On 29 January 2019, the French Competition Authority (FCA) cleared a merger between two major manufacturers of baking aids and dessert mixes based upon a “fix-it-first” remedy offered by the parties to address identified competition concerns. This case, which is only the third time a fix-it-first remedy has been approved by the FCA, offers the regulator an opportunity to point out the benefits of such remedies.
On 30 November 2018, a major manufacturer of dessert mixes and baking aids notified to the FCA its intention to take sole control of its main competitor. In view of the parties’ significant market share, the FCA found that the planned transaction would give rise to competition concerns in the relevant market. Indeed, if these two major manufacturers had merged, no credible alternative would have been available for distributors.
In this context, the acquirer pro-actively offered a remedy consisting of the granting of a five year licensing agreement regarding one of its trademarks to a third-party competitor not yet active in the relevant market segment. This “fix-it-first” remedy was therefore offered post-notification but prior to any decision from the FCA, based upon a letter of intent entered into with the concerned third-party.
In this case, the FCA acknowledged that the proposed remedy prevented the strengthening of the position of the competing parties in the relevant market and provided the distributors with a credible alternative. As a result, the remedy was taken into account by the FCA to reach a clearance decision, released on 29 January 2019.
Some benefits of fix-it-first remedies
As illustrated in this case, a fix-it-first remedy allows the parties to identify by themselves a purchaser for assets whose divestment is likely to address competition concerns potentially arising from a notified merger operation. Such a freedom of choice permits the parties to avoid negotiating divestments of assets under the pressure of implementing FCA’s decision on remedies, which may give rise to opportunist behaviours from potential buyers.
From the FCA perspective, these remedies offer a solution to address identified competition concerns and to make commitments effective as from the date of the clearance decision without being subject to enforcement monitoring. The FCA also highlights in its press release that fix-it-first remedies may also shorten the investigation period and reduces the uncertainty of the remedies’ implementation.
Very few precedents
Whilst such remedies are expressly considered by the FCA in its merger control guidelines, it is only the third time that “fix-it-first” remedies have been approved by the FCA (the previous examples being decisions No 09-DCC-67 and 15-DCC-53).
In all three instances, the parties to the transaction offered a remedy post-notification (between 10 days and 6 months). It could be observed however that no fix-it-first remedy has ever been offered as from the notification although it is possible at least in theory to do so, pursuant to the FCA merger guidelines.
In view of recent precedents highlighting the risks related to the implementation of remedies imposed by the FCA (see our post here), the fix-it-first remedy could be a pragmatic solution offered to businesses in the event of competition concerns arising from a contemplated merger operation.