BIICL 7th Annual Transatlantic Antitrust Dialogue
London, 1 May 2007
Hunting for the quick fix?
Phase I remedies in UK merger control
Simon Pritchard
Director, Mergers
Agency best practice
Learning from peer agencies
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Ex post studies – CC (2006), DGCOMP (2005), and FTC (1999)
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Policy guides, notices – 2004 DOJ guide, 2007 EC materials
Learning from DIY experience
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Beware of misplaced faith in behavioural remedies –
National Express/Prism (2000, reviewed in 2006)
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Beware contingencies and scarcity of suitable purchasers in
divestiture cases – Tesco/Co-op Slough (2004, referred in 2007)
OFT merger remedies cases 2006-7
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Boots / Alliance Unichem – divestiture of pharmacies
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Gala / County – divestiture of bingo hall
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Pendragon / Reg Vardy –
Inchcape / EMH
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Co-op / Fairways – divestiture of funeral homes
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Tetra Laval / Carlisle – IPR remedy in industrial cheese equip.
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Aggregate Ind / Foster Yeoman – divestiture of asphalt plants
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Flybe / BA Connect – release aircraft parking stand at SOU
divestiture of car dealerships
(authorized repair services)
Case study – Tetra Laval/Carlisle (2006)
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First UK up-front buyer case
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Rationale for transaction was target’s U.S. assets, but creates two
2:1’s and a 3:2 in markets for industrial cheddar-making equipment
in UK and Ireland
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Here, Phase II would not further the substantive analysis;
key issue is remedies design and buyer
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Only 5-10% of Carlisle UK plant devoted to overlap products;
doubtful a buyer would want entire plant
Tetra Laval/Carlisle
cont/…
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Quasi-structural remedies package: ‘irrevocable, exclusive,
perpetual’ EEA-wide licenses for IP rights
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OFT presses pause on timetable; Tetra finds candidate buyer
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OFT reviews FTC and DG Comp ex post studies;
tests credibility of buyer and scope of package pre-CRM
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Tetra closes on worldwide transaction outside UK
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Post-decision, Tetra signs conditional S&PA with buyer;
OFT consults on remedies package + buyer in tandem
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Bonus: Irish had gone to Phase II; closed early due to UK fix
Process optimisation – parties
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First-phase remedies are key to a sound two-phase merger regime,
and to reducing frictional costs of UK system
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Parties and advisers can assist the OFT with pinch-points
 Parties control what they offer – and typically prefer not to engage
early, fearing over-enforcement
 Clear-cut standard: degree of confidence in defining scope of
problem (e.g. which overlaps do / don’t raise concerns)
 Clear-cut solution: risk and complexity factors –
viability risk, deterioration risk, purchaser risk
 Third party litigants – addressing above improves chances of
defending a settlement on appeal – Celesio v OFT
Process optimisation – OFT
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OFT will respond to early and candid engagement on a
‘without prejudice’ basis
 Informal advice at confidential stage if parties ‘play ball’
 Pre-notification dialogue
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OFT indulges in ‘closed envelope’ devices to reassure clients
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Plan to consult on a second-bite option for ‘near miss cases’
featuring a good faith offer prior to the Case Review Meeting
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New head of remedies – creation of new senior position within
OFT Mergers to consolidate know-how and produce guidance
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Finally, OFT seeks optimal blend of empiricism and pragmatism:
accepting parties’ divestment offer of all 3:2’s in Boots/Unichem