On 20 June 2013, the European Commission opened a public consultation on proposed revisions to the EU Merger Regulation designed to bring certain acquisitions of non-controlling minority shareholdings into the Commission's merger control jurisdiction and to facilitate the referral of merger cases from Member State competition authorities to the Commission. This new public consultation was launched the day after the deadline for public comments on the Commission's proposed "simplification" of the EU merger notification process (see VBB on Competition Law, Volume 2013, No. 4, available at www.vbb.com).
Regarding minority shareholdings, under the present system, acquisitions of such shareholdings are not caught by the EU merger control rules if they do not result in a change in control of the company in which the stake is being acquired. In other words, an acquisition of a stake that is insufficient to give the acquirer either sole or joint control of the target company does not require a filing under the EU Merger Regulation, although it could still fall within the scope of Article 101 TFEU or, if the acquirer is dominant, Article 102 TFEU. Such an acquisition might also be caught by the merger control laws of certain Member States, such as Austria and Germany.
In the Commission's view, acquisitions of non-controlling minority stakes, or "structural links" as the Commission calls them, should be capable of being reviewed under the EU merger control rules, at least in certain cases. According to the Commission, such stakes can harm competition, particularly in three ways. First, a company holding a minority stake in a competitor falling short of control may nevertheless influence the latter's competitive behavior. Second, a competitor may have less incentive to compete with a company whose profits it shares. Finally, a minority shareholder of an upstream supplier may influence that supplier to disrupt or otherwise discriminate in its supply to the minority shareholder's competitors downstream.
The Commission's thinking on how to deal with structural links under the EU merger control rules appears to be still in a very early stage. Substantively, the Commission at present envisages applying the same substantive test to the acquisition of non-controlling minority stakes as it does to mergers and acquisitions of control, i.e., whether the transaction "significantly impedes effective competition" within the EU. Procedurally, however, the Commission has identified three alternatives for how such structural links could be reviewed: a prior notification system, a self-assessment system, and a transparency system.
Under the prior notification system, the requirement to make mandatory merger control notifications would simply be extended to acquisitions of non-controlling minority shareholdings fitting certain threshold criteria. These criteria are still to be determined, as are "safe harbour" rules for minority shareholdings that would not fall within the EU merger rules. To this end, the Commission notes differing standards to determine which structural links require notification currently used by national competition authorities, for example in the United States, Germany, and the United Kingdom. The consultation paper does not specify whether and how the Commission would apply a standstill obligation to transactions subject to review.
Under a self-assessment system, the relevant transactions would proceed without any notification, but the Commission would have the discretion to open an investigation into resulting structural links under the EU Merger Regulation, based on the Commission's own market intelligence or complaints it receives.
Under a transparency system, parties to transactions that could raise competition concerns would be required to file a short information notice, but the Commission would again have discretion whether or not to open an investigation into the resulting structural links.
For either system in which the Commission's review would be discretionary, certain rules would be considered to enhance legal certainty. First, the Commission would consider issuing guidance on what structural links it would be most likely to examine. Second, the Commission is considering whether to offer a system of voluntary notification for parties not covered by any duty to notify their transaction, but who seek certainty that their links will not result in competition law problems later being identified by the Commission. Third, the Commission would consider whether to apply a limitation period on the investigation of transactions creating structural links, and if so, how long that period should be. Finally, it would be necessary to define the contours of any standstill obligations on parties that either voluntarily notify or are subject to an investigation of their transaction.
The second proposed change to the EU Merger Regulation concerns the system of referral of merger cases from the Member State level to the European Commission. The proposed changes address cases where, prior to a national notification being made, the notifying parties themselves seek EU review of a case that is capable of being reviewed by three or more EU Member States, as well as cases where Member States refer cases that have already been notified at the national level to the European Commission.
Under the current system, parties to transactions that do not have a Community dimension (and thus do not require notification to the European Commission) but that are subject to review by three or more Member State authorities can request referral of the case to the European Commission by submitting a "reasoned submission" (Form RS) explaining why the Commission – and not the Member States – should review the deal. Then the parties must wait fifteen working days, during which period the Member States that would have jurisdiction may object to the referral. Only after the fifteen working day period has expired without Member State objections can the actual EU notification process commence. This has resulted in a burdensome and time-consuming process for parties in such cases wishing to take advantage of the Commission's "one-stop shop".
In its public consultation, the Commission proposes to streamline this process by abolishing Form RS and incorporating the relevant information to assess a referral request into the actual EU merger notification form. The Commission would allow parties seeking referral to file the EU notification immediately, moving the Member States' period for objecting to the referral to after the actual EU filing has been made, making this window concurrent with the Commission's review of the transaction. The Commission may even shorten this window to ten working days, possibly compensating by providing Member States with information regarding referral requests even before formal notification to the Commission. The substantive rules would be largely unchanged: the Commission would be obliged to refuse jurisdiction, for example, if any competent Member State objects within the appropriate time window.
In cases where a Member State seeks referral to the Commission after a notification has been made to it, the main change would be jurisdictional. At present, the Commission's decision in Member State-referred cases is applicable only with respect to the competent Member States whose authorities request EU review, leaving the transaction subject to patchwork review in the rest of the EEA. For example, if a transaction is notified in four Member States and only one of these Member States requests referral to the Commission, the Commission (if it accepts the referral request) would review the transaction in parallel with the three non-requesting Member States.
The Commission proposes to amend the EU Merger Regulation in this respect to make its decision to take a case applicable throughout the EEA whenever one or more Member States refer, and the Commission accepts, jurisdiction.
Interested parties have until 12 September 2013 to submit comments on the above proposals. Those interested in reading more may consult the Commission's website at http://ec.europa.eu/competition/consultations/2013_merger_control/index_en.html.
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