EU: Merger Control

EU Merger Control in 2015/6: a year of complex deals?¹

The explosion in M&A activity, which started in 2014, continued well into 2015/6. The Competition Commissioner Margrethe Vestager and DG Competition had to deal with a higher number of notifications of increased complexity.

The aggregate announced transaction value in 2015 proved to be a record-breaking US$5 trillion, or around 10 per cent more than the pre-crisis peak of 2007.² 2015 also saw 10 ‘megadeals’ each valued at over US$50 billion. Unsurprisingly, such an M&A frenzy kept Commissioner Vestager and the Directorate General for Competition (DG COMP) busy throughout the year. The number of cases notified to the European Commission in 2015 was up by around 20 per cent compared with 2013.³ Although this is below the 2006–2008 peak, transactions in 2015/6 were generally larger and more complex. With respect to industries, consolidation in the telecoms and pharmaceutical industries remained in the spotlight throughout 2015 and early 2016, as those two sectors accounted for around a third of the overall announced deal value.

The Commission opened 15 Phase II investigations in 2015/6, more than in any of Joaquín Almunia’s years as Competition Commissioner.⁴ The proportion of conditional clearance decisions in both Phase I and II investigations increased only moderately in 2015 if compared with 2014.⁵ However, 2016 also saw the first prohibition decision under Commissioner Vestager. On 11 May 2016, the Commission issued a prohibition decision in Hutchison 3G UK/Telefónica UK,⁶ the first prohibition decision in almost three years.⁷ The rate of actual prohibitions is higher when one factors in cases that were abandoned without a formal decision being adopted. In this respect, it is understood that antitrust concerns led to the abandonment of at least three high-profile cases – TeliaSonera/Telenor/JV, Mondi/Walki Group and Halliburton/Baker Hughes. The intervention rate is, therefore, higher in essence.

Apart from prohibitions, 2015/16 saw a large number of complex transactions in concentrated industries raising substantial antitrust concerns that required in-depth reviews and remedial action. Such deals inevitably entail close regulatory scrutiny, resulting in a lengthy process and substantial remedies.

A high number of Phase II proceedings, one prohibition and three abandoned cases in slightly over a year inevitably raise questions as to whether Commission Vestager has raised the intervention rate, adopting a tough antitrust enforcement stance. As noted above, the statistics of intervention generally do not suggest abnormal levels of scrutiny when compared with her predecessors. It is still early days in the Vestager mandate though and it remains to be seen whether this arguably more zealous approach in 2015/6 will be an overall feature of Vestager’s term.

Enforcement was not the only item on the agenda in 2015/6. Recently Vestager has reiterated her resolution to explore possible changes to the EU Merger Regulation (EUMR),⁸ something that has not been done since 2004. A previous proposal on expanding the EUMR to cover non-controlling minority stakes appears to be shelved for the moment.⁹In welcome news for the business community, the Commissioner and her team of experts will examine further how notification requirements can perhaps be lifted for unproblematic transactions. On the other hand, the Commission will also look into possible amendments to the EUMR thresholds to catch transactions that currently fall below the turnover thresholds but that may raise concerns. This is likely to be applicable in sectors where innovation plays a great role, such as tech and pharmaceuticals.¹⁰ The Commissioner has suggested that the review of the EUMR would likely be a long-term project, as the Commission is still very much at an internal reflection stage.

In the remainder of this contribution we review in more detail important developments in certain sectors, and also look at some novel aspects in the Commission’s most recent case law related to innovation, efficiency defence and remedies.

Telecoms

The telecoms sector has certainly been in the spotlight in recent years, with the industry trying to consolidate in the face of opposition by regulators, most notably DG Competition.

In the past few years, the Commission dealt with a large number of cases and scrutinised all them very carefully under lengthy Phase II investigations. It eventually cleared – with substantial remedies – Hutchison 3G Austria/Orange Austria,¹¹ Hutchison 3G UK/Telefónica Ireland,¹² Telefónica Deutschland/E-Plus,¹³ and Orange/Jazztel.¹⁴ In 2015/6 alone, the Commission opted to investigate in depth TeliaSonera/Telenor/JV,¹⁵ Global Liberty/BASE,¹⁶ Hutchison 3G UK/Telefónica UK¹⁷ and Hutchison 3G Italy/Wind/JV.¹⁸

A holistic overview of these cases suggests that the Commission has looked very closely at any transaction that involved a reduction in the number of network owners. While the vast majority of those cases involved a reduction in mobile network operators (MNOs) from four to three (‘four-to-three’ transactions), the Commission also scrutinised transactions involving loss of competition in fixed broadband and virtual networks.¹⁹

All telecoms mergers prior to 2015 were cleared with remedies. However, in 2015/6 the Commission arguably took a harder line with respect to less structural remedies in the sector, which resulted in the abandonment of TeliaSonera/Telenor/JV and the first ever prohibition of a mobile telecoms merger – Hutchison 3G UK/Telefónica UK.²⁰

TeliaSonera/Telenor/JV

The TeliaSonera/Telenor/JV transaction would have reduced the number of MNOs from four to three and would have created a market leader in Denmark by combining TeliaSonera’s and Telenor’s domestic activities.²¹ The parties cited their inability to arrive at a satisfactory remedy package as the main reason for withdrawing the case and hinted that the Commission was bound to prohibit the transaction.²² This was also confirmed by Commissioner Vestager, as the parties’ pull-out came less than a month from the Commission’s formal decision deadline, after which the Commission is generally considered to have finished its investigation.

Commissioner Vestager in one of her speeches²³ indicated that the Parties proposed to divest ‘a limited ownership stake in their shared mobile network to a new entrant with a right to use a corresponding share of the network capacity’. The divestment package also included the ‘companies’ secondary brands with a very limited market share and additional options, such as the take-over of some shops’. The Commission considered that such remedies were insufficient to recreate a fourth MNO in Denmark.

The details of the Commission’s reasoning in TeliaSonera/Telenor/JV may never become public. However, the case certainly marked a deviation from the position adopted in previous mobile telecoms mergers. The Commission cleared previous ‘four-to-three’ MNO transactions²⁴ where remedies allowed the entry of a mobile virtual network operator (MVNO). Remedy packages in those cases also contained a (remote) possibility for a fourth MNO to emerge but the Commission has never before conditioned its decisions on more structural remedies which would ensure the recreation of a fourth MNO.

Commissioner Vestager acknowledged that there is no ‘magic number’ of how many MNOs there should be in a specific national market. However, she was also clear that ‘the more structural the remedy, the better’.²⁵ The desire for structural remedies inescapably suggests a restoration of status quo in numbers of MNOs.

