Hunting for the quick fix? Phase I remedies in UK merger control Simon Pritchard Director, Mergers...
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Transcript of Hunting for the quick fix? Phase I remedies in UK merger control Simon Pritchard Director, Mergers...
Hunting for the quick fix? Phase I remedies in UK merger control
Simon PritchardDirector, Mergers
BIICL 7th Annual Transatlantic Antitrust DialogueLondon, 1 May 2007
Agency best practice
Learning from peer agencies
Ex post studies – CC (2006), DGCOMP (2005), and FTC (1999)
Policy guides, notices – 2004 DOJ guide, 2007 EC materials
Learning from DIY experience
Beware of misplaced faith in behavioural remedies – National Express/Prism (2000, reviewed in 2006)
Beware contingencies and scarcity of suitable purchasers in divestiture cases – Tesco/Co-op Slough (2004, referred in 2007)
OFT merger remedies cases 2006-7 Boots / Alliance Unichem – divestiture of pharmacies
Gala / County – divestiture of bingo hall
Pendragon / Reg Vardy – divestiture of car dealerships Inchcape / EMH (authorized repair services)
Co-op / Fairways – divestiture of funeral homes
Tetra Laval / Carlisle – IPR remedy in industrial cheese equip.
Aggregate Ind / Foster Yeoman – divestiture of asphalt plants
Flybe / BA Connect – release aircraft parking stand at SOU
Case study – Tetra Laval/Carlisle (2006) First UK up-front buyer case
Rationale for transaction was target’s U.S. assets, but creates two 2:1’s and a 3:2 in markets for industrial cheddar-making equipment in UK and Ireland
Here, Phase II would not further the substantive analysis; key issue is remedies design and buyer
Only 5-10% of Carlisle UK plant devoted to overlap products; doubtful a buyer would want entire plant
Tetra Laval/Carlisle cont/… Quasi-structural remedies package: ‘irrevocable, exclusive,
perpetual’ EEA-wide licenses for IP rights
OFT presses pause on timetable; Tetra finds candidate buyer
OFT reviews FTC and DG Comp ex post studies; tests credibility of buyer and scope of package pre-CRM
Tetra closes on worldwide transaction outside UK
Post-decision, Tetra signs conditional S&PA with buyer; OFT consults on remedies package + buyer in tandem
Bonus: Irish had gone to Phase II; closed early due to UK fix
Process optimisation – parties
First-phase remedies are key to a sound two-phase merger regime, and to reducing frictional costs of UK system
Parties and advisers can assist the OFT with pinch-points
Parties control what they offer – and typically prefer not to engage early, fearing over-enforcement
Clear-cut standard: degree of confidence in defining scope of problem (e.g. which overlaps do / don’t raise concerns)
Clear-cut solution: risk and complexity factors – viability risk, deterioration risk, purchaser risk
Third party litigants – addressing above improves chances of defending a settlement on appeal – Celesio v OFT
Process optimisation – OFT
OFT will respond to early and candid engagement on a ‘without prejudice’ basis
Informal advice at confidential stage if parties ‘play ball’ Pre-notification dialogue
OFT indulges in ‘closed envelope’ devices to reassure clients
Plan to consult on a second-bite option for ‘near miss cases’ featuring a good faith offer prior to the Case Review Meeting
New head of remedies – creation of new senior position within OFT Mergers to consolidate know-how and produce guidance
Finally, OFT seeks optimal blend of empiricism and pragmatism: accepting parties’ divestment offer of all 3:2’s in Boots/Unichem