The Heads of European national competition authorities (”NCAs”) and the European Commission have agreed a set of best practices (Best Practices on Cooperation between EU National Competition Authorities in Merger Review). The Best Practices aim to foster cooperation and sharing of information between NCAs in the European Union, for mergers that do not qualify for review by the Commission itself (the one-stop shop review) but require clearance in several Member States (”multiple filing”).

The 2004 reform of the EU’s merger review rules has facilitated the re-allocation of merger cases between the Commission and NCAs. As a result, many cases that do not reach the EC notification thresholds are nevertheless reviewed by the Commission. But many mergers are still reviewed by two or several NCAs simultaneously, applying their respective national rules. In 2007, NCAs reported that several hundred cases were reviewed in at least two Member States. However, multiple filings may, in some cases, entail significant legal uncertainty, cost and delay for merging parties; they may also be the source of conflicting decisions by NCAs.

The Best Practices have been adopted to alleviate the difficulties related to multiple filings. They identify the key steps at which the NCAs should cooperate and the information they may share, for instance on the timing of the review process or on remedies when necessary to avoid a merger harming customers and consumers.

Cooperation on mergers that have the potential to affect competition in more than one Member State, or where remedies need to be designed in more than one Member State, would help both merging parties and NCAs by reducing the risk of divergent outcomes.

The Best Practices were prepared by a Working Group set up in 2010 by the Commission and the NCAs. The European Economic Area’s NCAs were also represented.

The best practices do not envisage cooperation in all multi-jurisdictional cases. NCAs will decide on a case-by-case basis whether well targeted cooperation could enhance the review process. The success of cooperation will depend to a great extent on the goodwill and cooperation of the merging parties, because NCAs will in most cases depend on them for permission to exchange confidential information. Both the merging parties and NCAs have an interest in good cooperation, as it can increase the overall efficiency, transparency and effectiveness of the review process. The timing of notifications is also an important area where merging parties can facilitate cooperation between NCAs.

Background

The EU’s Merger Regulation first came into force in 1991 and was last revised in 2004. It sets the turnover thresholds to be met, both globally and within the EU, if companies party to a proposed concentration are to benefit from the one-stop review by the Commission, while making sure a deal is assessed where it has its strongest nexus.

First, the so-called “two-thirds rule” assigns jurisdiction to a Member State if more than two thirds of each of the parties’ EU-wide turnover is generated in that Member State. Also, under certain conditions merger review can be re-allocated between the Commission and the NCAs. Since the 2004 reform, such referrals may be made before mergers have been notified to a Member State or to the Commission at the initiative of the parties (pre-notification referrals).

Alternatively, they can be made later at the request of a Member State (post-notification referrals).The pre-notification referrals have allowed merger cases to be allocated efficiently to the more appropriately placed authority, thus avoiding parallel proceedings. Since 2004, almost 300 referral requests have been made pre-notification, more than 70% of which were requests for a one-stop-shop review.

The Best Practices are without prejudice to existing guidance on the system of re-allocating cases between the Member States and the Commission. However, the enhanced cooperation recommended in these Best Practices may also facilitate smooth case reallocation.

The Best Practices are the result of thorough reflection following broad stakeholder consultation this spring. On that basis, the Best Practices were amended to clarify for instance the use and scope of the case information system, the voluntary nature of waivers and the timing for providing up-front information about the merger. The Best Practices make it clear that confidential information is protected under the national legislation in all Member States.

(Source: European Commission)

The European Commission has approved under the EU Merger Regulation, following an in-depth investigation, the acquisition of the hard disk drive (HDD) business of Samsung Electronics of Korea by Seagate Technology of the US. HDDs are data storage devices used in computers, laptops or camcorders. Although the merger will further consolidate markets that are already highly concentrated, the Commission concluded that the transaction would not significantly impede effective competition in EEA or any substantial part of it.

The Commission’s examination showed that there are separate worldwide markets for hard disk drives based on their end use application (such as desktop computers, mobile computers, servers). The Commission also identified a separate market for external hard disk drives in the European Economic Area (EEA) 1, which is downstream from hard disk drives.

The main impact of the transaction is on the markets for 3.5″ desktop hard disk drives and 2.5″ mobile hard disk drives where the investigation revealed that Samsung is not a particularly strong competitor. There would remain three strong suppliers on the 3.5″ desktop market (the merged entity, Western Digital of the US and Japan’s Hitachi Global Storage Technologies), and four strong suppliers on the 2.5″ mobile market (the three plus Toshiba, also of Japan). With at least three suppliers, customers will retain sufficient possibilities to switch suppliers. The Commission also found that the removal of Samsung is not likely to lead to a risk of coordination among the remaining HDD suppliers.

The Commission found that the proposed transaction would not jeopardise the business of Japan’s TDK, an independent supplier of heads for HDDs, as the merged entity will continue to buy a sufficient volume of components from TDK post-merger. Finally, the Commission found that there would be no effect on the market for external hard disk drives in the EEA as non integrated suppliers of external hard disk drives would retain sufficient alternative sources for hard disk drives.