Finally, based on the statements of the Commissioner, it is unlikely that certain (efficiency) arguments, such as increased investment post-transaction, would resonate with the regulator.²⁶

Hutchison 3G UK/Telefónica UK²⁷

On 11 May 2016, the Commission prohibited the Hutchison 3G UK/Telefónica UK proposed merger. Telefónica UK is the number two player and Hutchison’s subsidiary Three is the number four player in the UK. The transaction would have created the largest MNO in the UK with more than 40 per cent combined market share. The Commission was concerned that the transaction would have led to a number of competition concerns, including higher prices and reduced choice for consumers, hampered development of the UK mobile network infrastructure and impaired negotiating position of UK MVNOs. In particular, the Commission was concerned that:

•  A reduced number of MNOs would have led to higher prices, reduced choice and quality. In its press release the Commission indicated that the transaction would have reduced the combined entity’s incentive to compete with the remaining players, Vodafone and Everything Everywhere (EE) which would have led to reduced choice and quality of service for UK consumers. The transaction, if completed, would also have led to higher retail prices.
•  The development of the UK’s mobile infrastructure may have been impaired. The transaction would have placed Hutchison in a unique position where it would have access to both the network sharing agreements each party currently has with its competitors, namely – Beacon (between Telefónica UK and Vodafone) and MBNL (between Three and EE). In the eyes of the Commission that would have hampered the future development of mobile infrastructure, including any future technologies (such as 5G).
• Finally, a reduced number of MNOs would have left MVNOs in a weaker bargaining position to obtain favourable wholesale access terms.

The proposed, largely behavioural, remedies were deemed by the Commission to be insufficient to address the ‘structural problems created by the disruption to the current network sharing agreements in the UK’.

In particular, to address the first concern, Hutchison offered to: give access to a share of the merged entity’s network capacity to one or more MVNO(s); divest Telefónica’s stake in Tesco Mobile and offer a purchaser a wholesale agreement for a share of its network capacity to Tesco Mobile; and offer Virgin Media a wholesale agreement for a share of its network. Parties also offered behavioural remedies to address the remaining two Commission concerns.

In the Commission’s view, such remedies were not capable of restoring weakened competition in the retail and wholesale markets. Finally, the Commission was also concerned that behavioural remedies were difficult to implement and monitor.

Hutchison has indicated that it may appeal the decision.²⁸

Reasons for caution?

There may be a few reasons for the arguably more vigilant approach by the Commission in the most recent telecoms cases.

First, complex and less structural remedies such as access remedies are generally considered by the Commission to involve significant implementation risks and difficulties in monitoring. The recent appeal by Telecom 1&1 in relation to the Commission’s implementation decision of a non-MNO remedy in Telefónica Deutschland/E-Plus is a clear reminder of how difficult and uncertain in practice such implementation may be.²⁹ The appeal challenges a letter of the Commission that allegedly rejected the applicant’s contention that the actual offer for MVNOs deviated from the final commitments approved in that case.

Second, the Commission’s approach to its analytical framework and remedies accepted in its Telefónica Deutschland/E-Plus decision are under appeal in the General Court by Airdata and Telecom 1&1.³⁰ While it is difficult to predict the outcome of those appeals, their mere existence puts all Commission services on high alert when adopting new decisions in this sector.

Third, in its wider push for ex-post evaluation, the Commission has published a study on T-Mobile/tele.ring³¹ and T-Mobile/Orange Netherlands³² transactions.³³ The study concludes that the prices in Austria post T-Mobile/tele.ring decreased at the same pace as in control countries. In the Netherlands post T-Mobile/Orange transaction prices did not fall to the levels of control countries, which suggests the merger had an effect. A few other studies were conducted analysing the issue of pricing in Austria. Two studies by Austrian regulators indicated that prices did increase after the transaction but eventually went down after a new player entered the market in 2015. Furthermore, the Commission is not the only EU authority looking into possible price implications of the ongoing M&A surge. The Body of European Regulators for Electronic Communications (BEREC) has recently published a call to collect various data sets, including pricing, in countries where telecom operators have recently merged. The data should feed into a wider study commissioned by BEREC, which may result in policy action.

Those ex-post evaluation efforts by regulators may be contrasted with evidence presented in third-party reports that show that prices per unit have decreased in countries affected by consolidation.³⁴ Without going further into the details of each individual study, one can say that econometric studies of this kind may yield different results owing to the different assumptions and data sets they use. While the Commission’s merger reviews are inherently forward looking, the existence of such ex-post scrutiny inevitably adds pressure on the ongoing Commission merger control reviews, and serves as another reason to exercise caution.

Loss of a MVNO

Remedies may be somewhat easier to tailor if loss of a MVNO is involved and the Commission may accept a combination of structural and behavioural remedies. In Liberty Global/Base Belgium, the Commission concluded that both Base and Telenet’s MVNOs³⁵competed aggressively in Belgium on price and that a loss of Telenet’s MVNO raised concerns. The remedy aimed to recreate a viable MVNO by selling Base’s share in Mobile Vikings (a pre-paid provider) and transferring Base’s customers under the JIM Mobile brand to Medialaan. The parties also committed to sign an access agreement with Medialaan which would ensure that it continued to operate as a viable MVNO.

Looking forward

On 30 March 2016, the Commission opened an in-depth investigation in Hutchison 3G Italy/Wind/JV which concerned a combination of Italy’s number three and number four MNOs.³⁶ Unsurprisingly, the press release cited identical competition concerns to the ones voiced in Hutchison 3G UK/Telefónica UK: both parties were close competitors and the transaction would remove an important competitive force; MVNOs would have less choice of networks and ability to compete; and the transaction would increase the risk of MNOs coordinating their behaviour.

If, similarly to TeliaSonera/Telenor/JV and Hutchison 3G UK/Telefónica UK, the Commission considers that structural remedies are the only option sufficiently addressing the loss of a MNO, it would be safe to speak of a clear new trend – and deviation from its previous decisional practice. Therefore, Hutchison 3G Italy/Wind/JV may prove to be pivotal for the future of telecom deal-making in the EU.

Pharmaceuticals

Healthcare was the leading sector by announced deal value in 2015.³⁷ Indeed, the number and individual value of those transactions was unprecedented. The main factors attributable to such high M&A activity in this sector are large cash reserves, cheap borrowing, the wish to mitigate ‘patent cliffs’ and to resist competitive pressure from budget players.³⁸ However, super-mega deals in the industry prove difficult to implement: on 6 April 2016 Pfizer and Allergan withdrew their US$160 billion merger,³⁹ which was the largest announced transaction of 2015 across all industries, and also the largest announced pharmaceutical deal to date. Two years ago Pfizer also withdrew its attempted takeover of AstraZeneca, valued at US$110 billion.

For a long time, the Commission’s approach in pharmaceutical merger cases⁴⁰ has been well established. Parties were consequently able to identify overlaps relatively easily and to address any Commission concerns with targeted divestments. This could explain why, since 1997, all transactions, despite the number of overlaps or complexity, have been cleared in Phase I.⁴¹

Developments in 2015 may suggest that the Commission is taking a more interventionist line in pharmaceuticals cases. This is especially evident in the analysis of a transaction’s impact on innovation, which is a part of a wider enforcement initiative.

