Control of concentrations between undertakings
The new regulation on the control of concentrations between undertakings, which entered into force on 1 May 2004, the date of European Union (EU) enlargement, reforms the regulatory reference framework in depth. Whilst strengthening the "one-stop shop" principle, it provides a positive incentive for national competition authorities to participate and simplifies the procedure for notifications and investigations.
Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation) (Text with EEA relevance).
Although the results obtained by the application of Regulation No 4064/89 can generally be regarded as positive, experience gained over the last twelve years in applying the Regulation and the discussions prompted by the publication of the 2001 Green Paper show that the system can be improved.
The 1989 Merger Regulation was based on the "one-stop shop" principle, which gave the Commission sole control over all major cross-border mergers. However, this new regulation, whilst ensuring that the same merger need not be notified to several competition authorities in the European Union (EU), adopts the principle of subsidiarity, whereby a merger is examined by the judicial authority best placed to do so.
This regulation is applicable to all concentrations with an EU dimension. A "concentration" arises where a change of control on a lasting basis results from:
- the merger of two or more previously independent undertakings or parts of undertakings;
- the acquisition by one or more persons (already controlling at least one undertaking) or by one or more undertakings of direct or indirect control of one or more other undertakings.
Multiple transactions that are conditional on one another or are closely connected are regarded as a single concentration.
A concentration acquires an "EU dimension" where:
- the combined aggregate worldwide turnover of all the undertakings concerned is more than EUR 5 billion; and
- the aggregate turnover in the EU of each of at least two of the undertakings concerned is more than EUR 250 million, unless each of the undertakings concerned generates more than two thirds of its aggregate EU-wide turnover within a single EU country.
If the above-mentioned thresholds are not reached, a concentration nevertheless has an EU dimension if:
- the combined aggregate worldwide turnover of all the undertakings concerned is more than EUR 2.5 billion;
- in each of at least three EU countries, the combined aggregate turnover of all the undertakings concerned is more than EUR 100 million;
- in each of at least three EU countries, the aggregate turnover of each of at least two of the undertakings concerned is more than EUR 25 million;
- the aggregate EU-wide turnover of each of at least two of the undertakings concerned is more than EUR 100 million, unless each of the undertakings concerned generates more than two thirds of its aggregate EU-wide turnover in one and the same EU country.
Notification procedure: the firms and persons concerned
As a general rule, concentrations with an EU dimension must be notified to the Commission prior to their implementation and following the conclusion of the agreement, the announcement of the public bid or the acquisition of a controlling interest. However, this regulation seeks to rationalise the time limits for notifying the Commission of merger plans by allowing notification before the conclusion of a binding agreement and abolishing the obligation to notify operations within a week of concluding an agreement. This not only makes the system more flexible but also facilitates coordination with other jurisdictions in investigations of mergers.
With a view to coordination with the competent national authorities, this regulation allows the undertakings or persons concerned to inform the Commission, by means of a reasoned submission, before notifying a concentration. This procedure, referred to as pre-notification, allows the parties to show the Commission that the proposed merger, while resulting in a concentration having a cross-border dimension, affects competition on the market of one EU country. If the EU country referred to in the reasoned submission fails to express its disagreement within a period of 15 working days of receiving the submission, with the application to refer the case, the Commission is allowed 25 working days from receipt of the submission within which to refer the whole or part of the case to the competent authorities of that EU country with a view to the application of that country's national competition law.
The same procedure applies where a person or an undertaking wishes to draw the Commission's attention to the cross-border effects which a merger without an EU dimension could have at European level.
Initiation of proceedings: the Commission
Once it has received a notification, the Commission has several powers of decision: to initiate proceedings, to carry out investigations and to impose fines. First, it determines by decision whether:
- the notified concentration comes under this regulation;
- the concentration is compatible with the common market;
- the concentration raises serious doubts as to its compatibility.
Concentrations with an EU dimension cannot, in theory, be implemented either before notification or for three weeks following notification. If, on the other hand, a concentration has already been implemented and has been declared incompatible with the common market, the Commission can order the undertakings concerned to dissolve the concentration or take any other appropriate measure to restore the situation prevailing prior to the implementation of the concentration.
The Commission can also adopt interim measures if it finds that a concentration that has been notified, although coming within the scope of this regulation, does not give rise to serious doubts as to its compatibility with the common market or is such that a simple change suffices to bring it into line with the common market.
To enforce compliance with this regulation, the Commission may impose the following sanctions:
- fines: the Commission may impose fines not exceeding 1 % of the aggregate turnover of the undertaking where, intentionally or negligently, it supplies incorrect, incomplete or misleading information or does not supply information within the required time limit. It may also impose fines where seals affixed during an inspection have been broken. It can impose fines of up to 10 % of the aggregate turnover of the undertaking concerned where, either intentionally or negligently, it fails to notify a concentration prior to its implementation, implements a concentration in breach of the regulation or fails to comply with a Commission decision.
- periodic penalty payments: the Commission may impose periodic penalty payments not exceeding 5 % of the average daily aggregate turnover of the undertaking for each working day of delay, calculated from the date set by the Commission in its decision requiring information, ordering inspections, etc.
An Advisory Committee composed of representatives of the EU countries’ authorities is to be consulted by the Commission before any decision relating to compatibility, incompatibility or the imposition of fines or periodic penalty payments is taken. The European Court of Justice can abolish, reduce or increase any fines or periodic penalty payments imposed.
Referral procedure: the Commission and the competent authorities of the EU countries
In order to ensure that the competent authority is the one best placed to investigate a concentration, the procedure for referral to the competent authorities of the EU countries has been simplified.
Until now, the turnover and "3+" criteria have been applied by identifying concentrations with a cross-border effect (i.e. exclusive EU competence where at least three EU countries request a referral). These two criteria, which make it possible to determine fairly rapidly whether a particular merger should be dealt with by the EU countries or the Commission have proved inadequate. However, this regulation introduces a new criterion for referral to the competent authorities of the EU countries.
In line with this approach, an EU country may, within 15 working days of the date of receipt of the copy of the notification, acting on its own initiative or at the Commission's invitation, declare that a concentration significantly affects competition in a domestic market of that country. The product or service market must present all the characteristics of a distinct market without, however, constituting a substantial part of the common market. The Commission has 65 working days following the notification of the concentration within which to decide whether to deal with case itself under this regulation or to refer the whole or part of the case to the competent authorities of the EU country; if the Commission fails to adopt a decision the case is considered to have been referred to the EU country in question.
Conversely, an EU country can request the Commission to investigate whether a concentration, although without an EU dimension, significantly hampers competition between EU countries and is liable to have a significant effect on competition on the territory of the EU country or countries making the request. The Commission must then inform the competent authorities of the EU countries and companies concerned, fixing a time limit of 15 working days within which any other EU country can join the initial request. If, within ten working days, the Commission has not adopted a decision to refer or not to refer, it is deemed to have adopted a decision in accordance with the request.
This regulation, which is applicable from 1 May 2004, replaces Regulation (EEC) No 4064/89.
|Act||Entry into force||Deadline for transposition in the Member States||Official Journal|
Regulation No 139/2004
OJ L 24, 29.1.2004