The Seagate/Samsung deal was assessed independently of Western Digital’s proposed acquisition of the HDD and Solid State Drives (SSDs) businesses of Hitachi Global Storage Technologies which was notified one day later and is still pending.

(Source: European Commission)

In the first meeting of the EU-South Korea Trade Committee, co-chaired between South Korea’s Trade Minister Kim Jong-hoon and the EU Trade Commissioner Karel De Gucht, both sides took stock of the success of the deal for business after the first one hundred days.

“I’m delighted that the first meeting of the EU-South Korea Trade Committee has proven so valuable at clearing up a number of outstanding issues thanks to the commitment and pragmatism of both sides. The first few months were always expected to be a test for such an innovative and far reaching trade agreement which is why I’m so pleased to see that it has passed with flying colours.”, stated EU Trade Commissioner Karel De Gucht.

For example, both parties agreed on ways forward to bridge outstanding implementation issues in the areas of motor vehicles and electronics. On motor vehicles, both sides tackled market access issues on tyres and after-sale verification rules for diesel emissions and safety standards of cars. On electronic goods, the meeting addressed the need to recognise agreed ways of testing electronic products. Commissioner De Gucht also underlined the need to use the free trade agreement and the deepened partnership to help forge common standards in the future on products such as electric vehicles (e-cars). Such a move is key to ensure that Europe, South Korea and their main trading partners remain leaders on standards for the world market, that their companies remain competitive and that their consumers get the best choice.

The meeting also identified a number of areas where further work by officials on both sides is needed to cut through red-tape hindering trade such as overly complex procedures to allow certain EU food and agricultural imports into South Korea.

Background

On 1 July 2011 the EU-South Korea FTA became operational. First reductions of tariffs took effect. Within 5 years from the application of the FTA, 98.7% of duties in bilateral trade value for both industrial and agricultural products will be eliminated. By the end of the transitional periods, duties on almost all products will disappear. Only trade in several agricultural products (e.g. garlic) will not be liberalised. This is the most ambitious trade liberalisation ever achieved in a FTA negotiated by the EU.

On 27 October 2011 the Commission will be hosting a high-level conference on the implementation of the EU-South Korea FTA in Brussels, which is part of the broader effort to promote this Agreement. The aim of the seminar is to raise awareness among the economic operators of the benefits of this FTA.

EU-South Korea goods trade exceeded €66.6 billion in 2010. The EU currently runs a deficit with South Korea in goods trade. However, the trends suggest that due to the significant growth potential of the Korean market and due to the entry into force of the EU-South Korea FTA this deficit will be decreasing. For products like chemicals, pharmaceuticals, auto parts, industrial machinery, shoes, medical equipment, non-ferrous metals, iron and steel, leather and fur, wood, ceramics and glass, the EU enjoys a solid trade surplus. Similarly, for agricultural products South Korea is one of the more valuable export markets globally for EU farmers, with annual sales of over €1 billion. On services, in 2009 the EU had a surplus with South Korea of €2.1 billion, with exports of €6 billion and imports of €3.9 billion. EU is also the biggest investor in South Korea in cumulative terms with 28.9 billion worth of investment stock in 2009.

(Source: European Commission)

European Commission officials undertook unannounced inspections at the premises of companies active in the supply, transmission and storage of natural gas in several Member States. The Commission has concerns that the companies concerned may have engaged in anticompetitive practices in breach of EU antitrust rules or that they are in possession of information relating to such practices.

At the same time, the Commission is also investigating suspicions of anticompetitive behaviour to the detriment of upstream suppliers themselves. As usual, the Commission officials were accompanied by their counterparts from the relevant national competition authorities.

Competition enforcement in the energy sector

The Commission is determined that consumers throughout the EU should enjoy the benefits of an integrated and competitive single European energy market that increases security of supply of energy at affordable prices. This means in particular ensuring the diversification of sources of supply and the free flow of gas once it has entered the EU. Whereas EU energy legislation serves to remove public barriers to an open energy market, competition rules serve to ensure that private players do not replace these barriers by anticompetitive conduct. In most countries, it was the Commission’s first competition inspection in the energy sector and in some, the Commission’s first ever competition inspection.

Background on inspections

Unannounced inspections are a preliminary step into suspected anticompetitive practices. The fact that the Commission carries out such inspections does not mean that the companies are guilty of anti-competitive behaviour, nor does it prejudge the outcome of the investigation itself. The Commission respects the rights of defence, in particular the right of companies to be heard in antitrust proceedings.

There is no legal deadline to complete inquiries into anticompetitive conduct. Their duration depends on a number of factors, including the complexity of each case, the extent to which the undertakings concerned co-operate with the Commission and the exercise of the rights of defence.

(Source: European Commission)

The European Commission’s second monitoring exercise of patent settlements in the pharmaceutical sector shows a continuing decline of settlements potentially problematic under EU antitrust rules. This highlights an increased awareness of so-called originator and generic companies of which types of settlements can give rise to antitrust scrutiny – generally the so-called pay-for-delay settlements - and is good news for consumers who will benefit from cheaper pharmaceuticals. The number of patent settlements increased in 2010, however, showing that the Commission’s vigilance does not prevent firms from settling disputes successfully within the boundaries of the EU rules.

