The Draft EU Notice on Horizontal Mergers: A Further Step toward Convergence

• Published date: 01 March 2004
• Date: 01 March 2004
• DOI: 10.1177/0003603X0404900107
• Subject Matter: Antitrust in the U.S. and the EU: Converging or Diverging Paths?

The Antitrust Bulletin/Spring-Summer 2004

The Draft

ED

Notice on horizontal

mergers: afurther step toward

convergence

BY VINCENT VEROUDEN, CLAES BENGTSSON

and SVEND ALBiEK*

I.

Introduction

243

The

European

Union

(EU) merger

control

system is currently

undergoing a process of comprehensive reform. An important step in

this process has been the adoption by the European Commission, in

December 2002, of a proposal to the European Council' for amending

*Economists for the European Commission, Directorate-General

for Competition, Brussels.

AUTHORS' NOTE: We would like to thank F. Enrique Gonzdlez-Diaz; Guil-

laume Loriot, Claude Rakovsky, Stephen Ryan, Thalia Lingos, Simon

Bishop, Jeffrey Church, Neil Marshall, Patrick Rey, Steven Salop and

Gregory Werden

for

their helpful comments

and

suggestions. We also

thank Viktor Luszc:

for

his research assistance. This article was submit-

ted in July 2003 and updated in December 2003. It does not cover the

final notice on horizontal mergers, the adoption

of

which is expected in

the beginning

of

2004. The views expressed in this article are those

of

the

authors and do not necessarily reflect those

of

the European Commission

or

of

the persons thanked above.

Proposal for a Council Regulation on the control of concentrations

between undertakings (0.1. (C 200), 28.01.2003, at 4-57). The Council

of

Ministers is the legislative body representing the member states of the

European Union.

©2004 by Federal Legal Publications. Inc.

244

The antitrust bulletin

the EC Merger Regulation (ECMR).2 The proposed changes to the

ECMR addressed jurisdictional and procedural issues, but also some

points of substance, in particular the substantive standard traditionally

used

by

the

European

Commission

to

review

mergers,

the

"dominance" standard, and the treatment

of

efficiencies under this

standard. Alongside this proposal, the European Commission adopted

draft guidelines for the appraisal of horizontal mergers in the form of

a Draft Notice.' This policy document sets out in more detail the

analytical approach that the Commission proposes to follow in the

review of horizontal mergers.

The purpose

of

this article is to provide more insight into the

substantive parts

of

the Commission's policy initiatives, and to

analyze them from the viewpoint of EU-U.S. policy convergence.

The article will mainly focus on the Draft Notice, and in particular on

those parts

of

it that have attracted most attention (the sections

describing scenarios

of

competitive harm

under

the dominance

standard, and the section on efficiencies). In our discussion we will

attempt to provide the reader with an understanding of some of the

tradeoffs made in the Draft Notice. The article will also, more briefly,

discuss the substantive issues in the proposed changes to the ECMR,

and the viewpoint of the EU Council in this regard.'

Council

Regulation

(EEC)

No.

4064/89

on

the

control

of

concentrations between undertakings. O.J. (L 395), 30.12.1989, at 1;

corrected version O.J. (L 257), 21.9.1990, at 13. Amended by Council

Regulation (EC) No. 1310/97 of June 30, 1997. The ECMR applies to all

concentrations having an EU dimension, as defined on the basis of the

annual

turnover

of

the companies concerned, and

confers

exclusive

jurisdiction to the European Commission for such cases. The ECMR thus

provides

a

"one-stop

shop"

within

the

European

Union

for

the

examination and control of concentrations having an ED dimension.

Draft Commission Notice on the appraisal of horizontal mergers

under the Council Regulation on the control of concentrations between

undertakings, O.J. (C 331), 31.12.2002, at 18-31 [hereinafter Draft Notice].

4On

November

27,

2003,

the

Council

of

Ministers

reached

consensus on amending the ECMR. The formal adoption

of

the new

regulation is expected for the beginning of 2004. The new regulation will

differ from the Commission's original proposal in a number

of

ways,

Draft eu notice :

245

The appearance of the Draft Notice could be seen as a point

of

convergence in itself. The first set of U.S. Merger Guidelines saw the

light of day some 35 years ago. In the European Union, where merger

control legislation was first introduced in 1990, commentators have

for some years been calling for similar guidance. The Commission

has acknowledged the value of providing such guidance and has, in

the first instance, decided to produce a Draft Notice on the assessment

of

horizontal mergers

for

public

consultation.

The

Commission

intends to complement this draft with a similar draft on nonhorizontal

mergers (vertical and conglomerate) at a later stage.

In our opinion, acomparison

of

the Draft Notice with the U.S.

Horizontal Merger Guidelines shows that, in substantive terms, there

has been a substantial degree of convergence. This, in our view, is an

important observation to keep in mind, especially in a context where

much

debate

has

been

taking

place

on the

question

of

how

the

dominance test as applied in the EU compares with the "substantial

lessening of competition" (SLC) test used in, for instance, the United

States. In the field of horizontal mergers, this debate basically focused

on the extent to which mergers resulting in unilateral effects are covered

by the EU dominance test. The Draft Notice indicates, however, that the

analytical framework for the assessment of horizontal mergers used in

the EU is broadly comparableto that used in the U.S.

There are, nevertheless, a few differences

between

the

Draft

Notice and the U.S. Guidelines. We would like to mention two at this

stage. A first, obvious, difference is one of scope. The U.S. Merger

Guidelines contain a section on market defmition, which in the EU is

the subject of a separate notice." Another difference is that the two

sets

of

guidelines operate in different legal settings.

The

different

wording of the tests (substantial lessening

of

competition in the U.S.

particularly as regards the substantive standard to review mergers. See

infra section II. The final ED notice on horizontal mergers, which will

reflect these changes, will be adopted subsequent to the formal adoption

of the new regulation.

Commission Notice on the definition

of

the relevant market for

the purposes of Community competition law, O.J. (C 372) Dec. 9, 1997,

at 147-55.