On 7 September 2017 the European Court of Justice (ECJ) issued a preliminary ruling in the case of Austria Asphalt GmbH & Co OG v Bundeskartellanwalt that, to qualify as a ‘concentration’ under the EU Merger Regulation (EUMR), a joint venture must exist as a full-functioning and autonomous entity. The ruling comes in response to a request from Austria’s Supreme Court in May 2016 for the ECJ to clarify the interpretation of Article 3 of the EUMR.
Article 3(1)(b) of the EUMR stipulates that a concentration arises where “a change of control on a lasting basis results from… the acquisition,…by one or more undertakings,…of direct or indirect control of the whole or parts of one or more other undertakings”. However, Article 3(4) of the EUMR states that “the creation of a joint venture performing on a lasting basis all the functions of an autonomous economic entity shall constitute a concentration within the meaning of paragraph 1(b)”.
The referral comes in the context of Austria Asphalt’s proposed acquisition of 50 per cent of the shares in the asphalt mix plant, Mürzzuschlag, from sole owner Teerag-Asdag. The joint venture was not intended to create a full-functioning entity; it was intended to supply asphalt predominantly to its parent companies rather than to third parties. Austria’s cartel court determined that the transaction would need to be notified to the European Commission (instead of being reviewed at national level) as it falls within the definition of a ‘concentration’ under Article 3(1)(b) of the EUMR, by virtue of the fact that Austria Asphalt would be acquiring joint control of Mürzzuschlag. Austria Asphalt appealed against that decision before the Supreme Court on the ground that, under Article 3(4) of the EUMR, the creation of a joint venture results in a concentration only where it is full-function. As the Supreme Court found no clear interpretation of these provisions in EU rules or case law, it referred to the ECJ the question of whether Article 3 of the EUMR must be interpreted as meaning that a move from sole to joint control of an existing undertaking constitutes a concentration only where that undertaking performs on a lasting basis all the functions of an autonomous economic entity.
The ECJ agreed with this interpretation, noting that where a textual approach to interpreting a provision of EU legislation does not allow its precise scope to be defined, interpretation must be based on the provision’s purpose and general structure. Accordingly, as the EUMR is concerned with preventing mergers and acquisitions from causing lasting damage to competition within markets, transactions will be caught
to the extent that they entail significant structural changes the impact of which on the market goes beyond the national borders of a Member State. As regards joint ventures (both those newly created and those where a solely-controlled undertaking existed before the transaction), only those that operate on a lasting basis and are full-function will have a lasting effect on market structure and therefore be caught.
The ECJ also flags that joint ventures that do not constitute a concentration under the EUMR but could lead to anti-competitive behaviour may fall to be considered under Article 101 or 102 of the Treaty on the Functioning of the European Union or the equivalent national regimes.