Indeed, the intervention rate in pharmaceutical transactions increased in 2015/6. The Commission has adopted 11 decisions with respect to transactions in the sector, five of which required concessions to address the regulator’s concerns,⁴² while six cases were cleared unconditionally.⁴³ This suggests that remedies were offered in almost half of the cases under consideration (45 per cent), which is significantly higher than the overall sector average (25 per cent) since 1989.⁴⁴

While the fundamental approach to market definition and competitive analysis has remained largely unchanged, in 2015/6 the Commission pushed the frontier in exploring how certain transactions affected innovation. In this respect two cases particularly stand out: Novartis/GSK Oncology Business⁴⁵ and Pfizer/Hospira.⁴⁶

Novartis/GSK Oncology Business

Novartis/GSK Oncology Business concerned existing and pipeline products (B-Raf and MEK targeted therapies, including their combination) for the treatment of different types of cancer.⁴⁷ The Commission decided that the transaction raised concerns as it reduced potential competition in ‘market-to-pipeline’⁴⁸ and ‘pipeline-to-pipeline’⁴⁹ scenarios.

Situations when the Commission has raised concerns on the basis of potential competition are rare. The Commission has previously identified competition issues only in Glaxo Wellcome/SmithKline Beecham,⁵⁰Pfizer/Pharmacia,⁵¹ and Teva/Cephalon⁵² with respect to ‘market-to-pipeline’ scenario, and it has never done so on the basis of pipeline projects alone.⁵³ In addition, the Commission in the past took into consideration only pipeline projects that were at a sufficiently advanced stage (Phase III clinical trials).⁵⁴

In the light of that, Novartis/GSK Oncology Business is significant in the following respects:

• Concerns on the basis of ‘pipeline-to-pipeline’. The Commission found an overlap between the Parties’ Phase III pipelines for treatment of low-grade serous carcinoma. The only other potentially competing project was AstraZeneca’s Phase II pipeline. The Commission, as a result, concluded that the transaction may have led to a reduction of available treatments from three to two. In particular, the transaction may have removed the potential competitive constraint that Novartis’ pipeline may have exerted on GSK’s pipeline. This would have reduced Novartis’ incentives to run two pipeline projects in parallel with substantially the same characteristics, and would likely have resulted in the elimination of Novartis’ pipeline.
• Concerns beyond Phase III projects. Most importantly, the Commission also raised concerns with respect to certain types of cancer⁵⁵ where the parties mostly had early pipeline projects (Phase I and Phase II). That marked a significant deviation from previous decisional practice. As noted, the Commission previously took into its assessment Phase III pipelines because only those were in a ‘sufficiently advanced stage of development to be considered as a possible competitive constraint’.⁵⁶Furthermore, a few other aspects of the Commission’s analysis appear to be novel. First, the regulator did not rely on the analysis of overlaps. The parties’ pipelines overlapped only with respect to a limited number of cancer indications, but concerns related to all early stage pipelines. Second, the Commission did not look at potential competition coming from B-Raf and MEK therapies trialled by other industry players. It must be noted that at least some of the competitors’ Phase I and II pipelines dismissed in the same decision for the treatment of advanced melanoma were also developed for the cancers in question.⁵⁷ Instead, the Commission relied on a more holistic assessment. It concluded that the acquisition by Novartis of the whole GSK oncology business would have reduced Novartis’ incentive to keep its own and GSK’s research programmes in parallel. The Commission considered such an outcome likely due to the expected internal sales-cannibalisation effect (ie, if both research programmes were successful, one would cannibalise sales of the other). The Commission, therefore, concluded that the transaction may have resulted in abandonment of one research programme, reducing innovation and harming competition as a result.⁵⁸

Pfizer/Hospira

The Pfizer/Hospira decision was another example where effects on innovation were considered. The Commission identified concerns with respect to ‘market-to-pipeline’ products, namely – biosimilar⁵⁹ infliximab⁶⁰ and vericonazole.⁶¹

Hospira had an infliximab-based biosimilar on the market since 2014 (licensed and co-marketed along with Celltrion),⁶²while Pfizer had a Phase III pipeline biosimilar. The Commission considered that biosimilars, unlike small molecule generic pharmaceuticals, are differentiated in more ways than just price.⁶³ However, unlike in Novartis/GSK Oncology Business,⁶⁴ the Commission did not engage in the analysis of closeness of competition, as the Commission had difficulties ‘to assess at this stage the potential commercial success of each of these products’.⁶⁵ Instead, both parties were viewed by the market participants more generally as significant players in the field of biosimilars. Other players, like Celltrion or Samsung Bioepis, were deemed to be at a competitive disadvantage essentially due to the lack of direct presence in Europe. The decision is silent on the timeline as to when Pfizer was likely to bring its product to the market, while at the same time it admitted that Samsung’s biosimilar may reach the market earlier than Pfizer’s pipeline product.⁶⁶ The Commission then concluded that the transition would have altered Pfizer’s incentives to compete either by withdrawing its own pipeline product or by handing back licence to Celltrion and seizing competition on price between Hospira and Celltrion.

The situation with respect to vericonazole was more straightforward as Pfizer was the developer of an originator molecule, and Hospira aimed to introduce a biosimilar for which it had obtained a marketing authorisation in May 2015. Similarly to Teva/Cephalon, the Commission concluded that Hospira was the only company that had a generic pipeline for this product, and the transaction would eliminate any competition for Pfizer’s generic product in the future.

More clarity?

What can be implied from those precedents and do they bring additional clarity?

As demonstrated by Novartis/GSK Oncology Business, the Commission appears to be more willing to deviate from well-established practice. The loss of innovation, as a theory of harm, provides the Commission a tool to tackle potential concerns that go beyond mere product overlap and market share analysis. However, analysis of early stage pipelines may prove to be difficult, if not outright speculative. The Commission has previously admitted that pharmaceutical pipelines have limited success rates (30 per cent for Phase II and 50 per cent for Phase III pipelines).⁶⁷ That leads to a general uncertainty about which pipelines and in which circumstances should be taken into account for antitrust scrutiny. Despite those difficulties, the Commission will be more likely to look at early-stage pipelines and intervene where it deems necessary.⁶⁸

With respect to ‘market-to-pipeline’ scenarios, the Commission commonly applied a 35 per cent market share threshold and two-year entry limit for generic pharmaceuticals, which was recently confirmed in Mylan/Abbott EPD-DM.⁶⁹ However, such thresholds seem to be reserved only for small molecule generic pipelines, as the Commission did not apply by analogy such thresholds to biosimilars. As a result, a biosimilar pharmaceutical on the market may have a very minor position but the transaction may nonetheless raise concerns on the basis of potential competition. Finally, cases involving originator pharmaceutical pipelines are unlikely to benefit from such thresholds at all.⁷⁰

In the light of the Commission’s recent precedents discussed above, pipeline entry timeline requirements also become blurred. The provisions of the Horizontal Merger Guidelines prescribe two years in assessing likely timeliness of an entry.⁷¹ By taking into account the potential competitive constraint of pipelines (especially those in early stages of development), the Commission looks well beyond the two-year period.

