Mergers & Acquisitions and Joint Ventures

Introduction

Chapter 1

MERGER REVIEW UNDER CANADIAN COMPETITION LAW

    George N. Addy

I.   Introduction

II.   Procedural Aspects

   A.   Notification

   B.   Advance Ruling Certificate

   C.   Advisory Opinions

III.   Substantive Merger Review

   A.   The Merger Issue

   B.   The Competition Issue

   C.   The Efficiencies Issue

IV.   Remedies  

   A.   Orders in Contested Cases

   B.   Consent Orders

V.   Conclusion
Chapter 2

VERTICAL ASPECTS OF MERGERS, JOINT VENTURES AND STRATEGIE ALLIANCES

    Juan Briones Alonso

I.   Introduction

II.   Basic Legislation

III.   Case Law

   A.   Early Case Law Under the Merger Regulation

   B.   Decisions in the Media Sector

   C.   Purchasing Power

   D.   Oligopolistic Dominance and Vertical Integration

   E.   Efficiencies
Chapter 3

VERTICAL ASPECTS OF MERGERS, JOINT VENTURES AND STRATEGIC ALLIANCES

    Bernard E. Amory

I.   Introduction

II.   Policy Developments in the European Union and the United States

III.   The Prohibition Decisions of the European Commission in the Media Sector

IV.   Regulations as a Response to Vertical Integration

V.   Conclusion

Chapter 4

MERGERS AND PARTIAL MERGERS UNDER EEC LAW

    Karen Banks

I.   The Treaty

II.   The 1996 Memorandum

   A.   Article 85

   B.   Article 86

III.   Continental Can

   A.   The Legal Position Established by Continental Can

   B.   Inadequacies of Article 86 as an Instrument of Merger Control

   C.   Remedies

   D.   Interim Measures

IV.   The Proposed Regulation on Merger Control

   A.   Definition

   B.   Scope

   C.   Incompatibility

   D.   Possibility of Individual Exemption

   E.   Declaration of Incompatibility

   F.   Prior Notification

   G.   Procedural Time Limits

   H.   Fines

V.   Partial Mergers/Joint Ventures

   A.   Early Developments

   B.   The Tests of a “Partial Merger”

   C.   Problems with the Tests

   D.   The Result

VI.   Recent Indications in Relation to Mergers

   A.   Mecaniverl/PPG

   B.   Philip Morris

VII.   Conclusion
Chapter 5

MERGERS OUTSIDE THE SCOPE OF THE NEW MERGER REGULATION - IMPLICATIONS OF THE PHILIP MORRIS JUDGMENT

    Christopher Bellamy

I.   Introduction

II.   The Background

   A.   The Law Prior to Philip Morris

   B.   The Tobacco Industry

   C.   The Structure of RI

   D.   The Events of 1981

   E.   The Complaints

   F.   The Statement of Objections

   G.   The New Agreements

   H.   The Commission Decision

   I.   The Court Proceedings

   J.   The Court’s Judgment

III.   Analysis  

   A.   What Does Philip Morris Decide?

   B.   Does the Principle of Philip Morris Apply to the Case of a Complete Merger or Concentration?

   C.   Does Philip Morris Apply to Stock Exchange Transactions?

   D.   In What Factual Circumstances Does Philip Morris Apply?

   E.   What is the Relationship between Philip Morris    and the Merger Regulation?
Chapter 6


THE GEOGRAPHIC MARKET DEFINITION UNDER EUROPEAN MERGER CONTROL LAW

    Cornelis Canenbley

I.   The Comparative Importance of Defining the Geographic Market

