Legislation and jurisdictionRelevant legislation and regulators
What is the relevant legislation and who enforces it?
The EU merger control regime, which applies to large-scale transactions (see question 5), is set out in Council Regulation (EC) No. 139/2004 (EUMR). The regime applies to the European Economic Area (EEA; that is, the 28 EU member states: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom (subject to Brexit)) together with the three members of EFTA (Iceland, Liechtenstein and Norway).
The EUMR is enforced by the Directorate General for Competition of the European Commission (DG Comp or the Commission) in Brussels.
EUMR notifications are reviewed by sector-specific units within DG Comp, which have integrated merger control competence. In addition to the sector-specific merger units, the Commission’s internal decision-making process involves a number of other stakeholders: the chief economist team and the case support and policy unit (within DG Comp), and the Legal Service and the sectoral directorates general (eg, Transport and Energy) (outside DG Comp). The Commission also uses ‘peer review panels’ in Phase II cases to test the validity of the case team’s arguments. The panels consist of a team of lawyers and economists from DG Comp, who are independent from the original case team. In addition, two hearing officers, who are independent of DG Comp and report directly to the competition commissioner, organise and conduct oral hearings in Phase II cases and act as an independent arbitrator where a dispute on the effective exercise of procedural rights between parties and DG Comp arises.
The Commission has published a series of notices and guidelines to assist in the interpretation of a number of key issues under the EUMR. These include: notices on jurisdictional and procedural issues (including the Consolidated Jurisdictional Notice (2008), the Notice on the Simplified Procedure (2013) and the Notice on Case Referrals (2005)); guidelines on issues of substance (including the Guidelines on the Assessment of Horizontal Mergers (2004) and the Guidelines on the Assessment of Non-horizontal Mergers (2008)); as well as the Remedies Notice (2008) and the Notice on Ancillary Restraints (2005). In addition, the Commission has published a number of ‘Best Practices’, including the Best Practices on the Conduct of Merger Proceedings (2004) and the Best Practices for the Submission of Economic Evidence (2011). These and other notices are important reading in all potential transactions. They are available on the Commission’s website.
The EUMR is based on the ‘one-stop-shop’ principle, whereby once a transaction has triggered notification to the Commission, the national authorities of the member states are precluded from applying their own competition laws to the transaction (except in the circumstances described in question 5). In addition, the ability of national authorities to apply other non-competition laws is circumscribed (see question 31). However, member states have tested the ambit of these principles (eg, Spain in E.ON/Endesa, Italy in Abertis/Autostrade and Poland in Unicredito/HVB).Scope of legislation
What kinds of mergers are caught?
A concentration is defined in the EUMR as a merger of two or more previously independent undertakings (or parts of undertakings) or the acquisition of direct or indirect control (see question 4) of the whole or parts of another undertaking, which brings about a durable change in the structure of the undertakings concerned. The EUMR applies to concentrations that have a ‘Union dimension’ (ie, meet certain turnover thresholds (see question 5)).
What types of joint ventures are caught?
Provided that the applicable turnover thresholds are met (see question 5), the creation and change of control over ‘full-function’ joint ventures are caught by the EUMR. A ‘full-function’ joint venture is an autonomous economic entity resulting in a permanent structural market change, regardless of any resulting coordination of the competitive behaviour of the parents.
Non-full-function joint ventures, such as strategic alliances and cooperative joint ventures (eg, production joint ventures), are not governed by the EUMR but by the Treaty on the Functioning of the European Union (TFEU) rules on restrictive practices, notably article 101 TFEU, which prohibits agreements between undertakings that may affect trade between member states and that have as their object or effect the prevention, restriction or distortion of competition. According to Regulation 1/2003, article 101 TFEU can be enforced by the Commission or by national competition authorities. However, non-full-function joint ventures can trigger merger control in a number of member states (eg, Germany, the United Kingdom and, in some circumstances, Austria) by the acquisition of a minority interest (see individual country chapters).
Is there a definition of ‘control’ and are minority and other interests less than control caught?
Control means the possibility of exercising ‘decisive influence’ over an undertaking on the basis of rights, contracts or other means. When outright legal control is not acquired (eg, through the acquisition of shares with the majority of the voting rights), the Commission will consider whether the acquirer can still exercise legal or de facto control over the undertaking through special rights attaching to shares or contained in shareholder agreements, board representation, ownership and use of assets and related commercial issues.
There is no precise shareholding or other test for decisive influence and each case is decided on its facts. For example, in News Corp/Premiere (2008), the Commission found that, based on the historic pattern of attendance at annual general meetings, the acquisition by News Corp of a 24.2 per cent shareholding was sufficient to confer on it a de facto majority of the voting rights, resulting in a notifiable concentration; by contrast, in Ryanair/Aer Lingus (2007), a holding of over 25 per cent was deemed not to amount to either de jure or de facto control. The definition of control was considered by the General Court, upheld by the Court of Justice of the European Union, C-84/13 P, when it confirmed the Commission’s decision to fine Electrabel for closing a transaction prior to notification and clearance (Electrabel/Compagnie Nationale du Rhône). The court agreed with the Commission that Electrabel had obtained de facto control of the target in 2003, three years prior to notification, and said that the relevant question was the ability of Electrabel, at that time, to impose its decisions on the target. The shareholding structure was the key factor in support of this conclusion: Electrabel held 49.95 per cent of the target’s shares, had a voting agreement in place with the next largest shareholder (with 22 per cent) and the remaining shares and voting rights were widely dispersed among almost 200 entities with a poor track record of participation at general meetings.
The General Court has also considered the extent to which minority shareholdings come within the scope of the EUMR. Following Aer Lingus’ appeal against the Commission’s decision not to order Ryanair to divest its minority shareholding in the wake of its 2007 prohibition decision, the court confirmed that the EUMR does not empower the Commission to deal with minority shareholdings, where these do not lead to an acquisition of control under article 3(2) EUMR.Thresholds, triggers and approvals
What are the jurisdictional thresholds for notification and are there circumstances in which transactions falling below these thresholds may be investigated?
