Merger Controls First Edition - J Sagar Associates

Cadwalader, Wickersham & Taft LLP European Union
rather than horizontal. McAfee specialised in security and antivirus software, whereas Intel was the world’s largest chipset
manufacturer. The general trend in the IT sector was to move security software closer to the hardware to close off loopholes,
i.e. have the security software embedded in the chipset, rather than just installed on the hard drive. The Commission
considered four theories of harm. First, it looked at whether Intel might hamper the interoperability of its chipsets vis-àvis
third party security software providers. Second, it assessed whether Intel hardware and McAfee security software
might be technically tied post-merger. Third, it considered whether Intel might commercially bundle its hardware with
McAfee security, for example through rebates or other commercial incentives. Finally, it looked at whether Intel might
hamper the interoperability of McAfee software with non-Intel chipsets.
Ultimately, Intel gave commitments to address the first, second and fourth theories of harm. Third party security software
vendors were given access to Intel’s operability data on a royalty-free basis. Further, if the merged entity supplies security
software embedded in chips, it has to allow the software to be disabled by OEMs so that third party anti-virus software
can be installed on computers using Intel chips. Finally, Intel had to commit not to actively engineer its security software
to degrade its performance when running on a non-Intel chip.
There was some industry criticism following this case that the forced disclosure of interoperability data by Intel for new
hardware one year before commercial launch would act as a disincentive for innovation post-merger. However it would
seem from statements by various DG Comp officials that interoperability remedies are likely to become more common in
very sophisticated technology cases involving innovation markets going.
Waiver of Outdated Remedies
Also noteworthy was the decision adopted under Article 8(2) of the Merger Regulation on 3 May 2011, technically a Phase
II decision, which waived certain commitments imposed on Hoffmann-La Roche in 1998 when it acquired Boehringer
Mannheim (M.950). The decision makes clear that DG Comp can revise its merger control decisions in order to amend
or waive commitments even in the absence of a time framework, deadline, or review clause in the original commitments.
The 2008 Remedies Notice (paragraphs 71 to 76) states that a waiver or modification of commitments may in particular
be relevant for non-divestiture commitments, such as access commitments, which may be on-going for a number of
years. Exceptional circumstances justifying a waiver or modification may be accepted if the parties show that the
market circumstances have changed significantly and on a permanent basis. A sufficiently long time-span, usually
several years between DG Comp’s original decision and the request by the parties, is required. DG Comp will also
take into account third party views and the impact a modification may have on their positions and on the overall
effectiveness of the remedy.
Trustees Must be Independent
In September 2010, the General Court found fault with the Commission’s decision to approve a purchaser of assets divested
by Lagardère when it acquired Vivendi Universal Publishing, because that 2004 decision was based on a report drafted by
a trustee who did not meet the essential requirement of independence (T-452-04 Editions Jacob v Commission). The
Commission has now appealed the judgment to the European Court of Justice. The case sends a clear message that parties
should be extremely cautious when selecting their trustees. Failure to comply with independence requirements may leave
companies and the Commission open to damages claims by third parties.
Court Finds Warehousing is not Gun Jumping
Concerning the same 2002 merger, while the Commission was reviewing the transaction, Lagardère entered into an
agreement with a bank to acquire the subsidiary it ultimately intended to acquire from Vivendi, while it was waiting for
merger clearance. The agreement provided that once the Commission had issued its clearance decision, the bank would
then sell the subsidiary to Lagardère. The General Court found in September 2010 that the arrangement did not breach
the stand-still obligation in the Merger Regulation (T-279/04 Editions Jacob v Commission). Traditionally, the Commission
has viewed such situations as gun-jumping and this position is articulated in its Consolidated Jurisdictional Notice. The
judgment is a very positive development but the court left open some key issues. Whether the Commission will maintain
its stance that warehousing amounts to implementation by the ultimate purchaser remains to be seen, despite the fact that
warehousing deal structures are valuable transactional tools.
Key policy developments
Implications of Merger Control for Foreign Direct Investments
In a number of recent speeches, Commissioner Almunia has stressed that, regardless of political sensitivities around certain
transactions, the Commission will continue to decide merger cases “exclusively on competition analysis”, and that “market
reality, and market reality alone must lie at the core”. There have been suggestions from some quarters that the Commission
establish some form of screening of foreign investment at the EU level, including during merger control in the wake of
(unsuccessful) Italian attempts to thwart the M.6242 Lactalis/Parmalat dairy merger (cleared by the Commission in June
2011), where a French buyer acquired one of Italy’s flagship companies, and M.6092 Prysmian/Draka Holding, cleared
in February 2011.
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