Remedies are in most cases an outcome of negotiations between interested parties and a competition agency for the purpose of avoiding the blockage of a merger or enforcement steps following a violation of competition law. Many agencies published guidelines or manuals that specify the principles that guide them in considering remedies. A few key principles in considering remedies are common for many agencies: (1) remedies should be considered only in cases where the agency can establish a concern to competition; (2) the remedies must completely preserve or restore competition; (3) remedies should be the least restrictive means to effectively eliminate competition concerns; (4) the remedies should address only competition concerns and should not be used for industrial planning or other non-competition purposes; and (5) remedies must be implementable within a short period of time and must be enforceable. Non-compliance of parties with remedies that were imposed on them or taken as a commitment by them is usually considered a violation of competition laws.
There is a distinction between structural remedies and behavioral remedies (sometime called conduct remedies). Structural remedies usually include divestiture of assets while behavioral remedies can include commitments to provide certain services or goods under specified conditions; to deal in a non-discriminatory manner; to avoid bundling of products; or to maintain certain price level. Behavioral remedies are characterized by an ongoing intervention in the market and therefore considered by competition agencies as less desirable. They are also more difficult to enforce. Nevertheless, competition agencies continue to impose behavioral remedies in some cases. For example, in 2020, the European Commission accepted commitments proposed by Google in connection with its acquisition of Fitbit and imposed a series of behavioral remedies as a condition to the approval of the merger. In 2010, the US DOJ reached a consent decree with Ticketmaster and Live Nation which included behavioral remedies and paved the way to the approval of their merger.
Structural remedies are usually considered more effective in correcting the harm to competition and in sustaining long term competition in the markets. They are also considered easier to enforce - mainly due to their characteristic as a onetime intervention in the market. In addition, they are less vulnerable to creative interpretation and creative circumvention by the parties. Nevertheless, the experience of many agencies shows that structural remedies are also difficult to design in a manner that will assure maintenance or restoration of competition. In many cases, for example, parties obligated to divest have difficulties to find an acquirer. In other cases, assets are divested to an acquirer that is not well suited to maintain the previous level of competition. The experience of agencies with enforcing structural remedies is only partially successful.
There are several ways in which competition agencies can improve their rate of success with divestiture. One of the tools is to impose a “fix it first” remedy, which requires the parties to comply fully with their divestiture duties prior to the consummation of the merger transaction. Another complementary tool is requiring the approval of the agency for the identity of the acquirer. In addition, it is important to pay attention to the scope of the assets that the parties are required to divest. The goal is, on the one hand, to require the divestiture of the least amount of assets required to restore or maintain competition. On the other hand, agencies need to make sure that the divested assets will enable the creation of a stand-alone business and will be divested with the relevant commercial arrangements that will allow the acquirer to compete.
The Israeli experience with remedies is a demonstration of the lessons that can be learned about the imposition of remedies. In the early years of the 21st century close to 20% of mergers were approved subject to remedies imposed on the parties, of those between 40% to 65% were behavioral remedies. In some cases, remedies were imposed to regulate the market in a way that was seen by the Israeli Competition Authority as improving competition and were not necessarily related to the merger at hand. However, growing recognition by the Israeli agency that remedies should be limited to cases where specific competition concern exists, and growing recognition that behavioral remedies are less desirable, brought a substantial decrease in the percentage of remedies that are imposed. Behavioral remedies were abandoned almost completely. In recent years approximately 0.5% to 2.5% of the mergers in Israel were approved subject to any remedies at all, and behavioral remedies are rare. In addition, the Israeli Competition Authority encountered frequent difficulties in enforcing the divestiture duties that it imposed on parties, which in turn evolved to legal dispute or to the need for enforcement steps. In 2017 the Competition Authority changed its policy and started to insist on “fix it first” divestiture as a condition to consummating a merger transaction. This caused a dramatic improvement in the compliance of parties with the imposed remedies and an improvement in their effectiveness.