General Principles of Merger Remedies Ingrid Zappia & Mark Rakers Structural vs. behavioural merger remedies General principles of merger remedies l Effectiveness l Enforceability l Proportionality l Burden and costs l Transparency and consistency Effectiveness of merger remedies l The remedy must address the potential harm which flows from the concerns identified l The remedy must be customised to the particular nature of the relevant merger l Consultation with relevant parties as to effectiveness of proposed remedy Enforceability of merger remedies l Before accepting a merger remedy it is important to ensure that the remedy will be implemented in a timely manner l Obligations of relevant parties must be clear and unambiguous l The party offering the merger remedy is capable of meeting its obligations l Can the remedy offered be frustrated by the actions (or inaction) of third parties? l What consequences flow if there is non-performance of the obligations? Proportionality of merger remedies l Remedy should be proportionate to the competition concerns or detriments l Burden and costs of implementing a merger remedy should be considered l Remedy does not need to improve competition beyond the pre-merger level of competition l Needs to adequately address the potential harm identified which results from the merger and be effective in restoring or maintaining competition Transparency and consistency of merger remedies l Transparency can assist in optimising the effectiveness of the remedy and compliance by the merger parties with their obligations l Transparency should not involve any disclosure of confidential information l Consistency will provide a reliable basis for merger party decisions and expectations – however, unique transactions may require a different approach/solution depending on the specific circumstances. May be instances where outright rejection of a merger is the only suitable outcome l If no remedy can be shown to be effective and enforceable, outright rejection of the merger may be the only suitable outcome ACCC experience l Standard features of an undertaking: – Objectives & competition concerns to be remedied – Interpretation clauses – Information gathering clauses – Monitoring compliance: auditors and independent managers – Merits of standard clauses - consistency vs flexibility ACCC experience l Incentives of parties may change – good faith negotiations – impact on future undertakings l Preference for up-front divestiture – aligns interests of parties and regulator – composition, asset and purchaser risks l Behavioural vs. structural remedies – strengths and weaknesses, including monitoring & enforcement challenges ACCC experience l Commercial timeframes – offering undertakings early l Remedial action available for breach of undertaking l Undertakings Compliance Unit – dedicated unit for negotiation, monitoring and enforcement of undertakings