Consultation provides opportunity for comments
The European Commission has published a staff working document "Towards more effective EU merger control" ("Proposal") which discusses (i) the need for the acquisition of minority shareholdings to be reviewed under the EU merger control regime, (ii) ways to streamline the current case referral mechanism between Member States and the EU, and (iii) other potential improvements, such as to limit jurisdiction for joint ventures that have no conceivable impact on EEA markets. Interested parties have the opportunity to comment on the Proposal until 12 September 2013. The Proposal can be found on the Commission's website.
We have significant experience of the EU merger control regime and offer support if needed in making your views known to the Commission.
Under the current framework, acquisitions of minority shareholdings are not subject to scrutiny by the Commission. A change of jurisdiction will have a significant impact for companies acquiring a minority stake. While from a legal and economic perspective it is recognized that acquisitions of minority shareholdings are less likely to cause detrimental antitrust effects, the Commission has identified an enforcement gap and proposes three options to deal with the issue:
- Apply the existing mandatory notification requirement to acquisitions of minority shareholdings, including the procedural burden, and the prohibition to close the acquisition prior to the Commission's approval (notification system);
- Authorize the Commission to investigate acquisitions of minority shareholdings whenever it deems necessary without requiring prior notification by the parties and without prohibition to close (self-assessment system); potentially allow parties voluntarily to make a notification;
- Require the parties to file a brief information notice to the Commission (presumably only in relation to acquisitions that satisfy a certain test), and authorize the Commission to investigate where it deems necessary, without prohibition to close (transparency system); potentially allow parties to voluntarily make a notification.
The Commission seeks input, inter alia, on the appropriateness of the potential scrutiny options in light of the costs and burden involved, on meaningful safe-harbour rules, on the possibility of voluntary notifications, and on the limitation period after which the Commission would be barred to investigate acquisitions of minority shareholdings.
The Proposal discusses the mechanism for referrals from Member States to the Commission that can be initiated by parties for a transaction that would have to be notified in at least three Member States (Article 4(5) EUMR referral), and the mechanism for referrals from Member States to the Commission that can be initiated by Member States (Article 22 EUMR referral).
Article 4(5) EUMR Referral
Under the current regime, parties seeking to refer to the EU a transaction that would normally be reviewed by three or more Member States, have to seek consent by Member States using a burdensome referral request (Form RS). Once the referral request is accepted, parties have to submit yet another notification (Form CO) to the Commission. Since only rarely Member States have opposed referral requests, the Proposal provides a quicker and leaner procedure:
- Abolition of the referral request (Form RS);
- Direct notification of the transaction to the Commission which starts its investigation, and consults with Member States who originally were competent to review the deal as to whether they agree that the Commission pursues its investigation;
- If only one Member State who originally was competent to review the deal objects to the referral within 15 or even 10 working days, the Commission would lose jurisdiction;
- A broader right to information exchange between the Commission and Member States which might be useful to allow Member States to gather the information the Commission has analysed already.
The Commission, inter alia, seeks confirmation that the abolition of Form RS is an appropriate way to increase the attractiveness of a referral, and requests the quantification of savings. It also raises questions about the information sharing between the Commission and Member States.
Article 22 EUMR Referral
This referral provides Member States the possibility to refer to the Commission a case that originally was notified to Member States. It was frequently criticised that even Member States that were not competent to review a transaction in the first place could request a referral, and that a successful referral does not automatically lead to the Commission's jurisdiction over the whole of the EEA. Indeed, under the current regime, there were cases of parallel investigations between the Commission and Member States in relation to the same transaction. The Proposal recommends the following:
- Referral requests could only be made by Member State that under its domestic law is competent to investigate the deal;
- Commission has EEA-wide jurisdiction if no other competent Member State objects, and Commission accepts referral request;
- Commission has no jurisdiction at all if one competent Member State objects against referral request.
The Commission, inter alia, seeks confirmation that parallel jurisdiction should be avoided. It raises questions about potential conflicting timetables between national proceedings and the referral mechanism.
Other Improvements: Extraterritorial Joint Ventures
The Proposal deals with other areas of improvement, such as the treatment of extraterritorial joint ventures. Currently, joint venture with no conceivable effects in the EEA nevertheless have to be notified to the Commission if the joint venture parent companies' worldwide and EU-wide turnover is sufficiently high to meet the turnover thresholds established by EU merger control law. Although the Commission is prepared to accept a shorter notification, the parties have to run through the full procedure (including pre-notification, prohibition to close until clearance etc.) which has negative impacts on timing and cost. The Commission considers to:
- Limit the right to scrutinize joint ventures which have no conceivable effects on markets in the EEA.