Although Shire/Baxalta reportedly was a candidate case to clarify certain issues regarding innovation, the matter was ultimately treated as a simplified no-overlap case by the Commission.⁷²

Harm to innovation – further examples

In 2015/16, pharmaceuticals were not the only category of horizontal mergers where the Commission intervened on the basis of alleged harm to innovation. Theories of harm employed in Medtronic/Covidien⁷³ (medical devices), GE/Alstom⁷⁴ (power generation equipment), and Halliburton/Baker Hughes⁷⁵ (oilfield services) also entirely or partly focused on impact on innovation. While the Commission previously also looked at innovation,⁷⁶ it was not a centrepiece of its competitive assessment. This may signal that Commissioner Vestager and the EC’s senior staff are looking beyond a simple overlap analysis with a focus on innovation.⁷⁷ In particular, the Commissioner stated that ‘we will continue to analyse likely price effects in our enforcement work. But not only price effects. We also assess what will happen to innovation.’⁷⁸ Therefore, we are likely to see more cases of this kind in the future.

Medtronic/Covidien

The Medtronic/Covidien transaction concerned medical devices for treatment of vascular diseases. While the parties’ activities overlapped on a number of peripheral vascular and electrosurgical devices, the Commission identified concerns only with respect to drug-coated balloons (DCBs). Medtronic was a market leader with its IN.PACT product line with overall EU market share of [60–70] per cent. Covidien had a promising DCB pipeline product Stellarex, which was at an earlier stage of development. It was tested for safety but not efficacy or equivalence, which effectively compared Stellarex to existing products on the market.⁷⁹

Market investigation showed that clinical trial data (efficacy and equivalence) were considered the most important parameter of competition and surgeons looked at such data first in selecting the devices they used.⁸⁰ Despite the fact that such data did not exist at the time of the decision, the Commission was able to conclude that Stellarex had a potential of becoming a very effective DCB treatment and, thus, was a serious challenger for Medtronic’s position. The parties were not helped by their internal documents. In particular, Covidien’s internal documents demonstrated that Stellarex had significant projected sales and possibly sizeable market share in DCBs. Also, Medtronic’s internal documents indicated that Medtronic had plans to discontinue Stellarex post-transaction. Therefore, it was concluded that the transaction would have a significant effect on innovation and raised concerns because ‘Covidien had the ability and incentive to continue innovation by further investing in clinical trials and developing Stellarex into a strong contender on the market including for indications for which Medtronic’s device is not currently approved.’⁸¹ The Commission’s concerns were addressed by divestment of the entire Stellarex business.

GE/Alstom⁸²

The focal point of the Commission’s investigation into GE’s acquisition of Alstom’s thermal power and grid business was sale and servicing of heavy-duty gas turbines operating at 50Hz. The Commission indicated that the markets were highly concentrated with only a few players: GE, a market leader, Siemens, number two, Alstom and Mitsubishi Hitachi Power Systems (MHPS). A fifth player, the Italian company Ansaldo, had more limited R&D capabilities, a narrower product range and a more limited geographic reach. The combined entity would have had a very significant market share of over 50 per cent both in the EEA and globally. According to the Commission, the transaction would have effectively reduced the number of players from three to two in the EEA, as MHPS was a more distant player and had limited European activities. Moreover, Alstom’s technology was deemed to be superior, and the Commission established that there were serious risks that certain Alstom heavy-duty gas turbine models would be discontinued and that the newly developed and most advanced gas turbine model (GT 36) would not be commercialised. The transaction would have reduced the competitive pressure on the other competitors to invest significantly in innovation.⁸³ Those concerns were addressed by divesting Alstom’s heavy-duty turbine business to Ansaldo and included: Alstom’s heavy-duty gas turbine technology for the GT 26 and GT 36 turbines, existing upgrades and pipeline technology for future upgrades; a large number of Alstom R&D engineers who will continue to develop the Alstom heavy-duty gas turbine technology; the two test facilities for the GT 26 and GT 36 turbine models in Birr, Switzerland; long-term servicing agreements for 34 GT 26 turbines already sold in recent years by Alstom; and Alstom’s PSM servicing business based in Florida, US.

Halliburton/Baker Hughes

On 1 May 2016, Halliburton and Baker Hughes withdrew their proposed transaction owing to antitrust concerns.⁸⁴ Both companies are active in oilfield exploration services. On the preliminary assessment, the Commission concluded that the market for such services was highly concentrated with only a few players: Schlumberger, Halliburton, Baker Hughes and to a lesser extent Weatherford. The transaction also ‘raised competition concerns on a very large number of markets related to oilfield services’.⁸⁵

The Commission’s press release opening an in-depth investigation into Halliburton’s contemplated acquisition of Baker Hughes indicated that the parties were close competitors both in terms of tenders and innovation. With respect to the latter, the Commission further noted that the transaction would have reduced the incentive to innovate, as the parties compete closely for the development of new products and services. While full details of the Commission’s reasoning are unlikely to ever become public, hopefully in the future the Commission will find an opportunity to share some insights as to how much weight it was willing to attach to innovation in this case.

Future policy steer

Recently the Commission services provided some informal guidance as to when they may be more likely to intervene based on impact on innovation.⁸⁶ With respect to horizontal mergers, serious concerns are likely to be expressed if two conditions are met. First, the potential competitor must act as a significant competitive constraint, or there must be realistic prospects that it would grow into such a force in the foreseeable future. The Commission noted that this condition is likely to be met if the market is concentrated. Second, there should not be enough actual or potential competitors to constrain the merged entity. This would be particularly the case where there are significant barriers to entry but the merged entity is well positioned to overcome them, by, for example, being present in an adjacent or vertically related market or having specific entry plans.⁸⁷

While general indications of this kind are valuable they do not really go much beyond existing guidance applicable to potential competition more generally, and some of the cases discussed above indicate that, in fact, the Commission interprets the test rather broadly. Therefore, parties and their advisers would do well to analyse comprehensively any significant product pipelines in the transaction planning stage, irrespective of the industry.

Breakthrough in efficiencies assessment?

The efficiency defence is an area of EU merger control that has always caused controversy. The Commission’s criteria for efficiencies (consumer benefit, verifiability, merger specificity) are very difficult to meet in practice due to the onerous evidentiary burden. Also, as admitted by the Commission itself,⁸⁸ the EU merger control timeline in Phase I usually does not allow for an extensive economic analysis which is necessarily associated with efficiency claims. Finally, the Commission has a very wide power of discretion to consider whether certain efficiencies can materialise and benefit consumers. This has led to relatively few parties exploring this avenue. When looking at problematic transactions, the Commission previously accepted limited efficiencies in DB/NYSE and Orange/Jazztel.⁸⁹

However, the prohibited UPS/TNT Express⁹⁰ and the unconditionally cleared Fedex/TNT Express⁹¹ suggest that, at least for some industries, the burden of proving efficiencies may be easier to meet. Both cases concerned express delivery of small parcels in Europe by using air and ground networks.

