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European Commission


Brussels, 9 July 2014

Mergers: Commission adopts White Paper on possible reform of EU merger control rules - Frequently Asked Questions

See also IP/14/801

Why is there a need for a review of minority shareholdings acquisitions?

In some instances, acquisitions of minority shareholdings can be detrimental to competition, particularly those in competitors or vertically related companies. Competitive harm may arise, for example, from the influence acquired over strategic decisions of a competitor or access to a competitor's confidential business information. Unlike merger rules of some Member States (Austria, Germany and the United Kingdom) and third countries including the US, Canada and Japan, the EU Merger Regulation does not currently allow the Commission to address competition concerns that may arise from such acquisitions, because it only covers acquisitions of control. This constitutes an enforcement gap. Even though the same competition concerns may arise, the Commission has to date only been able to intervene against pre-existing minority shareholdings when reviewing an acquisition of control.

Can you give an example where minority shareholding has caused harm to competition?

There are a number of cases where national competition authorities assessed minority shareholdings in order to ensure that competition was not harmed.

In the Ryanair/Aer Lingus case, the Commission has prohibited the merger twice since 2007 as it found that the dominant position created by the merger would be harmful to 11 million consumers flying annually from and to Ireland. However, the Commission lacked jurisdiction to review Ryanair's near 30% minority shareholding in Aer Lingus, which was subsequently reviewed by the UK competition authorities, who only had competence concerning flight routes from Ireland to the UK, and could not have reviewed the transaction for the entire EU, and which raised concerns about the negative effects of these minority stakes. The proposed reform would allow the Commission to review the case in one go, and to cover routes from Ireland to all European destinations.

Why is the Commission not addressing competition concerns raised by acquisitions of minority shareholdings under Articles 101 and 102 TFEU to?

The scope of Article 101 (that prohibits restrictive agreements) and Article 102 (that prohibits the abuse of a dominant position) of the Treaty on the Functioning of the European Union and (TFEU) is limited, and does not necessarily cover cases where acquisitions of minority shareholdings can cause competition concerns.

Article 101 can only be used for “agreements” with the object or effect of restricting competition. However, it is not clear whether certain types of acquisitions of minority stakes, for example those carried out on the stock market, could be qualified as "agreements" within the meaning of Article 101. In order for an acquisition of a minority shareholding to constitute an abuse of a dominant position pursuant to Article 102, the acquirer would have to already hold a dominant position in the relevant market (thus excluding all scenarios of unilateral effects in oligopolistic markets) and the acquisition of the shareholding would have to constitute in itself an "abuse", i.e. an attempt to shut out competitors or exploit customers.

But even if the acquisition of a minority stake could be construed as falling under Articles 101 or 102 TFEU, antitrust rules do not seem best placed for addressing the relevant competition issues since they are meant to assess past anti-competitive conduct, not the creation of a lasting structural link for the future (which is the case for acquisitions of both, minority stakes and control) and - unlike the Merger Regulation - they do not allow for a quick resolution of competition issues in a way that provides legal certainty to the parties of the transaction.

Which minority shareholdings transactions would fall under the review and how much would this affect businesses?

The White Paper proposes a tailor-made solution limited to certain categories of minority shareholdings, without creating a significant burden for businesses. The review system would specifically target transactions of EU dimension that give a certain degree of influence in a competitor or a vertically related company, i.e. which prima facie may be problematic from a competition point of view. This would cover an estimated 20 to 30 cases per year and would leave benign transactions completely unaffected.

The proposed review system would not affect the liquidity of the private equity market or companies' restructuring efforts, as benign investment or restructuring transactions would not fall under the review system.

The aim of the reform is to capture minority shareholdings acquisitions by a company in a competitor or a vertically related company which may potentially be problematic in competition terms and to review these transactions in order to see whether or not they would significantly impede competition in the market. The reform would not go beyond of what is necessary to achieve this.

What is the review process for minority shareholding transactions going to look like?

The White Paper proposes to establish a light system where the parties only have to provide basic information about a proposed operation in an information notice, so that the Commission can determine which cases involving minority shareholdings could be problematic and should be reviewed. All other transactions could go ahead quickly, possibly after a short waiting period. The proposed system would still allow the Member States to ask cases to be referred to them.

What is the added value of EU review of minority shareholding transactions compared to national reviews?

Currently three Member States (Austria, Germany and the United Kingdom) are competent to review acquisitions of minority shareholdings. These reviews are limited to assess the effects of such acquisitions on competition within the territory of each Member State. However, experience has shown that such cases may have European Economic Area (EEA)-wide effects which are currently not tackled. In addition, for transactions meeting the turnover thresholds of the Merger Regulation, the new system would create a one-stop shop for assessing the acquisition of control and of minority stakes at the level of the Commission instead of parties having to get approval in each Member State concerned. As more Member States are likely to introduce a review of minority shareholdings, the added value would be even greater. The proposal simplifies and slims down administrative burden on companies involved in parallel reviews in more jurisdictions across the EU.

How would referral systems be streamlined and simplified?

Although the experience since 2004 has shown that the referral system works well in general, there is scope for improvement. The proposal aims at reducing the administrative burden on businesses and the Commission and ensuring an enhanced one-stop shop and streamlined case allocation to the most appropriate authority.

For pre-notification referrals to the Commission under Article 4(5) of the Merger Regulation, the requirement for two separate submissions (a referral request and a subsequent notification) would be abolished to make the process quicker and less burdensome. The Commission would have EEA-wide competence to review a transaction received via post-notification referral (Article 22 of the Merger Regulation), with the aim of avoiding parallel reviews by the Commission and national competition authorities. By providing for an early information notice for multi-jurisdictional or cross-border cases, the proposal would also enhance cooperation among national authorities, even when no referral takes place.

How would convergence among national merger regimes be strengthened?

The White Paper promotes an enhanced cooperation between national competition authorities (NCAs) and the Commission and also amongst NCAs when reviewing a merger which does not fall under the Commission's jurisdiction, in particular to avoid contradictory or divergent decisions. It acknowledges the considerable degree of convergence already achieved and the Commission's role in promoting further efforts. The White Paper supports in principle the idea of moving towards a system where the Commission and all NCAs apply the same substantive EU law while acknowledging that this would require a more ambitious overhaul of the current system of EU merger control within longer time horizons.

What do the other proposals in the White Paper aim at?

The White Paper also proposes to streamline and simplify procedures. For example, it suggests excluding certain non-problematic transactions from the Commission's review, such as the creation of joint ventures operating outside of the EEA and with no impact on European markets. Also, reflections are made to further extend the light review system based on a simple information notice to some categories of non-problematic cases currently dealt with under a simplified procedure. This would further reduce the costs and administrative burden for businesses. The White Paper also includes some more technical amendments aiming at a smoother process of merger control.

Contacts :

Antoine Colombani (+32 2 297 45 13, Twitter: @ECspokesAntoine )

Yizhou Ren (+32 229 94889)

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