On 7 October 2016, the European Commission (the “Commission”) launched a public consultation on a number of procedural and jurisdictional aspects of EU merger control. This consultation builds on work undertaken by the Commission over recent years, such as the Commission’s 2014 White Paper “Towards More Effective EU Merger Control” and could have a significant impact on business and the M&A market. Most significantly, the consultation has the potential to lead to amendments to the EU Merger Regulation’s jurisdictional thresholds, which could require a greater number of transactions to be notified to the Commission.
The Commission’s consultation ended in mid-January 2017 – please find attached BLP’s consultation response here.
Turnover Thresholds – A Back Up Option for Big Data?
The most significant element of the consultation relates to the functioning of the turnover-based thresholds that determine whether the Commission has jurisdiction to review a merger. Under these thresholds, the worldwide and EU-wide turnover of the merger parties is assessed to determine whether the merger will be reviewed by the Commission. If they are not met, the parties are potentially faced with multiple notifications across the various Member States.
Recently, and particularly since Commissioner Margrethe Vestager took office in late 2014, there has been discussion as to whether the current turnover-based thresholds capture all transactions that could have a significant impact on the internal market. This is particularly important in the context of the Commission’s wider Digital Single Market agenda, with the Commission noting that concerns over the appropriateness of turnover-based thresholds are particularly important in the context of the digital economy.
The most significant concern the Commission has around turnover-based thresholds relates to the potential for some participants in the digital economy to have significant market impact but little (or potentially no) turnover. These market participants could, for example, control large amounts of data or otherwise have significant competitive potential in the market without generating significant revenue. The concerns about the turnover-based thresholds not capturing such deals are not just theoretical. For example, Facebook’s 2014 acquisition of WhatsApp did not meet the Commission’s turnover-based thresholds, and the Commission was only able to review the transaction because the parties requested that it be referred to the Commission from a number of Member States.
The Commission has also identified a potential gap in the pharmaceutical industry, for example in the case of research and development companies that have relatively low turnover but a significant impact on the market and innovation.
If, and how, the turnover-based thresholds are amended remains to be seen. Options for amendment could include additional thresholds based on factors such as the value of the transaction (the German government has recently suggested such an option for their domestic thresholds). Sector specific thresholds are another more controversial option, but are not unheard of, although they have never been included in EU merger control. What is clear, however, is that if the thresholds are amended or supplemented, it is possible that many transactions that could previously have escaped the Commission’s grasp would be subject to Commission review.
Other Elements of the Consultation
The consultation seeks views on three further aspects of EU merger control, namely:
- The Commission is seeking views on the functioning and scope of its “simplified procedure”, under which certain “no issues” transactions are notified under a simplified form.
- The Commission is seeking views on the functioning of the case referral system, under which certain transactions can be referred from Member States to the Commission, or from the Commission to Member States.
- The Commission is also seeking views on various technical aspects of its procedural and investigative framework.
BLP’s Antitrust & Competition team regularly advises clients on EU merger control and will be advising on the Commission’s consultation. If you have any questions about the Commission’s consultation, would like to make your own submission, or would simply like to discuss any aspect of EU merger control, then do not hesitate to contact any of BLP’s Antitrust & Competition lawyers to discuss.