A new order for EU merger control in digital markets

The compatibility test contained in Article 2 of the Merger Control Regulation (MCR) is at the very heart of EU merger control, for it determines whether a concentration with a community dimension is deemed compatible or incompatible with the common market. Incompatibility can lead to prohibition of a concentration, although this is rare. The paper reviews the recent developments to the conditions of the test itself as well as the analytical methods employed to determine compatibility. Concerning the former, the new foreseeable dominance interpretation, put forward by the European Commission and made law by the Court of First Instance (CFI), is explored. This new variant of the dominance condition is important on its own right but it is also of major interest because of the explicit legal requirement placed on the Commission to assess the future likelihood of abusive behaviour by the merging parties in its prospective analysis. This is not the case with the original dominance compatibility condition. The unexpected but important clarification by the CFI of the notion of substantial part of the common market, as contained in the express wording of the compatibility test, is also commented upon. Concerning the determination of compatibility, the Commission's controversial employment in certain conglomerate concentrations of the range effects of competitive harm theory is examined, as is the need to take cognisance of merger specific efficiencies when determining if a merger increases societal welfare. The EU is making progress toward such an efficiencies assessment as part of the compatibility determination. EU merger control – and hence the compatibility test – do not exist in a vacuum. The EU has played a major role in shaping the new multilateral architecture and its goal of increasing international convergence in competition matters. This in turn has led the EU to rethink the nature of the compatibility test. For example, it has sought to evaluate the dominance condition of the compatibility test with the substantial lessening of competition (SLC) approach used by some other regulators, like the US. The paper concludes by looking at a fundamental issue that has arisen from recent CFI judgements and the GE/Honeywell merger: the competence of the Commission, or more accurately the Merger Task Force (MTF), to carry out the compatibility determination. Proposals are outlined so as to ensure that the Commission's prospective analysis in a concentration case meets the requisite legal standard. It is essential for this standard to be met if EU merger control is to remain credible.

This book analyzes the specifics of corporate governance of China’s State Owned Enterprises (SOEs) and their assessment under EU merger control, which is reflected in the EU Commission’s screening of the notified economic concentrations. Guided by the going global policy and the Belt and Road Initiative, Chinese SOEs have expanded their global presence considerably. Driven by the need to acquire cutting edge technologies and other industrial policy considerations, Chinese SOEs have engaged in a series of corporate acquisitions in Europe. The main objective of this book is to demonstrate the conceptual and regulatory challenges of applying traditional merger assessment tools in cases involving Chinese SOEs due to the specifics in their corporate governance and the regulatory framework under which they operate in China. The book also explores the connection between the challenges experienced by the merger control regimes in the EU and the recent introduction of the EU foreign direct investment screening framework followed by a proposal concerning foreign subsidies. The book will be a useful guide for academics and researchers in the fields of law, international relations, political science, and political economy; legal practitioners dealing with cross-border mergers and acquisitions; national competition authorities and other public bodies carrying out merger control; policy makers, government officials, and diplomats in China and the EU engaged in bilateral economic relations.

Politically sensitive merger operations have traditionally been subject to selective state intervention. This is due to the fact that governments consider that industrial reorganization and change of control over strategic undertakings sometimes interfere with national interests. Therefore, providing legal grounds for state intervention in both domestic and EU merger control is justified by the privilege of democratically elected governments to protect legitimate public interests, which competition rules fail to take into account. However, due to the normative nature of these public interests, the legal grounds for state intervention in merger control can become vulnerable to unjustified political goals. The need for an effective legal framework for addressing unjustified state intervention in merger control is grounded in the observation that EU Member State governments have repeatedly shown favoritism towards national undertakings, and have often relied on state intervention grounds to influence merger operations with the aim to prevent foreign takeovers of strategic companies, therefore facilitating so-called ‘national champions’. This paper aims to reassess the effectiveness of the legal framework addressing the problem of protectionist state intervention under domestic and EU merger control.