The purpose of the EUMR is to review those concentrations that have a ‘Union dimension’, the criteria being designed to ensure that only large-scale acquisitions, mergers and joint ventures are caught. Thus, a concentration will be caught by the EUMR where:
- the aggregate worldwide turnover of all the parties exceeds €5 billion; and
- the aggregate Union-wide turnover of each of at least two parties exceeds €250 million; unless
- each of the parties achieves more than two-thirds of its aggregate Union-wide turnover in one and the same member state.
In an attempt to reduce the need for businesses to make multiple applications for clearance at the national level within the European Union, the EUMR also applies to smaller concentrations that have an impact in at least three member states. These concentrations are caught by the EUMR where:
- the aggregate worldwide turnover of all the parties exceeds €2.5 billion;
- the aggregate Union-wide turnover of each of at least two parties exceeds €100 million;
- in each of at least three member states, the aggregate turnover of all the parties exceeds €100 million; and
- in each of at least three member states mentioned immediately above, the turnover of each of at least two parties exceeds €25 million; unless
- each of the parties achieves more than two-thirds of its aggregate Union-wide turnover in one and the same member state.
Turnover is deemed to be the amount derived from the sale of products or the provision of services (excluding turnover taxes) in the preceding financial year. The turnover of the whole group to which the relevant undertaking belongs is taken into account according to detailed tests set out in the EUMR. The calculation can be complex and may involve certain adjustments being made to the turnover figure in the latest audited accounts, for example, to account for certain recent disposals or acquisitions.
In an acquisition, the turnover of the vendor is irrelevant except for that of the business being acquired. In the case of joint ventures, the whole turnover of the parents (and their groups) intending to share joint control of the venture is taken into account. In addition, there are rules for the calculation of turnover in specific sectors, in particular for banks and other financial institutions and insurance undertakings, as well as principles based on case experience for the geographic allocation of turnover in particular sectors such as airlines, telecommunications and financial services.
The EUMR establishes a system of referrals to ensure that a concentration is examined by the authority best placed to conduct the assessment (in line with the principle of subsidiarity). Under articles 4(4) and 9 of the EUMR, in certain cases, the national competition authority or the merging parties can request that a transaction that meets the EUMR thresholds is reviewed - in whole or in part - by the national competition authority. By the same token, under articles 4(5) and 22 of the EUMR, provided that certain conditions are met, the merging parties or one or more member states may request the Commission to review a merger that does not meet the EUMR thresholds (eg, Dolby/Doremy/Highlands (2014), Facebook/WhatsApp (2014), SCJ/Sara Lee (2010)). Despite the existence of these referral mechanisms, the Commission has reported that a significant number of cases are still subject to review in three or more member states.
In July 2017, the Commission published the results of a public consultation that sought feedback on, among other things, the effectiveness of the current turnover-based notification thresholds and the current EUMR referral mechanism. The majority of respondents did not see any need to introduce complementary jurisdictional thresholds.
Is the filing mandatory or voluntary? If mandatory, do any exceptions exist?
Filing is mandatory for concentrations with a Union dimension. There are no exceptions and the EUMR empowers the Commission to fine undertakings that fail to notify (see question 9). In certain circumstances, however, parties may request that a transaction that meets the EUMR thresholds be referred wholly or partly to a member state (see question 5).
Do foreign-to-foreign mergers have to be notified and is there a local effects or nexus test?
The EUMR applies to all concentrations that have a Union dimension. Because the turnover thresholds are based on geographic turnover and not on the location or registered office of the parties, even foreign-to-foreign transactions essentially involving non-EU groups are caught if the financial thresholds are met (see question 5).
Are there also rules on foreign investment, special sectors or other relevant approvals?
The EUMR applies to all transactions that meet the relevant turnover thresholds (see question 5). There are no sector-specific rules nor special rules on foreign direct investment (FDI), as this matter is governed at the member state level. As from October 2020, the European Commission will have the power to issue an opinion when an investment poses a threat to the security or public order of more than one member state (see question 36).
Notification and clearance timetableFiling formalities
What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?
There is no specific deadline for making a filing under the EUMR. According to article 4 of the EUMR, proposed concentrations (with a Union dimension) ‘shall be notified to the Commission prior to their implementation and following the conclusion of the agreement, the announcement of the public bid or the acquisition of a controlling interest’. A notification may also be made where the undertakings concerned demonstrate to the Commission a good faith intention to conclude an agreement, or in the case of a public bid, where they have publicly announced an intention to make such a bid.
However, the proposed concentration must be notified and cleared prior to implementation (this is known as the ‘suspensory effect’ of the EUMR; see question 11 on derogations from this obligation). The EUMR provides the Commission with powers to impose fines of up to 10 per cent of aggregate worldwide turnover on the parties if they intentionally or negligently fail to notify a merger with a Union dimension. In 2014, the Commission imposed a fine of €20 million on Marine Harvest for acquiring de facto sole control of Morpol prior to formal notification. This decision was upheld by the General Court (T-704/14) in 2017; an appeal before the court is currently pending. Similarly, in 2018, the Commission imposed a fine of €125 million on Altice for implementing the acquisition of PT Portugal before obtaining the Commission’s clearance, and in some instances prior to the notification of the transaction (Altice/PT Portugal).
Which parties are responsible for filing and are filing fees required?
In the case of either the acquisition of joint control or of a merger that creates a new undertaking, the notification must be jointly submitted by the parties to the merger or by the undertakings acquiring joint control. In the case of acquisition of sole control, the acquirer alone must notify. No filing fees are required.
What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?
Notification under the EUMR has a suspensory effect, meaning that a transaction that is subject to notification may not be implemented until clearance is obtained. Public takeover bids, however, are not subject to the full suspension obligation (see question 15). The Commission can and will investigate any mergers that have closed without prior notification, and could order the unwinding of any notifiable merger that has been implemented prior to clearance. The Commission has shown its willingness to prevent ‘gun jumping’ in the form of early implementation between the merging parties. The EUMR empowers the Commission to conduct inspections (ie, ‘dawn raids’) if it suspects that the parties have implemented the transaction prior to clearance. The Commission carried out dawn raids at the premises of merging parties suspected of gun jumping in the Ineos/Kerling case in 2008 and in the Caterpillar/MWM case in 2011 (these acquisitions were ultimately cleared without conditions, and no finding of gun jumping was reached).