II.   How the Geographic Market is Defined

III.   The Rationale Behind the Geographic Market Definition

IV.   The Relationship Between the Limits of the Geographic Market and the Competence of the Relevant Authority

   A.   Competence of National and EU Competition Authorities

   B.   Limits of the Geographic Market

V.   Factors Taken into Account in Assessing the Relevant Geographic Market

VI.   Conclusion

Chapter 7
REMEDIES UNDER THE MERGER REGULATION

    Götz Drauz

I.   Introduction

II.   Overview of the Commission’s Practice

   A.   The Commission’s Starting Point: Test of Dominance in the Market

   B.   The Role of the Notifying Parties

   C.   Remedies Must Eliminate the Competition Problem at Hand

   D.   Proportionality of the Proposal Remedies with the Competition Problem Posed

   E.   The Commission Will Consider a Broad Spectrum of Remedies

         1.   Prohibitions vis-á-vis Divestitures and Partial Divestitures

         2.   Hybrid (Mixed) Remedies, Involving Both Structural and Behavioral Elements

         3.   Behavioral or Conduct Remedies

               a.   Evolution in Practice

               b.   The Threshold Question

               c.   Statutory Background

   F.   Commission Review and Modification of Remedies

   G.   Timing

III.   Procedural Developments in Dealing with Proposed Commitments

   A.   The Commission’s Current Practice in Phase II

   B.   Proposals Regarding Phase I Commitments

IV.   Practical Considerations for Notifying Parties and Interested Third Parties

   A.   The Value of Prenotification Meetings with the Merger Task Force

   B.   The Interests of Third Party Industry Participants

   C.   Time Frame for Procedures

   D.   Confidential Treatment of Time Limits Imposed in Remedies

   E.   The Twin Tests of Effectiveness and Viability

   F.   Remedies for Non-Compliance with Commitments

V.   Consultations with the American Authorities

VI.   Conclusion

Chapter 8

PUBLIC INTEREST CRITERIA IN THE ASSESSMENT OF THE MERGERS IN THE UNITED KINGDOM BY THE MONOPOLIES AND MERGERS COMMISSION

    Dan Goyder

Introduction

   Merger Control 1973-93
Chapter 9

“CONTROLLING” THE SHIFTING SANDS: MINORITY SHAREHOLDINGS UNDER EEC COMPTETITION LAW

    Barry E. Hawk

    Henry L. Huser

I.   Introduction

II.   Before the Shifts Begin: EEC Control Thresholds After Philip Morris

   A.   The Philip Morris Judgment

   B.   Post-Philip Morris Commentaries and Decisions

   C.   Summary

III.   The Sands Begin to Shift: Expanding the Concept of  Decisive Influence Under the Merger Regulations

   A.   Sole Control

   B.   Joint Control

   C.   Summary

IV.   Shaving Too Closely in a Sandstorm? Gillette’s Expansion of the Philip Morris Influence Standard

   A.   Shifting the Lower Boundary of the Philip Morris Influence Standard: “Some” Influence Under Article 86

   B.   Shifting the Upper Boundary of the Philip Morris Influence Standard? “Back Door” Application of Article 85 to Concentrations

V.   Conclusion
Chapter 10

EEC MERGER CONTROL: ECONOMICS AS AN ANTITRUST DEFENSE OR AN ANTITRUST ATTACK?