The jurisdictional elements of the comprehensive 2004 reform of EU merger control are worth being analysed against the background of economic theory. Competence allocation and delimitation represent important factors for the workability of multilevel merger control regimes. The economics of federalism offer an analytical framework that can be adopted in a modified version in order to assess competence allocation regimes in competition policy. According to these theoretical insights, a given competence allocation and delimitation regime can be evaluated in regard to four criteria: internalisation of externalities, cost efficiency (the one-stop-shop principle), preference orientation, and adaptability. The old competence allocation and delimitation regime of EU merger control consisted of two elements: turnover thresholds and post-notification referrals. Analysis along the lines of the economics of federalism reveals considerable deficiencies of the old regime. Thus, the results of the theoretical analysis are compatible to the dissatisfying empirical experience, which represented a major motivation for launching the reform process. However, the actual reform eventually left the turnover thresholds untouched. The main element of the jurisdictional reform was the introduction of pre-notification referrals and the addition of institutionalised network cooperation. Against the background of the economics of federalism, one must conclude that the reform failed to significantly improve competence allocation in EU merger control. The internalisation of externalities, preference orientation, and adaptability have not been improved. Regarding the cost efficiency criterion, early, anecdotic and provisional empirical evidence hints towards minor improvements of the one-stop-shop principle, albeit merely in its centralising variant. This is contradicted by an increased opaqueness of the overall system due to the higher degree of complexity of the referral regime. The economic analysis in this paper shows that the underlying problems of jurisdictional issues of the multilevel EU Merger Control System have yet to be sufficiently solved. Therefore, this article predicts that jurisdictional issues will remain on the reform agenda.

The jurisdictional elements of the comprehensive 2004 reform of EU merger control are worth being analysed against the background of economic theory. Competence allocation and delimitation represent important factors for the workability of multilevel merger control regimes. The economics of federalism offer an analytical framework that can be adopted in a modified version in order to assess competence allocation regimes in competition policy. According to these theoretical insights, a given competence allocation and delimitation regime can be evaluated in regard to four criteria: internalisation of externalities, cost efficiency (the one-stop-shop principle), preference orientation, and adaptability. The ‘old’ competence allocation and delimitation regime of EU merger control consisted of two elements: turnover thresholds and post-notification referrals. Analysis along the lines of the economics of federalism reveals considerable deficiencies of the ‘old’ regime. Thus, the results of the theoretical analysis are compatible to the dissatisfying empirical experience, which represented a major motivation for launching the reform process. However, the actual reform eventually left the turnover thresholds untouched. The main element of the jurisdictional reform was the introduction of pre-notification referrals and the addition of institutionalised network cooperation. Against the background of the economics of federalism, one must conclude that the reform failed to significantly improve competence allocation in EU merger control. The internalisation of externalities, preference orientation, and adaptability have not been improved. Regarding the cost efficiency criterion, early, anecdotal and provisional empirical evidence hints towards minor improvements of the one-stop-shop principle, albeit merely in its centralising variant. This is contradicted by an increased opaqueness of the overall system due to the higher degree of complexity of the referral regime. The economic analysis in this article shows that the underlying problems of jurisdictional issues of the multilevel EU Merger Control System have yet to be sufficiently solved. Therefore, this article predicts that jurisdictional issues will remain on the reform agenda.

The 2013 Staff Working Document and the 2014 White Paper - 'Towards More Effective EU Merger Control' point to the existence of a potential enforcement / regulatory gap in the functioning of the EU Merger Control Regulation: acquisitions of non-controlling minority shareholdings may create anti-competitive effects and the current EU law mechanisms are not fully equipped to tackle such concerns. This contribution investigates the models that may be used to reform the EU merger control system, while avoiding overregulation, enhancing legal certainty, reducing costs and maintaining a high quality appraisal process. The steps that have been recently taken in order to bring the review of non-controlling shareholdings under Regulation 139/2004 are dealt with. This contribution's conclusions aim to provide the optimal solution meant to ensure a more effective system of merger control in the EU.

Merger control during the financial crisis of 2007/2008 is one of the most challenging topics for EU Competition law. The global crisis tested the EU merger control framework in both procedural and substantial aspects. On the one hand, the national governments had an interest (responsibility) to constantly salvage their vulnerable sectors throughout the crisis and did not want to interrupt these measures. On the other hand, such interventions may have led to a serious concentration in the market structure, and in this case, competition law had two significant challenging tasks: firstly, to maintain its existing competition law jurisdiction, and secondly, to cope with the crisis for the Single Market. While discussing the merger control throughout the financial crisis is obviously crucial, a case analysis-based discussion will be more accurate and useful to understand the lessons learned from the crisis. This paper will begin by sketching the overall consequences of the crisis in question, and will continue to further analyze the merger decisions related to enumerated crises. This piece of work is an attempt to cover all the aspects of EU merger control, including jurisdiction, the community dimension, substantive appraisal, remedies, and procedures.

