| Jurisdictional issues | Mergers are required to be notified to the Commission where there is a ‘concentration’ that has an ‘EU dimension’ Notification is required where the arrangement is of a type (concentration) and size (an EU dimension) which should be examined by the commission before the merger can go ahead Notification is mandatory where the Commission has jurisdiction (failure to do so = fines and requirement for merger to be reversed) Competition authorities of EU MS do not have jurisdiction to examine mergers unless the Commission specifically decides to refer a transaction, in whole or in part, to such authorities Can be beneficial to parties as they only have to make one application |
| Concentration (Art 3) | Issue is whether the transaction results on a lasting basis in a change in the structure of the market – concern is with establishing the economic potential of the transaction and therefore the economic unit (i.e the concentration) being created -
Art 3(1): concentration exists where: Two or more previously independent undertakings merge; or One or more undertakings acquire ‘whether by purchase of securities or assets, by contract or by other means, direct or indirect control of the whole parts of one or more other undertakings’ Concentration can arise where there is an acquisition of sole control (such as a takeover), a pure merger (two undertakings combining) or an acquisition of joint control (such as a joint venture) Control Means more than just voting control Assessed by reference to the ‘possibility of exercising decisive influence on the undertaking’ (Article 3(2)) – e.g. ability to block resolutions Control does not have to be obtained by one undertaking but can be satisfied where there is joint control Joint venture and concentration Joint ventures are a common form of business vehicle, commonly used where parties pool their respective resources into a specific company (a joint venture company) -
Key requirements for concentration in Joint Venture: there must be joint control, which generally exists where there is negative control over key strategic decisions, in particular in relation to the budget, the business plan, major investments, and the appointment of senior management; and the joint venture must be a ‘full function’ entity, which generally means that the joint venture company must have sufficient financial, human and other resources to carry on, on a lasting basis, independently from its parent companies. |
| ‘EU dimension’ (Art 1) | Assessed under the Merger Regulation by reference to the turnover of the parties -
Turnover thresholds contained in Art 1 of the Merger Reg Care must be taken as to assess whether the test relates to combined or individual turnover -
Jurisdictional Notice outlines rules relating to turnover identifying the correct undertaking for the purpose of turnover (para 129 onwards); group turnover (para 175 onwards); joint venture turnover (para 186); the correct accounts (para 169 onwards); where the turnover is generated (para 196 onwards) |
| Turnover thresholds | The turnover thresholds will be exceeded whereeither: Art 1(2)(a) - The combined aggregate worldwide turnover of all the undertakings concerned is more than EUR5 billion (this threshold is intended to exclude mergers between small and medium-sized companies); and The aggregate EU-wide turnover of each of at least two of the undertakings concerned is more than EUR250 million (this threshold is intended to exclude relatively minor acquisitions by large companies or acquisitions with only a minor European dimension), unless each of the undertakings concerned achieves more than two-thirds of its aggregate EU-wide turnover within one and the same member state (this threshold - the so-called "two-thirds rule" - is intended to exclude cases where the effects of the merger are felt primarily in a single member state, when it is more appropriate for the national competition authorities (NCAs) to deal with it) (Article 1(2), Merger Regulation) or: The combined aggregate worldwide turnover of all undertakings concerned is more than EUR2.5 billion (instead of EUR5 billion); and The aggregate EU-wide turnover of each of a least two of the undertakings concerned is more than EUR100 million (instead of EUR250 million); and The combined aggregate turnover of all undertakings concerned is more than EUR100 million in each of at least three member states; and In each of at least three of these member states, the aggregate turnover of each of at least two of the undertakings concerned is more than EUR25 million, unless each of the undertakings concerned achieves more than two-thirds of its aggregate EU-wide turnover within one and the same member state (Article 1(3), Merger Regulation – national competition authority are better placed than Commission) |
| Notification to Commission | Concentration with an EU dimension must be notified to the Commission prior to implementation and after the conclusion of the agreement, the announcement of the public bid, or the acquisition of a controlling interest Notifications may also be made under the Merger Regulation where the parties ‘demonstrate to the Commission a good faith intention to conclude an agreement or, in the case of a public bid, where they have publicly announced an intention to make such a bid’ (Article 4(1)) |
| Referrals between Commission and MS’s | Article 9 of the Merger Regulation allows the Commission to refer a merger to a Member State authority where the merger is held to affect competition on a market within that Member State that ‘presents all the characteristics of a distinct market’ (Article 9(2)(a) and (b)) Article 22 of the Merger Regulation allows Member States to request the Commission to deal with a concentration even if it does not have an EU dimension provided the concentration affects trade between Member States and threatens to have a significant effect on competition within the Member State or States making the request -
Article 4(4) of the Merger Regulation permits the parties, prior to notification, to inform the Commission by way of reasoned submission that the concentration may significantly affect competition in a market within a Member State which presents all the characteristics of a distinct market; accordingly, it should therefore be examined, in whole or in part, by that Member State The Commission must forward the submission to the relevant NCA, and if the NCA agrees, the Commission must then decide whether to make a referral to the NCA -
Article 4(5) the parties to a proposed concentration which does not have an EU dimension may by way of reasoned submission inform the Commission that the Commission should examine the concentration E.g. if a concentration falls below the thresholds for an EU dimension but still covers several Member States and so would be subject to notification to and review by several NCAs The Commission must forward the submission to the NCAs of the Member States concerned. If at least one Member State that is competent to examine the concentration disagrees then the Commission cannot accept the reference. If no NCA objects, the concentration is deemed to have an EU dimension and must be notified to the Commission Article 21(4) allows Member States to protect legitimate interests, for example maintaining the plurality of the media or national security or financial strength (credit crisis) |
| Commissions Assessment |
| Substantive test | Outlined in Art 2(2) and (3) and whether the concentration will or will not ‘significantly impede effective competition in the common market or in a substantial part of it, in particular as a result of the strengthening of a dominant position’ In assessing a concentration the Commission must...
|
