On September 11, 2020, Commissioner Vestager during a speech at a conference[1] for the 30th anniversary of the EU Merger Regulation (“EUMR”),[2] outlined her vision on merger control policy for the upcoming years.[3] In anticipation of the Commission’s long awaited report on its 2016 consultation on the evaluation of procedural and jurisdictional aspects of EU merger control, Commissioner Vestager shed some light on the Commission’s position on (i) notification thresholds; (ii) the simplification of merger filing and review processes; and (iii) its reflections on the substance of merger review in certain sectors. At a high-level, Commissioner Vestager’s statements indicate what to expect from the upcoming EUMR reform proposals.

Out of oblivion – “Dutch clause” revival to solve alleged enforcement gap

Since Facebook’s acquisition of WhatsApp in 2014,[4] a major topic discussed in the European antitrust community was the perceived enforcement gap for so-called “killer acquisitions”[5] and other transactions involving nascent targets with no or only limited revenues, mainly in the digital and pharmaceutical areas. Competition agencies’[6] concern was that turnover-based thresholds may not be suitable to subject transactions to merger review in situations where a company’s turnover does not reflect its importance in the market. In line with last year’s Special Advisers’ report,[7] Vestager clarified that the existing notification thresholds have proved to generally “work well.” That said, in Vestager’s view, have proved generally to remain a handful of cases that escape merger control under the current regime that do not meet turnover thresholds but can seriously affect competition. To remedy that situation, Vestager suggested to reinvigorate referrals from NCAs under Article 22 EUMR (“Article 22 Referral”),[8] commonly known as the Dutch clause,[9] a solution she described as “hiding in plain sight.” The Commission plans to change its current approach of discouraging national competition authorities (“NCA”) from Article 22 Referrals, and instead invite NCAs to make increased use of this tool. A notable feature of the Article 22 Referral process is that it allows NCAs to refer cases even when national thresholds are not met, provided the transaction is “worth reviewing at the EU level.”

While it remains to be seen whether this new enforcement practice will lead to a significant number of otherwise non-notifiable merger reviews, there is a real risk that broader reliance on Article 22 Referrals introduces significant legal uncertainty:

  • The Commission can accept cases even when they meet neither EU nor national notification thresholds, as long as the Commission “considers” them to “[affect] trade between Member States and [threaten] to significantly affect competition” within the territory of the referring Member State(s), potentially opening the door for review even of minor transactions at the EU level.[10] Merging companies will have to self-assess whether these two conditions are met in one or several Member States which, given the complexity and uncertainties associated with such assessment, will require them to proceed with great caution;
  • The Commission can actively call in transactions by “inviting” Member States to make a referral,[11] leading to the need for strategic self-assessment of merging parties known only from other jurisdictions to date, in particular, the UK; [12] and
  • Member States can make referrals within 15 working days from the date on which the transaction was “made known” to them.[13] This risks opening the door not only for interventions by (hostile) third parties, but also for referrals post-closing. This might also significantly lengthen the procedure for cases that are initially not reviewable, potentially resulting in arbitrary outcomes: transactions that are not closed by the time the Commission accepts the Article 22 Referral will become subject to the standstill obligation and may no longer be closed without the Commission’s clearance, or risk significant fines for “jumping the ”

Commissioner Vestager expects the new policy to come into effect by mid-2021, which leaves the Commission time to adopt clear guidance—for both companies and NCAs—to ensure at least a minimum of legal certainty for merging parties.

Cutting red tape – simplification of filing and review procedure

Commissioner Vestager further discussed the need to simplify merger filings, especially for cases unlikely to harm competition. Without changing the EUMR, the Commission plans to “review some of the rules and guidance that put the regulation into practice.” This includes the Best Practices on merger proceedings,[14] the Notice on simplified procedure,[15] and the Implementing Regulation No. 802/2004.[16] Contemplated measures include: (i) a further expansion of the categories of cases eligible for a simplified procedure;[17] (ii) a reduction of the amount of information that merging parties are required to provide; and (iii) a simplification and shortening of the filing process. In that context, the Commission could accept to digitize the entire filing procedure, which has proven workable during the Covid-19 pandemic.

The Commission will consider dropping the pre- notification phase for a broader set of cases “so straightforward that there’s really nothing to discuss before the merger is filed.” Although the Commission normally expects pre-notification contacts even in seemingly unproblematic cases, for a small set of cases already today, the Commission does not consider pre-notification contacts to be necessary. This concerns transactions subject to simplified procedure in which there exist no horizontal or vertical overlaps between any activities of the merging parties.[18] While these considerations are obviously a welcome starting point, they should go even further to also include, e.g., clear guidance and a limitation of the scope for, ever broader information requests.

