The Failing Firm Defence – Some Further Thoughts Post Nynas/Shell and Aegean/Olympic II

May 25, 2015

CPI Europe Column edited by Anna Tzanaki (Competition Policy International) & Juan Delgado (Global Economics Group) presents:

The Failing Firm Defence – Some Further Thoughts Post Nynas/Shell and Aegean/Olympic II by Kyriakos Fountoukakos & Lisa Geary (Herbert Smith Freehills LLP)

Intro by Anna Tzanaki (Competition Policy International)

In the wake of the economic crisis in Europe, the failing firm defence has become increasingly relevant in the context of merger control. Indeed, despite its previous sparing application, the Commission embraced it in two merger cases within a short period of time in 2013. Interestingly, the defence in both of these cases concerned a failing division, a particular circumstance not specifically referred to in the Horizontal Merger Guidelines and for which, traditionally, the Commission had adopted a very strict approach. With the relevant decisions now publicly available, Kyriakos Fountoukakos and Lisa Geary revisit the issue and explain whether and how the Commission might have relaxed its approach to the failing firm defence. Even though the substantive criteria of the test are still adhered to, the Commission now seems more open to applying those criteria with greater flexibility, based on a broader counterfactual analysis; however, robust evidence including internal corporate documents will still be required.

In late 2013, the Commission adopted in quick succession two decisions which applied the so-called fa