    Frederic Jenny

I.   Introduction

II.   Efficiency and Articles 85 and 86 of the EEC Treaty

III.   Efficiency and the EEC Merger Regulation

IV.   Efficiency and Merger Control Case Law

V.   Conclusion
Chapter 11

THE PROBLEM OF MARKET DEFINITION UNDER EC COMPETITION LAW

    Thomas E. Kauper

I.   Introduction

II.   Market Definitions Under Articles 85 and 86

   A.   The Definition of Product Market

         1.   The Early Cases

         2.   Product Market Definition - 1989 to Date

               a.   Substitute Products

               b.   Identical Products with Different Uses and Buyers

               c.   Single Brand Markets

               d.   Supply Substitutability

   B.   The Definition of Geographic Markets

         1.   The Early Cases

         2.   The Post-1988 Decisions

III.   Market Definition Under the Merger Regulation

   A.   The Definition of Product Market Under the Merger Regulation

         1.   Physically or Technically Differentiated Products

         2.   Physically Similar Products with Different End Uses or Methods of Distribution

         3.   Supply Substituability

         4.   Other Product Market Issues

               a.   Technology Markets

               b.   Captive Output

   B.   The Definition of Geographic Markets Under the Merger Regulation

IV.   Conclusion
Chapter 12

INTERNATIONAL JOINT VENTURES UNDER COMMUNITY LAW

    Dr. John Temple Lang

I.   Introduction

   A.   The Complexity of Community Antitrust Law on Joint Ventures

   B.   The Commission’s Two Approaches and Their Evolution

   C.   The Extent of the Anticompetitive Effects of Joint Ventures Under Article 81(1)

   D.   Dynamic Competition

II.   The Economic Effects of Joint Ventures

   A.   Effects of Joint Ventures on Actual Competition Between the Parent Companies: Oligopolistic Interdependence

   B.   Where the Joint Venture is Selling to Third Parties in the Same Product and Geographic Market as the Parents

   C.   Withdrawal of One Parent From the Joint Venture’s Market

   D.   Where the Joint Venture Sells to Third Parties the Products or Services of its Parents

   E.   Where the Joint Venture Sells to its Parents

   F.   Foreclosure by Joint Ventures of Potential Competition Between Parent Companies

   G.   Defensive Joint Ventures

   H.   “Spillover” Effects of the Joint Venture on the Behaviour of the Parents in Related Markets

   I.   Where the Joint Venture Enters the Same Market was One Parent

   J.   Where the Joint Venture Enters a Different Geographic Market, but the Same Product Market, as Both Parents

   K.   Where the Joint Venture Enters a Different Product Market, but the Same Geographic Market, as Both Parents

   L.   Foreclosure by Joint Ventures of Competition From Third Parties

   M.   More Complex Situations

   N.   Multiple Joint Ventures

III.   The Case Law of the Court

   A.   The Matra and European Night Services  Judgments

IV.   Article 81(3) (EX 85(3)) - General Comments

   A.   Benefits

   B.   Allowing Consumers a Fair Share of the Benefit

   C.   Indispensability: The Need for Clear and Precise Provisions

   D.   Indispensability: The Test is Objective

   E.   Indispensability: Independent Operations

   F.   Indispensability: “Weighing-up”

   G.   Indispenability: Less Restrictive Structures

   H.   No Possibility of Eliminating Competition Over a Substantial Part of the Products or Services

V.   Joint Ownership and Joint Dominance

   A.   Joint Ventures and Dominant Companies

   B.   Jointly Owned Companies Without  Joint Control

   C.   Divestiture and the Philip Morris Principle

   D.   Collective or Joint Dominance: The Gencor Judgment

   E.   When Does Setting up a Joint Venture Create or Strengthen Joint Dominance?

   F.   When is a Joint Venture an Abuse of a Joint Dominant Position?

VI.   Spillover Joint Venture Cases Under the Merger Regulation: Substantive Law

VII.   Procedural Rules

   A.   Joint Control of Joint Ventures: When Does the Merger Regulation Apply?

   B.   “Full-function” Joint Ventures: When Does the Merger Regulation Apply?

   C.   Comparison Between Merger Regulation  and Regulation 17 Procedures

   D.   Conditions and Obligations in Joint Ventures: Regulation 17 Cases

   E.   Duration of Exemptions in Joint Venture  Regulation 17 Cases

   F.   Spillover Joint Venture Cases Under the Merger Regulation: Procedural Aspects of Article 2(4)

   G.   Ancillary and Non-Ancillary Clauses: Merger Regulation Cases

   H.   Clauses Ancillary for a Limited Time: Merger Regulation Cases

   I.   Non-competition Clauses: Regulation 17 Cases

   J.   Changing Circumstances: Merger Regulation Cases

   K.   Joint Ventures and the Commission’s Proposals for Reforming Regulation

VIII.   Concluding Comments
Chapter 13

VERTICAL MERGERS, JOINT VENTURES AND STRATEGIC ALLIANCES

    William T. Lifland

    Juan Briones

    Robert Pitofsky

    Michael Reynolds

    Neal R. Stoll

    Joseph Winterscheid
     

    (Panel Discussion)