UPS/TNT Express

The public version of the UPS/TNT Express decision (published in May 2015) revealed that interesting efficiency arguments were used to clear competition law concerns in some European markets.

UPS chose a somewhat unorthodox antitrust strategy by first presenting the Commission with its own econometric price concentration analysis, which indicated that the prices would increase post-merger. UPS argued that there were efficiencies that would have neutralised the suggested price increases. Based on public statements, the parties claimed synergies with respect to operational costs, air network, management and administrative overheads in the range of €400–550 million.⁹²

The Commission assessed whether those efficiency claims were verifiable, benefited consumers and were merger specific. The Commission did conclude that some efficiencies should be accepted and that they would indeed neutralise any price increases.

Verifiability

The Commission concluded that only cost savings related to certain parts of the combined network, namely – European air network and ground handling – were verifiable.⁹³ It, therefore, dismissed as unverifiable a number of other potential synergies such as cost savings related to operations, facilities, line-haul, transatlantic air, common carriage and administrative overheads.

Benefit to consumers

In line with the Horizontal Mergers Guidelines,⁹⁴ the Commission took into account only variable and marginal costs in its assessment and did not consider fixed cost savings. The wording of the decision suggests that the parties also envisaged a rather lengthy period for estimated efficiencies to materialise. The Commission took into consideration efficiencies that were to occur within three years and attached less weight to any cost savings going beyond that timeline.

Merger specificity

Due to the network nature of express small parcel delivery industry and the need for an operational control over the delivery network, the Commission accepted that there were no alternatives other than a merger. Therefore, it concluded that efficiencies were merger-specific.

The Commission then concluded that ‘in some countries, the orders of magnitude of price effects based on the refined economic models and cost savings based on efficiencies were such that net price decreases might be expected [...], while in others prices would increase net of efficiencies’.⁹⁵ It also took into account other ‘qualitative evidence’, which appears to have included assessment of FedEx’s competitive position in Europe. It is unfortunate that the decision does not provide any further detail on any of the markets where the Commission did not raise antitrust concerns. However, it may be safe to assume that efficiencies played a key role in dismissing concerns in those markets, as FedEx was considered a distant competitor of UPS and TNT and its bearing on competition was likely to be limited. Owing to the network nature of this industry, the biggest synergies were likely to materialise in the major European economies that generate large volumes of parcels. Therefore, unsurprisingly the majority of Western European markets were cleared, while concerns were raised in mostly Central and Eastern EU member states where efficiencies were unlikely to be sufficient to neutralise the price effects of the merger.

FedEx/TNT Express⁹⁶

While the Commission opened a Phase II investigation into FedEx’s contemplated acquisition of TNT Express, the case was eventually cleared unconditionally. In many respects this was a simpler transaction than UPS’s ill-fated attempt. In UPS/TNT Express, the Commission indicated that FedEx suffered from a number of weaknesses in Europe and that it was a more distant competitor of the other express parcel companies – Deutsche Post’s DHL, TNT or UPS (called integrators). Unsurprisingly, the Commission in FedEx/TNT Express decided that the combined share was moderate and the parties could not be considered as competing particularly closely. FedEx was recognised to exert a weak competitive pressure on other integrators due to the lack of density and scale of its European network. As the appeal in UPS/TNT Express is still pending, the Commission was evidently careful not to deviate from the analytical framework it adopted there. It carried out a price concentration analysis that was ‘in line with the approach in UPS/TNT’.⁹⁷ The Commission concluded that network cost savings were verifiable, merger-specific and benefited the consumers. Therefore, FedEx/TNT Express appears to be the first case that was cleared unconditionally (partly) because of efficiencies. However, only the public version of the Commission’s decision will indicate what weight was attached to efficiency argument in this case.

Looking forward

UPS has appealed the Commission’s decision mostly on the grounds of the Commission’s assessment of UPS’ pricing model and efficiency arguments.⁹⁸ It remains to be seen whether the Court will be willing to re-open the Commission’s econometric analysis, or whether instead it will defer to the regulator’s wide margin of assessment in such matters. In any event it is hoped the upcoming judgment will provide useful guidance on the efficiency defence.

Remedies

An analysis of remedies accepted by the Commission since 2014 reveals an interesting trend: there is a considerable rise in the number of cases where the parties cannot close the transaction prior to finding a suitable purchaser for a divestment business (‘up-front buyer’ remedy). An up-front buyer solution is typically reserved for cases where considerable risks exist that a suitable purchaser may not be found.⁹⁹ The up-front buyer solution primarily gives comfort to the Commission that the divestment business will end up in the hands of a purchaser that will be capable of running it as a viable business. However, it may cause a significant delay in the implementation of a transaction, especially if such a requirement becomes apparent close the Commission’s decision deadline.

Despite senior Commission officials arguing to the contrary,¹⁰⁰ recent years saw a clear rise in numbers of ‘up-front buyer’ instances. In the period from 2008 to 2012, up-front buyer solutions were used in four cases.¹⁰¹ In 2014 four out of five Phase II investigations were approved with up-front buyer solutions that were further complemented by three Phase I cases. The numbers decreased somewhat in 2015, as only Zimmer/Biomet and GE/Alstom necessitated an up-front buyer solution in Phase II, accompanied by two Phase I investigations.¹⁰² All Phase II conditional clearances adopted until April 2016 required an up-front buyer solution.¹⁰³ Although the figures suggest that there is a clear increase in ‘up-front buyer’ requirements, a wider convergence between European and the US¹⁰⁴ approaches to up-front buyer solutions would appear remote at this point.

The increased number in ‘up-front buyer’ instances has led merging companies to anticipate such an outcome and seek potential purchasers well ahead of any remedy discussion. That resulted in a wider use of ‘hybrid’ solutions,¹⁰⁵ where parties identify a particular purchaser still within the Commission’s investigation, but the formal divestment sales agreement is not concluded until after the conditional clearance decision. Nonetheless, the Commission takes the identity of such a prospective purchaser into its competitive assessment. Recently ‘hybrid’ solutions were used in GE/Alstom and Global Liberty/BASE.

Next to that, a few other decisions are noteworthy from the perspective of remedies.

Holcim/Lafarge¹⁰⁶

The transaction initially posed very significant antitrust concerns, as it would have created a market leader in cement and other products in a number of European countries with very significant combined market shares. In the light of that, the parties decided to entirely eliminate the overlap on all markets. Therefore, a first remedy package was submitted along with the formal notification. The package was market-tested on the tenth day of Phase I which is considered to be very early. The Commission is typically averse to testing remedies before it fully articulates competition law concerns, which usually does not happen before the 15th working day of a Phase I investigation. However, Holcim/Lafarge was exceptional in a sense that the parties proposed to entirely remove an overlap of their activities. The revised remedies were submitted just a few days before the expiry of the Commission’s deadline for a Phase I decision that addressed in full concerns raised by market participants. As a result, the transaction was cleared in Phase I.

