A. GENERAL POLICY QUESTIONS
3. CHANGES TO THE EC MERGER REGULATION (ECMR)
Letter from the Rt Hon Margaret Beckett MP, President
of the Board of Trade to Lord Tordoff, Chairman of the Committee
I am writing to inform the Committee that I intend to lift
the United Kingdom's scrutiny reserve on this proposal to allow
this measure to be agreed as an A" point at a Council later
this month. My predecessor, Ian Lang, negotiated a package of
measures at the 24 April Industry Council with which I am content.
The matter has been considered in depth by both Scrutiny
Committees. A debate in the House of Commons European Standing
Committe B on 15 October 1996 completed scrutiny of the Commission's
proposals as set out in EC document 9961/96 (COM(96)313). The
House of Lords Select Committee on the European Communities took
evidence from officials and published a report (4th report, 1996-97).
The previous administration responded to that report in a letter
of 22 January 1997 and the House of Lords subsequently completed
scrutiny.
The Industry Council on 24 April 1997 gave unanimous political
agreement to a package of changes to the ECMR. The components
of this package are shown at Annex A. All components except the
first two were previously considered by the Committees. Two earlier
proposed amendments were dropped: a general reduction of turnover
thresholds; and a power to charge merger fees. The first two components
at Annex A are essentially similar to proposals previously considered
by the Committees but differ somewhat in the detail.
First, there is a new threshold mechanism which is designed
to operate alongside the existing general" turnover thresholds.
Its purpose is to catch selected large multiple notifications"
ie merger cases which fall below the current general" thresholds
but which would be likely to require notification in three or
more Member States. The Committees considered an earlier proposal
which depended on the triggering of national qualifying criteria.
The new mechanism establishes objective turnover criteria for
a minimum size of merger and companies involved in three or more
Member States. The new mechanism should therefore catch transnational
mergers but avoid the handicaps of the earlier proposal (eg different
national qualifying criteria; criteria not explicit on the face
of the ECMR). Our best estimate is that the new mechanism may
catch around 20-30 extra cases/year, including around 8-10 cases
involving UK companies ie around 5 per cent of cases currently
falling to the Fair Trading Act merger provisions. Details are
in Annex B.
Second, the Council agreed that a qualified majority would
be sufficient to change the new threshold mechanism, in the light
of experience. However, in future unanimity will be required to
change the existing general" turnover thresholds. The thresholds
and criteria must be reviewed within three years.
In addition, the United Kingdom entered a formal minutes
statement in relation to the measure extending the ECMR to all
full-function" cooperative joint ventures (item 3 in Annex
A). One effect of this measure will be to bring within the Commission's
jurisdiction, under the ECMR, large airline joint ventures involving
air transport services outside the EU. The Council had not hitherto
given the Commission the power to apply any EC competition rules
to air transport services outside the EU; and any further extension
outside the relatively narrow context of merger control remains
subject to debate with the Commission and other Member States.
The minutes statement therefore formally reserves the United Kingdom's
future negotiating position on the extension of Community competence
more generally in this area.
The amending Regulation with the whole package of measures
will now go forward as an A" point for adoption without further
debate, probably before the end of June. The amending Regulation
is expected to enter into force on 1 March 1998.
16 June 1997
Annex A
Council Amending Regulation: Changes to the EC Merger
Regulation (ECMR)
JURISDICTIONAL/SUBSTANTIVE CHANGES
1. Introduce a new mechanism to transfer to the ECMR additional
large multiple notification" cases (ie mergers likely to
fall to jurisdiction of three or more Member States) - details
in Annex B.
2. Provide for a review of the thresholds after three years;
amendments by unanimity (existing thresholds) and qualified majority
(new mechanism).
3. Incorporate all full-function" cooperative joint
ventures in the ECMR.
4. Simplify the rules permitting Member States to repatriate"
an EC merger.
5. Allow greater flexibility for Member States to refer national"
cases jointly to the Commission.
PROCEDURAL/TECHNICAL CHANGES
6. Provide legal basis for the Commission to accept undertakings
from business as an alternative to detailed investigation.
7. Change the basis for calculating banking turnover from
assets to gross income.
8. Make express provision for revocation of a clearance decision
in exceptional circumstances.
9. Provide express legal basis for accepting ancillary restrictions
(conditions attaching to a merger agreement) in clearance at preliminary
stage.
10. Extend merger suspension period during preliminary state
and increase flexibility to waive suspension.
11. Make express provision to stop-the-clock" during
the preliminary investigation.
Letter from Lord Tordoff, Chairman of the Committee,
to the Rt Hon Margaret Beckett MP, President of the Board of Trade
Thank you for your letter of 16 June informing the Committee
of developments in this matter. I note that agreement has been
reached on extending the Regulation to deal with multiple filings"
cases and all full-function" joint ventures, both of which
were changes to which Sub-Committee E had given support. The criteria
established for the new notifications mechanism seem preferable
to those in the earlier version of the proposal for the reasons
you give. They are complex at first sight but should be workable
in practice and should extend the benefits of the one-stop shop"
under the Regulation.
In view of the nature and extent of the changes from the
earlier version of the proposal a further Explanatory Memorandum
should have been promptly furnished dealing with all the amendments.
But in view of the detail given and the circumstances described
in your letter I am prepared to clear the proposal from scrutiny
on the basis of your letter. This should not, however, be taken
as a precedent and I hope that the proper procedures will be followed
in future.
19 June 1997
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