What procedure applies in the event that remedies are required in order to secure clearance?
Merger Control (2nd Edition)
The notifying party(ies) may, at any time in Phases I or II of the procedure, at their own initiative or upon informal invitation from the PCA, submit commitments with the aim of ensuring approval for the concentration. There is not a legal timeframe for commitments to be offered, but the PCA recommends that, during Phase I, the parties submit commitments within 20 business days of the original notification and, in Phase II, within 40 business days of the decision being taken to open an in-depth investigation. The parties may also choose to submit commitments during pre-notification contacts before the review procedure is formally initiated.
Remedies are discussed with the PCA on an informal basis. The PCA does not formally have the prerogative to impose remedies which were not proposed by the notifying party(ies).
If the PCA considers the proposal adequate, it is formally submitted in the form of a “commitment”. The formal commitment shall be accompanied by a complete form describing the commitment, explaining its suitability to eliminate the competition concern, identifying any deviations from the PCA’s model texts and providing detailed information on the divestiture business/behavioral commitment offered. The usual practice involves the submission to the PCA of a draft of the commitment and complete form for the case team to review and comment on. After receiving the final formal commitment, the PCA “market tests” it with other market players, and publishes it on its website, before accepting it.
The clearance decision is subject to conditions and obligations intended to ensure compliance with the commitment.
Commitments can be proposed only after the Chairman of the HCC has issued a resolution that has been served on the parties to the concentration, holding that the notified concentration gives rise to significant doubts as to its compatibility with competition in the particular markets to which it relates. According to the Competition Act, this resolution may be issued within one month following the date of submission of the notification by the parties to the concentration, a deadline that may in practice be extended if the parties are requested by the HCC case handler to submit additional evidence on their operations and the concentration itself. A report is then drafted on the merits of the concentration within forty five days from the issuance of the Chairman’s resolution, on the basis of which the case is referred to the HCC for further assessment.
The parties have the right to submit commitments any time from the date they have been served with the Chairman’s resolution initiating Phase B, and, in any event, no later than twenty days following the referral of the case to the HCC. Exceptionally, the HCC may accept the submission of commitments even after the expiration of said deadline, but it would be expected that the parties advance sufficient reasons for which submission of commitments within the said statutory deadline was not possible. The acceptance of the substance of the commitments as a condition to clearance of concentrations lies within the HCC’s ample discretion. If the HCC has accepted the substance of the commitments, it may impose a fine of up to 10% of the turnover of the parties to the concentration in case the commitments have not been complied with post consummation.
During the first-phase investigation, remedies can be offered at any time up to five working days after the CMA has informed the parties of a decision that the merger risks giving rise to a substantial lessening of competition, and will therefore be subject to a second-phase investigation unless suitable remedies are agreed and implemented. This means that the parties are not required to offer remedies without having been informed of the substance of the CMA's concerns and the markets to which they relate. In practice, it is possible to commence a dialogue on remedies at any stage in the process, or even before the CMA begins its investigation.
After the CMA has issued its SLC decision, the parties have five working days within which to offer remedies, and the CMA will have up to 10 working days from the SLC decision within which to decide whether the offered remedies merit further negotiation (if it considers that they do not, it will open the second-phase investigation).
The CMA will then have up to 50 working days from the date of the SLC decision within which to negotiate, consult on, and finalise the remedies. This period can be extended to 90 working days if there are 'special reasons' (e.g. if an up-front buyer is required – see section 31 above).
During the second-phase investigation, the question of remedies will not normally be raised until the CMA has issued its provisional findings. The basic outline of any remedies will be finalised before the CMA takes its final second-phase decision on the merger. The detailed terms and conditions of the undertakings are negotiated after the final decision has been announced, and must be finalised within 12 weeks (which can be extended by six weeks, if there are special reasons). Where parties do not cooperate in the negotiation of second-phase remedies, the CMA can impose the required remedy in the form of an order on the parties.
Remedies are typically proposed by the parties, negotiated with the ICA, and formally imposed by the latter. If the ICA believes that the remedies offered by the parties do not eliminate all the competitive concerns, it can also impose further measures.
There is no standard procedure. Remedies can in principle be offered either during Phase I or Phase II. However, the ICA has the legal power to impose remedies in Phase II only. Accordingly, if the concentration is cleared in Phase I also based on remedies offered by the parties, such remedies are not enforceable by the ICA. This means that the ICA cannot impose any fines in case the parties violate the remedies, but can only argue that the clearance decision was adopted based on a different factual scenario and open new proceedings.
In light of the above, the ICA is generally more inclined to open a Phase II investigation, when it deems that remedies are necessary to clear the concentration.
Executing a concentration without complying with the remedies imposed by the ICA may result in a sanction between 1% and 10% of the turnover of the business activities that form the scope of the concentration.
Typically, throughout the reviewing agency’s investigation, the parties to the transaction and agency staff discuss any competitive issues raised by the transaction and potential remedies to address such concerns. Any proposed divestiture is scrutinised and evaluated by the agency to ensure it effectively remedies anticompetitive concerns identified during the investigation. Typically, parties offer a remedy after the reviewing agency has conducted its investigation, to ensure that any fix addresses the agency’s concerns.
The agencies usually require a buyer up front in the vast majority of divestitures. In contrast to a buyer up front remedy, post-order consents typically allow the parties to divest the required assets or business approximately three to six months after the merger is consummated. In either case, the agencies require approval of the divestiture buyer for the package of assets to ensure that the buyer is (1) financially stable, (2) will be able to compete going forward, and (3) that the divestiture will restore any competition lost due to the transaction.
If the reviewing agency has evidence that a transaction may be anticompetitive and the parties are unwilling or unable to offer a divestiture, the agency may file an injunction proceeding in federal court to block the transaction.
It should be noted that the initiative for remedies lies with the parties, not the FCO. While there are no sharp lines in practice, commentators argue that the FCO should not suggest or demand a certain way in which undertakings might alter the structure of a transaction in order to receive clearance. It follows that the parties should suggest remedies, as the FCO is under no obligation to do so but may just outright deny clearance. There is no specific “deadline” for suggestions. In practice, the FCO may suggest, in bilateral talks, what kind of remedy might be sufficient for it to clear an envisioned transaction. If such indication is given, the parties should examine the reasons given carefully and may then suggest a remedy. The FCO will then assess whether the suggested remedy is sufficient to countervail or avoid the negative effects on competition. The assessment by the FCO is usually very thorough, as the FCO must clear a transaction without any additional leeway if the remedies are sufficient to resolve remaining competition concerns.
One important consequence of this procedure is that the FCO won’t give a conditional clearance where the parties did not suggest one. Conditional clearance will only be given where the parties have suggested a remedy beforehand. Otherwise, the FCO will decide only between clearing a transaction and not clearing it.
The parties can begin negotiating remedies with the JFTC at any time during the review. The negotiation is typically triggered by the JFTC’s explanation to the parties of its competitive concerns on the notified transaction. The parties need to take initiative in proposing them. When the parties propose remedies, the JFTC will comment as to whether the proposed remedies are sufficient to resolve the concerns or not.
The JFTC’s merger guidelines provide that remedies in principle should take place before the implementation of the transaction. Even if this is not possible, they should be implemented before the proper deadline which is to be clearly provided in the remedy proposal. In addition, if the remedies include the divestiture of any or all of the overlapping business, for example, the buyer of such business should be identified before the implementation of the transaction, otherwise the parties may have to obtain the JFTC’s approval of the buyer before divesting the business.
Remedies can be offered both in Phase I and Phase II. They may be given by notifying parties’ offer or upon official parties’ request. The notifying parties may offer remedies in order to convince the official parties not to refer a case to Phase II or to withdraw their Phase II request(s). Another possibility is that the notifying parties negotiate commitments with the official parties and present them to the Cartel Court, which will then issue a decision including the commitments.
In Phase II, the notifying parties may also offer remedies directly to the Cartel Court. However, in practice, remedy negotiations with the BWB and the FCP are much more common.
In the last years, the number of cases, in which parties have entered into commitments in order to get clearance, has increased substantially.
There is no specific procedural regime for remedies discussions, nor are there any strict deadlines. However, if the parties consider offering remedies in Phase I, these should be offered relatively early in the proceedings, given the short time available (maximum of six weeks). In Phase II, more time is available for remedy discussions.
Remedy negotiations and decisions can be done at any point in the merger review process and are negotiated between the parties and the Bureau. There is no formal deadline for offering remedies.
The Bureau typically market tests proposed remedies, including by seeking feedback from industry stakeholders such as customers and suppliers. The Bureau will often collaborate with foreign agencies to make remedy decisions and sometimes will waive a demand for a formal remedy in Canada if an appropriate remedy has been agreed to in another jurisdiction.
Only the parties can propose remedies, which can be done at any stage of the investigation before the expiration of phase II. However, the remedies offered in phase I may only be accepted if the risks are easily identifiable and the remedies are sufficiently comprehensive and adequately address all the possible competition issues the operation may raise.
The offer must be made in writing, detailing the remedies offered, the way in which they are intended to be implemented and the deadlines for doing so. If necessary, it shall also identify and describe the functions of the compliance supervisor and/or trustee.
Once the offer is submitted to the FNE, the terms of phase I and phase II will be automatically suspended up to 10 and 15 working days, respectively.
