Comments on European Commission Draft Notice on the Appraisal of Horizontal Mergers

ICC welcomes the Draft Notice on the Appraisal of Horizontal Mergers ("Draft Notice"), which provides the long-awaited Commission response to calls for more detailed guidance as to the analytical framework that will be used by the Commission to assess notified horizontal mergers. That mergers can raise competitive concerns, even without creating a single market leader had been clear for some time (high-profile precedents include Nestlé/Perrier, Gencor/Lonrho and Price Waterhouse/Coopers & Lybrand). However the controversial Airtours/First Choice prohibition of 1999, and the subsequent expansive use by the Commission of the concept of 'collective dominance' to condemn certain mergers in concentrated markets (for instance, Time Warner/EMI and Alcan/Pechiney), have created a strong need for clarification on the scope of 'dominance', the analytical framework being employed by the Commission, and the nature of the evidence upon which the Commission will rely in such cases.

ICC considers the Draft Notice a positive effort to bring needed transparency to the analytical process and clarification on the economic rationale underlying the Commission's approach to assessing mergers of competing assets (ICC also looks forward to a similar exercise being performed for mergers of complements, as in vertical and conglomerate deals, where there is still considerable and undesirable uncertainty). The approach adopted in the Draft Notice is, for the most part, broadly sensible and consistent with mainstream economic thinking, as well as broadly in line with the US approach. As discussed below, however, ICC remains highly concerned with certain conceptual aspects of the Draft Notice. ICC also believes that there are still unresolved issues of resource constraints and consistency of implementation at the MTF, that need to be resolved as a threshold matter to ensure consistent and meaningful decision-making, and to provide business with greater certainty in the future.