Antitrust Law Daily Wrap Up, ANTITRUST NEWS: European Commission invites comment on proposals to alter merger control regulation, (Jun 21, 2013)
By Tobias J. Gillett, J.D., LL.M.
The European Commission has called for comment on its proposals to amend its Merger Regulation to permit the Commission to examine non-controlling minority shareholdings and to modify its mechanisms for transferring cases between the Commission and national competition authorities. The Commission has outlined its proposals for reform in a consultation paper.
Minority shareholdings. According to the paper, its present Merger Regulation only applies to transactions leading to acquisition of control over a company. However, the Commission observes in its consultation paper that acquisitions of non-controlling minority shareholdings (“structural links”) may sometimes result in anticompetitive effects. The paper notes three principal ways this can occur: (1) “by reducing competitive pressure between competitors,” (2) “by substantially facilitating coordination among competitors,” and (3) “by allowing companies to hamper competitors’ access to inputs or customers.” The paper notes that although the competitive effects from the acquisition of non-controlling shares may be less pronounced, the efficiency gains may be similarly limited.
Currently, the Commission can only “take pre-existing minority shareholdings into account in the context of a notified merger where the Commission is competent to analyze a separate acquisition of control.” In circumstances in which “the subsequent acquisition of a minority stake is unrelated to an acquisition of control, the Commission cannot investigate and possibly intervene in such acquisition.” The paper notes that the Commission’s ability to intervene under Articles 101 or 102 of the Treaty on the Functioning of the European Union “is limited and does not cover all categories of anti-competitive structural links.”
The paper proposes two principal options for addressing the perceived problem. First, the Commission could “extend the current system of ex-ante merger control to structural links,” which would require them to be notified to the Commission in advance and would not allow them to be approved until the Commission has cleared them. Second, the Commission could adopt a system permitting it to select cases to investigate, either through a “self-assessment system” or a “transparency system.” A self-assessment system would not require parties to notify non-controlling minority shareholdings, but would allow the Commission to investigate in its discretion when it became aware of concerns. A transparency system would require parties to file an information notice with the Commission that it would publish on its website and/or in its Official Journal, thus making third parties aware of the transaction.
Depending on the options adopted, further decisions would have to be made regarding (1) “the scope and substance of the Commission’s power to examine structural links,” (2) “the relationship between the Commission and national competition authorities,” and (3) “procedural issues.”
Referral of cases between the Commission and national authorities. According to the consultation paper, “[t]he referral provisions of the Merger Regulation allow for a re-allocation of individual cases where the notification thresholds, based on turnover figures, do not provide for the best-placed authority to deal with the case from the outset.” The paper notes that a Commission report found “that a significant number of cross border cases are still subject to multiple review in several Member States.” This could be due to “cumbersome and time consuming” procedures for referral, and to companies “opt[ing] against a referral to the Commission in order to avoid the Commission’s jurisdiction for reasons of ‘forum shopping.’”
Under Article 4(5) of the Merger Regulation, parties requesting the referral of a merger to the Commission must submit a “reasoned submission” allowing “Member States to assess whether or not they accept the referral request,” and the Member States are given 15 working days to oppose the referral. If no Member State opposes the referral, the Commission obtains jurisdiction and the parties must submit a notification to the Commission.
The paper proposes modification of this procedure by (1) abolishing the reasoned submission and instead permitting parties to notify directly to the Commission, which would forward notification to the Member States; (2) allowing the Commission to have jurisdiction unless a competent Member State opposes the jurisdiction within 15 working days of receiving the notification; and (3) requiring the Commission to renounce jurisdiction if a Member State opposes it. Referrals would still be available only on the request of the notifying parties, and the requirements for a referral would remain the same (“a concentration within the meaning of the Merger Regulation for which the turnover thresholds are not met, but for which at least three Member States are competent under their national laws”).
Under Article 22 of the Merger Regulations, concerning post-notification referrals from the Member States to the Commission, the Commission only has jurisdiction “over the case for the territory of those Member States requesting and joining the referral.” The paper proposes to alter this provision to allow the Commission to have jurisdiction for the entire European Economic Area. The paper contends that this would (1) “ensure a coherent treatment of a case displaying cross-border effects, reduce the risk of diverging decisions and increase legal certainty”; (2) “reduce the administrative burden for the parties as they only need to deal with one authority in cases where the Commission is the more appropriate authority’; and (3) “help to capture cases of forum shopping where the parties opt against an Article 4(5) referral in order to avoid scrutiny by the Commission.”
The Commission seeks the views of stakeholders on these and other ways to improve the current merger control framework. Comments must be submitted by September 12, 2013. Further information and consultation documents can be found here.
News: Antitrust