Competition Law Newsletter – June 2018
Merger Control: Two recent announcements make the headlines.
First, on June 7, 2018, the French Competition Authority (the “Authority”) announced several measures to streamline and simplify merger control filing requirements and the launch of a public consultation on the proposed introduction of an ex post control mechanism under French law.
Then, on June 14, 2018, the French Minister for the Economy (the “Minister”) announced that he would use his power to review de novo the Cofigéo/William Saurin merger previously cleared by the Authority, in light of public interest considerations other than the maintenance of competition. This is a first
1. The Authority lays out plans to “modernize and simplify merger control”
The Authority’s June 7 announcement came in the wake of a public consultation launched in October 2017, which yielded a lot of responses. In light of this input, and upon review of its recent decisions, the Authority concluded the following:
- The Authority will not propose changing the current notification thresholds
The Authority is satisfied that the current thresholds (whether generally applicable or specific to the retail industry) are proportionate and do not require any changes.
It has also decided not to introduce a new “transaction value” threshold. This avenue was explored as a way to control acquisitions of digital or high tech (biotech, drugs) companies with high market value but very low revenues, but the Authority has come to the conclusion that not only would it not necessarily address all potentially problematic transactions, but it would also impose considerable constraints on many other mergers.
- The introduction of a new ex post control mechanism is under consideration
The Authority intends to look further into the possible introduction of ex post control as it exists in many other countries (the United Kingdom, Sweden, the United States, etc.). The Authority believes that unlike transaction value thresholds, ex post control would serve to target only those transactions that raise the most antitrust concerns.
Therefore, the Authority has launched another 4-month public consultation to further outline and explore this avenue. In any case, this new ex post merger control would need to be passed into law and therefore would not be effective for several months or even years.
The new consultation will no doubt draw considerable response, as companies may see the introduction of ex post control as a source of major legal uncertainty. The ex post review of a merger raises many questions, including as to how it ties in with the clampdown on abuse of dominance. It also raises the issue of the nature and scope of the corrective measures that could be applied to a merger that, by definition, has already been completed.
- Towards a simplified notification process
The Authority has also announced measures that should simplify the merger notification process for companies in France.
First, in order to ease the considerable burden of red tape imposed on merging companies, the Authority proposes (i) to reduce disclosure requirements, including financial ones, and (ii) to require only one copy of the notification file instead of four. However, for this to happen, the regulatory provisions of the French Commercial Code will have to be amended by decree.
Second, the Authority has announced that it would extend the benefit of the simplified procedure, under which companies can file a short-form notification and receive a decision within a shorter period (about 3 weeks instead of 5 under the standard procedure), to the following transactions:
(i) merger between competitors, if their combined market share does not exceed 25% or if it is less than 50% and the increment resulting from the merger is less than 2%;
(ii) vertical integration, if the parties’ upstream or downstream market share is less than 30%;
(iii) change from joint to exclusive control of the target by the acquirer;
(iv) transaction involving the creation of a full-function joint venture operating exclusively outside of France; or
(v) joint acquisition of an off-plan property.
Finally, the Authority is considering implementing an electronic filing process for mergers eligible for the current simplified procedure: in the future, these mergers could be notified to the Authority using an online form.
The Authority could amend its merger control guidelines to extend eligibility for the simplified procedure and implement the electronic filing process as soon as 2018. A further, more extensive review of these guidelines could follow, upon completion of another public consultation announced for the spring of 2019.
2. For the first time ever, the Minister for the Economy uses his power to review de novo a merger approved by the Authority
The takeover of William Saurin is still making headlines.
On June 14, 2018, after an in-depth (“stage II”) review, the Authority cleared Cofigeo’s takeover of some of Agripole Group’s “ready-meals” assets (William Saurin, Panzani, Garbit). The Authority’s clearance was conditional on Cofigeo selling certain assets (its Zapetti brand and a production site) in order to enable the competition to “quickly provide a credible alternative to the products of the new entity”, which would otherwise have held a dominant position in the Italian ready-meals and exotic ready-meals markets.
This decision came in the wake of the court-supervised reorganization of Financière Turenne Lafayette (Agripole group’s parent holding company), on which the government weighed in, in 2016, to avoid job cuts.
Against this background, and no doubt in another attempt to save jobs, the Minister for the Economy decided to use his power to review the case de novo, pursuant to Article L.430-7-1 of the French Commercial Code.
Under this article, the Minister has the power to “review the transaction in light of public interest considerations other than the protection of competition that could make up for the transaction’s adverse effect on competition”. These public interest considerations include “industrial development, the relevant companies’ competitiveness on the international stage or job creation or maintenance”. After having heard both parties, the Minister has 25 business days to study these considerations and issue a reasoned decision, which may be conditioned on certain commitments being made and effectively fulfilled. It is worth noting that if these commitments are not fulfilled, the Minister may decide to revoke the clearance decision, order the parties to fulfil their commitments on pain of a civil fine for non-compliance or replace their initial commitments with injunctions.
This is the first time a merger is subject to a “stage III” review. It is too soon to know whether or not the Minister will use his de novo review power more often in the future, since he has merely stated that the reasons for his decision to weigh in on this case were the need to “maintain employment and industrial development” and the “serious frauds that led to the difficulties and takeover of Financière Turenne Lafayette”.
In any case, this de novo review power raises many questions for businesses, especially as to the time frame for the integration of the target and the additional commitments that the acquirer may be required to make to obtain the Minister’s clearance. It also raises the question whether the Minister’s review could in any way challenge that of the Authority.
The Minister’s decision on this transaction will therefore shed some light on the government’s policy on this matter.
Feel free to contact Franklin’s Competition-Distribution Practice for further information on merger control.
This newsletter does not constitute legal advice or legal opinion on specific facts or circumstances. The content of the newsletter is intended only to provide general information.
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