On December 12, 2022, the Commission published Frequently Asked Questions and Answers (“Q&A”) on the application of Article 22 of the EU Merger Regulation (“EUMR”). While this represents a step in the right direction, the Q&A fails to provide enough clarity given the ample discretion Article 22 EUMR affords the Commission in reviewing mergers that do not meet EU-level notification thresholds.
On March 26, 2021, the Commission adopted a Communication on the application of the referral mechanism pursuant to Article 22 EUMR. Departing from its long-standing approach, the Commission encouraged national competition authorities (“NCAs”) to refer transactions that do not meet EU or national-level notification thresholds to the Commission under certain circumstances, even where they have already been implemented. The goal of this significant policy shift was to fill a perceived enforcement gap in respect of so-called “killer acquisitions.”
The Commission applied its new Article 22 EUMR referral policy for the first time in the Illumina/GRAIL case, inviting NCAs to refer the transaction to the Commission in February 2021. In September 2022, the Commission blocked the transaction after it had already been implemented. This was the first time the Commission reviewed – and blocked – a transaction falling below the EUMR and referring Member State notification thresholds.
Since then, Article 22 EUMR referral requests have also been accepted in three other cases, namely Meta/Kustomer, Viasat/Inmarsat, Cochlear/Oticon Medical, and most recently Adobe/Figma. However, unlike in Illumina/GRAIL, which did not trigger merger control thresholds in any Member State (let alone at EU-level), in these cases the transactions did trigger national merger control thresholds in at least one Member State.
The Commission’s long awaited practical guidance
The Q&A answers 10 questions, split into different sections covering, among others, the assessment of candidate cases for Article 22 EUMR referral as well as practical guidance on: (i) interactions between merging parties and the Commission; (ii) interactions between third parties and the Commission; and (iii) the cooperation between NCAs and the Commission. In particular:
- Seeking Commission Guidance. The Q&A clarifies that the merging parties may voluntarily interact with the Commission to receive an “early indication” of whether their proposed transaction is a good candidate for an Article 22 EUMR referral. To facilitate the communication, the merging parties may submit a short briefing paper, that includes information on whether: (i) the transaction affects trade between or in Member States; (ii) the parties’ turnover properly reflects their actual or future competitive potential; and (iii) the transaction is notifiable in other jurisdictions. The Q&A confirms that the Commission will only provide guidance after the conclusion of the agreement, announcement of the public bid, or the acquisition of a controlling interest and not for purely hypothetical transactions.
- Third party complaints. The Q&A specifies that third parties may also contact the Commission or NCAs to inform them of concentrations they consider suitable for referral. Similarly to the merging parties, third parties are advised to submit a short briefing paper to enable the Commission and the NCAs to examine whether or not the transaction is a suitable candidate for referral.
- Examples of candidates for referral. The Q&A provides five possible examples of cases that may be suitable candidates for an Article 22 EUMR referral, where turnover thresholds of the EUMR are not met and these transactions do not require notification under national merger control rules of the Member States. The examples are in the tech (i.e., social networking), pharmaceutical, biotech, and music distribution sectors where the targets have important data regarding user preferences.
- Timeline for referral and implementation of the transaction. The Q&A clarifies that an EU-wide standstill obligation only applies for undertakings that have not implemented the transaction by the time they are informed by the Commission that a Member State has made an Article 22 EUMR request (although the Commission still has the power to review implemented transactions if they are subsequently referred). In turn, the Member States have 15 working days to refer a transaction of which they become aware.
- Commission’s response to a referral request. There is no legal deadline for the Commission to finalize its assessment, but it would normally strive to carry out a first review of the information provided by the merging parties within five working days from receipt.
The Commission’s Q&A is very succinct and fails to provide the much sought after legal certainty for pending and future transactions. The Commission remains able to examine transactions that do not meet EU or national notification thresholds, even if they have already been implemented, and will enjoy ample discretion when deciding whether to accept a referral, due to the Guidelines and Q&A’s open-ended and non-binding nature.
Until the Illumina/GRAIL saga comes to an end, and before the Court of Justice establishes bright line rules on the application of Article 22, it is advisable for companies to factor in a possible Article 22 EUMR referral in their condition precedents, closing timelines, and antitrust risk allocation provisions.
 European Commission, Practical information on implementation of the “Guidance on the application of the referral mechanism set out in Article 22 of the Merger Regulation to certain categories of cases,” Frequently Asked Questions and Answers (“Q&A”), available here.
 Communication Commission 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. See our March 2021 EU Competition Law Newsletter.
 Commission Press Release MEX/21/2464, “Mergers: Commission to assess proposed acquisition of Kustomer by Facebook,” May 12, 2021. Austrian merger notification thresholds were met in this case.
 Commission Press Release MEX/22/4743, “Mergers: Commission to assess proposed acquisition of Inmarsat by Viasat,” July 27, 2022. Spanish merger notification thresholds were met in this case.
 Commission Press Release MEX/22/7554, “Mergers: Commission to assess the proposed acquisition of Oticon Medical by Cochlear,” December 12, 2022. Spanish merger notification thresholds were met in this case.
 Commission Press Release MEX/23/904, “Mergers: Commission to assess proposed acquisition of Figma by Adobe,” February 15, 2023. Austrian and German merger notification thresholds were met in this case.
 For recent coverage of the Illumina/GRAIL case and Article 22 EUMR, see our August/September 2022, July 2022, October 2021, August/September 2021, April 2021, March 2021, and September 2020 EU Competition Law Newsletters.