In exceptional circumstances, the Commission may grant a derogation from this suspension obligation if it is satisfied that the detriment to the notifying parties or to a third party resulting from the suspension exceeds the threats to competition posed by the transaction. According to the Commission, an applicant must demonstrate that the standstill obligation poses a real threat to the business, not merely a hypothetical one (eg, SCJ/Sara Lee (2011)). The Commission has recognised that undue delay could potentially be fatal to a proposed emergency rescue package and has granted derogations on a limited number of occasions - mostly during the global economic downturn in 2008 and 2009.Pre-clearance closing
What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?
The Commission may impose fines on companies (of up to 10 per cent of aggregate worldwide turnover) for closing a transaction before clearance has been obtained, irrespective of whether clearance is ultimately obtained. The Commission may also order interim measures to restore or maintain conditions of effective competition.
The General Court has confirmed that the fact that a concentration has no adverse effect on competition and is ultimately cleared by the Commission is pertinent only insofar as it may be a relevant factor in determining the amount of the fine to be imposed (see Electrabel/Compagnie Nationale du Rhône). Similarly, the court also took the view that a finding that an infringement was committed negligently, rather than intentionally, does not prevent a characterisation of that infringement as grave or serious (see also question 9).
Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?
The Commission has the same powers to impose sanctions in cases involving closing before clearance in foreign-to-foreign mergers as in mergers of domestic (EEA/EFTA) companies (see question 12). To date there are no examples of such sanctions having been applied in foreign-to-foreign mergers, but most companies take care not to breach the notification obligations in such cases.
What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?
Foreign-to-foreign mergers cannot be implemented outside the EU without breaching the EUMR suspension obligation, unless the Commission grants a derogation (but see question 11 and question 15 in relation to public bids). At a late stage in the investigation, the Commission may be prepared to grant a derogation to allow closure of a transaction if the competition issues have been resolved. However, these situations are rare, and parties must usually await clearance before closing. It is not permissible under EU merger control rules to close a transaction globally while suspending implementation of closing in the European Union (ie, by way of a carveout).Public takeovers
Are there any special merger control rules applicable to public takeover bids?
The EUMR does not prevent the implementation of a public bid that has been notified to the Commission, provided that the acquirer does not exercise the voting rights attached to the securities in question or does so only to maintain the full value of those investments and on the basis of a derogation granted by the Commission. These derogations are difficult to obtain and do not apply where a controlling stake is acquired by the purchaser through the acquisition of a single package of shares from one seller only (Yara/Kemira Growhow (2007)). In 2008, the Commission exceptionally granted such a derogation in the context of a Phase II investigation (STX/Aker Yards (2008)).Documentation
What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?
Notification is made to DG Comp using a Form CO. The parties are required to provide the Commission with detailed information regarding the transaction, the undertakings involved (corporate details and structure), the definition of the relevant markets, the effect of the merger on the affected markets (including information on competitors and customers and economic evidence in more complex cases) and possible efficiencies arising from the transaction. The parties must submit one original of the Form CO, three hard copies and two copies on CD or DVD-ROM together with supporting documentation. This includes the transaction documents, audited accounts and relevant internal documents such as board presentations and the parties’ ordinary course analyses, reports and strategic plans relating to any potentially affected market. The filing must be complete for the review clock to start running. Notification can be made in any of the EU official languages.
Although the Commission can grant waivers from the obligation to provide information (a process that has been formalised and clarified) the significant amount of detail and senior management time required to complete a Form CO should not be underestimated. In complex cases, it is not uncommon for the review process to last seven to eight months; this is in addition to the time it takes to complete ‘pre-notification’ discussions, which are not subject to any statutory time limits. The Commission has implemented changes as part of a ‘merger simplification project’ with the aim of streamlining the notification process and reducing the administrative burden on notifying parties.
Mergers that qualify for assessment under the simplified procedure (broadly, when the merger is unlikely to raise competition concerns, according to prescribed criteria set out in the notice on the simplified procedure) are notified through the submission of a Short Form CO, which requires less detailed information from the parties. Recent amendments to the notice on simplified procedure and the Short Form CO have extended the categories of merger cases suitable for the simplified procedure. The Commission may, however, require the submission of a full Form CO where it appears either that the conditions for using the Short Form CO are not met, or, exceptionally, where they are met but the Commission nonetheless determines that a full Form CO notification is required for an adequate investigation of possible competition concerns.
The Commission can impose a fine of up to 1 per cent of aggregate worldwide turnover if incorrect or misleading information is supplied during its review. Periodic penalty payments not exceeding 5 per cent of average daily turnover can also be imposed for each day that the infringement persists. For these purposes, the EUMR empowers the Commission to conduct inspections (ie, dawn raids) if it suspects that the parties have provided incorrect or misleading information. The Commission has recently been active in penalising procedural infringements, imposing sizable fines in Facebook/Whatsapp (2017) and in General Electric/LM Wind (2019).
The Commission’s Best Practice Guidelines 2004 and the Notice on the Simplified Procedure summarise key aspects of the notification procedure, in particular the desirability (and usually the necessity) of pre-notification contacts with the Commission.Investigation phases and timetable
What are the typical steps and different phases of the investigation?
Most (if not all) proceedings begin with pre-notification contacts with the Commission. These contacts are not strictly mandatory, but are nonetheless highly advisable and, in practice, essential, even for simplified procedure cases. Depending on the complexity of the transaction, this pre-notification stage may involve the submission of a finalised draft Form CO or a briefing memorandum for the Commission’s consideration and possibly attending a meeting with Commission officials. The Best Practice Guidelines also provide that the Commission may undertake informal fact-finding exercises in the pre-notification period, so long as the transaction is in the public domain and the merging parties have had the opportunity to express their views on such measures.
Following the formal notification, the Commission will initiate a Phase I review. In this context, the Commission will contact relevant third parties such as customers, suppliers and competitors to collect their views on the transaction (see question 29) and may require them to complete detailed questionnaires on the relevant markets (see question 18 on the review timetable). During the course of the investigation, the Commission will often demand further information at short notice. Calls and meetings are also frequently held with the case team. As explained in the Best Practice Guidelines, ‘state-of-play meetings’ may be held with the parties at various key stages of the investigation and the Commission may also instigate tripartite or ‘triangular meetings’ with the merging parties and interested third parties to allow points of concern to be discussed. In complex merger cases, the Commission commonly issues extensive and tailored document requests (see question 36). Following the Phase I investigation, the Commission may decide to clear the merger unconditionally, to clear the merger subject to conditions and obligations offered by the parties, or to initiate an in-depth investigation if it considers that the transaction raises ‘serious doubts’ as to whether it may give rise to a significant impediment to effective competition (Phase II) (see question 19).
