On October 5, 2020, the General Court dismissed an action for annulment by HeidelbergCement and Schwenk Zement (the “parent companies”) against the Commission’s April 2017 decision,[1] which prohibited their acquisition of Cemex’s Croatian and Hungarian subsidiaries through Duna-Dráva Cement (“DDC”), a full-function JV (“JV”) equally owned and controlled by the parent companies. [2]

Clarity On When JV Parent Companies’ Revenues Decisive For Determining Whether EU Revenue Thresholds Are Met

The parties claimed the Commission was not competent to review the transaction as it should have considered only the turnover of the JV, and not that of its parent companies when assessing whether the jurisdictional thresholds were met. The parent companies argued that the JV, DDC, was long-established and the direct acquirer of Cemex Croatia. They further argued that the wording of the CJN did not allow the Commission to identify the relevant parties for jurisdictional purposes on a case-by-case basis unless the JV was clearly a shell company or set up as a mere vehicle for the transaction. On this logic, the turnover of the parent companies should have been attributed to DDC and not considered separately, in which case the transaction did not meet the EU turnover thresholds because at least two undertakings did not have EU turnover exceeding €250 million.

The critical jurisdictional issue in this case related to identifying the “undertakings concerned” in an acquisition by a full-function JV. Article 1(2) of the Merger Regulation introduces but does not define the concept of “undertakings concerned.” Paragraphs 145 to 147 of the Consolidated Jurisdictional Notice (“CJN”) interpret the concept where a JV acquires control of another company.[3] In principle, the relevant parties for jurisdictional purposes are the full-function JV itself and the targetnot the Parties that are participating in the JV. But where the JV “can be regarded as a mere vehicle for an acquisition by the parent companies,” the Commission will consider both of the parent companies and the target as the relevant parties for jurisdictional purposes. This could occur in a number of instances, for example, where the JV is set up especially to acquire the target company, has not yet started to operate, or where “there are elements which demonstrate that the parent companies are in fact the real players behind the [transaction],” including because they initiated, organized, and financed the deal.[4]

The General Court dismissed the Parties’ plea which was based on a “misconceived premise”: “it is not only when the parent companies use a ‘shell company’ for the acquisition or in circumvention scenarios that it may be necessary to consider the parent companies to be the undertakings concerned, but also when they are the real players behind the transaction.”[5] A full-function JV’s interest in a merger cannot prevent parent companies being classified as relevant parties for jurisdictional purposes if they are the real actors behind the transaction in light of their involvement. In this case the General Court concluded that the parent companies’ “decisive” involvement was evident from the facts, and most notably:

  • HeidelbergCement attended the kick-off meeting, before which it “took decisions regarding the implementation and composition of the steering committee, the timing, preparation and submission of an indicative offer, the structure of the due diligence;”[6]
  • The HeidelbergCement members of the steering committee “attended negotiations with Cemex and prepared detailed documentation, deal valuation and other components of the business case for the decision by the HeidelbergCement management board and supervisory board to approve the acquisition;”[7]
  • HeidelbergCement negotiated non-disclosure agreements, reached verbal agreement on the main terms of the transaction, and agreed the final purchase price with Cemex;
  • Schwenk agreed to pursue the acquisition with HeidelbergCement, “was regularly informed about HeidelbergCement’s organisation of the transaction and never sought to oppose HeidelbergCement’s role in any ”[8]

The judgment is a helpful reminder that parent companies should be conscious that their actions with respect to a transaction can be determinative of whether or not they will be viewed as the relevant parties for jurisdictional purposes. Where parent companies are the real actors in a deal, they should expect their turnover to be included for assessing whether EU notification is necessary. This confirms an interpretation of the CJN that prevents parent companies from circumventing notification thresholds through creative transaction structures.

Business Confined To A Limited Part Of A Member State Sufficient To Trigger EC Prohibition

The parent companies also contested the Commission’s substantive framework of assessment. The General Court dismissed each plea.

Most notably, the General Court endorsed the Commission’s approach to finding a risk of a SIEC in a substantial part of the internal market. The Commission found the transaction was likely to impede effective competition in southern Croatia. The parent companies claimed the affected market must constitute a substantial part of the EU internal market to constitute a SIEC (as the EU Merger Regulation stipulates)—which it alleged was not the case in view of the size of the catchment area around Cemex’s plant in Split. Based on surface area, population, consumption, and imports/exports, the Commission concluded that the catchment areas around Cemex’s plant in Split could constitute a substantial part of the internal market regardless of their precise definition.

Reiterating its precedent,[9] the General Court upheld the Commission’s methodology. It considered a surface area of 30,000 km2 and a population of more than 2 million inhabitants (comparable with or greater than the population of several Member States) a substantial part of the internal market. The use of grey cement in that area was also comparable to or higher than that in several Member States. The judgment is a reminder that high market shares in localized areas can jeopardize EU merger control approval.

High Market Shares In Localized Areas Can Jeopardize EU Approval

Source: European Commission, Competition Merger Brief, Issue 3/2017

The General Court Endorses The Commission’s Standard For Assessing Remedies

The parent companies claimed that the Commission’s assessment of its proposed commitments was based on an incorrect and overly strict standard essentially requiring “a divestiture of a viable business comprising a production plant, brands, customer relationships and staff,” which “must entirely eliminate, or at least substantially reduce, the overlap between the merging parties.”[10]

In rejecting the parties’ claim that the standard was overly exacting, the General Court highlighted that the proposed commitments—access to a Cemex cement terminal in southern Croatia without existing customers, brands, or sales staff— would not have had an effect comparable to the divestiture of an existing standalone business and therefore could not be accepted. The merged entity’s capacity shares would have remained high. Reiterating the wording of the Commission’s Remedies Notice, the General Court underlines the standard for a behavioral remedy is that it must be at least equivalent in its effects to a divestiture: “the commitments offered a mere, uncertain business opportunity for a new lessee to start selling, or to expand sales of, grey cement in the relevant markets, ‘which [wa]s not comparable’ to the divestiture of an existing standalone business.”[11]

In contrast to the landmark Three/O2 judgment, the General Court’s judgment in this case provides a full endorsement of the Commission’s approach to determining several critical merger control concepts.


[1]      HeidelbergCement/Schwenk/Cemex Hungary/Cemex Croatia (Case COMP/M.7878), Commission decision of April 5, 2017.

[2]      HeidelbergCement & Schwenk Zement v. Commission (Case T-380/17) EU:T:2020:471 (“General Court Judgment”).

[3]      Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No. 139/2004 on the control of concentrations between undertakings, OJ 2008/C 95/01.

[4]      CJN, para. 147.

[5]      General Court Judgment, para. 124.

[6]      General Court Judgment, para. 196.

[7]      General Court Judgment, para. 182.

[8]      General Court Judgment, para. 264. The evidence provided in the General Court Judgment suggests that Schewenk’s role was secondary to HeidelbergCement’s. This raises the question of whether the actions of one of two parties to a JV can implicate the other party as the “real player” behind the Transaction. The judgment does not address the question directly. It appears to take the view that a parent company is involved if “but for” that parent company’s actions and decisions, the transaction would not have gone ahead. Here, but for Schwenk approving HeidelbergCement’s initiatives, the transaction would not have happened at all.

[9]      Ambulanz Glöckner (Case C-475/99), EU:C:2001:577, para. 38.

[10]    General Court Judgment, para. 578.

[11]    General Court Judgment, para. 583.