On March 26, 2021, the Commission adopted a Communication on the application of the referral mechanism pursuant to Article 22 of the EU Merger Regulation (“EUMR”) and announced a further simplification of merger control proceedings, effective immediately.
Breaking away from its long-standing approach, the Commission now encourages national competition authorities (“NCAs”) to refer transactions that do not meet EU or national notification thresholds to the Commission under certain circumstances, even where they have already been implemented. The stated goal of this significant policy change is to fill a perceived enforcement gap in respect of so-called “killer acquisitions.”
Towards a broader application of Article 22 EUMR
Article 22 EUMR has always enabled NCAs to refer to the Commission two types of transactions: (1) those that meet national filing thresholds but are more effectively dealt with at EU-level, and (2) those that meet neither national nor EU thresholds, provided they: (a) affect trade between Member States; and (b) threaten to significantly affect competition within the referring Member State(s). The Commission’s long-standing practice with respect to the second category of cases has been to discourage referrals, as the Commission in the past considered that such cases are “not generally likely to have a significant impact on the internal market.”
The Commission, through this Communication, is now taking a different approach. It will “encourage and accept [such] referrals by NCAs in certain circumstances even where the proposed transaction does not meet any turnover thresholds. The decision to actually request a referral remains exclusively with the NCAs.
With this, the Commission hopes to fill the perceived enforcement gap regarding transactions, usually in the tech and pharmaceutical sectors, “where the turnover of at least one of the undertakings concerned does not reflect its actual or future competitive potential.”
Senior Commission official Guillaume Loriot stressed that the shift in EU merger policy is not intended to be “an indiscriminate catch-all,” but, rather, a “safety net” targeted at these specific types of cases.
More specifically, the circumstances warranting a referral to the Commission pursuant to the Communication are cases where the target:
- is a nascent competitor “with significant competitive potential” that has yet to develop “a business model generating significant revenues;”
- is an “important innovator or is conducting potentially important research;”
- is an “actual or potential important competitive force;”
- has access to “competitively significant assets” (g., raw materials, infrastructure, data, or intellectual property rights); and/or
- provides products or services that are “key inputs/components for other ” Companies will need to consider these in their deal negotiations when assessing the risk of an Article 22 EUMR referral pursuant to the Communication.
In terms of procedural guidance, the Communication makes the following noteworthy points:
- NCAs have to request the referral of a transaction to the Commission within 15 working days of the date of notification or the date on which the transaction is “made known” to the  “Made known” is interpreted as “implying sufficient information to make a preliminary assessment as to the existence of the criteria relevant for the assessment of the referral.” While merging parties may “voluntarily come forward with information” regarding an intended transaction to gain certainty over the possibility of referral, this may, however, delay the transaction’s implementation “until it has been decided whether a referral request will be made.” “Gatekeeper” platforms would notably have to “inform the Commission of all of their intended and concluded acquisitions of [digital services providers]”—irrespective of whether the transaction is notifiable to the Commission or an NCA—pursuant to the Commission’s separate but related proposal for a Digital Markets Act.
- The Commission will inform the parties to the transaction of a referral request “as soon as ” Other NCAs may join the initial request within 15 working days of being informed by the Commission of the initial request. The Commission may then accept the referral within 10 working days after the expiry of the 15-working day period for NCAs to join the referral request if it finds that the requirements of Article 22 EUMR are fulfilled based on the factors outlined above.
- Once the Commission has accepted the referral, the regular pre-notification process, followed by Phase 1 (and potentially Phase 2) proceedings will begin. It remains to be seen whether the EU Courts will consider the Commission’s decision to accept the referral request as a “reviewable act” under Article 263 TFEU, thus allowing parties to seek judicial review of the decision to accept a referral without having to wait for the Commission’s decision on the merits of the 
- Pursuant to Article 7 EUMR, the parties may not close the transaction before the Commission’s clearance decision. This standstill obligation only applies “as of the date on which the Commission informs the undertakings concerned that a request has been made, to the extent that the concentration has not been implemented on that date” and ceases “if the Commission subsequently decides not to examine the ”
- Notably, the Communication indicates that referrals will be possible even if a transaction has been  The Commission will “generally not consider” referrals of transactions that have been implemented more than six months ago—except in exceptional circumstances where there are serious potential competition concerns. In the context of already closed transactions that are referred to the Commission, the standstill obligation of Article 7 EUMR does not apply.
The Commission’s new approach to referrals under Article 22 EUMR, effective immediately, creates significant legal uncertainty for pending and future transactions. Not only will the Commission now be able to examine transactions that do not meet EU or national notification thresholds, even if they have already been implemented, but it will enjoy ample discretion when deciding whether to accept a referral, due to the Communication’s open-endedness (and its non-binding nature).
The Commission begun implementing its new approach even before it published the Communication. On February 19, 2021, the Commission invited NCAs to refer the Illumina/ Grail transaction, which reportedly did not meet any national jurisdictional thresholds. The Communication and its practical implications are further analyzed in our Alert Memorandum available here.
 Communication Guidance on the application of the referral mechanism set out in Article 22 of the Merger Regulation to certain categories of cases, C(2021) 1959 final of March 26, 2021 (the “Communication”). See our October 21, 2020 Alert Memorandum “European Commission Announces New Policy to Accept Member State Referrals for Merger Review Even if EC and National Thresholds Are Not Met.”
