On 27 March 2013, the European Commission opened a consultation on proposed revisions to its Notice on Simplified Procedure and Merger Implementing Regulation. The proposed amendments are intended to increase the number of transactions that can benefit from the so-called "simplified procedure" whereby parties can notify a transaction using a simplified form (the Short Form) rather than the full form used for standard notifications (Form CO). They also aim to reduce the amount of information requested in each of the EU notification and referral forms (Form CO, Short Form and Form RS).
The draft revisions to the Notice on Simplified Procedure would, most importantly, increase the market share ceilings below which transactions can benefit from the simplified procedure. Under the current rules, a transaction falls qualifies for a simplified notification and review if the parties' combined share is less than 15% on each market where there is an overlap, and their share is below 25% on each market that is upstream or downstream of a market where the other party is active. Under the proposed revisions, these thresholds will be increased to 20% and 30%, respectively. In addition, under the current proposal the Commission may also apply the simplified procedure to horizontal mergers where, "under all the plausible alternative market definitions", the parties have a combined share below 50% and the increase in market concentration, measured by the Herfindahl-Hirschman Index, is below 150. The Commission estimates that these changes will result in approximately 10% more mergers benefiting from the simplified procedure.
However, the proposed amendments also introduce an additional example of cases where the Commission may revert to a full-scale review, even though the transaction falls under the conditions to benefit from a simplified review as set out in the Notice. More specifically, the Commission notes that a full assessment may be appropriate in certain joint venture cases where EEA turnover falls below the relevant thresholds set out in the Notice and which would thus normally benefit from a simplified review. For example, this would be the case where that turnover is likely to increase, or where a foreign joint venture's products or services are important inputs into products or services themselves widely sold in the EEA.
The Commission has also sought to cut red tape and reduce the workload for notifying parties by simplifying the merger filing forms (Form CO and Short Form) and the form used by parties to request a referral of the case from the Member State level to the Commission, or vice versa (Form RS).
In Form CO, for example, the Commission is seeking to eliminate requests for information on cross-directorships and Herfindahl-Hirschman Index calculations. The Commission is also proposing to eliminate or make less onerous other sub-questions, which are generally less important to the Commission's review, such as the more detailed questions on imports from outside the EEA territory and quantitative data on the parties' largest independent customers.
However, certain other changes to Form CO proposed by the Commission may in fact increase the burden on filing parties in important respects. For instance, the proposed changes would require the submission with the notification of all board documents of the last three years that assess any of the markets affected by the deal, regardless of whether they relate in any way to the deal, whereas the current Form CO only requires such documents if they are prepared "for the purpose of assessing or analyzing the concentration". The changes also specifically request documents such as minutes of board meetings at which the transaction was discussed and presentations "analysing different options for acquisitions". In addition, the changes would require that notifying parties provide market share data not only for what they consider the relevant markets to be, but for "all plausible alternative product and geographic market definitions (in particular but not limited to alternative product and geographic market definitions that were considered in previous Commission decisions)".
Given the broad language proposed, these particular changes, if implemented and enforced, could substantially increase the burden on notifying parties. Similarly burdensome changes are proposed to the Short Form (used to notify transactions that fall under the simplified procedure) and the Form RS (used to request referral of a case from the EU Member State level to the European Commission, or vice versa).
Overall, the proposed changes are certainly a step in the right direction. However, the effectiveness of the proposed changes in streamlining the EU merger control process will depend in large part on how the Commission will apply the proposed amendments in practice. For instance, how much data the parties will have to provide will depend on how the Commission applies the requirement under the current proposal that "all plausible" alternative product and geographic market definitions have to be discussed, and relevant data must be provided for these plausible alternative markets, in the Form.
Moreover, the proposals do not address other means by which the EU merger control process could be simplified that would depend not on redrafting the forms and regulations but on modifying the Commission's internal practices. For instance, a common concern expressed by notifying parties is that the Form RS referral process takes too long. The referral process could be expedited if the Commission were willing to do away with its current practice of requesting drafts of Form RS before the final Form RS is submitted. While it makes sense for the Commission to insist on receiving drafts of Form CO, Form RS is intended to enable a decision to be made on jurisdiction, not on substance, making it less obvious why it should be necessary for the Commission to review drafts of Form RS, especially given the delays this can cause in some cases.
Interested parties can obtain the proposed amended documents at http://ec.europa.eu/competition/consultations/2013_merger_regulation/index_en.html and are invited to provide comments until 19 June 2013. The Commission hopes to finalize the amendments before the August holiday period and to implement them by the end of the year.
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