“Antitrust is a hungry policy, always seeking new terrain to conquer as soon as it has won its victories and imposed rigid rules in older areas” (Bark, The Antitrust Paradox, 249 (1978)). The Airtours/First Choice, Schneider/Legrand and Tetra Laval/Side! mergers had all fallen prey to that hungry policy. In each of the cases, an increasingly expansive merger control enforcement had ventured on new ground. In June and October 2002, the Court annulled all three prohibition decisions. The Court's judgments mark a clear turning point in EU merger control.

The electricity sector is a typical network industry consisting of four closely linked vertical stages. Following liberalisation in Europe in the 1990s, the sector witnessed a surge of mergers, which were subject to review by the European Commission. At the same time, comprehensive economic regulation was established. This raises the question of the adequate relationship between these two forms of industry supervision ('policy mix') as the first issue of this paper. The second more specific issue concerns the increased use of divestiture remedies in EU Merger Control. Empirical evidence on two leading cases from the electricity sector is presented, which casts doubt on their effectiveness. Therefore, a strict(er) merger control policy including prohibitions if necessary coupled with effective access regulation is derived as the preferred policy choice for the liberalised electricity sector in Europe.

Academics and competition enforces advocated the idea to use behavioural economics to apply competition law. The believe that the so-called behavioural antitrust should provide for a more accurate understanding of the conducts of economic operators. It is however unsettled whether behavioural antitrust may have a role in merger control. This paper deals with the question whether behavioural economics can play an effective role in EU merger control and how it can be possibly incorporated into it. It can be argued that the European Commission already takes into consideration the concerns voiced by behavioural economists about the biases of consumers and undertakings. Therefore, at this stage of development the role behavioural antitrust may have in the context of the EU merger control seems to be still quite limited.

The EU Merger Regulation (EUMR) provides the European Commission with exclusive jurisdiction to assess mergers, acquisitions and full-function joint ventures with an EU dimension on the basis of turnover-based thresholds. The EUMR also contains corrective mechanisms allowing the Commission, under certain circumstances, to review smaller transactions. Until recently, these corrective measures have not been frequently applied but the picture is changing. The Commission believes that market developments (particularly in digital and pharma markets) are resulting in more acquisitions of companies that play or may play a significant competitive role in the EU despite generating little or no turnover. Similar considerations may apply to companies with valuable assets, intellectual property rights, data or infrastructure. This article analyses the development in the Commission’s guidance instruments which look to give merging parties a sense of the circumstances in which smaller deals may be referred by Member States to the Commission for EUMR assessment (mindful though that these developments may yet be checked by the EU's highest court). Legislation has also been evolving at the Member State level (e.g., recently in Ireland) to allow national competition authorities to review sub-threshold deals. This article also provides a comparison of the EU system with certain other non-EU ‘callin’ systems and which reflects that merging parties have an increasingly complex merger control picture to navigate in 2024 and beyond before they can safely implement deals (such as in digital and pharma deals).

Governments in developed countries have responded to the COVID-19 pandemic with an almost unprecedented level of government support, thereby preserving many firms and jobs. However, this government support will be progressively withdrawn, and coupled with recent, and expected further, increases in interest rates and the market impacts associated with changes in consumers’ and firms’ behaviour, there is likely to be restructuring in many sectors. This raises the public policy question as to the appropriate balance between government support facilitating and ameliorating this restructuring and the role played by merger control, including how the COVID-19 pandemic and its aftermath affects the application of the so-called ‘failing’ or ‘exiting’ firm defence or scenario under UK and EU merger control. To consider these questions, this article: addresses the policy considerations underpinning the failing firm defence under UK and EU merger control; describes the extensive government support and State aid provided in the UK in response to COVID-19 and the impact of COVID-19 on various sectors; and provides an overview of the evidence required for the ‘failing firm defence’, given these policy and factual considerations.

This work deals with the welfare effects of mergers in the context of the EU merger control. The aim of the paper is to identify the broader welfare implications of EU mergers, considering the relation between the EU economic integration, the recent M&A waves in the EU economy, and the international competitiveness of EU producers. The paper focuses first on the motives and welfare effects of vertical mergers. The EU merger control is presented from the policy level to the merger procedure. Then, a theoretical framework is proposed in order to allow for a better understanding of the mechanics influencing the EU-citizens welfare, given that the four freedoms of movement link all sectors in all Member States as a whole. The framework helps understanding the broader welfare implications of a potentially harmful merger. Since the effect of Merger Control has never been evaluated, this tool may be useful as it catches some important effects related to the overall EU welfare. It can also be useful in relation to a significant aspect: the distribution of EU welfare within and between nations. Last, the framework could be helpful for weighing consumers and producers' interests related to mergers.

