CMS Ex­pert Guide to Mer­ger Con­trol in Europe

Overview

Merger transactions, including many joint ventures, which affect European markets can face merger control either at European Union (EU) level by the European Commission, or at national level by the relevant national competition authorities of EU Member States. They may also be reviewed by other European and other national merger control authorities outside the EU. This guide gives an overview of the main merger control rules at EU level and in all European countries.

The EU Merger Control Regulation (Regulation (EC) No. 139 / 2004) (the ECMR) governs merger control at EU level. The EU merger control system imposes strict obligations on the parties to a merger with a Community dimension, requiring notification to the European Commission of that merger or other concentration, and suspension of the transaction prior to clearance. To make the system more flexible, EU merger control includes the ability to notify transactions before the conclusion of binding agreements / announcement of a public bid, and a method of referrals (to EU Member States or from EU Member States to the European Commission). The test of whether EU or EU Member State merger control rules apply to concentrations (as defined in the ECMR) is determined by the ECMR turnover thresholds. In recent years, the European Commission has issued comprehensive informal guidance in the form of notices and guidelines on a large number of procedural and substantive aspects of EU merger control. For practitioners, familiarity with these notices and guidelines has become indispensable in their daily work with the ECMR.

When the transaction falls below the turnover thresholds of the ECMR and the relevant national thresholds of EU Member States are satisfied all mergers and most concentrations (as defined in the ECMR) will typically be subject to relevant national merger control rules. The criteria for applicability of the merger control rules of the diverse countries of Europe vary as between turnover, market share tests and asset tests.

The national merger control rules of non-EU countries can apply whether or not the ECMR applies. National merger control rules of both EU and non-EU countries may also apply to certain transactions which do not qualify as concentrations under EU rules. For example, some joint ventures and some acquisitions of non-controlling minority shareholdings falling outside the ECMR may be subject to national merger control law at EU Member State level, even if they do not constitute a concentration under the ECMR rules (the European Commission is considering changing this and making certain non-controlling minority shareholdings notifiable). Such transactions can also be subject to the general EU competition rules on restrictive agreements contained in Article 101 of the Treaty on the Functioning of the European Union (TFEU).

Whichever rules apply, it is important for the parties to ensure that any compulsory pre-merger notification is made and any standstill periods respected. Even where pre-merger notifications are not compulsory, parties should take account of the risk of proceeding to implement the transaction without (voluntary) prior notification and approval, insofar as the relevant national authorities could order a divestment or other separation of assets or entities following a subsequent investigation and opposition to the transaction.

The treatment of mergers and concentrations does vary as between EU rules and the national rules of the various different EU and other European countries. This manual summarizes the key features of each regime using a consistent, thematic approach. The guide is intended to facilitate a rapid overview of the relevant rules at EU level and in each of the countries of Europe. The rules are explained in each case by reference to the following questions:

  • Which authority is to be notified and what is the source for merger control regulations?
  • Is a notification mandatory or voluntary?
  • When do you need to notify?
  • What are the thresholds?
  • Who is obliged to notify?
  • What are the consequences of:
    • failure to notify,
    • implementing the transaction despite an obligation to suspend until clearance; and
    • implementing the transaction despite a prohibition decision?
  • What are the stages of merger control?
  • Are foreign-to-foreign mergers caught?
  • How are JVs treated?

This manual is intended only to provide an overview of the merger control rules in the EU, the EEA and the European countries listed. The information and views expressed in this manual are not necessarily comprehensive and do not purport to give professional advice. If you would like further information, please contact the CMS lawyers mentioned in the list of contact points.

EU Merger Control

Authority / Source

  • European Commission, DG COMP
  • Council Regulation (EC) No. 139 / 2004 (the ECMR) as amended.

Mandatory / Voluntary

Mandatory

When to notify?

The European Commission will accept a notification once parties can show that there is a “good faith intention to conclude an agreement” and that their plans are sufficiently concrete. The parties must notify before completion (and suspend the concentration until clearance).

Threshold(s)

Either:

  • combined aggregate worldwide turnover of all undertakings concerned exceeds EUR 5,000 m; and
  • aggregate Community-wide (EU 28) turnover of each of at least two of the undertakings concerned exceeds EUR 250 m; unless each of the undertakings concerned achieves more than two-thirds of its aggregate EU-wide (EU 28) turnover within one and the same EU Member State.