Chapter 14
POLITICS OR POLICY? THE DEMYSTIFICATION OF EC MERGER CONTROL

    H. Colin Overbury

I.   Introduction

II.   The Background to the Merger Regulation

III.   The Merger Debate

IV.   The Merger Regulation

V.   Implementation of the Merger Regulation

VI.   Administration

VII.   Procedures

VIII.   The Statistics

IX.   Conclusions on the Procedures and Methodology

X.   The Problems

XI.   The Criticisms

XII.   Epilogue  
Chapter 15

THE EFFECT OF GLOBAL TRADE ON UNITED STATES COMPETITION LAW AND ENFORCEMENT POLICIES

    Robert Pitofsky

I.   Introduction

II.   Some Background Data

III.   Effect on Enforcement

   A.   Enforcement Attitudes

         1.   National vs. International Goals

         2.   Citizenship of Parties to the Transaction

         3.   Economic vs. Broadly Political Goals

   B.   Measurement of Market Power

   C.   Theory of Anticompetitive Effects

   D.   Efficiency Defense

         1.   Background

         2.   Standards to Measure Efficiency Claims

IV.   Treatment of Cross-Border Efficiencies

V.   Conclusion
Chapter 16

MERGERS AND JOINT VENTURES: THE VERTICAL DIMENSION

    Michael J. Reynolds

I.   Introduction

II.   The Position Under EC Competition Law

   A.   European Commission’s Approach Under the Merger Regulation

         1.   Upstream and/or Downstream Effects

               a.   Vertical Foreclosure in the Telecommunications and Media Sectors

         2.   Potential Foreclosure Effects in Mergers Between Two Already Vertically Integrated Companies

         3.   Financial and Other Advantages of Vertical Integration

         4.   Vertical Links Between Independent Companies

         5.   Vertical Aspects of Horizontal Mergers

   B.   Vertical Integration and Strategic Alliances Examined Under Article 85

III.   The Position Under UK Competition Law

IV.   Conclusions
Chapter 17

SELECTED RECOMMENDATIONS FOR SUBSTANTIVE AND PROCEDURAL CONVERGENCE IN THE

MULTI-JURISDICTIONAL MERGER CONTEXT 

    James F. Rill
    
    Christine Chambers Wilson

I.   Overview  

II.   International Merger Activity

III.   Achieving Substantive Convergence

   A.   Existing Mechanism Facilitate Convergence

   B.   Selected Recommendations to Facilitate Further Substantive Convergence

         1.   Facilitate Greater Transparency in Merger Review Processes

         2.   Develop Common Principles for Merger Review

         3.   Continue Cooperation in Multi-Jurisdictional Review

   C.   Limits on Full Cooperation in Multi-Jurisdictional Merger Review

IV.   Achieving Procedural Convergence

   A.   The Need for Procedural Convergence

   B.   Selected Recommendations for Procedural Convergence

         1.   Harmonize Merger Notification Thresholds

         2.   Establish a Mechanism to Facilitate Soft Deference

         3.   Develop a Common Merger Notification Form

               a.   OECD’s Framework for a Notification and Report Form for Concentration

               b.   Common Form for Mergers in the United Kingdom, France and Germany

               c.   Proposal of Don Baker and Neil Campbell

         4.   Establish Common Timeframes for Merger Review

         5.   Establish a Mechanism to Permit the Secure Exchange of Confidential Business Information

IV.   Additional Issues for Consideration

   A.   Multiple Agency Review of Mergers

   B.   Multi-Market Balancing of Competitive Effects

V.   International Competition Policy Advisory Committee
Chapter 18

CURRENT PROCEDURAL AND LITIGATION ASPECTS OF MERGERS AND TAKEOVERS

    Mario Siragusa

I.   Introduction

II.   Merger Control in the EEC – Recent Developments

   A.   Application of Article 86

   B.   Application of Article 85

III.   Procedural Aspects

   A.   No System of Authorization

   B.   Time

   C.   Formal v. Informal Procedure for Approval

   D.   Commissions Procedures to oppose the Transaction

   E.   The Position of the Complainant

   F.   Interplay of EEC Law and National Merger Control Rules

IV.   Conclusion

Chapter 19
THE TREATMENT OF JOINT VENTURES UNDER THE EC MERGER REGULATION - ALMOST THROUGH THE THICKET

    James Venit

I.   Historical Background

II.   The 1990 Notice on the Distinction Between Concentrative and Cooperative Joint Ventures