 Commission Press Release IP/21/1384, “Mergers: Commission announces evaluation results and follow-up measures on jurisdictional and procedural aspects of EU merger control,” March 26, 2021. See also Commission Staff Working Document, Evaluation of procedural and jurisdictional aspects of EU merger control, SWD(2021) 66 final of March 26, 2021.
In the Staff Working document, the Commission observed the increased use of the simplified procedure. Nevertheless, it highlighted the room for improvement in this area, including a possible extension of the simplified procedure to cases that are prima facie unlikely to raise competition concerns and a further reduction of the information required for notifications.
The Commission consequently launched an impact assessment and opened a public consultation to gather feedback on and assess the possibility of: (i) expanding and clarifying the categories of simplified cases; (ii) streamlining the review of simplified cases; and (iii) making the electronic merger notification— introduced due to the COVID-19 restrictions—permanent. The Commission intends to publish a draft of the proposed revisions in the second half of 2021.
 The Commission defined these as acquisitions where “an incumbent acquires a potential competitor with an innovative project that is still at an early stage of its development and subsequently terminates the development of the target’s innovation in order to avoid a replacement effect.” See Competition policy for the digital era, April 2019, available at: https://ec.europa.eu/competition/publications/reports/kd0419345enn.pdf.
 The Communication provides further guidance on these two criteria. See Communication, paras. 13–15.
 Ibid, para. 8; Commission Notice on Case Referral in respect of concentrations, 2005/C 56/02 of March 5, 2005 (“Notice on Case Referral”), para. 45.
 Communication, para. 8.
 Ibid., paras. 11 and 26.
 Ibid., paras. 10 and 19. This notably includes transactions where the target is a nascent competitor with significant competitive potential or is conducting potentially important R&D activities.
 Change in EU merger policy a ‘safety net,’ not ‘indiscriminate catch-all,’ Loriot says, MLex, April 8, 2021. G. Loriot is the Director responsible for Directorate C, dealing with information, communication, and media cases, at DG Competition.
 Communication, para. 19.
 See Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings, 2004/C 31/03 of February 5, 2004, paras. 37–38.
 EUMR, Article 22(1), second sub-paragraph.
 Communication, para. 28.
 Ibid, paras. 24 and 27.
 Proposal for a Regulation on contestable and fair markets in the digital sector, COM(2020) 842 final of December 15, 2020, para. 31 and Article 12.
 Communication, para. 27.
 Ibid., para. 29; EUMR, Article 22(2), first and second sub-paragraphs.
 See supra, circumstances warranting a referral; Communication, paras. 17 and 19.
 The General Court has held that Commission’s decisions to refer a case to NCAs under Article 9 EUMR are reviewable acts. See Royal Philips Electronics NV v. Commission (Case T-119/02) EU:T:2003:101 and Cableuropa and Others v. Commission (Joined Cases T-346/02 and T-347/02) EU:T:2003:256.
 EUMR, Article 7(1).
 Communication, para. 31 and footnote 25; EUMR, Article 22(4), first sub-paragraph.
 Communication, para. 21.
 Ibid, para. 31.
 Communication, para. 19. The factors that the Commission will take into account to accept and review the transaction are non-exhaustive and broadly defined. Note, for instance, the reiterated use of the qualifiers “significant,” “important,” “key” and “particularly,” when referring to the “competitive potential” or “force” of the target, as well as its innovative character, revenues, assets and outputs.
 On September 21, 2020, Illumina, a U.S.-based pharmaceutical company announced its intention to acquire Grail, a U.S. start-up that has developed multi- cancer early detection tests. The French and Dutch NCAs have positively responded to the Commission’s invitation and requested a referral of the transaction, which was subsequently joined by Belgium, Greece, the Netherlands, Iceland, and Norway. Illumina appealed the French and Dutch NCAs’ decision before national courts. Illumina’s challenges were dismissed, on March 31, 2021 and April 1, 2021, in the Netherlands and France respectively.
In France, the Conseil d’État held that such a referral decision is “inseparable from the Commission’s review of the transaction,” which “falls under the control of the Court of Justice,” and therefore concluded that it was not competent to rule on the referral request. See Conseil d’État, Illumina-Grail v. Autorité de la concurrence, order n°450878, 450881 of April 1, 2021.
In the Netherlands, the District Court of The Hague held that the EUMR enables NCAs to refer a case to the Commission even if they lack jurisdiction over the transaction. It also noted that it would be for the EU courts to rule on the legality of the Commission’s decision to accept the referral. See Rechtbank Den Haag, Illumina Inc.- Grail Inc. v. De Staat der Nederlanden, judgment n°31C/09/609526 of March 31, 2021, available at: https://uitspraken.rechtspraak.nl/inziendocume nt?id=ECLI:NL:RBDHA:2021:3128&showbutton=true&keyword=illumina.
More recently, the Commission received a referral request to review Facebook’s acquisition of Kustomer from the Austrian NCA, which has jurisdiction over the transaction, in contrast to the Illumina/Grail case. See also Kustomer To Join Facebook, Helping Brands Thrive In The Digital Economy with Modern Customer Service, available at: https://www.kustomer.com/blog/kustomer-to-join-facebook-helping-brands-thrive-in-digital-economy/.