For the notifying parties, a Phase II inquiry will involve responding to many requests for information and may lead to a statement of objections. If a statement of objections is issued, the parties will be granted access to the Commission’s file and with the agreement of the parties an oral hearing will take place (often involving complainants). The oral hearing is organised and conducted by one of the two hearing officers (see question 1). Following the Phase II investigation, the Commission may decide to clear the merger unconditionally, to clear the merger subject to conditions and obligations or to prohibit the merger (see question 24).
What is the statutory timetable for clearance? Can it be speeded up?
The Commission must reach a Phase I decision within 25 working days of the effective date of notification. This period may be increased to 35 working days if the Commission receives a referral request from a member state (see questions 5 and 31) or the parties submit commitments (remedies) to resolve competition issues (see questions 25 and 26). The review period under the simplified procedure is also 25 working days.
Should the Commission initiate a Phase II investigation, the decision must be taken within 90 working days of the date on which the proceedings were initiated (ie, from the beginning of Phase II). This period may be extended to 105 working days if the parties offer commitments after the 55th day of Phase II proceedings. Further, the investigation period may be extended if the parties request a one-off extension of the investigation period (they must do so within 15 working days of initiation of Phase II proceedings) or if the Commission decides to extend the Phase II investigation period with the consent of the parties. In both cases, the cumulative extension cannot exceed 20 working days.
These time periods may be suspended (thereby ‘stopping the clock’) if, for circumstances imputable to one of the undertakings involved, the Commission has to issue a decision to request information or to order an inspection.
Pre-notification discussions with the Commission are a standard part of all merger review processes (including simplified cases) and can be expected to take a minimum of two weeks. This period can be considerably extended even for relatively straightforward cases.
There is no formal means of accelerating the review under the EUMR. However, the Commission has showed some flexibility in certain cases, notably by issuing ‘accelerated’ clearance decisions during the financial crisis even in cases that raised significant competition concerns and required remedies (eg, BNP Paribas/Fortis (2008)).
Substantive assessmentSubstantive test
What is the substantive test for clearance?
The EUMR prohibits concentrations that significantly impede effective competition in the EEA, or a substantial part of it, in particular as a result of the creation or strengthening of a dominant position. Full-function joint ventures are appraised under the same test (see question 20). In its appraisal, the Commission must (formally) take into account substantiated claims of efficiencies brought about by the merger (see question 23) and evidence that one of the merging parties (or the acquired undertaking) is a ‘failing firm’ (also referred to as a ‘rescue merger’). In practice, such ‘defences’ play a limited role in merger review and, up until now, the Commission has never cleared an otherwise problematic merger only on the basis of efficiencies claimed by the parties for all markets where competition concerns were found (see question 23) and has accepted the failing firm defence only in very few cases.
Is there a special substantive test for joint ventures?
In addition to examining whether the joint venture will significantly impede effective competition, the Commission will also assess under article 101 TFEU whether it is the object or effect of the transaction to coordinate the competitive behaviour of two or more parents to the joint venture. Such coordination can occur where two or more parents retain activities in candidate markets; namely, activities either in the same market, or on an upstream, downstream or closely related neighbouring market to that of the joint venture. The significance of this ‘spill-over’ effect is assessed and can be cleared with the merger - if justified - under the criteria set out in article 101(3) TFEU. Full details of overlapping activities of the parents in candidate markets must be given in the notification.Theories of harm
What are the ‘theories of harm’ that the authorities will investigate?
In accordance with the guidance set out in the Commission’s guidelines on horizontal mergers and non-horizontal mergers, the Commission will consider, in its assessment, whether the merger will have unilateral or coordinated anticompetitive effects.
Anticompetitive unilateral effects may occur when the merger removes relevant competitive constraints over the merging firms to the extent that it contributes to the creation or strengthening of a dominant position (eg, London Stock Exchange/Deutsche Börse (2017), Pfizer/Hospira (2015), Ryanair/Aer Lingus III (2013) and Deutsche Börse/NYSE Euronext (2012)) or to the weakening of competitive pressure in an oligopolistic market (eg, Orange/Jazztel (2015), UPS/TNT Express (2013) (Commission decision overturned by General Court on appeal, T-194/13), Hutchison 3G Austria/Orange Austria (2012), EDF/Segebel (2009) and T-Mobile Austria/Tele Ring (2006)). The Commission assesses the parties’ ability and incentives to profitably increase prices, reduce output, choice or quality of goods and services, but also to diminish innovation. Potential loss of innovation as a result of the merger is increasingly investigated by the Commission (eg, Dow/Dupont, J&J/Actelion (both 2017), Bayer/Monsanto (2018)).
In non-horizontal mergers, the main concern of the Commission with regard to unilateral effects lies in the ability and incentive of the merging firms to engage in input or customer foreclosure, owing to vertical links (BASF/Cognis (2010), TLP/Ermewa (2010), RWE/Essent (2009), TomTom/Tele Atlas, Google/DoubleClick (both in 2008)) or to portfolio effects (Qualcomm/NXP (2018), Essilor/Luxottica (2018), Microsoft/LinkedIn (2016), Intel/McAfee (2011)).
Coordinated effects may arise when the merger alters the competitive conditions prevailing on the market, allowing competitors to coordinate their behaviour (eg, Celanese/Blackstone/JV (2017), AB InBev/SAB Miller (2016), ABF/GBI Business (2008), Sony/BMG (2007 and 2004), Johnson & Johnson/Guidant (2005)).Non-competition issues
To what extent are non-competition issues relevant in the review process?
Under the EUMR, the Commission can only prohibit a concentration that significantly impedes effective competition in the European Union, or a substantial part of it, in particular as a result of the creation or strengthening of a dominant position. When applying the test, the Commission looks only at competition-related criteria (see questions 19 to 21), and economic efficiencies are also relevant (see question 23). In certain cases, however, member states may have limited jurisdiction to intervene to protect their non-competition legitimate interests (see question 31). In Phase II cases, the full College of Commissioners, rather than just the commissioner for competition, is involved in the final decision, and they may consider issues other than pure antitrust in forming their views. The competition portfolio (under Commissioner Vestager) is part of project teams concerning digital, energy, jobs, growth, investment and competitiveness. The Commissioner must therefore cooperate with colleagues with responsibilities for these other portfolios.