The Commission’s full report on its 2016 consultation on the evaluation of procedural and jurisdictional aspects of EU merger control is now expected for early 2021.

Calibrating the focus of substantive merger control – not anytime soon

The Commission has intensified its reflection on the substance of merger review, though not least since the 2019 Special Advisers’ report. While reiterating that the rules “still work very well,” Commissioner Vestager underlined the ever-changing nature of markets and the constant need for EU merger rules to adapt. To that end, she announced a new review of recent Commission decisions to evaluate their effect, especially on prices, choice, quality, and innovation. This is complemented by the Commission’s ongoing effort to better understand how certain markets, especially digital, work and evolve to make sure that merger rules remain fit for purpose.

The other area of interest focuses on reasons for and remedies against a perceived growing market concentration in various sectors, and persistently higher price mark-ups, and hence profit margins, without attracting additional market entry as traditional economic theory would suggest.

Any substantive revision of the merger rules is unlikely to materialize for some time.[19] In the coming months, the Commission will launch a “reflection” on how to improve the rules and will be “open to ideas, no matter where they come from.” In addition, the Commission will not hasten the drafting of new merger guidelines, especially not before the outcome of its appeal in the Hutchison case.[20] It will also cautiously try to avoid discussion about another substantive change, which is the softening of standards for so-called “European champions.”[21]

[1]      International Bar Association 24th Annual Competition Conference.

[2]      Council Regulation (EC) No. 139/2004 of 20 January 2004 on the control of concentrations between undertakings, OJ L 24/1, 29.1.2004.

[3]      International Bar Association 24th Annual Competition Conference, The future of EU merger control, Speech by Margrethe Vestager, September 11, 2020, available at: https://ec.europa.eu/commission/commissioners/2019-2024/vestager/announcements/future-eu-merger-control_en.

[4]      Facebook/WhatsApp (Case COMP/M.7217), Commission decision of October 3, 2014.

[5]      The term covers situations where companies allegedly acquire startups to obtain their technology, either to quell a nascent threat, or to integrate it to their own offerings, further entrenching their dominance.

[6]      Germany and Austria have therefore introduced new transaction value-based filing thresholds, although the number of additional cases in both jurisdictions remains limited.

[7]      Competition policy for the digital era, report, J. Crémer, Y-A. de Montjoye, and H. Schweitzer, May 20, 2019, available at: https://ec.europa.eu/competition/ publications/reports/kd0419345enn.pdf.

[8]      Article 22(1) EUMR provides that “[o]ne or more Member States may request the Commission to examine any concentration as defined in Article 3 that does not have a Community dimension within the meaning of Article 1 [of the EUMR] but affects trade between Member States and threatens to significantly affect competition within the territory of the Member State or States making the request. Such a request shall be made at most within 15 working days of the date on which the concentration was notified, or if no notification is required, otherwise made known to the Member State concerned.”

[9]      Named “Dutch clause” as it was introduced initially to allow Member States without merger control regime, such as the Netherlands at the time, to request examination of a transactions by the Commission.

[10]    Article 22(3) EUMR.

[11]    Article 22(5) EUMR.

[12]    Outside the EU, this is the case e.g., for Australia.

[13]    Article 22(1) sub-para. 2 EUMR.

[14]    Commission Best Practices on the conduct of EC merger proceedings of 20 January 2004.

[15]    Commission Notice on a simplified procedure for treatment of certain concentrations under Council Regulation (EC) No. 139/2004 of 14 December 2013, herein “the Notice on simplified procedure.”

[16]    Commission Regulation (EC) No. 802/2004 of 21 April 2004 implementing Council Regulation (EC) No. 139/2004 on the control of concentrations between undertakings, herein “the Implementing Regulation.”

[17]    Currently, around 75% of all cases are filed in simplified procedure.

[18]    See Annex II of the Implementing Regulation, Short Form CO for the notification of a concentration pursuant to Regulation (EC) No. 139/2004, point 1.3; and point 5(b) of the Notice on simplified procedure.

[19]    The announced “calibration” of the EU merger rules are part of a broader policy review, and build on efforts dating back to the Commission’s White Paper “Towards More Effective EU Merger Control” (COM/2014/0449 final).

[20]    Commission v. CK Telecoms UK Investments (Case C-376/20 P) EU:T:2020:217.

[21]    After prohibiting the merger between Siemens and Alstom in 2019 (see Case COMP/M.8677), the Commission faced calls to review merger control rules to allow for the creation of “industrial champions.” France, Germany, and Poland in particular advocated for a stronger consideration of potential competition at the international level, and for a reinforced role for the Council regarding merger control policy and decision-making. Commissioner Vestager systematically rejected such suggestions, refusing to build industrial champions at the expense of competition on European markets.