Protecting Against Protectionism - The Case of Merger Control

Abstract

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.