Divestiture Commitments under the EU Merger Regulation – Commission updates model text

Key takeaways

On 5 February 2025, the European Commission published an updated Standard Commitments template, which is a model text for use by merging parties offering divestiture commitments to secure the Commission’s approval of a concentration. The Standard Commitments now include:

• stricter criteria which the purchaser of the Divestment Business will need to fulfil;
• a dispute resolution procedure for conflicts between the merging parties and the purchaser about the Commitments; and
• additional changes that serve to clarify or strengthen the obligations of the parties giving commitments may now include the target and other changes to enhance the Commission’s ability to ensure effective implementation.

Introduction

On 5 February 2025, the European Commission published an updated model text for use by merging parties offering divestiture commitments to secure the Commission’s approval of a concentration (the Standard Commitments). They are based upon the experience the Commission has gained to date from merger cases involving remedies. The Standard Commitments were first published in 2003 and then updated in 2013. 

Whilst they are neither exhaustive nor legally binding upon parties in a merger procedure, they contain the elements for all standard provisions that should be included in divestiture commitments. In parallel to the most recent updates, the Commission has made corresponding changes to its best practice guidelines which provide additional explanation on how the Standard Commitments should be interpreted and applied in different circumstances. 

Important changes

This latest version of the Standard Commitments introduces some important substantive changes as well as some clarifications and specifications, including in terms of the obligations of the parties involved in divestment Commitments. 

1. The parties bound by the Commitments

In the previous version of the Standard Commitments, the Commitments were to be given by the party/ies notifying the main transaction to the Commission for clearance. The updated Standard Commitments provide for signature by the party or parties committing to the divestiture (the “Committing Parties”) with the consequence that this will include (and thus bind) the target where the Commitments relate to a business on the target side or include any obligations incumbent on the target.

2. Scope of the Divestment Business

Several amendments to the Standard Commitments concern the scope of what is to be included in the business which the Committing Parties commit will be divested, and which must consist of a viable going concern that can compete effectively with the merged entity on a lasting basis (the Divestment Business), including:

• the explicit capture of (i) pipeline products and related rights and (ii) know how within the intangible assets to be transferred to the purchaser (previously only IPR was specified); 
• the entitlement of the Divestment Business to products or services has been significantly enhanced insofar as necessary to maintain the full economic viability and competitiveness of the Divestment Business: first, the Divestment Business must include not only (as was the case previously) all current arrangements under which the parties to the main transaction supply the Divestment Business, but it is now specified that it must also include any other current or new arrangements which are necessary for the viability of the Divestment Business. Any departures from this principle must now be agreed with the purchaser of the Divestment Business and approved by the Commission. Second, whereas the Standard Commitments previously required that the transitional services must be provided on terms and conditions equivalent to those already afforded to the Divestment Business, a new formulation has been introduced requiring provision at cost if that is more advantageous to the Divestment Business. We note that, in the past, actual commitments often required transitional services to be provided at cost.

3. Purchaser requirements

Updates to the Standard Commitments introduce significantly more stringent requirements to be met by the prospective purchaser of the Divestment Business to be approved by the Commission:

• when it comes to financial resources, the Standard Commitments now specify that the purchaser must have turnover significantly larger than that of the Divestment Business, must not be excessively leveraged and must have sufficient equity and profitability. This would appear to reflect a shift in the Commission’s attitude towards leveraged buy-outs;
• there is now an explicit requirement for the purchaser to have the ability to develop the Divestment Business as a competitive force (supplementing the pre-existing requirement for the proven expertise to do so). Previously, the Guidelines stated that the purchaser requirements (as then listed) could generally be met by either industrial or financial investors, while noting that financial investors could demonstrate the necessary management capabilities and proven expertise, by financing a management buy-out. As now amended, the Guidelines state that “specific industrial expertise may be required […], thereby excluding financial investors”. This change suggests that financial investors may need to work harder to gain Commission approval than may previously have been the case and flags the importance of clearly demonstrating to the Commission that the necessary specialist expertise has been secured.

4. Sale under a Divestiture Trustee

There is a clarification that, should the sale of the Divestment Business fall to the Divestiture Trustee, this may involve a negative price if considered appropriate and reasonably required. 

5. Full implementation of Commitments

Several changes contribute to ensuring that the divestment occurs in line with the Commitments, among others the establishment of a dispute resolution process:

• there is a new stipulation that, in case of a conflict between the wording of the Commitments and contracts implementing them, the wording of the Commitments will prevail, and the interpretation of the Commitments will take account of the solution that is more favourable to the Divestment Business; 
• deviations from the Commitments in such contracts are valid only if expressly approved by the Commission; and the contracts are required to include a clause to that effect;
• a new provision prevents changes to the version of the transaction documents approved by the Commission without Commission approval;
• an entire new section introduces a dispute resolution procedure which applies in the case of conflict between the Committing Party/ies and the purchaser of the Divestment Business in relation to Commitments, to be conducted under the supervision of the Monitoring Trustee.

6. Preservation of the Divestment Business

Obligations to preserve the viability, marketability and competitiveness of the Divestment Business fall on all signatories to the Commitments, who as noted above can include the target in the main transaction. There is now increased granularity as to how this is to be achieved, including with regard to the development of pipeline products, IT migration / separation, continued progress with regard to any licences / authorisations (governmental or otherwise) required by the Divestment Business.

In summary, the new Standard Commitments template introduces important changes to the process of obtaining Commission approval of proposed transactions requiring structural remedies. These updates provide further assurance that the objective of structural remedies will be achieved.

Behavioural commitments are not affected by the changes. Businesses should be aware of the revisions in the context of deal planning. Some changes in approach will be required, in particular to the scoping of the divestment business and risk assessment with respect to the purchaser selection process, rendering the overall remedies process more complex.

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