In the context of the global economic downturn after 2008, the Commission was required to consider how the grant of state aid (ie, support from government) might affect the substantive analysis in merger control proceedings (eg, in relation to the financial strength and future market positions of the parties). However, in most cases (eg, BNP Paribas/Fortis, Santander/Bradford & Bingley Assets (both in 2008)) DG Comp concluded that the state measures in question did not affect its competition analysis, as such aid was the subject of a separate assessment under the state aid rules.Economic efficiencies
To what extent does the authority take into account economic efficiencies in the review process?
The Commission, in its Horizontal Guidelines, has stated that it will consider substantiated efficiency claims in its overall assessment of the merger. According to the Horizontal Guidelines, the Commission will only take into account efficiencies that are of direct benefit to consumers, merger-specific, substantial, timely and verifiable, thereby counteracting the adverse effects of the merger. Efficiency considerations are highly unlikely to be taken into account where the merger results in the creation of a monopoly or a quasi-monopoly. In practice, this means that significant evidence will need to be adduced by the parties to satisfy the requisite criteria. The Form CO includes a section specifically dealing with efficiencies, although it is not obligatory for parties to complete this section.
The Commission has accepted the parties’ efficiencies claims in a very few cases (eg, FedEx/TNT (2016), UPS/TNT Express (2013), Microsoft/Yahoo!, Search Business (2010) and TomTom/Tele Atlas (2008)) but it has never cleared an otherwise problematic merger purely on the basis of efficiencies claimed by the parties.
Remedies and ancillary restraintsRegulatory powers
What powers do the authorities have to prohibit or otherwise interfere with a transaction?
The Commission is empowered to prohibit a concentration that will significantly impede effective competition in the European Union, or a substantial part of it. Since the entry into force of the first EU merger control regime in 1990, the Commission has blocked 30 mergers (as of 30 June 2019). Even though the Commission recently blocked several mergers (London Stock Exchange/Deutsche Börse (2017), HeidelbergCement/Schwenk/Cemex Hungary/Cemex Croatia (2017), Siemens/Alstom (2019) and Wieland/Aurubis Rolled Products/Schwermetall (2019)), prohibition decisions are expected to remain relatively rare. This statistic does not, however, take into account transactions that were abandoned by notifying parties as a result of initial objections raised by the Commission either during ‘pre-notification’ discussions or during the course of a formal notification.
If the parties implement a notifiable merger before clearance has been obtained or after a prohibition decision has been issued, the companies concerned may not only incur fines (see questions 9 and 11) but may also be ordered to dissolve the merger in its entirety. The Commission may also impose interim measures or take any other action that it considers appropriate to restore conditions of effective competition.
The Commission may revoke its clearance decision (whether granted in Phase I or II) if it subsequently transpires that the decision was based on incorrect information, or where there has been a breach of an obligation attached to the decision. In such a case, the Commission may also order the dissolution of the merger.Remedies and conditions
Is it possible to remedy competition issues, for example by giving divestment undertakings or behavioural remedies?
During the course of a Commission investigation, the parties can offer undertakings to the Commission to remedy competition issues identified by the latter. Proposed remedies will need to be submitted in a Form RM, introduced by the Remedies Notice (2008). Remedies have regularly been accepted to avoid prohibiting a transaction, or indeed a Phase II referral. The Commission has a strong preference for structural rather than behavioural undertakings, but in its Remedies Notice (2008) and Best Practice Guidelines for Divestiture Commitments (2013), states that it will also accept behavioural undertakings in limited circumstances (see question 26).
What are the basic conditions and timing issues applicable to a divestment or other remedy?
The most basic condition applicable to a divestment or other remedy is that it must be capable of restoring effective competition in a timely fashion, while being simple enough to allow the Commission to determine this with sufficient certainty.
The Commission has a clear preference for structural remedies, in particular divestments, as it believes that the most effective way of restoring competition will be either to create new competitive entry or strengthen existing competitors through divestments. According to the Commission’s Best Practice Guidelines for Divestiture Commitments, divested activities must constitute a viable business able to compete over the long term on a stand-alone basis. In this regard, the Commission will consider a broad range of divestiture remedies and where appropriate alternative structural remedies to facilitate market access, such as the granting of licences. In T-Mobile/Orange (2010), in addition to a divestment remedy, the parties concluded a revised network sharing agreement with a competitor to secure its position as a competitive force on the market. In Hutchison 3G Austria/Orange Austria (2012), in addition to a divestment remedy, Hutchison committed to provide wholesale access to up to 30 per cent of its network to 16 mobile virtual network operators for a period of 10 years. Divestments can only be made to a suitable purchaser, approved by the Commission, and the sale must be completed within a specified time limit (usually six months). If the parties do not find an acceptable purchaser within the disposal deadline, a ‘divestiture trustee’ will handle the disposal of the business at no minimum price. Any divestment remedy must be accompanied by a proposal to safeguard the business in the interim and the parties will need to propose a monitoring trustee to oversee compliance with the preservation measures.
A principal concern of the Commission is the practical efficacy of the remedies proposed by the parties and, in particular, the need to ensure the long-term viability of the ‘remedy-taker’ or divestment purchaser. When there are doubts about the viability of the business to be divested, an ‘upfront purchaser’ may be required. The Commission may also require a ‘fix-it-first’ remedy, meaning that the parties must identify a purchaser for the divestment business and enter into a binding agreement with that purchaser during the Commission’s merger control review. The viability of the business to be divested was an important part of the Commission’s assessment in the cases of GE/Alstom (2015), Chemchina/Syngenta (2016), London Stock Exchange/Deutsche Börse and HeidelbergCement/Schwenk/Cemex Hungary/Cemex Croatia (both 2017).
The Commission may also accept other non-divestment structural remedies such as the severing of links with competitors or important players in a supply chain. For example, the Commission intervened in Glencore/Xstrata (2012) because of concerns that the merged entity would have the ability and incentive to raise prices of zinc metal. To remedy concerns, Glencore committed to sever links with Nyrstar (the largest European zinc metal producer). This included inter alia the termination of an exclusive long-term offtake agreement and committing not to buy zinc metal quantities from Nyrstar for 10 years.