EU review of mergers has been an overwhelming success: the European Commission has established itself as a leading competition regulator on the strength of the transparency of its rules-based merger control regime. Nevertheless, the independence of decision-making from political influence and industrial policy considerations has been a constant theme. These tensions were recently laid bare by the Commission’s decision to block the combination of the train activities of Siemens and Alstom. This contribution examines that controversy, as well as the roles of Chinese outbound investment and COVID-19 in shaping the recently launched EU Industrial Strategy. We conclude that, notwithstanding the challenges faced by European businesses as a result of an unlevel global playing field, the EU should not abandon its strict application of the EU Merger Regulation. European interests have been well served by an independent competition policy based on antitrust orthodoxy. Finally, the chapter discusses how other instruments put forward by the Commission are capable of preserving Europe’s industrial base and protecting firms from unfair competition without baking industrial policy considerations into the EU Merger Regulation.

The Seeds and Agro-Chem Industry today is a tightly knit oligopoly with only a handful of global players. Following a detailed assessment, the European Commission recently conditionally cleared three major transactions in the already highly concentrated sector - Chem China and Syngenta, Dow and Du Pont, Bayer and Monsanto – reducing the number of effective global players from six-to-four. Even though the Commission’s decisions are laudatory in terms of their economic assessment of the impact of the transactions on product, price and innovation competition, these merger approvals suggest the following gap in EU Merger Control. Taking pride in its more economic approach, the EU Merger Control in its current form neglects the need to integrate the most fundamental principles of EU law. These principles can neither be easily quantified nor put in a straitjacket of ‘cost/benefit’ or ‘efficiency’ analysis. This article accordingly calls for the need to go back to the Treaty articles and examine how EU Merger Control can effectively meet the larger policy objectives as enshrined in the Treaty articles, such as Article 11 TFEU’s ‘environmental integration rule’, while simultaneously retaining the impression of being based in sound principles of competition law and economics. Incorporation of the principle of sustainable development alongside the well-defined economic principles well aligns with an integrated and holistic approach to policy-making. The approach suggested may lead to a multiciplty of objectives – meaning that if such an approach is indeed adopted, the EU Merger Control may well need to look beyond the narrow construct of ‘efficiency’ and ‘consumer welfare’. A failure to take account of these larger objectives, however, may ironically thwart the EU Merger Control from achieving the very fundamental objective it seemingly aspires to achieve that is ‘consumer welfare’! Consumers being numerous and geographically dispersed experience the collective action problem. In the Bayer/Monsanto merger, despite this typical collective active problem, the Commission received over 55,000 emails, letters and postcards and an uncountable number of tweets on the social networking site Twitter. The citizens, who are also consumers, in their complaints requested the Commission to prohibit the transaction, as they saw the proposed merger being detrimental to ‘human health, food safety, consumer protection, the environment and the climate’. The Commission’s response to these complaints was that even though the said concerns were significant - they nonetheless could not form the basis of merger assessment, which needs to be limited to competition issues. As for the issues raised, in the opinion of the Commission, other areas of law such as those dealing with the regulatory system for pesticides and the consumer protection law could well address these other concerns. The dilemma confronting the Commission was whether to assess these transactions within the current framework grounded in well-defined scientific principles of economics (and increasingly econometrics) or in the alternative take account of some qualitative non-price considerations. The Commission evidently resorted to the former option. A decision otherwise would have been subject to intense economic criticism just like the GE/Honeywell decision, wherein the Commission proposed a very novel theory of ‘Archimedean Leveraging’, and prohibited the proposed merger. This means that for a truly effective competition policy and EU Merger Control in particular, the authorities need to ‘re-think, re-design and re-frame’ the notion of competition policy as a ‘system of inter-locking processes’ in the Raworth’s ‘doughnut’. For such a sustainability-driven thinking on innovation, that re-directs the ‘consumption choices available to consumers’ within the sustainable ‘safe and just space for humanity’, there is a visible need to think and reflect upon the ‘double limit of planetary boundaries’ and incorporate it in the everyday philosophy of competition policy.