Short Reads

EU merger control: Dutch clause to catch future killer acquisitions

EU merger control: Dutch clause to catch future killer acquisitions

EU merger control: Dutch clause to catch future killer acquisitions

01.10.2020 NL law

Competition Commissioner Vestager presented a sneak peak of her plans for the future of EU merger control on the 30th anniversary of the EU Merger Regulation. The proposed plans include a simplification of the notification procedure and a new approach towards the system of referral to ensure that significant transactions, particularly in the digital and pharmaceutical industries, no longer escape Commission scrutiny.

The Commission calls upon national competition authorities to refer transactions to it that remain below notification thresholds, but potentially have an effect on competition.

The intended policy shift will bring about more uncertainty on whether, when, how and by whom intended mergers will be reviewed. It is therefore advisable for merging parties to assess for all transactions – even those falling below EU and national thresholds – any potential impact on competition in the single market. More guidance is expected before the policy comes into effect around the middle of 2021.  

The Commission’s plans

In her speech, Commissioner Vestager outlines the need for a simpler assessment of transactions under the EU Merger Regulation (EUMR), including a relaxing of information requirements, a broader application of the simplified procedure and fewer pre-notification obligations for no-issue transactions.

In line with the recommendations made in the Report on Competition Policy in the digital era, the Commissioner furthermore notes that some mergers that could seriously affect competition currently escape scrutiny by the Commission due to the companies’ turnover not meeting the EU thresholds. In this regard, she mentions so-called “killer acquisitions”, in which an incumbent buys a potential rival that is still in its nascent stage, with the aim of terminating the business after acquisition. Where Germany and Austria have responded to this (perceived) enforcement gap by introducing value thresholds, Commissioner Vestager indicates that for the EU such thresholds ‘do not seem like the most proportionate solution’ (in line with the responses to the Consultation on Evaluation of procedural and jurisdictional aspects of EU merger control). Instead, she refers to an answer hiding in plain sight: encouraging greater usage of the ‘Dutch clause’ of Article 22 EUMR. In the Commissioner’s plans, national competition authorities will be encouraged to refer transactions that are ‘worth reviewing on the EU level – whether or not those authorities had the power to review the case themselves’

The revival of the Dutch clause and its consequences for merging companies

The Commission’s ‘revival’ of the Dutch clause of Article 22 EUMR is remarkable. The provision was historically included in the EUMR to overcome the absence of national merger control regimes. Over time, the Commission has consistently discouraged national competition authorities from relying on the article. In the White Paper towards more effective EU merger control, the Commission even considered eliminating the possibility of referring cases where national notification thresholds are not met.

In the Commission’s new plans, Article 22 will serve as a tool to target transactions that remain below notification thresholds, but potentially have an effect on competition. The plans thereby seem to have a specific focus on transactions in the digital and pharmaceutical industries. By using Article 22, the Commission stretches the tool-kit of the EUMR to its maximum and tactically circumvents the strenuous political process of revising the EUMR (which would be necessary in the case of the aforementioned value thresholds).

Unpredictability

As a result, however, merging companies will be confronted with numerous uncertainties in their deal-making process. They can no longer predictably determine if, when or by whom their transaction will be scrutinised, what the overall timing will look like, and what the potential impact of other merger control related aspects (such as suspension obligations) will be. In her speech, the Commissioner promises to provide more guidance soon – which will hopefully also address the abovementioned aspects – before the policy enters into effect in the middle of 2021.

 

 

This article was published in the Competition Newsletter of October 2020. Other articles in this newsletter:

Team

Related news

20.09.2022 EU law
Launch of Metaverse blog series

Articles - Stibbe launches a new blog series focusing on the legal challenges of the Metaverse. In our upcoming blog posts, we will discuss the legal challenges of NFTs, crypto-assets, Metaverse platforms, crypto exchanges, DAO, and many more.

Read more

28.07.2022 NL law
Zuiver commercieel belang ook gerechtvaardigd belang: Raad van State laat zich er niet over uit

Short Reads - Op 27 juli 2022 heeft de Raad van State bevestigd dat de Autoriteit Persoonsgegevens onterecht een boete van € 575.000 aan VoetbalTV heeft opgelegd. De hoop bestond dat de Afdeling antwoord zou geven op de vraag of de AP terecht of onterecht meent dat een zuiver commercieel belang géén gerechtvaardigd belang kan zijn in de zin van de Algemene Verordening Gegevensbescherming. Het antwoord op deze vraag blijft echter uit.  

Read more

03.08.2022 EU law
Gotta catch ‘em all? Upward referral of ‘killer acquisitions’ upheld

Short Reads - Companies involved in intended or completed M&A transactions falling below EU and national merger notification thresholds should beware that their deals may still catch the European Commission’s eye. The General Court has upheld the Commission’s decision to accept a national referral request regarding Illumina’s acquisition of Grail: a transaction not triggering any of the notification thresholds within the EEA.

Read more

28.07.2022 NL law
Purely commercial interest also a legitimate interest? Council of State leaves the question unanswered.

Short Reads - On 27 July 2022, the Council of State confirmed that the Dutch Data Protection Authority wrongly imposed a €575,000 fine on VoetbalTV. But the Council did not answer the question whether the AP rightly or wrongly believes that a purely commercial interest cannot be a legitimate interest within the meaning of the General Data Protection Regulation.

Read more

06.07.2022 NL law
Highest Dutch court: the postman may still ring twice?

Short Reads - The Dutch Minister of Economic Affairs and Climate Policy was wrong to unblock the ACM’s prohibited merger between postal operators PostNL and Sandd on grounds of public interest. According to the Trade and Industry Appeals Tribunal (CBb), the Minister cannot substitute the ACM’s assessment for its own when considering public interest reasons. Since the Minister did do so in this particular case, the CBb annulled the Minister’s merger clearance.

Read more