Six months after the UK Competition Commission (CC) issued its widely criticised decision in the Eurotunnel/ SeaFrance case, the UK Competition Appeal Tribunal (CAT) has, in its judgment of December 4, 2013 (the Judgment), illustrated the risks of conflicts between different national competition authorities (NCAs) examining cross-border mergers.
Placed in judicial liquidation, the ferry company SeaFrance’s assets were transferred, pursuant to an order of the Paris Commercial Court in June 2012, to Eurotunnel, which was selected among four proposed purchasers to acquire three vessels and certain other assets (brand, client listing, etc.) belonging to SeaFrance (the Assets). However, the hurdle of merger control clearance remained, as the transaction was reviewed by both the UK and French competition authorities.
The review process began favourably for Eurotunnel with a clearance decision from the French Competition Authority (FCA) in November 2012. Although, this was subject to behavioural commitments in order to limit the risks identified in respect of vertical and conglomerate effects between the rail and maritime transport activities of Eurotunnel on the ‘short sea’ area of the Channel, which was found to be the relevant geographic market in this case.
However, across the Channel, the CC issued a decision in June 2013 effectively blocking the deal: although it approved the transaction, the CC prohibited Eurotunnel from operating ferry services at the Dover port for ten years, unless it divests two of the three vessels and refrains from operating ferry services at Dover with any vessel for two years.
These conflicting findings reflect a lack of cooperation between the two NCAs, and are all the more difficult to understand as the authorities were analysing the same geographic market, which is quite rare in multijurisdictional transactions and could have perhaps motivated a referral to the European Commission.
Failing that, the two NCAs could at least have agreed on the choice of the ‘counterfactual’ grounds prior to analysing the impact of the transaction on competition:
- the FCA took as point of comparison the competitive situation just prior to the acquisition by Eurotunnel of the Assets – i.e. when SeaFrance had ceased all activities
- in contrast, considering that there were other potential purchasers, the CC assessed whether an acquisition by the most likely alternative bidder would have been better for competition than an acquisition by Eurotunnel, whereas this question had been dismissed by the FCA as too hypothetical. In doing so, the CC relied on extracts of its guidance to support its approach and to dismiss the need to divert from its guidelines to align with the FCA.
In its Judgment, although confirming the approach of the CC, the CAT raised a new concern which leads to an even deeper contradiction: could the Assets really be considered as an ‘Enterprise’ whereas it was unsure whether human resources had been transferred to Eurotunnel? In particular, the CAT noted that the new employees allocated by Eurotunnel to the operation of the Assets had no longer been employed by SeaFrance for several months prior to the acquisition. Consequently, unless such a transfer is duly established, the CC could in the end conclude that the transaction did not even fulfil the conditions to be reviewed under the UK law …
As this issue has not raised any difficulties for the FCA, this Judgment confirms the importance of the reflection currently under way with respect to cross-border mergers, which recently led the French Minister of Economy to request the FCA to produce a report on a possible reform of the merger control procedure in this area.