Giving Effect to the Remedy

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Remedies are an important aspect of merger control because a large proportion of mergers where competition concerns are identified are cleared with remedies. For example, in the EU in 2018, six out of 12 mergers investigated in Phase II were cleared with remedies. In addition, in 17 out of 383 mergers that were cleared in Phase I, clearance was subject to remedies to avoid an in-depth Phase II investigation. An effective remedy is one that fixes the competition concern caused by the transaction, while at the same time preserving the commercial rationale of the deal. There are two main categories of risk that can undermine the ability of a remedy to achieve this goal: composition risk and implementation risk. Composition risk refers to the possibility that the design of the remedy fails to address the competitive harm identified, while implementation risk relates to the possibility that the remedy might not work in practice, for example, because it takes too long to become effective or the new competitor the remedy aimed to create ultimately exits the market. In October 2005, the European Commission (EC) undertook a critical appraisal of the effectiveness of remedies and identified a series of ‘serious design and implementation issues affecting the effectiveness of remedies’. [2] The EC identified composition risk in terms of the divestment business being inadequate in scope as the most common issue. Since then, the EC has developed a remedies policy designed to minimise both composition and implementation risks. The US agencies’ approach to remedies as developed over the years is very similar to that of the EC. Crafting an effective remedy can be challenging and often depends on the competition concerns that need to be addressed, as well as timing (i.e., whether the parties have the time to fight the case on the merits or prefer to give a broader remedy early on in order to secure a quick clearance). This chapter focuses on designing an effective remedy and then identifies guideposts for dealing with composition risk and implementation risk in the United States and the European Union.