The EC Merger Regulation ( The Council of the European Communities

Regulation 4064/89)

It became effective in 1990. Under the Merger Regulation, parties to all mergers,
acquisitions, joint ventures having a Community Dimension must provide pretransaction notification to the Commission. (The European Council made
substantial amendments in 2004.) The new Merger Regulation has both
procedural review and the substantive test for merger prohibition.
The EC Merger Regulation had historically been administrated by the
Commissions Merger Task Force.
When the Commission receives a notification of the merger proposal, it begins a
five-week Phase 1 merger inquiry. During this phase, based on the studies of the
competitive effects of the proposed transaction The Task Force determines
whether the merger raises serious doubts to its compatibility with the common
market.
The criteria employed in assessing compatibility include market share
(compatibility is presumed if joint market share in the common market doesn't
exceed 25%), legal or practical barriers to entry, supply and demand trends in
relevant markets, competition from firms outside in the Union; and the structure
of the market.
If no serious doubts arise, the merge is cleared. Otherwise, the merger review
enters Phase 2 a four-and-one-half-month review including meeting with the
parties, a Statement of Objections and a formal hearing.
In any inquiry, the commission first attempts to determine Community dimension
in cases of any dispute. Such a dimension exists when altogether or individually
worldwide and European sales of the companies exceed a fixed amount of
assets.
Once the Task Force determines that the transaction has a Community dimension
it then determines whether the concentration is compatible with the common
market.
In trio of cases decided in Luxembourg in 2002 the European Court of First
Instance (CFI) vetoed the Merger Task Forces decisions blocking the unions.
Altogether, the three cases suggest that any Merger Task Force rejection of a
proposed merger will be held to a more stringent standard of proof.
Airtours v. Commn
A UK-based travel company, Airtours announced its planned merger with another
travel agency First Choice to EC authorities in 1999. Later that Year, the Merger
Task Force blocked the proposed merger, asserting that such a combination of
the travel agencies would create a collective dominance position in the UK
market for short-haul travelers. The merger Task Force asserted that the merger
would cause higher prices for consumers and elimination of smaller agencies.
Airtours appealed to the Court of First Instance.

The main goal for the merger Task Force here is to produce the evidence that
proofs the existence of the collective dominance. Such a behavior can be
revealed in suchlike factors as the lack of effective competition between the
members of the dominant oligopoly and the weakness of any competitive
pressure exerted by the operators.
Commissions finding that the same institutional investors hold 30 to 40% of the
shares in Airtours, First Choice and Thomas cannot be regarded as evidence of a
tendency to collective dominancy in the industry unless it has examined to what
extent they are involved in the management of the companies. Furthermore,
there is no suggestion in the Decision that the group of the institutional investors
form a united body controlling those companies. Moreover, the Commission did
not deny that the market was competitive.
The result is that the Commission failed to prove that the concentration would
give rise to a collective dominant position of the three major tour operators and
impede effective competition.
Decision. The CFI annulled the Merger Task Forces decision prohibiting the
merger. CFI stated that the Task Force did not give the slightest indication that
there is not competition between the main tour competitors. The CFI emphasized
that if no competitive effects were immediately created, then the merger must
be allowed. It was the first time that the CFI had overruled such a merger ban by
the EC.
This string of decisions resulted in EU adoption of the new merger reform
package, which includes a more flexible time frame regarding merger
investigations, guidelines for horizontal mergers and guidance of anticompetitive
analysis. Considering the new regime, The EC settled on the significant
impediment to effective competition test (SIEC).
The differences between U.S and Non-US competition Law.
U.S. Law Enforcement by private
Enforcement by national courts, no
attorneys general, the plaintiff is free free to go to the pan-European forum
to choose any forum meaning private
of the EU option for the plaintiff
parties ostensibly injured by the
antitrust violation
Recognition of a private cause of
No grant for a private cause of action
action for damages
for damages
Treble-damage awards for successful
Treble-damage award are not
parties
generally available
No reimbursement for the defendants Reimbursement for the defendants
lawyers fees in the event of lose
lawyers fees in the event of lose
Poses the possibility of criminal
No criminal liability
liability ( from 2005 up to 2009 DOJ
collected $3.4 billion in fines based on
violations of the U.S. antitrust laws)
Thus, the plaintiffs have much greater risk, less probability of success and less
reward if they succeed. The result is drastically less ligitation.
The Rule of Reason Analysis
Preapproval System
Actions under the analysis can be
Structured to provide for a resolution
legal if they are not found to be
of competition law issues prior to the

anticompetitive. For example,

possession of a monopoly, must be
analyzed under the rule of reason and
are only considered illegal when their
effect is to unreasonably restrain
trade.
It encourages litigations

transaction.
It reduced private litigations
Previously under Article 101(3), the
Commission could exempt
agreements with favorable economic
effects overall that violated the terms
of Article 101(1) in advance issuing
an individual exemption, a negative
clearance and de minimis (block
exemptions)
The great benefit of the preapproval
research is that the parties can
consummate the transaction without
risk of subsequent nullification and
fines.
Yet, over time, an enormous backlog
developed at the Commission.
Disposition of pending requests
became notoriously slow. Businesses
were burdened by the need to fit their
agreements into the rigid categories
of the exemptions. Such an approach
greatly restricted the flexibility of
entrepreneurs.

In 2000 the Commission effectively proposed an end to its preapproval system.

In 2004 The EU Council of Ministers endowed Regulation 1/2003.
Under the new regime, when a transaction affects trade between member states,
the national authorities must apply 101 and 102, even if national law is also
applied.
The commission has abandoned the prior preapproval model in favor of an afterthe-fact, decentralize enforcement regime whereby companies decide in
advance whether they violate Article 101(1), and if so, whether they are
potentially exempted from coverage by Article 101(3)