EU merger control: the road ahead
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Significantly, early 2019 saw a key decision – the European Commission’s (EC) prohibition of Siemens/Alstom – attract fierce criticism from certain political quarters (in particular France, Germany, and later Poland and Italy) about the need to amend the rules to take better account of competition from outside the EU. While the EC has been sceptical of some of the more radical elements of proposals made in response to that decision, it has started a review of the 20-year old market definition notice (the consultation period ends in early October). But, even before this, the EC had been carrying out a wider evaluation of various aspects of the merger control regime – a 2014 White Paper entitled “Towards more effective EU merger control” led to an evaluation of procedural and jurisdictional aspects in 2016. The results of this evaluation, originally tabled for late 2020, have been pushed back to early 2021. However, in the meantime, Commissioner Vestager has given us a sneak preview of the EC’s findings and plans in a speech at the International Bar Association 24th Annual Competition Conference.
Evolution, not revolution
In short the EC has concluded that the EU Merger Regulation doesn’t need to change as such, but that there are a number of things that can be done to make the rules work “even better”.
- Solving the ‘killer acquisition’ conundrum: Rather than looking to introduce new or revised thresholds to capture potentially anti-competitive deals where the target has no or little turnover (of which, according to Vestager, there are a “handful” each year), the EC will instead use a tool it already has – the referrals system. It believes this will be a more proportionate solution to the issue than trying, for example, to set a new deal value threshold at the right level (transaction-value thresholds introduced in 2017 in Germany and Austria have reportedly had limited impact). The reliance on referrals will require some tweaks to the system – the EC plans to start accepting referrals from EU national competition authorities (NCAs) of mergers that are “worth reviewing at the EU level”, even where those NCAs have no power to review at the national level. Vestager hopes to see this new policy and EC guidance in place from mid-2021.
- Making life easier for merging parties: The EC will take action to simplify the merger process, by seeking to bring more deals within the scope of the simplified procedure, cutting the amount of information that parties need to provide, and looking at ways to make reviews faster. Interestingly, this may also include ‘cutting back’ on pre-notification discussions in straightforward cases, which could shave weeks off the total review period (although the EC doesn’t seem to be committing to any changes to pre-notification discussions in complex cases, which can stretch to multiple months). Amendments to the EC’s best practices on merger control proceedings, the simplified procedure notice and implementing regulation will be needed to facilitate these changes. The timing is a little vague – Vestager expects the EC to review the rules and guidance “in the months ahead”.
- Reflecting on substance: The EC plans a two-pronged approach to checking it is “getting things right” in its merger assessment. First, it will look back at certain recent decisions, to see how they impacted prices, choice, quality and innovation. This is similar to action taken by the EC in the past (2015 review of merger decisions in the EU) and in other jurisdictions, e.g. in the UK (the Lear report on past digital merger decisions). It will be interesting to see if the EC focusses its review on particular sectors (most notably digital but also potentially pharma) or whether it is more wide-ranging. Second, Vestager announced the EC is “launching a reflection”, to discuss ideas and share evidence on how the rules could be improved to take account of digitisation and growing market concentration (according to the EC, several industries are more concentrated now than they were 20 years ago). Just last week, General Court President Marc van der Woude reportedly suggested the use of early informal meetings between the EC, court and parties in complex cases to reduce the risk of judicial challenge of merger decisions. But the EC will not rush into any changes – it is waiting to see how the European Court of Justice will rule on its appeal in the Hutchison mobile merger case (see our Antitrust in focus – August 2020 publication for further information on the EC’s appeal of the General Court’s annulment of its Three/O2 prohibition).
The expanding antitrust toolbox
The merger control rules evaluation is just one in a series of recent reform announcements by the EC. Despite the challenges presented by the Covid-19 pandemic, the EC has continued to drive all these initiatives forward:
- a possible New Competition Tool, including a new market investigation tool aimed at addressing structural competition problems across markets (see our publication for more information)
- potential ex ante regulation of digital platforms, including blacklisted practices, tailor-made remedies and a horizontal framework allowing a new EU regulatory body to collect information from large online platforms acting as gatekeepers (see our publication for more information)
- a White Paper on foreign subsidies, with proposals including (i) the advance vetting of foreign-backed acquisitions of EU businesses (potentially including acquisitions of minority shareholdings) and (ii) a ‘catch-all’ instrument under which the EC and EU Member States would be able to launch an ex officio review following information indicating the granting of a foreign subsidy to a beneficiary active in the EU with power to impose a wide range of remedial measures (see our publication on the White Paper for more information)
- a “fitness check” of the 2012 state aid modernisation package to help the EC decide whether to further prolong or update the rules
And the EC is not the only antitrust authority to be looking at the future of its rules – all over the globe agencies are wrestling with what improvements and amendments could be made, particularly in the digital sector.