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French Competition Authority has published its revised Guidelines on merger control

    • Competition, EU and Trade - Competition e-briefings

    11-07-2013

    On 11 July 2013, following a public consultation launched in February 2013, the French Competition Authority (the Authority) published its amended Guidelines on Merger Control (the Guidelines).

    The objective of the Guidelines is to bring French merger procedure closer to the EU merger control regime and provide companies with legal certainty in relation to the scope of merger control, the procedural steps the Authority will take during its review and the methods used for analysis. In particular, the Guidelines set out:

    • The criteria for the simplified procedure;
    • The importance of pre-notification discussions,
    • Substantive assessment in relation to the analysis of the market; and
    • Standard models for the transfer of assets and trustee mandates.

    Each of these changes are discussed further below.

    1.        Pre-notification phase 

    The Guidelines emphasis the importance of the pre-notification phase and encourage companies to approach the Authority to discuss any possible competition concerns.

    The Guidelines state that the Authority will appoint a case handler and notify the merging parties if the notification form is complete within five working days of submission of the draft notification. This suggests a strong emphasis on cases being handled more quickly by the Authority.

    However, the Guidelines do not provide information in relation to the content required in submitting a pre-merger filing. The Guidelines only specify that information about the merger and the relevant markets can be submitted in advance.   

    2.        Simplified procedure 

    The Guidelines have consolidated the practice of the Authority since 2011 in relation to the simplified procedure. Under the simplified procedure, a shortened notification form is used for mergers which do not raise competition problems. The simplified procedure may apply when the purchaser is not in the same or neighbouring markets as the target company. This procedure will enable companies to benefit from a clearance decision within 15 working days following the receipt of a complete notification. This is shorter than the normal 25 working day timetable under a first phase investigation.

    3. Substantive assessment – Tests

    The Guidelines identify the criteria that the Authority will use in carrying out an assessment of the merger. The Guidelines recommend the use of the hypothetical monopolist test or the “SSNIP” test (“small but significant non-transitory increase in price”) for the purposes identifying the relevant market. The SNNIP test seeks to identify the smallest relevant market within which a hypothetical monopolist could profitably impose a small by significant increase in price (or a small but significant reduction in quality, range or service). 

    The Guidelines also set out alternative tests that the Authority may also apply when looking to define the relevant market. In particular, the Upward Pricing Pressure test (UPP) and the Illustrative Price Rise test (IPR). These tests assess whether the merged group will have greater power to profitability increase prices post-merger.

    It has been pointed out that having a number of different possible market definitions may give rise to uncertainty, while the purpose of the Guidelines is to provide companies with sufficient legal certainty in relation to the analysis of their mergers by the Authority. Indeed, the UPP test and the IPR test can be employed without having to precisely define the relevant market. However, the Authority regards market definition as an essential part of its economic assessment. Therefore, the use and hierarchy of each test will need to be clarified by the Authority since their application could be used as way to avoid providing a precise definition of the relevant market.

    In spite of this uncertainty, the Guidelines emphasise the importance of economic analysis. The Guidelines also published some recommendations for the merger control assessment and submissions of economic studies to the Authority.

    4. Standards agreements for remedies

    The Guidelines provide details for companies submitting commitments to the Authority and sets out a standard commitment agreement to serve as a basis for asset sales (structural remedies). In addition, the Guidelines set out a trustee mandate, which is based on the European Commission’s model.

    The standard trustee mandate sets out provisions designed to maintain the monitoring trustee’s independence and formalises the relationship between the monitoring trustee, the Authority and the company concerned.  

    These models should also allow the Authority to monitor the implementation of commitments more closely. In this respect, the recent withdrawal by the Authority of its clearance decision in the TPS / Canalsat merger in the pay TV sector because of the breached their commitments shows the need to improve the monitoring of commitments.

    The improvement of the trustee’s role should enhance the possibility for the parties to submit behavioural remedies, whereas the new standard will ensure the swiftness and transparency of the assessment of the commitments proposed. However, practitioners have raised concerned that, if the Authority requires the parties concerned to propose a draft agreement for commitments, this may   depart from the suggested standard model.

    Conclusion

    The general framework of the filing procedure and the competitive assessment remains largely unchanged. However, some major concerns still remain unresolved such as the date of when the filing would be considered as complete. Therefore, even if the Guidelines provide details of the filing process, progress still needs to be made in practice to provide full legal certainty to companies.

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