In certain (but more limited) circumstances, behavioural remedies can be accepted, such as in Microsoft/LinkedIn (2016), which was granted conditional clearance in Phase I on the basis of the parties’ commitments to allow PC OEMs using Windows not to install the LinkedIn application and to ensure interoperability and provide access to all necessary information to LinkedIn’s competitors. Similarly, in ASL/Arianespace (2016) the Commission was satisfied with behavioural commitments that included the implementation of information firewalls and restrictions to employee mobility between the merging parties. In other cases (eg, Universal Music Group/EMI Music (2012)) the Commission has accepted behavioural remedies as part of a package including other divestment and structural commitments.
Alternatively, primary and secondary remedies can be offered in circumstances where the preferred primary remedy may be difficult to implement owing to external factors. The second alternative remedy must be equal to or better than the first remedy, and will typically involve divestiture of the parties’ ‘crown jewels’. This twofold structure has been used in a number of cases including Pfizer/Wyeth (2009), Teva/Ratiopharm (2010) and Swissport/Servisair (2013).
Under the Remedies Notice, the Commission has discretion to review the need for commitments when the parties are able to establish that a ‘significant change in market circumstances’ has occurred. This review is of particular relevance for non-divestment type remedies (see, for instance, Newscorp/Telepiu (2010) and Hoffmann-La Roche/Boehringer Mannheim (2011)). Typically, such commitments will include a review clause and the Commission has been willing to accept detailed review clauses specifying certain criteria of particular relevance for the future assessment of the need for the commitments (see, for instance, T-Mobile/Orange (2010) and SNCF/LCR/Eurostar (2010)).
The Commission will accept undertakings both in Phase I and Phase II. In Phase I, the commitments must be submitted to the Commission within 20 working days from the date of receipt of the notification (and in practice in draft form earlier). The notifying parties can also in some circumstances withdraw their notification and resubmit it following appropriate changes to the original concentration in an attempt to avoid the need for second-stage proceedings. In Phase II, undertakings must be submitted to the Commission at the latest within 65 working days of initiation of the Phase II investigation.
The court has shown a willingness to accept deviations from the strict procedural rules, particularly in relation to timing in cases of ‘late remedies’ (Case T-87/05 EDP v Commission (2005), and Case T-212/03 MyTravel (2008)).
What is the track record of the authority in requiring remedies in foreign-to-foreign mergers?
The Commission can require the same type of remedies in foreign-to-foreign mergers as in domestic EU mergers. When analysing remedies, the Commission may liaise with other competition authorities that are examining the same merger on the basis of confidentiality waivers by the parties. For example, in UTC/Goodrich (2012), the Commission cooperated with the US and Canadian authorities on remedies and in Panasonic/Sanyo (2009) the Commission cooperated with the Japanese and US authorities including as to the identity of a suitable purchaser for divested assets. Other examples of EU-US cooperation include Johnson & Johnson/Guidant (2005), Inco/Falconbridge (2006), Agilent/Varian (2010), Intel/McAfee (2011) and Thermo Fisher Scientific/Life Technologies (2013).Ancillary restrictions
In what circumstances will the clearance decision cover related arrangements (ancillary restrictions)?
The treatment of ancillary restraints (such as non-compete obligations or transitional supply agreements) is set out in the EUMR and the Commission’s notice on restrictions directly related and necessary to concentrations, published in March 2005 (the Ancillary Restraints Notice). The EUMR provides that any Commission decision approving a merger will automatically cover restrictions that are directly related and necessary to the implementation of the merger. The Commission is obliged to assess the restrictions only if the parties so request and the issues raised are novel and give rise to genuine uncertainty. Consequently, merging parties will usually need to assess for themselves, by reference to the Ancillary Restraints Notice, whether or not their restrictions are permissible.
Involvement of other parties or authoritiesThird-party involvement and rights
Are customers and competitors involved in the review process and what rights do complainants have?
Third parties can play a significant role in EUMR proceedings. The Commission publishes a summary of all notifications in the Official Journal of the European Union. This provides a preliminary opportunity for third parties to express their opinions on the likely impact of the transaction. In publishing the notice, the Commission is obliged to consider the parties’ legitimate interests in relation to the protection of business secrets.
More importantly, the Commission also sends out detailed questionnaires to third parties (usually to customers, suppliers, competitors and trade associations) seeking their views on the transaction. This is done by means of a web-based eQuestionnaire, which provides respondents with a secure web-based workspace to submit their replies to the Commission. Third parties who show a sufficient interest (including worker representatives) may also apply to be heard by the Commission, by giving oral or written evidence. They may further be given a non-confidential copy of the statement of objections in Phase II proceedings, enabling them to submit comments to the Commission on its preliminary assessment. Active complainants will often attend the oral hearing with the notifying parties.
Third parties can also appeal a Commission clearance decision to the General Court if they can show sufficient interest. Examples include Impala’s appeal against the Commission clearance decision of Sony/BMG, Editions Odile Jacob’s appeal in relation to the Lagardère/Vivendi Universal Publishing (2004) merger against the Commission’s clearance decision (rejected by the General Court T-279/04, which was confirmed by the CJEU C-551/10) and the Commission’s approval of Wendel as the purchaser of certain divestment assets (upheld by the General Court T-452/04 and confirmed by the CJEU C-553/10) and Cisco Systems’ appeal against the Commission clearance decision of Microsoft/Skype (rejected by the General Court T-79/12). Another example is KPN’s successful appeal of the Phase II clearance decision Liberty Global/Ziggo (2015) (T-394/15). Third parties will usually need to have played an active role in the Commission’s proceedings to have standing to appeal. The General Court rejected an application by Canonical, an open-source software developer, to intervene in support of the Commission in the proceedings brought by Monty Program against the Oracle/Sun Microsystems clearance decision. In 2011, the General Court clarified that consumer associations enjoy a right to be heard during the administrative proceedings provided that they lodge a written application to be heard by the Commission during the administrative proceedings (Association belge des consommateurs test-achats/European Commission, T-224/10).Publicity and confidentiality
What publicity is given to the process and how do you protect commercial information, including business secrets, from disclosure?
