The European Commission has been more active in the area of merger control, recently blocking two deals following in-depth investigations and having rejected inadequate remedy proposals in each. This can be seen as part of a broader trend of an interventionist Commission under Margrethe Vestager, who is now halfway through her term as head of its Competition Directorate (DG COMP).

The first opposed merger was the proposed €29 billion Euro merger between Deutsche Börse and London Stock Exchange under the EU Merger Regulation. This merger was blocked on the basis that it would have led to a de facto monopoly in certain financial markets in the EEA. The merged entity would have owned the stock exchanges of Germany, Italy and the United Kingdom. DG COMP suggested the divestiture of key aspects of the merged entity's business to alleviate its competition concerns. However, the parties ultimately refused, having instead offered what DG COMP considered to be unsatisfactory remedy proposals. The doubt surrounding London’s future as global financial centre may have played a role in the parties’ unwillingness to compromise.

The second merger DG COMP prohibited was the joint acquisition of Cemex (Croatia's largest cement producer) by Schwenk and Heidelberg Cement (a large importer of cement) on the basis that the transaction would have eliminated competition between companies otherwise competing in Croatian cement markets and created significant barriers to entry market entry by competitors. The remedy proposed by the parties was also deemed insufficient in this case; as DG COMP considered that granting access to a cement terminal to a 3rd party was too remote from establishing a competing cement business in Croatia.

In two other recent (full investigation) Phase II decisions, DG COMP cleared the Dow/DuPont merger, following significant divestiture commitments offered by the purchaser. The EU Commission had expressed concern around reduced competition and innovation in the pesticide and petrochemical sectors, and has also since cleared a separate pesticide acquisition of Syngenta by ChemChina following a full investigation.

Commentary

The Deutsche Börse and Cemex cases are reminiscent of previous merger prohibitions under the post-2004 EU merger control regime. Both Deutsche Börse and Ryanair have been prevented from merging with competitors on three separate occasions. Meanwhile, as with the Cemex case, DG COMP has refused to clear mergers involving significant market concentrations at Member State level. Examples of this include the prohibited 2016 UK Hutchinson/02 merger, the 2011 Olympic and Aegean airlines merger, and the multiple proposed Ryanair / Aer Lingus mergers. These cases are illustrative of DG COMP's rigorous approach to market power where there are serious competition concerns arising mainly at Member State level, even when this comes at the expense of creating industrial European champions to compete at a global level.

Outright prohibitions of mergers by DG COMP have been rare since the current merger control regime came into force in 2004, with 3 of the 8 prohibitions coming in the last 12 months alone. Beyond prohibitions, DG COMP is also vigorous in seeking remedies from the parties. In 2016, a total of 25 mergers were subject to binding commitments. This is the highest such number since the height of Mario Monti’s activism in the year 2000.

Other areas of DG COMP activism

Contentious antitrust cases are ongoing and escalating. On the one hand, the Commission is investigating Russian State-owned Gazprom for an abuse of dominance in the supply of energy to Eastern European States, while on the other it continues to investigate US multinational Google for breaches in online markets. DG COMP issued record fines for breaches of antitrust law in 2016, amounting to a total of €3.7 billion; including a total €2.9 billion fine in relation to the EU trucks cartel alone. The figure for the first quarter of 2017 already stands at €1 billion, following a re-instatement of fines in the infamous air cargo cartel case. As for the remainder of 2017, antitrust investigations into Amazon e-books, e-commerce, sacks, airline code sharing, the International Skating Union, Gazprom, Google, and others are all ongoing.

A broad reading of the State aid rules has also led DG COMP to pursue large multinationals in respect of their non-payment of tax in certain EU Member States, with the Commission taking adverse decisions against Apple, Starbucks, and Amazon, with another decision against McDonald’s expected soon. Several of these cases have been appealed to the Court of Justice of the European Union (CJEU). Beyond the tax rulings cases, DG comp has also been highly active in the State aid sphere more generally, adopting 80 decisions in the first quarter of 2017 alone.

Conclusion

Margrethe Vestager has reached the halfway point of her term, and has been gathering momentum in heading up a rigorous enforcement approach by DG COMP. Contrary to some commentary in the US and elsewhere based (in particular that on the State aid tax ruling cases), DG COMP’s recent enforcement activities appear to be firm but even-handed.

Despite what its critics might say, DG COMP does not appear to unduly favour European companies at the expense of large multinationals outside the EU. Just as the merger between Deutsche Börse and the New York Stock Exchange was prohibited in 2012, so too was the all-EU merger between Deutsche Börse and the London Stock Exchange. DG COMP appears to block mergers where necessary from a competition law point of view, and is increasingly binding parties to commitments. The same is true in the antitrust sphere, where DG COMP has shown its willingness to pursue both Russian-owned Gazprom and US-based Google in arguably further evidence of a non-discriminatory approach.