The second monitoring exercise identified 89 patent settlement agreements between originator and generic companies in 2010. This compares with 207 such agreements during the 8.5 years covered by the sector inquiry concluded in July 2009 (see IP/09/1098 and MEMO/09/321). It also compares with 93 agreements during the 18 months covered in the first monitoring exercise (see IP/10/887).

However, the number of settlements potentially problematic from an antitrust perspective – in particular those that limit generic entry against payment from the originator to the generic company - decreased significantly more in importance and number. In the period covered by the sector inquiry, such settlements accounted for 45 out of 207, or 22 % of the settlements reported. In the first monitoring period the figure dropped to 10% or 9 out of 93 of the settlements. In 2010, only 3% or 3 out of 89 of the settlements fell into the category that might attract scrutiny.

At the same time the use of patent settlements shows that neither the sector inquiry nor the monitoring exercise drove companies to litigate patent disputes until the end and that in most cases companies were able to find solutions that are usually considered unproblematic from a competition law perspective.

The Commission will repeat the monitoring exercise in 2012.

Separately, the Commission closed an antitrust investigation against Boehringer Ingelheim, following the latter’s settlement with its competitor Almirall removing obstacles that could have blocked Almirall (see IP/11/842). The investigation was unrelated to the patent settlement monitoring exercise mentioned above.

Background

Problematic patent settlements are those where typically an originator company pays to delay entry of a generic drug. Cases where the two sides stop litigation without payment and the restrictions are within the scope of the contested patent or patent settlements where the generic company can enter without delay and restrictions are normally not problematic under antitrust law.

The aim of the monitoring exercise was to better understand the use of patent settlements in the EU and to help identifying those that might need further scrutiny. The latter category proved to be small and none of the cases so identified will automatically trigger an in depth antitrust investigation by the Commission. In any event each case has to be assessed on its merits. In cases with a purely national dimension, the Commission may also share certain information with national competition authorities.

(Source: European Commission)

The European Commission confirmed that on 30 November 2010 Commission officials carried out unannounced inspections at the premises of a limited number of companies active in the pharmaceutical sector in several Member States. The Commission had reason to believe that the companies concerned may have acted individually or jointly, notably to delay generic entry for a particular medicine.

Unannounced inspections are a preliminary step in suspected anticompetitive practices. The fact that the Commission carries out such inspections does not mean that the companies are guilty of anti-competitive behaviour nor does it prejudge the outcome of the investigation itself. The Commission respects the rights of defence, in particular the right of companies to be heard in the Commission’s proceedings against them.

There is no legal deadline to complete inquiries into anticompetitive conduct. Their duration depends on a number of factors, including the complexity of each case, the extent to which the undertakings concerned co-operate with the Commission and the exercise of the rights of defence.

(Source: European Commission)

EU Trade Commissioner Karel De Gucht, the Belgian Minister of Foreign Affairs Steven Vanackere representing the Presidency of the Council of the European Union (EU), and the Korean Minister for Trade Kim Jong-hoon today signed a Free Trade Agreement (FTA) between the EU and South Korea. This FTA is the most ambitious trade agreement ever negotiated by the EU and the first with an Asian country. Today’s signature signals a significant step on the road to its implementation and is one of the main events of the EU-Korea Summit taking place in Brussels today.

“The agreement between the EU and South Korea marks a significant achievement in improving our trade links. It will provide a real boost to jobs and growth in Europe at this critical time. This wide-ranging and innovative deal is a benchmark for what we want to achieve in other trade agreements”, said Commissioner De Gucht. “Tackling the more difficult non-tariff barriers to international commerce can cut the costs of doing business as much if not more than getting rid of import duties.”

The Council adopted the Decision authorising the signature and provisional application of the Free Trade Agreement (FTA) between the European Union and its Member States and the Republic of Korea (hereinafter referred to as Korea) and to forward the agreement to the European Parliament for consent. In agreement with Korea, the signature of the FTA will take place on 6 October 2010.

The Council agreed that, pursuant to Article 3(2) of the Council Decision, the date of provisional application shall be 1 July 2011 and that the notification referred to in Article 3 of the Council Decision shall be sent to Korea before that date provided that the European Parliament has given its consent to the FTA and that the Regulation of the European Parliament and of the Council implementing the bilateral safeguard clause of the EU-Korea FTA is in force. The Council also agreed on the importance of an effective safeguard which provides protection in the case of sudden surges of imports in sensitive sectors, including small cars.

In this connection, the Council will also take into account the extension to the EU of any new benefits that Korea may accord to the US in the context of discussions on the Korea-US FTA, and the need to ensure that the Korea CO2 Regulation does not impose an unfair burden on EU exporters.

(Source: Council of the EU)

(Source: European Parliament Legislative Observatory)