Or:

  • combined aggregate worldwide turnover of all undertakings concerned exceeds EUR 2,500 m; and
  • in each of at least three EU Member States, the combined aggregate turnover of all the undertakings concerned exceeds EUR 100 m; and
  • in each of at least three of the EU Member States included for the purpose of (b), the aggregate turnover of each of at least two of the undertakings concerned exceeds EUR 25 m; and
  • aggregate Community-wide (EU 28) turnover of each of at least two of the undertakings concerned exceeds EUR 100 m; unless each of the undertakings concerned achieves more than two-thirds of its aggregate EU-wide (EU 28) turnover within one and the same EU Member State.

Obligation on whom

The person(s) acquiring control.

Consequences of failure to notify

  • Fine of up to 10% of the aggregate worldwide group turnover of the undertaking concerned.
  • The concentration will not be valid until it is cleared.

Consequences of implementing a transaction despite obligation to suspend until clearance

  • Fine of up to 10% of the aggregate worldwide group turnover of the undertaking concerned;
  • the European Commission may also take appropriate interim measures to restore or maintain conditions of effective competition;
  • periodic penalty payments of up to 5% of average daily aggregate worldwide turnover of the undertaking concerned may be imposed for each working day of delay in complying with any interim measures ordered by the European Commission;
  • the validity of the concentration depends upon the European Commission’s ultimate decision in the case.

Consequences of implementing transaction despite prohibition decision

  • Fine of up to 10% of the aggregate worldwide group turnover of the undertaking concerned;
  • the European Commission may also require the parties to dissolve the concentration, so as to restore the situation prevailing prior to implementation of the concentration, or take other restorative measures as required;
  • periodic penalty payments of up to 5% of average daily aggregate worldwide turnover of the undertaking concerned may be imposed for each working day of delay in complying with any requirement to unwind, etc. the concentration.

Stages

Phase I – 25 working days

By the end of 25 working days from complete notification, the concentration will be cleared, or a full investigation opened. The 25 working days deadline may be extended for reasons concerning:

  • referral to an EU Member State where proposed concentration affects competition on a distinct market in that EU Member State (45 working days from the date of referral / notification to the national authority); or
  • submission by the parties of commitments in order that the concentration may be cleared in phase I (extendable to 35 working days).

Phase II – 90 working days from date of decision to conduct an in-depth investigation (unless further extended).
The phase II period may be extended:

  • where undertakings are submitted (extension of up to 105 working days);
  • where the parties or the European Commission request an extension of time (extension of up to 20 working days).

Foreign-to-foreign mergers caught?

Yes, if mergers satisfy the turnover thresholds. No physical presence in the EU is required.

Treatment of JVs

A JV which performs on a lasting basis all the functions of an autonomous economic entity (full- function joint venture) needs to be notified the turnover thresholds are met.

Up to date as of 1 September 2014

Merger Control under the EEA Agreement

Authority / Source

  • EEA Surveillance Authority
  • European Economic Area (EEA) Agreement of 1992, Annex XIV to the Agreement, its Protocols 21 and 24 and Chapters IV and V of its Protocol 4

The European Economic Area Agreement (the EEA Agreement) brings together the EU Member States and the three EEA-EFTA States Iceland, Liechtenstein and Norway. The rules on jurisdiction are such that the European Commission in practice handles all merger control cases and the EEA Surveillance Authority and the authorities of the three EEA-EFTA States are cooperating with the European Commission.

Threshold(s)

Either:

  • the combined aggregate worldwide turnover of the undertakings concerned exceeded EUR 5 bn; and
  • the aggregate turnover in either the EU (EU 28) or in the three EEA-EFTA States (Iceland, Liechtenstein and Norway) of each of at least two of the undertakings concerned exceeded EUR 250 m.

Or:

  • the combined aggregate worldwide turnover of all the undertakings concerned exceeded EUR 2.5 bn; and
  • in each of at least three EU Member States (EU 28) or in each of the three EEA-EFTA States (Iceland, Liechtenstein and Norway) the combined aggregate turnover of all the undertakings concerned exceeded EUR 100 m; and
  • in each of at least three of such EU Member States or in each of the three EEA-EFTA States (Iceland, Liechtenstein and Norway), the aggregate turnover of each of at least two of the undertakings concerned exceeded EUR 25 m; and
  • the aggregate EU-wide (EU 28) turnover or the aggregate turnover in the EEA-EFTA States (Iceland, Liechtenstein and Norway) of each of at least two of the undertakings concerned exceeded EUR 100 m.

