Boston Brussels Chicago Düsseldorf London Los Angeles Miami Munich New York Orange County Rome San Diego Silicon Valley Washington, D.C. Strategic alliance with MWE China Law Offices (Shanghai) © 2007 McDermott Will & Emery LLP. McDermott operates its practice through separate legal entities in each of the countries where it has offices. INTERNATIONAL COMPETITION NETWORK SIXTH ANNUAL CONFERENCE Merger Working Group Notification and Procedures Subgroup DEFINING “MERGER” TRANSACTIONS FOR PURPOSES OF MERGER REVIEW Joseph F. Winterscheid McDermott Will & Emery LLP Thursday, May 31, 2007

2 COVERED TRANSACTIONS PROJECT  Project Scope: Definition of transactions that merit notification and review as “mergers” under applicable merger legislation. – Critical for effective enforcement and efficient allocation of agency resources. – Essential to permit merging parties to readily ascertain notification obligations.  Project Team Members: Australia Italy Canada Japan EC Mexico Germany United States And significant contributions by South Africa, the United Kingdom, OECD and NGAs Work Product: Overview paper and annexed detailed guidance notes from 7 jurisdictions.

3 GENERAL PRINCIPLES  “Mergers,” generally: – Business transactions in which two or more previously independent economic undertakings are combined in some fashion that involves a lasting change in the structure or ownership in one or more of the undertakings concerned.  “Merger” transaction earmarks: – Plurality of economic interests (excludes intra-person reorganizations). – Lasting structural integration of those interests. – Brought about by a change in the nature of ownership or control of one or more of the undertakings concerned.  Excludes mere collaborative arrangements between undertakings.

4 TRANSACTION TYPOLOGY  Technical terminology varies by reference to local business laws.  Two main types of qualifying business transactions: – “Share” acquisitions/transfers: Includes a variety of equity interests (e.g., stock, voting securities, partnership interests, LLC interests) that entitle the owner to vote for or otherwise influence directors or management. – Asset acquisitions/transfers.  Formation of joint ventures (also included as “covered transactions” in most jurisdictions) typically involve transfers of assets and/or shares.

5 SHARE ACQUISITIONS/TRANSFERS  Typically covered whenever the acquisition gives rise to an acquisition of “control” of the target, e.g., “decisive influence” (whether by majority stake or veto rights).  Many jurisdictions also cover minority share acquisitions (e.g., acquisitions falling short of “control”) where the shareholding results in potential ability to exert significant influence over the target. – Some jurisdictions set out specified percentage levels (e.g., 10%, 15%, 25%, etc.). – Other jurisdictions look at additional factors beyond simple percentages (e.g., special voting rights, board representation, etc.).  Exemptions for “ordinary course” share acquisitions by financial institutions, institutional investors and for passive investments.

6 ASSET ACQUISITIONS/TRANSFERS  Acquisitions of all or substantially all of seller’s business assets almost universally viewed as covered transactions.  Many jurisdictions also cover asset purchases falling short of “all or substantially all” of the seller’s assets. – No question as to “change of control” of assets. – Rather, pertinent question is whether assets have sufficient economic significance to merit merger review coverage.  “Partial” asset transfers typically covered where transfer involves: – Going concern or stand-alone business enterprise. – Assets to which turnover can be attributed or sufficient to carry on a business. – Assets having independent competitive significance in production or distribution in some relevant market. – May include intellectual property rights (patent or trademark).

7 JOINT VENTURES  JV formation also qualifies as a covered transaction in most jurisdictions. – Flexible “JV” concept makes it difficult to generalize. – But typically directed at some pooling of resources to create a new business enterprise on a lasting basis. – Mere collaborative arrangements distinguished.  Qualifying JV earmarks: – Economic integration of business activities (e.g., contribution of assets, risk sharing). – JV parents exit from field of JV (often resulting in elimination of competitive overlap, e.g., a “partial merger”) – Relative permanence of arrangement.  Selected approaches: – Value of assets/shares contributed to JV (US). – Two or more enterprises “cease to be distinct” (UK). – Creation of autonomous economic entity that can operate on the market independently of parent companies on a lasting basis (EU “full function JV”).

8 KEY DEFINITIONAL AND POLICY ISSUES  Share acquisitions: – Notion of “control”. – Minority share acquisition coverage test.  Asset acquisitions: – Economic/competitive significance of assets concerned.  Joint ventures: – Distinguishing mere collaborative arrangements. – Intersection of merger laws and “conduct” laws (e.g., Section 1 and Article 81). Pre-emption vs. dual coverage.  Common definitional issues theme: Objectivity.  Jurisdictional issues: – “Covered transactions” for purposes of merger notification vs. substantive jurisdiction over transactions.