Novartis/GSK Oncology Business

Novartis’ MEK targeted therapy was licensed in from Array BioPharma Inc, while B-Raf therapy was developed by Novartis itself. The proposed remedies consisted of: returning the MEK therapy licence to Array; and divesting the B-Raf therapy also to Array. Array then had to enter into joint development and commercialisation of both the B-Raf and MEK therapies with a third party. The divestment business, along with more usual elements, included Novartis’ commitment to provide assistance with the technical transfer, support and funding for all clinical trials for a transitional period. While technical cooperation clauses are common, a blanket commitment to fund existing clinical research programmes is somewhat unusual.¹⁰⁷ In particular, Novartis committed to sponsor clinical trials for B-Raf and MEK used either as mono or combination therapies.¹⁰⁸ The ‘dowry’ type of commitment was likely included to minimise the risk that Array would abandon clinical trials before a joint development and commercialisation agreement was reached.

NPX/Freescale¹⁰⁹

While the Commission’s cooperation with other competition authorities is well documented,¹¹⁰ this case provides a rare example of how non-antitrust regulatory processes may interfere with remedy negotiations. In the initial remedy package NPX proposed a fix-it-first solution, as it had signed an agreement to sell the divestment business to Jianguang Asset Management Co Ltd (JAC), a state-controlled Chinese investment company. However, the transfer of the divestment business was subject to a regulatory approval by the Committee on Foreign Investment in the US (CFIUS).¹¹¹ The Commission noted that the CFIUS review was unlikely to be completed before the Phase I decision deadline. CFIUS had powers to require far-reaching remedies that could have compromised the viability of the remedy package in the EEA. Therefore, the final version of remedies included an up-front buyer solution, instead of fix-it-first, as this would have allowed the Commission to ascertain the outcome of the CFIUS process and the viability of the divestment business in the light of any modifications imposed by the CFIUS.

Possible policy developments

Since concluding its public consultation on the White Paper in October 2014,¹¹² the Commission officially shared very little with the public regarding its future policy steps.

However, in a recent speech¹¹³ Commissioner Vestager provided some useful insights as to where the Commission’s internal reflection on possible policy changes may be heading. In particular, the Commissioner revealed some of the regulator’s thinking on a possible simplification of the EUMR rules, minority shareholdings and notification thresholds.

Simplification

The Commissioner indicated that she was still considering the possibility of excluding certain unproblematic transactions from the scope of its review (probably by means of a block exemption), even where the notification thresholds are technically met. While specific instances were not spelled out in the speech, the White Paper suggests that ‘offshore’ joint ventures¹¹⁴ and no-overlap cases may benefit.

Minority shareholdings

In the face of significant opposition by the legal and business community to changing the EUMR thresholds to catch non-controlling minority stakes,¹¹⁵ the Commissioner herself appears unconvinced at present that ‘this is a change we absolutely have to make to our system’. Therefore, the addition of minority shareholding control to the EUMR system does not appear to be likely at this stage.

Notification thresholds

The Commission is exploring how to include in its review transactions that may affect competition, even if they fall below the current EUMR notification thresholds. The Commissioner indicated that various additional thresholds to catch Facebook/WhatsApp¹¹⁶ type transactions – where the target has low or even no turnover but the transaction is valuable and may raise concerns – may be considered. In particular, thresholds based on asset or transaction value were highlighted. The challenge, as noted by the Commissioner herself, is to ‘identify the right threshold’ to apply. Those suggestions are novel and did not feature in the Commission’s White Paper of 2014. Therefore, any imminent proposals in this area would appear to be unlikely either.

The contemplated policy changes would necessitate the revision of the EUMR itself, which would require unanimous approval of EU member state governments and a majority vote in the European Parliament. Given that the Commission appears still in rather early stages of its internal reflection, any changes to the EUMR are unlikely to materialise anytime soon.

Conclusion and outlook

As conceded by Commissioner Vestager, the Commission received ‘a lot of attention last year for launching in-depth investigations in 11 cases’. This has been the highest number since 2007, when Neelie Kroes was the Commissioner for competition. High numbers of Phase II probes would generally correspond to the peak of M&A activity, which has almost returned to 2007–2008 levels. The Commissioner has decided to prohibit Hutchison 3G UK/Telefónica UK and other transactions were reportedly abandoned due to antitrust concerns. Therefore, we see some indications that the Commission under Ms Vestager is taking an arguably more interventionist line in terms of both substantive appraisal and procedure. It remains to be seen whether this trend will continue when the M&A tide ebbs.

The coming year promises to be equally busy and interesting for the regulator and the antitrust community with several large and possibly complex transactions in the pipeline, such as Hutchison 3G Italy/Wind/JV,¹¹⁷ Wabtec/Faiveley Transport,¹¹⁸ DuPont/DOW or Bayer/Monsanto.