The EEA Agreement does not apply to a concentration where each of the undertakings involved generated more than two-thirds of their EU-wide (EU 28) turnover or the turnover allocated to the combined territory of the three EEA-EFTA States (Iceland, Liechtenstein and Norway) in one and the same EU Member State or in one and the same EEA-EFTA State, respectively.

Cooperation

The EEA Agreement provides that where a concentration meets the thresholds of the EU merger control rules, the European Commission has exclusive jurisdiction to review such concentration. However, the European Commission and the EFTA Surveillance Authority must cooperate in the assessment of concentrations if:

  • the aggregate turnover of the undertakings concerned in the combined territory of the three EEA-EFTA States (Iceland, Liechtenstein and Norway) equals 25% or more of their aggregate turnover within the EEA; or
  • each of at least two of the undertakings concerned have a turnover exceeding EUR 250 m in the combined territory of the three EEA-EFTA States (Iceland, Liechtenstein and Norway); or
  • the concentration is liable to significantly impede effective competition in the territories of the three EEA-EFTA States (Iceland, Liechtenstein and Norway), or a substantial part thereof, in particular as a result of the creation or strengthening of a dominant position.

In addition, cooperation must also take place where:

  • the concentration threatens to affect significantly competition in a market within an EEA-EFTA state which presents all the characteristics of a distinct market, whether it is a substantial part of the territory covered by the Agreement or not, or
  • an EEA-EFTA State wishes to exercise its rights to adopt measures to protect legitimate interests, principally those of public security, plurality of media and prudential rules.

Concentrations requiring notification under the EEA Agreement but not meeting the EU merger control thresholds must be notified to the EFTA Surveillance Authority. Where a concentration is subject to review by the EFTA Surveillance Authority under the EEA Agreement, the jurisdiction of the three EEA-EFTA States (Iceland, Liechtenstein and Norway) is superseded by the EFTA Surveillance Authority’s jurisdiction.

The EFTA Surveillance Authority’s jurisdiction, is without prejudice to the jurisdiction of the EU Member States’ competition authorities to review a concentration. National merger control rules of EU Member States may therefore apply to a concentration that must be notified to the EFTA Surveillance Authority.

Up to date as of 1 September 2014

Acknowledgements

This guide has been produced jointly by the competition lawyers of the CMS member firms. The general editor of the guide is Harald Kahlenberg of CMS Hasche Sigle.

The chapters on a number of jurisdictions were written by competition lawyers outside CMS. In this respect, we particularly wish to thank the following non-CMS lawyers and their firms, who have contributed their expertise to the CMS Guide to Merger Control in Europe 2014:

Belarus

Tatiana Emelianova, Vlasova Mikhel & Partners

Cyprus

Ramona Livera and Evyenia Epaminondou, Andreas Neocleous & Co

Denmark

Simon Evers Kalsmose-Hjelmborg and Mark Gall, Bech-Bruun

Estonia

Mariana Hagström, Glikman & Partnerid

Finland

Sari Hiltunen, Castrén & Snellman Attorneys

Greece

Dimitris Emvalomenos, Bahas Gramatidis & Partners

Iceland

Steinar Gudgeirsson and Astridur Gisladottir, Islog Law Firm

Ireland

Niall Collins and Anne-Marie Jenkinson, Mason Hayes+Curran

Latvia

Ivo Maskalans and Laine Skopina, Borenius

Lithuania

Irmantas Norkus and Ieva Sodeikaite, Raidla Lejins & Norcous

Malta

Malcom Falzon and Ron Galea Cavallazzi, Camilleri Preziosi

Moldova

Alexander Turcan, Turcan Cazac Law Firm

Norway

Erling Christiansen and Olav Kolstad, Advokatfirmaet Schjødt

Sweden

Ulf Djurberg and Mikael Rydkvist, Setterwalls

Turkey

Suleyman Cengiz and Mamak Kemal, Hergüner Bilgen Özeke

Contact points

This manual is intended only to provide an overview of the merger control rules and regulatory requirements in the EU, the EEA and the European countries listed. The information and views expressed in this manual are not necessarily comprehensive and do not purport to give professional advice. If you would like further information, please contact the following:

CMS EU Law Office in Brussels

Avenue des Nerviens 85
1040 Brussels
Belgium
T +32 2 65 00 420
F +32 2 65 00 422

Authors

Harald Kahlenberg
Dr. Harald Kahlenberg
Rechtsanwalt