The FNE may request from third parties their opinion on the suitability of the remedies offered to revert the risks to competition caused by the concentration, and on the potential problems that the implementation of remedies could imply.
The FNE will evaluate the remedies offered during the term of the investigation. Once such evaluation is made, the FNE will approve or prohibit the notified transaction, depending on whether it considers that the remedies offered are sufficient to mitigate the risks observed.
Where the CPC ascertains that the notified concentration falls within the scope of the Law and raises doubts as to its compatibility with the competitive market, it will inform the Service of the need to conduct a full investigation. In such an event, the Service will request further information from the participants as well as other entities involved in the specific sector for the purpose of completing its investigation. Moreover, the Service will notify the participants that it proposes remedies that will remove the doubts of the CPC regarding the compatibility of the transaction within the time-limit defined by the Service.
Appendix IV of the Law provides the form that the undertakings concerned will be asked to submit when they are willing to undertake any remedies. The CPC accepts both divestiture and behaviour remedies. If, following its review of the additional information provided to it, the CPC’s doubts as to compatibility have not been removed, the Service if it finds any differentiations or modifications in the circumstances under which the concentration has been established which may result in the removal of the doubts, will commence negotiations with the participating undertakings.
If the DCCA finds that a merger gives rise to concerns, the parties may propose remedies in order to obtain an approval. Remedies should preferably be offered as early as possible. Remedies offered late in Phase II will extend the time frame of Phase II in order to grant the DCCA at least 20 business days to assess the remedies. The offered remedies will usually be market tested.
During the course of a Commission investigation, the parties can offer undertakings to the Commission to remedy competition issues. Proposed remedies will need to be submitted in a “Form RM”. The Commission will accept remedies both in Phase I and Phase II. In Phase I, the commitments must be submitted to the Commission within 20 working days from the date of receipt of the notification. The notifying parties can also, in certain circumstances, withdraw their notification and resubmit it following appropriate changes to the original concentration in order to avoid Phase II proceedings. In Phase II, remedies must be submitted to the Commission at the latest within 65 working days from the initiation of the Phase II investigation.
Remedies can be submitted both in Phase I and Phase II examination. The submission of remedies automatically extends the review period since the FCA needs to assess them and market test them before considering it may address the identified concerns.
Should the remedy proposal be considered insufficient, the FCA may either prohibit the transaction or impose injunctions.
Remedies may be provided to the OFC during both phases. Remedies during Phase I shall not preclude the DG from proceeding with Phase II, although if the remedies sufficiently eliminate serious doubts, then the DG shall not proceed to Phase II.
Since is no clear cut precedent as to remedies which are acceptable to the DG, the OFC generally adopts the views of the European Commission in this regard. The determining criterion remains the removal of any serious doubt regarding the lessening of competition.
The parties have no duty to offer remedies, but the NCA shall prohibit the transaction if it considers that the substantive test is fulfilled and the notifying parties do not propose adequate remedies.
Remedies may be proposed in either phase of the NCA's case handling. In phase I, remedies must be proposed no later than 20 working days from notification. In phase II, there is no deadline, but when remedies are proposed later than 55 working days from notification, the NCA's deadline is extended accordingly. When remedies are proposed after the NCA has issued a draft prohibition decision, the deadline for a final decision by the NCA is extended by 15 working days, with the possibility of a further extension by an additional 15 working days.
The NCA will normally perform a market test of whether the suggested remedies are considered adequate, but it is not required to do so. Remedies suggested by the notifying parties can be accepted by the NCA and form part of a binding decision without any further formal notice to the parties.
The remedies proposal must also be set forth and described in a non-confidential document for publication, due to the NCA’s need to consult third parties as to the effectiveness of the proposal.
In case there are serious doubts regarding the compatibility of the notified concentration with a normal competitive environment, the parties have to propose remedies to the Competition Council in order to eliminate such serious doubts.
Remedies can be accepted by the Competition Council in the “phase I procedure” (the initial review period) or in the “phase II procedure” (the extended review period).
In the “phase I procedure”, the parties may propose remedies before the notification’s effective date (i.e. the date on which the Competition Council considers that the notification is complete) or within maximum 2 weeks as of such date. The parties must also submit a non-confidential version of the remedies, to be published by the Competition Council in order to seek observations from third parties with respect to the proposed remedies.
