EU moves to cut red tape for merging businesses
Business red tape - Photo by Romain Dancre on Unsplash
(BRUSSELS) - The European Commission adopted a package Thursday with the main aim of simplifying, streamlining and speeding up both the EU's simplified and normal merger review procedure.
The package includes: (i) a revised Merger Implementing Regulation ('Implementing Regulation'), (ii) a Notice on Simplified Procedure ('Notice'), and (iii) a Communication on the transmission of documents ('Communication').
The new package is expected to bring significant benefits for businesses and advisers in terms of preparatory work and related costs. It aims to simplify and expand the scope of the Commission's review process of unproblematic mergers ('simplified cases'). It also seeks to reduce the amount of information required for notifying transactions in all cases and to optimise the transmission of documents.
"The new rules also make the notification process significantly easier for the parties to the benefit not only of companies and advisors but also of the Commission, which will be able to focus its resources on the most complex cases," said EC vice-president Margrethe Vestager.
The new rules will be applicable as of 1 September 2023.
Main changes of the 2023 merger simplification package
The main changes to the previous rules seek to simplify and streamline both the simplified and normal merger review procedure. In particular, the new rules:
- Expand and/or clarify which cases can be treated under the simplified procedure. The Notice identifies two new categories of cases that can benefit from simplified treatment. These are cases where under all plausible market
definitions:
- The individual or combined upstream market share of the merging parties is below 30% and their combined purchasing share is below 30%; and
- The individual or combined upstream and downstream market shares of the merging parties are below 50%, the market concentration index ('HHI delta') is below 150, and the company with the smallest market share is the same in the upstream and downstream markets.
The Notice also grants the Commission discretion to treat certain cases under the simplified procedure even if they do not fall under any of the default categories for such treatment. In particular, the Notice includes the following flexibility clauses:
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- For horizontal overlaps where the combined market shares of the merging parties are 20-25%;
- For vertical relationships where the individual or combined upstream and downstream market shares of the merging parties are 30-35%;
- For vertical relationships where the individual or combined market shares of the merging parties do not exceed 50% in one market and 10% in the other vertically related market; and
- For joint ventures with turnover and assets between €100 million and €150 million in the European Economic Area ('EEA').
The Notice also provides a clearer and more detailed list of circumstances in which the Commission may investigate a case that technically qualifies for simplified treatment under the normal review procedure.
- Streamline the review of simplified cases. The Implementing Regulation introduces a new notification form ('tick-the-box' Short Form CO) for simplified cases. This form includes primarily multiple-choice questions and tables, and streamlined questions on both the jurisdictional and substantive assessment of cases. The Notice also identifies categories of cases that can benefit from a 'super-simplified' treatment, whereby parties are invited to notify directly without prior engagement with the Commission.
- Streamline the review of non-simplified cases. The Implementing Regulation reduces and clarifies the information requirements in the notification form for these cases (Form CO). This now includes clearer information on waiver possibilities, introduces tables for information on affected markets, and eliminates certain information requirements.
- Optimise the transmission of documents to the Commission with the new Communication, which introduces electronic notifications by default.
All of these changes are also expected to simplify pre-notification contacts overall, further reducing the time needed for these discussions. Additional detailed information on the main changes can be found in an explanatory note that accompanies the revised rules, and in the Q & A document.