III.   The Commission’s Early Decisions Concerning Concentrative Joint Ventures Under the Merger Regulation

IV.   The 1994 Notice on the Distinction Between Concentrative and Cooperative Joint Ventures

V.   The Amendment of the Merger Regulations of 30 June 1997

VI.   The “New” Test for Coordination Under the Merger Regulation: Oligopolistic Dominance and Coordination

   A.   The Relevance of the Test in Kali und Salz

   B.   The Commission’s Decision

   C.   The Court’s Decision

   D.   The Court’s Approach to Economic Analysis

   E.   Implications of Kali und Salz for the Assessment of Oligopolistic Dominance

VII.   Conclusion

About the Editor: 
Barry Hawk, Director, Fordham Corporate Law Institute; Professor of Law, Fordham University and Partner, Skadden Arps Slate Meagher & Flom (New York and Brussels).

Contributors Include:

• George Addy, Senior Partner, Davies Ward Phillips & Vineberg, Toronot; Former Director of Investigation and Research, Bureau of Competition Policy, Ottawa.
• Juan Briones Alonso, Merger Task Force, EC Commission, Brussels.
• Bernard E. Amory, Partner, Jones Day, Brussels. As an official in the Directorate General IV (Competition) of the European Commission, he was in charge of the application of the competition rules in the telecommunications sector. He is also co-chairman of the Communications Law Committee of the International Bar Association.
• Karen Banks, Member of Legal Service, EC Commission, Brussels.
• Christoper Bellamy, QC, President, Competition Commission Appeal Tribunal, London.
• Cronelis Canenbley, Partner, Freshfields Bruckhaus Derringer, Dusseldorf and Brussels.
• Gotz Drauz, Director, Merger Task Force, EC Commission, Brussels.
• Dan Goyder, Member, Competition Commission Appeal Tribunal; Former Deputy Chairman, UK Monopolies and Merger Commission, London.
• Henry L. Huser, Partner, Skadden Arps Slate Meagher & Flom, Brussels.
• Frédéric Jenny, Vice-Chairman of the Conseil de la concurrence, Paris; In 1996, he was appointed Special Advisor to the French Minister of International Trade and Competition on international trade and competition issues. In 1994, he was elected Chairman of the OECD Competition Law and Policy Committee. He was General Counsel (Rapporteur General) of the Conseil de la concurrence from 1985-1992. Professor Jenny served as special assistant to the French Minister for Consumer Affairs in 1977, where he was in charge of the revision of the French antitrust law.
• Thomas E. Kauper, Henry M. Butzel Professor of Law, University of Michigan. Professor Kauper has twice served in ranking positions with the United States Department of Justice, first as deputy assistant attorney general in the Office of Legal Counsel and then as assistant attorney general in charge of the Antitrust Division, the chief enforcement officer in that field.
• John Temple Lang, Counsel with Cleary Gottlieb, Brussels. From 1995-2000, he was Director responsible for telecommunications and media in the Competition Directorate General of the European Commission.
• Robert Pitofsky, Charmin, Federal Trade Commission, Washington DC.
• Michael Reynolds, Partner and Head of EU and Competition Practice Group, Allen & Overy, Brussels.
• Neal Stoll, Partner, Skadden Arps Slate Meagher & Flom, New York.
• Joseph Winterscheid, Partner, McDermott Will and Emery, Washington DC; Former Chair of the International Antitrust Committee, Antitrust Section of the American Bar Association.
• H. Colin Overbury, Director of Merger Task Force, Directorate General for Competition, EC Commission
• James F. Rill, Co-Chair of the Antitrust Practice Group of Howery Simon Arnold & White in Washington DC. Mr. Rill has served as Assistant Attorney General in charge of the U.S. Department of Justice's Antitrust Division, as well as a chairman of the ABA's antitrust section. During his tenure as Assistant Attorney General he negotiated the U.S. - European Union Antitrust Cooperation Agreement of 1991, and issued the first joint FTC and DOJ Horizontal Merger Guidelines in 1992.
• Mario Siragusa, Partner, Cleary Gottlieb, Rome and Brussels.
• James Venit, Partner, Skadden Arps Slate Meagher & Flom, Brussels.