New developments in Merger law – The regulation of new merger

The modernization of merger control continues in 2021, both at the national and European levels.

An overall review had already been initiated last summer by the French Competition Authority with the introduction of new simplification and modernization measures adopted by new merger control guidelines^[1].

In September 2020^[2], the European Commission also announced its intention to change its practice by accepting to examine referrals by national competition authorities of concentrations that do not have to be notified at both national and European level, insofar as the turnover thresholds are not met, for review under Article 22 of Council Regulation (EC) No 139-2004 of 20 January 2004 on the control of concentrations between undertakings (hereinafter the “Merger Regulation”)^[3].

The objective of this review will be to better apprehend so-called “predatory” mergers in innovative sectors such as the digital economy, the pharmaceutical industry or even start-ups with high competitive potential, which until was beyond the control of national competition authorities or the Commission^[4].

According to the European and French competition authorities, the introduction of a new application of Article 22 will fill a gap in merger control that existed until now, but will require an effort of adaptation and anticipation for companies and their lawyers.

During her speech, Margrethe Vestager – European Commissioner for Competition – warned that the implementation of this new approach would not take place before mid-2021 and would be preceded by the adoption of guidelines by the Commission.

On March 26, 2021, the Commission finally adopted a notice allowing national authorities, companies and their lawyers to better understand the circumstances in which referral requests can be accepted by the Commission^[5]. This text is very important since this new approach may force companies to notify concentrations that they did not previously notify. It is therefore essential that companies be able to anticipate as much as possible the impact of this new approach on their mergers.

This guidance applies immediately and may be revised at any time in the light of future developments, or even consolidated in the Notice on Case Referral in respect of concentrations^[6].

This guidance provide indications on (i) the criteria that the Commission may take into account in assessing referral requests, including the types of concentrations that may make such requests, and (ii) the procedural aspects of referral requests.

(i) In addition to clarifying the interpretation of the two cumulative conditions that must be met for a referral request to be made under Article 22 (the concentration must (a) affect trade between Member States and (b) threaten to significantly affect competition in the territory of the Member State(s) making the request), the Commission has clarified the other criteria that may be taken into account in assessing a referral request.

In this respect, the Commission indicates that the concentration targeted, without being limited to a particular sector of activity^[7], will be those for which the turnover of at least one of the undertakings involved in the merger does not reflect its actual or future competitive potential. It also specifies that a concentration that has already taken place may, in certain cases, be subject to a referral (in particular when the request is made less than six months after the concentration has taken place, but also, exceptionally, beyond this period when the concentration is likely to be problematic for competition).

(ii) On the procedural aspect^[8], the Commission stresses its willingness to communicate with the national competition authorities, but also with the parties to a concentration, and even with third parties, who will be able to provide sufficient information on the concentration to allow a preliminary assessment of the justification for a referral. The Commission provides details on the time limits; for example, the national competition authorities will have 15 working days after the concentration has been brought to their attention to formulate a referral request. The prohibition on completing the concentration until clearance is granted, as provided for in Article 7 of the Merger Regulation, only applies if the concentration has not been implemented on the date on which the Commission informs the undertakings concerned that of the referral request. The suspension obligation ceases if the Commission subsequently decides not to examine the concentration.

On March 26, the Commission also published the findings of the evaluation on the procedural and jurisdictional aspects of EU merger control^[9]  and decided to launch an impact assessment until June 18, 2021^[10] to better target companies and further simplify procedures through a revision of the Merger Implementation Regulation and the Notice on a Simplified Procedure.

Michel Ponsard, Malka Marcinkowski and Ophélie Sommé – UGGC Law Firm

^[1] French Competition Authority Merger Control Guidelines  (July 23, 2020).

^[2] Speech“The future of EU Merger control”, Margrethe Vestager (September 11, 2020).

^[3] JO L 24 of 29.1.2004, p. 1-22.

^[4] For example, Facebook’s purchase of WhatsApp in 2014 or Facebook’s purchase of Instagram in 2012.

^[5] Commission Notice – Guidance on the application of the referral mechanism set out in Article 22 of the Merger   Regulation to certain categories of cases, EU Commission, Communication, No. C/2021/1959, 26 March 2021: OJEU C 113, 31 March 2021.

^[6] Commission Notice on Case Referral in respect of concentrations (2005/C 56/02).

^[7] This would include, for example, cases where the undertaking: (1) is a start-up or recent entrant with significant competitive potential that has yet to develop or implement a business model generating significant revenues (or is still in the initial phase of implementing such business model); (2) is an important innovator or is conducting potentially important research; (3) is an actual or potential important competitive force; (4) has access to competitively significant assets (such as for instance raw materials, infrastructure, data or intellectual property rights); and/or (5) provides products or services that are key inputs/components for other industries. In its assessment, the Commission may also take into account whether the value of the consideration received by the seller is particularly high compared to the current turnover of the target.

^[8] Not exhaustive.

^[9] Commission Staff Working Document Evaluation of procedural and jurisdictional aspects of EU Merger Control, March 26, 2021.

^[10] EU Commission, press release, 26 mars 2021.