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).
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: