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Court of Justice clarifies that a change from sole to joint control requires EU clearance only if the joint venture is "full-function"

Court of Justice clarifies that a change from sole to joint control r

Court of Justice clarifies that a change from sole to joint control requires EU clearance only if the joint venture is "full-function"

02.10.2017 EU law

On 7 September 2017, the European Court of Justice delivered its judgment on a request for a preliminary ruling by the Austrian Supreme Court on the interpretation of the EU Merger Regulation (EUMR). It confirmed that a change in the form of control from sole to joint control of an existing undertaking is considered a concentration under the EUMR only when the joint venture resulting from this transaction performs on a lasting basis all the functions of an autonomous economic entity in the relevant market and therefore qualifies as a full-function joint venture (FFJV).

The case before the Austrian Supreme Court originated from the notification by Austria Asphalt to the Austrian Federal Competition Authority of its acquisition of 50% of the shares in an existing asphalt mixing plant. At the time, the plant was solely owned by Teerag Asphalt, which would keep the other 50% of the shares. The asphalt mixing plant which was the object of the notification would supply only to its parent companies (and had only supplied its sole parent company Teerag Asphalt before the transaction). It therefore qualified as a non-FFJV.

Since a textual interpretation of the relevant articles of the EUMR did not provide a clear answer, the Court of Justice had to assess the purpose and general structure of the EUMR. It concluded that the concept of a concentration under the EUMR captures transactions that bring about a lasting change in the structure of the market. With regard to joint ventures, the Court then clarified that they fall within the ambit of the EUMR only if they perform on a lasting basis all the functions of an autonomous economic entity and therefore qualify as a FFJV.

In addition, the Court clarified that the EUMR does not make a distinction between a newly created joint venture and a joint venture that results from a change from sole to joint control.

Interestingly, in its judgment the Court dismissed the European Commission's view that a transaction involving a change in the form of control over an existing undertaking is always a concentration, regardless of whether the joint venture is full-function or not.

This article was published in the Competition Law Newsletter of October 2017. Other articles in this newsletter:

  1. Court of Justice landmark judgment: Intel's EUR 1.06 billion fine is sent back to the General Court
  2. Court of Justice upholds fine imposed on Philips and LG in the cathode ray tubes cartel
  3. Court of Justice provides guidance on examining excessive prices as abuse of a dominant position
  4. Curaçao Competition Act entered into force on 1 September 2017
  5. District Court of Rotterdam dismisses Vodafone claims of abuse of dominance by KPN

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