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Mario Monti, Europe’s top antitrust official, will launch a critical debate next week that could herald extensive changes in the way merger reviews are conducted by the European Commission. In a wide-ranging interview, the Competition Commissioner, who leads the antitrust division of the European Union’s executive agency, said he intends to present a 60-page document unveiling the parameters of the debate to the 20-member board of the Commission for adoption at its next weekly meeting Tuesday. The long-awaited document, or green paper, should lead to a major overhaul of the EU’s merger regulations, arguably one of the EU’s most important pieces of legislation next year. “I think that the green paper comes at an appropriate time, though of course it is not linked to any recent debates,” said Monti, in a not-so-veiled reference to the controversy surrounding his rejection of General Electric Co.’s proposed $41 billion takeover of Honeywell International Inc. earlier this year. “Because this is a legal instrument which is so rich in concrete operational implications for companies and for the economic landscape, it needs to be kept alive and kept alive through discussion.” he explained. The green paper, he said, will touch on nearly every aspect of merger legislation but will focus on three categories: substance, jurisdiction and procedure. The most crucial substantive points include whether the Commission should change its legal test in merger reviews. EU merger review language now examines whether a deal “creates or strengthens a dominant position.” In contrast, the U.S. test considers “the substantial lessening of competition.” The Commission itself is debating whether the EU should align its test with the U.S. wording. But Monti said he wants to keep all options open. The paper will also discuss the role of efficiencies in EU policy, an area that has created some confusion among the legal community. Monti admits the EU does not have an “explicit efficiency policy” and is therefore eager to debate the matter. A debate over efficiencies was at the heart of the disagreement between Washington and Brussels in the GE-Honeywell merger review. Although the U.S. Department of Justice has never officially published its decision to approve the deal, it’s widely accepted that GE successfully argued with Washington that efficiencies from the deal would encourage competition. The Commission, however, blocked the deal, sparking a public debate between the DOJ and EU. “What has been very clear is that efficiencies are not an offense,” Monti said. “Efficiencies are not a thing we will use to condemn a merger, that is something that has been constant and clear.” Monti added, however, that “GE was not a case of efficiency offense because GE did not claim efficiencies.” Brussels, he said, may consider efficiencies as an argument by companies to approve a deal. On jurisdictional matters, the paper will discuss whether the Commission should automatically review any deal involving companies from three or more EU states. The document will also examine the mechanism for referring cases back to member state authorities. This referral system has led to controversy when countries have been denied referral from Brussels. There have also been rare cases in which the EU has handled reviews believed to have been more effectively handled by national authorities. In some cases, though, member states are suspected to have waived their right to referral on big domestic mergers, diverting the political heat to Brussels when a review proves problematic. Another important aspect of the forthcoming merger review will be discussion of the EU’s current system of M&A deadlines. The commission now conducts mandatory four- to six-week reviews in its so-called Phase 1 rulings, and if it finds problems, it moves on to its more intense four-month Phase 2 reviews. Among the proposed amendments, the green paper will suggest allowing companies to request extensions to Phase 2 deadlines. The aim is to allow companies an opportunity to offer further concessions in the rare occasions that the Commission’s market tests prove negative. One option in the green paper would allow companies to “stop the EU’s merger clock” by 10 to 15 days to discuss an improved offer. The document will also propose extending Phase 1 deadlines, though this would be at the Commission’s discretion, not the petitioning company. Brussels wants this option to allow extra time for further discussions with the companies or market tests in cases that have a fair chance of securing early approval. The EU merger review that will kick off Tuesday with the release of the green paper is different from the EU’s so-called takeover directive, which would set down parameters that EU member states should adopt as guidelines for takeovers. The European Parliament struck down a proposed takeover directive earlier this year, and the Commission is working on a new proposal. Monti said he did not have any predetermined calendar to wrap up the merger review initiative, though it’s widely hoped the Commission will hand a draft to member states for final adoption by next summer. Consultations with interested parties will take place until March. “We do not feel in a hurry because the system is there functioning well, and we want to discuss possible improvements.” Copyright (c)2001 TDD, LLC. All rights reserved.

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