Revision of the EU merger control procedural rules adopted: the arrival of the super-simplified procedure and other key take aways

Following its evaluation of procedural aspects of EU merger control, on 20 April 2023 the European Commission adopted a package to further simplify its procedures for reviewing concentrations under the EU Merger Regulation. The package includes: (i) a revised Merger Implementing Regulation (‘Implementing Regulation'); (ii) a Notice on Simplified Procedure (‘Notice'); and (iii) a Communication on the transmission of documents (‘Communication'). The package will enter into force on 1 September 2023.These are the ten key aspects of the reform package:

1.    More cases will be open for simplified procedure as a default

The Notice amends the category of transactions for which the Commission will "typically" apply the simplified procedure by two alternative types of vertical transactions:

• If the parties' combined market share is below 30% on any upstream market and below 30% on any relevant purchasing market (i.e. it is not decisive for this type of vertical transaction whether the market share on the downstream market is above 30% or not).
• If the parties' combined market share both on the upstream and downstream market is below 50% and the HHI delta is below 150 and the smaller party (in terms of market shares) is the same both on the upstream and the downstream market.

2.    New flexibility clause to cover additional unproblematic transactions

A new flexibility clause will enable the Commission to apply the simplified procedure (at the request of the parties) in the following cases:

• In case of a horizontal overlap, if the parties' combined market share is above 20% but remains below 25%.
• In case of a vertical relationship, if the parties' combined market share both on the upstream and the downstream market is above 30% but remains below 35%.
• In case of a vertical relationship, if the parties' combined market share on one market (either the upstream or the downstream market) is below 50% and below 10% on all other vertically related markets.
• In case of the acquisition of joint control over a joint venture, if the joint venture's EEA-wide annual turnover is less than EUR 150 million and the total value of asset transfers to the joint venture in the EEA is less than EUR 150 million.

3.    List of safeguards and exclusions broadened

The Notice provides a non-exhaustive list of examples regarding the circumstances in which the Commission may refuse to apply the simplified procedure. In particular, the Notice foresees that only one of the exclusion circumstances is enough for the Commission normally not to apply the flexibility clause.
Compared to the current version of the Notice on Simplified Procedure, the Notice also introduces four new exclusion categories:

• If one party to the concentration has significant non-controlling shareholdings in companies active in the markets where another party to the concentration is active.
• If the parties to the concentration combine technological, financial or other resources, or competitively valuable assets, such as raw materials, intellectual property rights (including patents, know-how, designs and brands), a significant user base or commercially valuable data inventories, even if the parties do not operate in the same market.

Furthermore, the Commission will be less likely to apply the simplified procedure if the merged entity would, by integrating, gain access to commercially sensitive information on the upstream or downstream activities of its rivals or if the parties to the concentration are active in markets that belong to different levels of a value chain without being in a vertical relationship, and the individual or combined market shares are 30% or higher in at least one of these markets.

4.    Introduction of a "super-simplified procedure"

For certain categories of concentrations (e.g. transactions where the parties have no horizontal overlap or vertical relationship), the Notice foresees that the companies are invited to formally notify without any pre-notification contact. (The parties, however, are expected to submit a case team allocation request at least one week before the formal notification).

5.    "Hybrid" decisions

If in a transaction, which has to be filed under the normal Form CO procedure, some markets fulfil the requirements for a simplified procedure (be it under the default system or the flexibility clause system), the Commission will not include a detailed assessment of these markets in its decision, but simply mention the category, which justifies simplified treatment, unless safeguards or exclusion reasons indicate otherwise.

6.    Full electronic filing as the new standard

Under the current system, notifications generally must be submitted as paper documents, including copies. (These requirements are to some extent suspended due to the COVID-19 pandemic, but the Commission will require a signed paper document at some point in the process for its file). The new system would in principle only allow electronic notifications, including all annexes. Importantly, the procedure will require documents signed by way of Qualified Electronic Signature according to the eIDAS Regulation.

7.    Higher standards in the Form CO for companies regarding description of data

The new Form CO will increase the requirement for the parties to provide information regarding that which they collect and store in their ordinary course of business in two respects: first, it enlarges the scope of information to be provided as it foresees information also regarding the "source of the data" (e.g. CRM software or data sets purchased from external providers) and the "usage of the data in the normal course of business" (e.g. as analysis tool for the business strategy). Secondly, unlike the current Implementing Regulation, the Implementing Regulation stipulates that the information regarding data must be supplied for the Form CO to be considered as complete.

8.    "Tick the box" format for Short Form CO

The Implementing Regulation will introduce a completely new format for the Short Form CO with many sections in a "tick-the-box" format.

9.    Pipeline products

The Commission has used the package documents to underline formally the particular attention it pays to pipeline products for substantive assessment. (Pipeline products are vaguely defined as products or services that companies "intend to bring to the market in the short or medium term"). Both the Form CO and the Short Form CO contain several specific references to pipeline products. For instance, parties would be required to provide information – for each affected market – on pipeline products, including the pipeline products of their competitors. (The type of information requested would include information on the stage of development as well as an estimate of the projected sales and market shares over the next three to five years).

10.    Minority shareholding

The Form CO requires the parties to explain whether competitors hold significant non-controlling shareholding (i.e. above 10%) in any of the parties to the concentration. The parties must indicate the percentage and the rights attached to the shareholding. This confirms that in its merger review the Commission will continue to consider possible "common ownership" theories of harm (i.e. the possible effects of non-controlling minority stakes in competitors, particularly in oligopolistic markets).

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