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Legislation, triggers and thresholds
Legislation and authority
What legislation applies to the control of mergers?
The main laws governing merger decisions are the EU Merger Regulation (139/2004) and the 2004 Implementing Regulation (802/2004), as amended by the 2013 Implementing Regulation (1269/2013). The EU Merger Regulation sets out the main rules for the assessment of concentrations, whereas the implementing regulations concern procedural issues (eg, notification, deadlines and the right to be heard). The commission has also published a series of notices and guidelines to help parties in transactions that potentially fall within the scope of the EU Merger Regulation. These include the Consolidated Jurisdictional Notice (2008) and the Notice on the Simplified Procedure (2013).
The laws and non-binding notices and guidelines are available on the European Commission’s Directorate General for Competition’s website.
What is the relevant authority?
The sole authority in charge of enforcing the EU Merger Regulation is the Directorate General for Competition, the European Union's executive body based in Brussels. The commission directly enforces the EU Merger Regulation in the European Economic Area (EEA) and European Free Trade Association (EFTA) member states (ie, Iceland, Liechtenstein and Norway).
The EU Merger Regulation operates on a one-stop shop basis, whereby a transaction that comes under the commission’s jurisdiction need not be notified to the national competition authority in EEA and EFTA member states which would otherwise have jurisdiction over the transaction. National competition authorities are precluded from applying their own rules to the transaction in this context, except in specific circumstances.
Transactions caught and thresholds
Under what circumstances is a transaction caught by the legislation?
Only so-called 'concentrations' with an EU dimension fall within the scope of the EU Merger Regulation.
The concept of a 'concentration' covers transactions that result in a lasting change of control. ‘Control’ is defined as rights, contracts or other means which, separately or in combination, and in all factual and legal circumstances, confer on the acquirer of control the ability to exercise decisive influence over an undertaking. Control may be held by one party (sole control) or by several parties acting jointly (joint control). There is no strict percentage shareholding test, although control has been found to exist on the basis of as little as a 27% shareholding (eg, the Pirelli/Edizione/Olivetti/Telecom Italia merger), based on evidence of attendance rates of less than 27% of voting rights from shareholders' meetings during the three preceding years.
A concentration has an EU dimension only where it satisfies the turnover thresholds under the EU Merger Regulation. In the case of concentrations without an EU dimension, the national competition authorities in EU member states may review the merger.
Do thresholds apply to determine when a transaction is caught by the legislation?
Only concentrations with an EU dimension must be notified to the commission under the EU Merger Regulation. According to Article 1 of the regulation, a concentration has an EU dimension where the parties' combined worldwide turnover exceeds €5 billion and the EU-wide turnover of at least two parties exceeds €250 million, unless each party achieves more than two-thirds of its EU-wide turnover within one member state.
Unless each party achieves more than two-thirds of its EU-wide turnover within one member state, a concentration that does not meet the above thresholds has an EU dimension where:
- its combined worldwide turnover exceeds €2.5 billion;
- the combined turnover of all parties exceeds €100 million in at least three member states;
- the turnover of at least two parties exceeds €25 million in each of at least three member states included for the purpose of the previous point; and
- the EU-wide turnover of at least two parties exceeds €100 million.
Article 4(4) of the EU Merger Regulation allows notifying parties to request the referral of a concentration with an EU dimension, which would otherwise be within the commission’s jurisdiction, to the competent national competition commission.
Article 4(5) of the EU Merger Regulation allows notifying parties to request the referral to the commission of a concentration that has no EU dimension, but is notifiable to the national competition authorities of at least three EU member states.
Is it possible to seek informal guidance from the authority on a possible merger from either a jurisdictional or a substantive perspective?
The commission may provide informal guidance on questions from parties directly relating to a planned transaction – for example, jurisdictional questions – where the parties provide sufficiently detailed background information to allow the commission to properly assess the question. Simultaneously, pre-notification contacts with the commission are standard, even for simplified procedure notifications. This usually involves email correspondence and conference calls with the case team and the submission of a draft version of the Form CO notification template. Pre-notification may involve discussions on the possibility of referrals to or from national competition authorities within the European Union or parallel proceedings in non-EU jurisdictions.
Are foreign-to-foreign mergers caught by the regime? Is a ‘local impact’ test applicable under the legislation?
The EU merger control regime applies regardless of whether the relevant thresholds are met.
What types of joint venture are caught by the legislation?
Where the joint venture performs on a lasting basis all the functions of an autonomous economic entity and is thus ‘full function’, a filing is required. Non-full function joint ventures are not caught by the legislation, but may trigger filing obligations in EU member states, such as Austria, Germany and Poland.
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