Notes

1. This article aims to provide an overview of the main EU merger control developments from January 2015 to May 2016. It will also touch upon select significant developments from previous years in particular where non-confidential Commission decisions were published during the period of review.
2. www.prnewswire.com/news-releases/dealogic-data-shows-2015-ma-volume-surpasses-5-trillion-300197391.html.
3. Official merger cases statistics can be accessed at http://ec.europa.eu/competition/mergers/statistics.pdf.
4. Eleven in-depth reviews were opened in 2015. Also, four proceedings have been opened until May 2016: Halliburton/Baker Hughes (January 2016), ASL/Arianespace (February 2016), Hutchison/VimpelCom/JV (March 2016), and Wabtec/Faiveley Transport (May 2016).
5. With respect to Phase I, in 2015 the Commission conditionally cleared 4.2 per cent of total cases, while in 2014 it has done so in 4 per cent of cases. Regarding Phase II investigations in 2015, the Commission conditionally cleared 63.6 per cent of cases where proceedings have been initiated. In 2014, the intervention rate for opened Phase II investigations was 62.5 per cent.
6. COMP/M.7612 Hutchison 3G UK/Telefónica UK.
7. There have been no prohibition decisions since COMP/M.6663 Ryanair/Aer Lingus III.
8. Speech, Refining the EU merger control system, Studienvereinigung Kartellrecht, Brussels, 10 March 2016.
9. See, White Paper ‘Towards more effective EU merger control’ (2014 consultation). Also see, Commission Staff Working Document ‘Towards improving EU merger control’ (2013 consultation).
10. In her speech of 10 March 2016, the Commissioner indicated that the Commission may be contemplating to introduce thresholds based on assets or transaction value.
11. Case COMP/M.6497 Hutchison 3G Austria/Orange Austria.
12. Case COMP/M.6992 Hutchison 3G UK/Telefónica Ireland.
13. Case COMP/M.7018 Telefónica Deutschland/E-Plus; under appeal in the General Court (T-305/15, T-307/15).
14. Case COMP/M.7421 Orange/Jazztel.
15. M.7419 TeliaSonera/Telenor/JV, withdrawn.
16. Case COMP/M.7637 Global Liberty/BASE.
17. Case COMP/M.7612 Hutchison 3G UK/Telefónica UK.
18. Case COMP/M.7758 Hutchison 3G Italy/Wind/JV.
19. Respectively Orange/Jazztel and Global Liberty/BASE.
20. The Commission has prohibited transactions involving telecom firms, such as, for example, Xase IV/M.1027 Deutsche Telekom/BetaResearch or COMP/M.1741 MCI WorldCom/Sprint, however, those cases were unrelated to wireless deals.
21. Some press reports indicate that Hutchison’s Danish MNO was a somewhat distant player compared to TeliaSonera, Telenor and TDC. If true, this would have made the transaction ‘three-to-two’ merger.
22. TeleSonera’s statement includes the following: ‘However, the merger discussions have now reached a point where it is no longer possible to gain approval for the proposed transaction.’
23. 42nd Annual Conference on International Antitrust Law and Policy Fordham University, 2 October 2015, accessible at http://ec.europa.eu/commission/2014-2019/vestager/announcements/competition-telecom-markets_en.
24. Hutchison 3G Austria/Orange Austria, Hutchison 3G UK/Telefónica Ireland, Telefónica Deutschland/E-Plus.
25. Ditto.
26. Ditto.
27. At the time of this article going to the press, a public version of this decision was not yet available.
28. Hutchison statement regarding the prohibition decision of 11 May 2016.
29. T-43/16 Telecom 1&1 v Commission, OJ C106/44, 21 March 2016.
30. T-305/15 Telecom 1&1 v Commission and T-307/15 Airdata v Commission.
31. Case COMP/M.3916 T-Mobile/tele.ring (approved with remedies).
32. Case COMP/M.4748 T-Mobile/Orange Netherlands (cleared unconditionally).
33. Ex-post analysis of two mobile telecom mergers: T-Mobile/tele.ring in Austria and T-Mobile/Orange in the Netherlands, http://ec.europa.eu/competition/publications/reports/kd0215836enn.pdf.
34. For example, GSMA study ‘Assessing the case for in-country mobile consolidation’ (February 2015), Frontier Economics study ‘Mobile Prices in Austria’ (May 2015), or HSBC report ‘European Mobile Consolidation is Win-Win for operators and citizens alike’.
35. Telenet owns extensive cable infrastructure in Belgium, but it relies on a third party’s network to provide its wireless services.
36. Case COMP/M.7758 Hutchison 3G Italy/Wind/JV, in-depth investigation opened on 30 March 2016.
37. US$723.7 billion, www.prnewswire.com/news-releases/dealogic-data-shows-2015-ma-volume-surpasses-5-trillion-300197391.html.
38. No end in sight to wave of pharma dealmaking, 26 April 2015, the FT, www.ft.com/cms/s/0/6aad8ebe-e9c0-11e4-b863-00144feab7de.html#axzz4BXy5ikb7.
39. Pfizer cited inability to perform a tax inversion as the main reason for the abandonment of the transaction. See www.pfizer.com/news/press-release/press-release-detail/pfizer_announces_termination_of_proposed_combination_with_allergan.
40. This chapter excludes cases related to medical devices.
41. The only two in-depth investigations that concerned pharmaceutical companies were: COMP/M.950 Hoffmann-La Roche/Boehringer Mannheim (1997) and COMP/M.737 Ciba-Geigy/Sandoz (1996).
42. COMP/M.7275 Novartis/Glaxosmithkline Oncology Business, COMP/M.7276 Glaxosmithkline/Novartis Vaccines Business (excl. influenza)/Novartis Consumer Health Business, COMP/M.7379 Mylan/Abbott EPD-DM, COMP/M.7559 Pfizer/Hospira, COMP/M.7746 Teva/Allergan Generics.
43. COMP/M.7480 Actavis/Allergan, COMP/M.7583 CLS/Novartis Influenza Vaccines Business, COMP/M.7645 Mylan/Perrigo, COMP/M.7685 Perrigo/GSK Divestment Businesses, COMP/M.7716 Pfizer/GSK Menacwy Business, COMP/M.7872 Novartis/GSK (Ofatumumab Auto-immune Indications).
44. Until 1 April 2015, remedies to overcome the Commission’s doubts were offered in 33 cases out of 134 pharmaceuticals cases considered (statistics based on NACE code C.21 – Manufacturing of Pharmaceuticals).
45. Case COMP/M.7275 Novartis/Glaxosmithkline Oncology Business.
46. Case COMP/M.7559 Pfizer/Hospira.
47. Namely, concerns were raised with respect to advanced melanoma, ovarian cancer and other types of cancer (colorectal, non-small-cell lung cancer, advanced melanoma brain metastases, and uveal melanoma).
48. Scenario where one party is already active on the market and the other has a pipeline product. The Commission further considered two situations where the pipeline product is (i) an original pharmaceutical (originator), and (ii) a generic version of an originator already on the market.
49. Scenario in which both parties have only pipeline products. Typically both products would relate to originator pharmaceuticals.
50. Case IV/M.1846 Glaxo Wellcome/SmithKline Beecham with respect to GlaxoWellcome’s strong position in second line treatment of chronic obstructive pulmonary disease and SmithKline Beecham’s originator pipeline.
51. Case COMP/M.2922 Pfizer/Pharmacia with respect to erectile dysfunction and urinary incontinence.
52. See case COMP/M.6258 Teva/Cephalon with respect to Teva’s generic version of Modafinil for which Cephalon was an originator.
53. In case IV/M.737 Ciba-Geigy/Sandoz, while the Commission has analysed ‘pipeline-to-pipeline’, it has not identified antitrust concerns. Nonetheless, it took note of the parties’ binding commitment (paragraphs 106–107).
54. R&D of new pharmaceuticals can be sub-divided into the following stages: (i) Pre-trial/experimental phase relates to a discovery of a new substance, (ii) Phase I trials, usually in healthy volunteers, determine safety and dosing, (iii) Phase II trials are used to get an initial reading of efficacy and further explore safety in small numbers of sick patients, (iv) Phase III trials are large, pivotal trials to determine safety and efficacy in sufficiently large numbers of patients.
