The number of deals cleared by the European Commission in Phase I (in non-simplified cases) subject to remedies has increased from 10% of cases to 15% in the past twelve years. It is statistically less likely to achieve unconditional clearance in Phase I.
In Phase II, on average, prohibition decisions have increased from 10% to 12%. The number of cases which are withdrawn or abandoned in Phase II has increased from 9% to 21%. We have gone from 19% of deals not getting through, to one third of deals not getting through.
In 2012, a Phase II investigation lasted an average of 9 months, including prenotification and formal review. In 2021 that number was 16 months, an increase of 77%. The years 2020 and 2021 were outlier years with many Phase II cases being delayed due to pandemic related market changes. But if you take the average of 2017, 2018 and 2019 you still arrive at an increase of 34% in the length of time you can expect for a Phase II case compared to the average from 2012 to 2014.
Phase II case duration – prenotification and formal review duration in months*
The increase in the duration of the formal review is, in part, due to the increased use of the stop the clock mechanism. The year 2021 is an example of the increase of the use of this mechanism.
Phase II cases with at least one stop-the-clock since 2012
If you look at prenotification duration in Phase I remedies cases, you also see an upward trend. In 2012, on average, the prenotification period was 4.3 months. In 2021, the duration was more than 7 months. In the pre-pandemic years 2017, 2018, 2019, prenotification lasted 4.9 months on average, which is still an increase of almost 29% compared to 2012.
Phase I remedies cases – prenotification duration in months*
2021 data confirmed the upward trend in prenotification duration. It remains to be seen if this will normalise in 2022 and the prenotification duration will shorten to a pre-pandemic level.
*Data points for prenotification duration that fall outside a two standard deviation boundary are not included in the graphs on this page. If you would like to receive the graphs including all prenotification data points, please email Rhino@linklaters.com.
The EC is increasingly requiring up-front buyer remedies, where the parties cannot close the transaction before having entered into a binding agreement with an approved purchaser. This occurs where it is unclear if there will be suitable purchasers.
We also see an increase in fix-it-first remedies from 2016. The parties must identify a purchaser, have it approved by the EC and enter into a binding agreement before clearance.
Remedies cases in manufacturing sectors (2015-2021)
Divestitures in the manufacturing sectors aren’t soft in terms of the substantive overlap that needs to be divested. Only in 23% of cases less than the full overlap has been divested. And chances of the EC accepting such divestiture are not necessarily higher in Phase II compared to Phase I. This shows two things: it is difficult to get away with less than the divestment of the full overlap, but it’s not entirely excluded. And parties do not necessarily get a better deal in Phase II compared to Phase I.