UK Law and Practice Contributed by: Alex Stratakis and Marc Freedman, Van Bael & Bellis
2. In seeking remedies that are effective in addressing an SLC and any resulting adverse effects (see 5.2 Parties’ Ability to Negotiate Remedies ), the CMA should: • aim to select the least costly and intrusive remedy that it considers to be effective; • ensure that any remedies offered are not disproportionate in relation to the SLC and its adverse effects; and • have regard to any relevant customer benefits arising from the merger. In addition to these common principles, the CMA’s guidance lays out specific requirements for both structural and behavioural remedies. Structural Remedies The CMA has expressed a clear preference for structural remedies (ie, divestments), as these are designed to have immediate and lasting mar - ket impact and do not require ongoing oversight. Divestments typically relate to the business being acquired. However, the CMA will consider divestment in relation to the acquirer, as long as the SLC can be effectively addressed in that way. In determining the scope of the divestiture pack - age, the CMA will typically seek to identify the smallest viable, standalone business that can independently compete successfully on an ongoing basis and that includes all the relevant operations applicable to the area of competitive overlap. At Phase 1, the CMA will usually require an “upfront buyer” for a divestment. An ”upfront buyer” is a purchaser who:
• has contractually committed to purchasing the divested business; and • is approved by the CMA. Where no such buyer is found, the CMA may still refer the transaction for a Phase 2 review. At Phase 2, although the parties are still able to proactively offer remedies, the CMA has the power to ultimately impose remedies, such as full divestment of the target’s business in a com - pleted transaction. Behavioural Remedies The CMA is generally more sceptical of behav - ioural remedies (ie, commitments by the parties to behave in a certain way on the market) as these tend to be more complex to implement and monitor. The CMA will generally only use behavioural remedies where: • structural remedies are not feasible; • the SLC is not expected to be sustained; or • at Phase 2, such measures would preserve substantial relevant customer benefits that would otherwise be eliminated by structural measures. Examples of behavioural remedies include sup - ply obligations, access to key technology or infrastructure, licensing commitments and fire - wall measures. Note that the CMA may use behavioural commit - ments to supplement structural remedies. Process for Proposing Remedies at Phase 1 and Phase 2 The parties may: • offer UILs at Phase 1 once the CMA has iden - tified an SLC; and
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