55. Colorectal, non-small-cell lung cancer (NSCLC), advanced melanoma brain metastases, and uveal melanoma.
56. See, for example, COMP/M.5778 Novartis/Alcon, paragraph 111.
57. See footnote 49. For the list see footnote 34 of Novartis/GSK Oncology Business. At least some of pipeline products meant for the treatment of advanced melanoma had also other indications (eg, Teva’s CEP-32496, http://pharmabiz.com/PrintArticle.aspx?aid=69080&sid=2, or Roche’s PLX3603, www.roche-trials.com/studyResultGet.action?studyResultNumber=NP25247, are also developed to treat colon cancer).
58. Paragraph 105.
59. Biosimilar is a generic version of an originator biopharmaceutical but, unlike small molecule pharmaceuticals, it is not chemically identical to it.
60. Infliximab is an anti-tumor necrosis factor agent used in autoimmune diseases such as rheumatoid arthritis.
61.  Vericonazole is an antifungal medication that is generally used to treat serious fungal infections.
62. Celltrion pursued dual-channel marketing as it relied on both local distributors and Hospira’s sales force to market the product. Both Celltrion and Hospira competed against each other, primarily on price because the product they sold was identical.
63. Paragraph 45 of Pfizer/Hospira.
64. Novartis/GSK Oncology Business, paragraph 54.
65. Paragraph 46.  
66. Paragraph 50.
67. Case IV/M.1846 Glaxo Wellcome/SmithKline Beecham, paragraph 70.
68. Speech by Carles Esteva Mosso at Sixth Annual Chicago Forum on International Antitrust Issues, 8–9 June 2015.
69. COMP/M.7379 Mylan/Abbott EPD-DM.
70. Although the Commission also applied 35 per cent threshold at least in Pfizer/Wyeth (paragraph 85), which concerned originator pipeline.
71. Paragraph 74.
72. Cleared on 24 April 2016, Case COMP/M.7951.
73. Case COMP/M.7326 Medtronic/Covidien, non-confidential version of the decision published in March 2015.
74. Case COMP/M.7278 General Electric/Alstom (Thermal Power – Renewable Power & Grid Business).
75. Case COMP/M.7477 Halliburton/Baker Hughes.
76. See, for example, Case COMP/M.5984 Intel/McAfee, Case COMP/M.6584 ARM/Giesecke & Devrient/Gemalto/JV, Case COMP/M.6314 Telefónica/Vodafone UK/Everything Everywhere/JV. The Commission in those cases focused on vertical relationships’ impact on innovation.
77. Speech by Johannes Laitenberger, Competition and Innovation, CRA Annual Brussels Conference, 9 December 2016.
78. Speech by Commissioner Vestager: The State of the Union: Antitrust in the EU in 2015–2016.
79. In order to obtain a CE marking (and put product on the market in the EU) the manufacturer only needs to demonstrate safety but unlike for pharmaceuticals efficacy and equivalence data is not required.
80. Paragraph 202.
81. Paragraph 249.
82. At the time of this article going to the press, a public version of this decision was not yet available.
83. Competition Policy Brief, EU Merger Control and Innovation, 2016-01, April 2016, p.5.
84. The pull out came a few days after the Commission issued its Statement of Objections for this transaction. On 6 April 2016, the US Department of Justice also filed suit to have the transaction blocked in the US.
85. Statement by Commissioner Vestager on announcement by Halliburton and Baker Hughes to withdraw from proposed transaction.
86. Competition Policy Brief, EU Merger Control and Innovation, 2016-01, April 2016.
87. Ditto, p.3.
88. Case COMP.M.4057 Korsnäs/Assidomän Cartonboard, paragraph 62. While the Commission generally accepted efficiencies in this case, the transaction did not pose any antitrust concerns.
89. Cases COMP/M. 6166 Deutsche Börse/NYSE Euronext (efficiencies accepted for collateral savings) and COMP/M.7421 Orange/Jazztel (efficiencies accepted for double marginalisation). The Commission, however, has ultimately decided that efficiencies in those two cases were insufficient to offset the anticipated negative effects. Also, the Commission accepted limited efficiencies in Case COMP/M.6905 Inoes/Solvay. However, in that case remedies offered removed to a certain degree the scale required to achieve cost savings. The Commission concluded that parties have failed to prove the magnitude, merger specificity, verifiability, timeliness and pass-on of efficiencies in a scenario involving remedies (paragraph 1215).
90. Case COMP/M.6570 UPS/TNT Express.
91. Case COMP/M.7630 FedEx/TNT Express.
92. www.tnt.com/corporate/en/data/press/2012/03/UPS_and_TNT_to_create_a_global_leader_in_the_logistics_industry.html.
93. Paragraphs 869-876 and 877-880 respectively.
94. Paragraph 80.
95. Paragraph 935.
96. At the time of this article going to the press, a public version of this decision was not yet available.
97. See the Commission’s press release: http://europa.eu/rapid/press-release_IP-16-28_en.htm.
98. T-194/13 – United Parcel Service v Commission.
99. This option can be contrasted to ‘fix-it-first’ remedy when the Commission conditions its decision on the sale of divestment assets to a specific purchaser within the Commission’s investigation.
100. Carles Esteva Mosso arguing that upfront buyer remedies were still relatively exceptional in merger cases examined by the European Commission, speech at 19th IBA Annual Competition Conference in Florence, 11 September 2015.
101. Case COMP/M.4513 Arjowiggins/M-realZanders Reflex, Case COMP/M.4835 Hexion/Huntsman, Case COMP/M.6203 Western Digital Ireland/Viviti Technologies, and Case COMP/M.6497 Hutchison 3G Austria/Orange Austria.
102. While in Novartis/GSK Oncology Business a ‘hybrid’ solution was contemplated, the clearance was eventually conditional upon classic requirements for the prospective purchaser. Also see Case COMP/M.7435 Merck/Sigma-Aldrich.
103. Case COMP/M.7775 Staples/Office Depot (based on press release), Case COMP/M.7637 Liberty Global/Base Belgium, and Case COMP/M.7567 Ball/Rexam.
104. In the US, up-front buyer solutions for conditional clearances are commonplace.
105. Carles Esteva Mosso, speech at 19th IBA Annual Competition Conference in Florence, 11 September 2015.
106. Case COMP/M.7252 Holcim/Lafarge. Public version of the decision published in March 2015.
107. The Commission has accepted in the past commitments that involved funding of specific pipeline research projects in at least case COMP/M.2922 Pfizer/Pharmacia, paragraph 154.
108. The wording of the footnote 154 of the decision suggests that such funding is not limited to a specific clinical research programme.
109. Case COMP/M.7585 NXP Semiconductors/Freescale Semiconductor.
110.  For latest high-profile examples, see Ball/Rexam or GE/Alstom.
111. CFIUS reviews the national security implications of foreign investments in US companies or operations.
112. White Paper ‘Towards More Effective EU Merger Control’, opened for consultation on July 2014.
113. Refining the EU merger control system, Studienvereinigung Kartellrecht, Brussels, 10 March 2016.
114. Joint ventures without or with very limited activities in the EEA.
115. See White Paper, paragraphs 24–58. Also see opinions of stakeholders: http://ec.europa.eu/competition/consultations/2014_merger_control/index_en.html.
116. Case COMP/M.7217 Facebook/WhatsApp.
117. Case COMP/M.7758, notified on 5 February 2016, in-depth investigation opened on 30 March 2016.
118. Case COMP/M.7801, notified on 4 April 2016, in-depth investigation opened on 12 May 2016.