Upon receipt of a notification, the Commission publishes a non-confidential notice of the fact of notification in the Official Journal inviting third-party comments. The parties to the transaction provide a draft of this notice as part of the Form CO (section 1.2 of the Form CO). The Commission also issues a press release following the adoption of its decision at the end of every Phase I and Phase II examination (and upon referring a case to a Phase II investigation). A non-confidential copy of the final decision is made available on the Commission’s website, after the Commission and the parties have agreed on which information qualifies as business secrets and therefore should be redacted. In addition, final decisions issued following a Phase II examination are published in the Official Journal (with business secrets redacted). In the case of a short-form decision for simplified procedure cases, the Commission will publish a notice of the fact of the decision in the Official Journal.
Dedicated antitrust press follow cases very closely and report on developments and speculation on a daily basis.
The confidentiality of business secrets is protected under article 339 TFEU and under article 17 of the EUMR (see also articles 18 and 19, and recital 42). These provisions require the Commission (and the member states, the EFTA Surveillance Authority and the EFTA states, their officials and other servants) not to disclose information covered by the obligation of professional secrecy that they have acquired through the application of the EUMR.
If a party believes that its interests would be harmed if any of the information supplied were to be published or otherwise divulged to other parties, this information should be submitted separately with each page clearly marked ‘business secrets’.
Parties should also give reasons why this information should not be divulged or published. In the case of mergers or joint acquisitions, or in other cases where the notification is completed by more than one of the parties, business secrets may be submitted under separate cover, and referred to in the notification as an annex. All such annexes must be included in the submission in order for a notification to be considered complete.
The Commission has published ‘Guidance on the preparation of public versions of Commission decisions under the Merger Regulation’ as well as ‘Best practices on the disclosure of information in data rooms’ (both 2015).Cross-border regulatory cooperation
Do the authorities cooperate with antitrust authorities in other jurisdictions?Cooperation with national competition authorities in the European Union
The member states’ national competition authorities (NCAs) have the opportunity throughout the Commission’s investigation to express their views on the concentration. Within three days of receipt of a notification, copies are sent to the NCAs for their comments. The NCAs have a particularly active role to play in Phase II decisions as part of an advisory committee that opines on the Commission’s draft decision and any commitments before its final adoption. This opinion is published.
In addition, despite the one-stop-shop principle, a member state may have limited jurisdiction to intervene to protect its non-competition legitimate interests, such as public security, plurality of the media and the prudential supervision of financial institutions (see article 21 EUMR), and in certain defence-related matters (see article 346 TFEU). The list of legitimate interests in article 21 EUMR is not exhaustive and a member state can claim additional legitimate interests in consultation with the Commission, though the Commission has attempted to limit a wider application. This provision has received scrutiny recently.
The national competition authorities also cooperate with the Commission in the context of the referral system foreseen in the EUMR (see question 5).
For other instances where a transaction does not qualify for review by the Commission but does require merger clearance at the national level in several member states, the Commission published Best Practices on Cooperation between EU National Competition Authorities in Merger Review (2011) with a view to improving cooperation between the European NCAs, streamlining the approval process across the different jurisdictions and avoiding conflicting outcomes, in particular by facilitating information sharing between the national authorities.Cooperation with the United States
The Commission routinely seeks to cooperate with the US antitrust authorities that are also reviewing a proposed transaction. Cooperation is based on the 1991 US-European Community Agreement on the Application of Competition Laws (as amended), under which the Commission is required to keep the US antitrust authorities informed of mergers involving US interests, and vice versa, and also on the US-EU Best Practice Guidelines on Bilateral Cooperation published in October 2011, which aim to enhance coordination on the timing of reviews, collection and evaluation of evidence and communication between the reviewing agencies. In view of this cooperation, and in particular the exchange of information between the EU and US authorities, parties to transatlantic mergers should carefully coordinate their merger clearance procedures and, to the extent possible, ensure that any remedies offered will not produce inconsistent results in the United States and European Union. Examples of high-profile cases in which the EU and US agencies have closely cooperated include Intel/McAfee (2011), Medtronic/Covidien (2014), NXP/Freescale (2015), Wabtec/Faiveley (2016), Smiths/Morpho (2017), Dow/Dupont (2017) and Bayer/Monsanto (2018).Cooperation with Brazil, Canada, China, India, Japan, South Korea and Switzerland
Several other cooperation agreements with third countries exist. The EC-Canada cooperation agreement was signed in June 1999 and contains similar provisions to the US agreement. An agreement with Japan on cooperation and anticompetitive activities entered into force in August 2003 (currently under review by the EU and Japan), with the aim of facilitating bilateral cooperation in major merger and acquisition cases. Close cooperation with the Japanese Fair Trade Commission proved successful in the Sanyo/Panasonic case (2009), which was granted a Phase I clearance subject to conditions. For several years, the EU and China have been increasing their cooperation on competition policy (agreement on the terms of reference of a bilateral competition policy dialogue from May 2004; memorandum of understanding on cooperation from September 2012; best practices cooperation framework from October 2015). In April 2019, the EU and China agreed, on a memorandum of understanding on dialogue in the area of the state aid control regime and the fair competition review system, and on the terms of reference of the EU-China competition policy dialogue. The European Union has also entered into a bilateral competition cooperation agreement with South Korea, and into a memorandum of understanding with the Brazilian Ministry of Justice and the heads of the Brazilian Competition Authorities to ensure closer cooperation. In March 2011, the European Union and Russia signed a memorandum of understanding for cooperation in the area of competition policy, legislation and enforcement. The European Union has been working in close technical cooperation with the Competition Commission of India. On 1 December 2014, a cooperation agreement entered into force between the European Union and the Swiss Confederation.
In addition, the Commission actively participates in the International Competition Network’s working group on multi-jurisdictional merger control, which was established in 2001 with the aim of promoting best practices and international cooperation.
The Commission played a key role in the adoption in 2015 of the ICN Merger Working Group Practical Guide to International Enforcement Cooperation.
Judicial reviewAvailable avenues
What are the opportunities for appeal or judicial review?
The EUMR provides for appeal to the General Court against Commission decisions on both procedural and substantive grounds. A further appeal can be made to the CJEU. An appeal can be made either by way of an expedited procedure (only suitable for cases where the appeal is based on limited grounds), or following the normal appeal procedure.
