The Hindu Business Line : Tata-Corus: Three options before the European Commission

On the site of the EC or the European Commission (http://ec.europa.eu), you can find merger-related `publications, press-releases and Commission decisions on individual cases'. Numbered `M.4408' is Tata/Corus, listed on November 20, along with three other cases on the same date: Hewlett Packard/Mercury Interactive, Basell/ Münchsmünster Cracker and Associated Assets, and OJSC Novolipetsk Steel/Duferco/JV.

"Tata Steel intends to acquire the entire issued share capital of Corus by way of a court-approved scheme of arrangements under UK law. The transaction is conditional on obtaining merger control clearance under Merger Regulation," reads the one-page communiqué on the Commission's site.

To know more about how the UK law and European Union (EU) law interact, Business Line sought the views of Richards Butler, a leading law firm based in London. Ms Katherine Holmes, Partner and Head of the firm's Competition and EU Group, and Steve Ball, Solicitor and a member of the same group answer a few questions.

Ms Holmes, "has been involved in a number of EC and UK investigations, and court and arbitration proceedings relating to anti-competitive agreements or behaviour, including pricing issues," as the firm's site informs. "Her work regularly involves advising on and seeking clearances under the UK and EC Merger regimes."

Mr Ball Steven

Mr Ball Steven specialises in the UK and EU competition law; he "advises clients on the impact on their commercial strategies of competition law." Here, the Q&A.

Does Tata have to notify both the UK and EU?

The proposed acquisition of Corus was notified to the European Commission (Commission) for investigation under the EU merger control rules. The deal was not notified separately in the UK or in any other EU Member State. The reason for this is that the Commission has exclusive competence to review transactions that meet certain turnover thresholds, and it would appear that those thresholds are met in the present case.

How can a EU Member State protect its interest?

The EU merger rules do permit a EU Member State to request that a transaction notified to the Commission be referred to it (in whole or in part) if the deal threatens to affect significantly competition in a market within that EU Member State which presents all the characteristics of a distinct market.

What is the procedure in such a case?

If the UK's Office of Fair Trading (OFT) wished to make such a request, which in the present case seems unlikely, it would have to do so within 15 working days of receiving its own copy of the parties' notification from the Commission.

Any examples?

The OFT has made a number of referral requests in the past few years, including the proposed acquisition of Express Dairies by Arla in 2003 and, more recently, the completed acquisition by the Blackstone Group of NHP plc (a property investment group) in 2006. Both of these requests were granted by the Commission.

How does the Commission handle requests from Member States?

Following any request by the OFT, the Commission would then have to decide whether to accept or reject the request. In doing so, it would consult with the Advisory Committee on mergers, whose role is to provide a means by which the competition authorities of the Member States can express their views to the Commission on certain important aspects of the Commission's investigations. The UK's representative on the Advisory Committee is the OFT.

Can there be more than one investigation into a merger proposal?

Yes. In addition to making a referral request, a Member State may also carry out an investigation parallel to that of the Commission if its `legitimate interests' are affected. The EU merger control rules give `public security', `plurality of the media' and `prudential rules' as examples, although this list is not exhaustive. For example, the Commission has, in the past, recognised the legitimate interest of the UK in applying, under certain conditions, the relevant provisions of the UK Water Industry Act in parallel with the Commission's merger investigation.

What are the options before the Commission?

The Commission, following its review of the transaction, will be presented with three options: it can either clear the transaction unconditionally, clear the transaction subject to certain undertakings being given by the parties, or block the deal. While it is unusual for transactions to be blocked in their entirety, the Commission might, for instance, require the merged entity to sell off certain steel plants or give price undertakings.

Will the Commission look into CSN's proposal too?

The bid made last week by Brazil's CSN (Companhia Siderurgica Nacional SA) would only be reviewed by the Commission after the company had made a formal offer. It would be reviewed substantively in the same way as the Tata bid, that is to say, the Commission would need to decide whether the transaction would significantly impede effective competition in the EU or a substantial part of it.

More Stories on : Interview | Courts/Legal Issues | Steel | Tata Steel Ltd | Mergers & Acquisitions

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