If the Competition Council considers that the serious doubts regarding the compatibility of the notified concentration with a normal competitive environment were eliminated by the proposed remedies, a conditional clearance decision is adopted within 45 calendar days as of the effective date. If not, an investigation is launched, within the same time-limit of 45 calendar days. In the “phase II procedure”, the parties must propose remedies within 30 calendar days as of the date when the investigation is launched. Upon the parties’ well-grounded request, the Competition Council may extend this time-limit by maximum 15 calendar days. The parties must also submit a non-confidential version of the remedies, to be published by the Competition Council in order to seek observations from third parties with respect to the proposed remedies. Within maximum 5 months as of the effective date, the Competition Council must adopt a decision: if the proposed remedies are accepted, a conditional clearance decision or, if the proposed remedies are rejected, a decision prohibiting the concentration.
KN: The remedies are only possible in Phase II proceedings and are generally offered by the parties. In particular, if the Competition Commission determines that the implementation of the concentration may result in negative effects which can seriously distort competition on the relevant market(s) in Serbia, it adopts a Conclusion on the Initiation of an In-Depth (i.e. Phase II) Proceedings. The Competition Commission is obliged to render a final decision within four months as of the day of the adoption of this conclusion. Before rendering of the final decision, the Competition Commission will issue a statement of objections outlining all facts and evidence based on which the final decision will be adopted. The statement of objections gives a strong indication of the decision including the possible remedies.
The Phase II review is usually extensive and include furnishing significant economic and legal data to the Competition Commission. It, as a rule, involves the Commission seeking information from interested parties, such as competitors and customers. If commitments were considered, the parties would firstly propose them and then negotiate with the Competition Commission in formal meetings in order to secure the most favourable outcome. Therefore, as a standard practice the negotiations are initiated with the parties proposing the commitments which are then examined, discussed and finally agreed upon in direct communication with the Competition Commission. If the negotiations fail, the Competition Commission would prohibit the merger.
There is no deadline by which parties are required to offer remedies. Ideally, remedies should be agreed with the Commission before a final decision is made by the Commission.
In practice, parties tend to propose remedies following engagements with the Commission in respect of the outcome of its investigation and findings. It is during these engagements that potential remedies (proposed by the parties or the Commission) are typically discussed.
The Commission often considers remedies agreed with other jurisdictions and often the same condition will be imposed, where appropriate.
The parties may submit to the Board proposals for possible remedies either together with the notification form, during the preliminary review or the investigation period. If the parties decide to submit the commitment during the preliminary review period, the notification is deemed filed only on the date of the submission of the commitment. In any case, a signed version of the commitment text that contains detailed information on the context of the commitment and a separate summary should be submitted to the Authority.
As per the Remedy Guideline, it is at the parties’ own discretion whether to submit a remedy. The Board will neither impose any remedies nor ex parte change the submitted remedy. In the event the Board considers the submitted remedies insufficient, the Board may enable the parties to make further changes to the remedies. If the remedy is still insufficient to resolve the competition problems, the Board may not grant clearance.
There have been several cases where the Competition Board has accepted the remedies or commitments (such as divestments) proposed to, or imposed by, the European Commission as long as these remedies or commitments ease competition law concerns in Turkey (see, for example, Cookson/Foseco, 08-25/254-83, 20.03.2008).
The Board conditions its clearance decision on the application of the remedies. Whether or not the parties may complete the merger before the remedies have been complied with depends on the nature of the remedies. Remedies may either be a condition precedent for the closing or may be designed as an obligation post-closing of the merger. The parties may complete the merger if the remedies are not designed as a condition precedent for the closing.
If the AMC informs the parties to the concentration that they may not be granted an approval, they have 30 calendar days (extendable at the parties’ request) to offer the AMC remedies they are willing to undertake, in order to eliminate negative effects on the competition. As a rule, the AMC informs the parties that remedies are required within the framework of Phase II.
In case the parties wish to submit a proposal of agreement to control acts of concentration (ACC, in Portuguese), they are entitled to do so within 30 days from the date that the Superintendence votes for not clearing the transaction. The ACC will be submitted to CADE’s Court, which can request for amendments or freely accept or reject it.
Parties may appeal from the decision if they understand that the remedies applied by CADE’s Tribunal were not necessary or are too burdensome.
The CCA does not prescribe any formal timing requirements regarding the offering of remedies.
Court enforceable undertakings can be offered by the parties upfront (for example where material competition issues are evident) or during a review once particular competition concerns have been clearly identified by the ACCC (for example, after a 'Statement of Issues' has been published).
The ACCC is likely to take into consideration remedies agreed in other jurisdictions where they are relevant in assessing competition issues in Australia. It will ultimately need to be satisfied that the competition issues affecting Australian markets have been adequately addressed. Sometimes it will still require that court enforceable undertakings are offered by the parties with respect to Australia.
Court enforceable undertakings are (typically) market tested before acceptance by the ACCC, formally documented and executed by the parties giving the undertaking. Undertakings must be published (subject to confidentiality exemptions) on the ACCC's public register (available online).