Both merging parties and third parties who show standing can lodge an appeal before the General Court to challenge Commission decisions. Member states can also appeal merger decisions.
The appeal process for substantive appeals is rigorous, with the General Court engaging in a detailed forensic analysis of the Commission’s decision. The judgments have led to a clarification of the standard of review and the type of evidence that the Commission can rely upon. For example, in February 2005, in Commission v Tetra Laval BV, the CJEU confirmed that, even though the Commission has a margin of discretion with regard to economic matters, the General Court must establish whether the evidence relied upon by the Commission is factually accurate, reliable and consistent, whether that evidence contains all the information necessary to assess a complex situation and whether it is sufficiently capable of substantiating the Commission’s conclusions.
In more recent cases, the General Court has put emphasis on procedural grounds and reinforced due process and transparency standards in merger control procedures. In UPS v Commission (2017), the General Court held that the Commission had infringed UPS’s rights of defence when handling economic evidence and it annulled the Commission’s decision. The General Court has also recently asserted the Commission’s obligation to lay out a complete reasoning justifying its decisions in KPN v Commission (2017).
If the EU courts annul a merger decision, the parties need to re-notify their deal, as was the case in Sony/BMG, approved by the Commission in October 2007 after reassessment subsequent to the court’s decision.
In addition to judicial review remedies, actions have been brought against the Commission for non-contractual liability arising from its decisions in the merger control area (article 340 TFEU).
See also question 29.Time frame
What is the usual time frame for appeal or judicial review?
The average time for the adjudication of a merger decision case before the General Court is about 30 months, although in some cases the process can take a number of years. When used, the expedited procedure has shortened the waiting period to between seven and 18 months from the date of the Commission’s decision. Consequently, for cases that are not expedited (and even some that are), the delay involved will usually represent a major factor against bringing an appeal.
Appeals to the CJEU of the General Court’s findings generally take in excess of two years to be concluded.
Enforcement practice and future developmentsEnforcement record
What is the recent enforcement record and what are the current enforcement concerns of the authorities?
The majority of mergers notified to the Commission are cleared in Phase I without commitments. For example, in 2018, 366 cases were approved in Phase I (without commitments), 17 were cleared in Phase I (with commitments) and 10 were decided upon in Phase II (of which four were cleared without commitments and six were cleared with commitments; none were prohibited). Further, the large majority of Phase I clearances (302 out of 366) were subject to the simplified procedure (see question 16). Prohibition decisions are rare - there have been two in 2019 (as of 30 June 2019), none in 2018, and 30 in total since the EUMR entered into force in 1990.
The Commission analyses foreign-to-foreign mergers in the same way as EU-to-EU mergers. Notable examples of foreign-to-foreign cases that have qualified for EU merger review include GE/Honeywell (2001), Johnson & Johnson/Guidant (2005), Oracle/Sun Microsystems (2010) and Intel/McAfee (2011).
EU merger control applies equally to all industries and sectors.Reform proposals
Are there current proposals to change the legislation?
There are no pending changes to the EUMR.
In January 2018, the Commissioner for competition Margrethe Vestager announced that the Commission was preparing a set of best practices to provide practical guidance to companies on how to reply to the Commission’s requests for internal documents during a merger review. The Commission’s requests for information increasingly require the production of thousands, and sometimes hundreds of thousands, of internal documents, particularly during Phase II proceedings. The Commission has indicated that it is increasingly relying on internal documents obtained during merger reviews. For example, in Dow/Dupont (2017) the Commission relied on the parties’ internal documents to support its conclusion that the merger would reduce the parties’ research efforts.
On 18 December 2018, in the context of the discussions accompanying the Siemens/Alstom proceedings, ministers from 18 member states issued a joint statement calling for updated merger rules that better take into account international markets and competition (see question 36).
Update and trendsKey developments of the past year
What were the key cases, decisions, judgments and policy and legislative developments of the past year?Key developments of the past year36 What were the key cases, decisions, judgments and policy and legislative developments of the past year? Increasing M&A activity
The trend of increasing M&A activity in recent times continues to be reflected in an increasing number of merger notifications to the Commission. 2018 again saw an increase compared to previous years: 414 cases were notified in 2018, compared to 380 cases in 2017, 362 cases in 2016, and 337 in 2015.Simplified merger cases
The share of mergers reviewed under the European Commission’s simplified procedure has increased steadily since the rules were updated in 2014. In 2018, 75 per cent of notified deals qualified for a simplified procedure, up from 69 per cent in 2014 and 67 per cent in 2015. The trend appears to have continued in the first quarter of 2019: 78 per cent of the 92 deals filed between January and March were under the simplified procedure. Reviews for 58 cleared mergers lasted an average of 17.52 working days. Looking at sectors, non-financial services topped the list, followed by the energy, financial services and automotive sectors.Siemens/Alstom
On 6 February 2019, the European Commission announced the prohibition of the proposed acquisition of Alstom by Siemens. In the wake of the decision, German and French Economic and Finance Ministers, Peter Altmaier and Bruno Le Maire, voiced their dissatisfaction with the Commission’s approach. In particular, Le Maire made critical statements about the Commission’s decision to block the proposed merger, saying that it was an ‘economic and political mistake’ and that the underlying rules were ‘obsolete’.
On 18 December 2018, ministers from 18 member states issued a joint statement calling for updated merger rules that better take into account international markets and competition. On 19 February 2019, France and Germany unveiled a ‘Common manifesto for a European industrial policy fit for the 21st century’ to facilitate the creation of ‘European champions’. The manifesto suggested that competition law should take greater account of competition at the global level as well as potential future competition. Furthermore, it should be considered whether a right of appeal of the Council, which could ultimately override Commission decisions, could be appropriate in certain cases. Currently, there are no plans to amend the existing EU merger control rules in light of these criticisms.Investment screening
In March 2019, the EU adopted Regulation 2019/452 on the screening of FDI. Investments completed after 11 April 2019 may be subject to the Regulation once it enters into force on 11 October 2020. While 14 EU member states already have national screening mechanisms, the new framework creates the first EU-wide system that supports member states’ screening of FDI on grounds of security and public order. The European Commission will be able to ask for information and deliver its opinion to the member state where the investment is planned, but the final decision remains with the country concerned.