empirical evidence and the possible impact of a proposed merger.
Second, the draft also assigns a role to the merging parties. Merging parties should, as far as possible, provide NCAs with information as to where the merger will be filed, the dates of the proposed filing, geographic areas, sectors involved etc. Also, merging parties should assist in ensuring that remedies do not lead to inconsistencies and that such remedies are effective. Of importance is further the proposal that the merging parties, but also third parties, shall – as far as possible – grant waivers of confidentiality so that NCAs actually are permitted to discuss particular issues of a proposed transaction.
Comments on the Commission’s draft can be submitted until 27 May 2011 to email@example.com.
The consultation page can be accessed via http://ec.europa.eu/competition/consultations/2011_merger_best_practices/index_en.html