alerts & publications
European Commission Revises Rules to Simplify Antitrust Merger Control ProcessApril 21, 2023
On Thursday, April 20, 2023, the European Commission announced the adoption of a set of measures to simplify procedures under the EU Merger Regulation (“EUMR”). Laid down in a revised Merger Implementing Regulation, a Notice on Simplified Procedure (“Notice”), and a Communication on the transmission of documents, and slated to come into effect on September 1, 2023, these new rules will expand the scope for parties to notify their transactions under the simplified procedure (first established back in 2000 to deal with transactions that are unlikely to raise substantive antitrust concerns) and to streamline the process under the standard procedure.
Future transactions that meet the jurisdictional thresholds under the EUMR will qualify for a short-form notification process if:
- there is no horizontal or vertical overlap between the parties’ activities (i.e., if they do not compete with each other on any market and are not active on any market that is upstream or downstream of a market on which any other transaction party operates); or
- there is a horizontal overlap between the parties’ activities but their combined market share remains below 20% or where the combined market share remains below 50% as long as the increment brought about by the transaction is negligible at less than 150 on the Herfindahl-Hirschman Index (“HHI”); or
- there is a vertical overlap between the parties’ activities, but there is no individual or combined market share of 30% or more; or
- the transaction concerns the creation of a jointly controlled joint venture that has no, or negligible, actual or foreseen activities within the EEA (namely local turnover and assets of less than EUR 100 million); or
- the transaction concerns the acquisition of sole control by a party that already has joint control over the target company;
and now also in vertical overlap cases if the parties’ individual or combined market shares
- are lower than 30% on the upstream market, and parties to the concentration active in the downstream market hold a purchasing share of less than 30% of upstream inputs (which is different from the established 30% downstream market share if the input is used in more than one downstream market); or
- are lower than 50% on both the upstream and downstream markets as long as the HHI increment remains below 150 on both the upstream and downstream markets, and the smaller undertaking in terms of market share is the same in the upstream and downstream markets.
The new rules also give the Commission ‘flexibility’ to handle cases under the simplified procedure rules if the notifying parties so request and if:
- the parties’ combined market share on any horizontal overlap market remains below 25%; or
- the parties’ individual and combined market shares on any vertical overlap market
- are lower than 35% in the upstream and downstream markets;
- are lower than 50% in one market while all parties’ individual and combined market shares on all the other vertically related markets are less than 10%; or
- the transaction concerns the creation of a jointly controlled joint venture with EEA revenues and assets of less than EUR 150 million.
Importantly, the Commission also retains the power to exclude a transaction from the simplified procedure even if it technically qualifies for simplified treatment. This power is broad and covers not only scenarios where the above-mentioned market share thresholds may be difficult to ascertain because it is unclear how to define the markets. According to the Notice, simplified treatment may also not be available if a transaction, for example,
- takes place in an already concentrated market;
- involves a market in which capacity and production output are important and where the above-mentioned market share thresholds are exceeded in terms of these metrics;
- involves a recent entrant, the elimination of an important actual or potential competitive force, or the combination of important innovators; or
- allows the merged entity to gain access to commercially sensitive information on the upstream or downstream activities of its rivals.
In light of these far-reaching ‘safeguards and exclusions,’ it is not surprising that the Commission ‘strongly encourages’ notifying parties to engage in pre-notification discussions with its case handlers as soon as there is some horizontal or vertical overlap between the parties’ activities. Interestingly, the timing proposed for initiating these discussions is the same as the one for non-simplified, but non-complex cases — ‘at least 2 weeks before the expected date of notification’. Considering that even non-complex cases remain in pre-notification for months before the parties receive the green light to submit their notifications and start the statutory review process, it remains to be seen whether the range of reserved matters ultimately cancels out the simplifications that the new rules seek to deliver. Companies deliberating over how to address questions about market shares on ‘all plausible markets’ may well end up opting for a standard notification rather than spending weeks if not months arguing with the Commission whether their case deserves simplified treatment.
Accounting for more than 80% of all Phase I clearances in 2022, there is no doubt that the simplified procedure under the EUMR has resulted in great benefits since its original introduction in 2000. It eases the burden on notifying parties by allowing them to file their cases with the so-called Short Form CO without having to provide, e.g., extensive sales and market data or a full-blown competitive assessment. It also reduces the burden on the Commission in conducting its investigations (e.g., without having to market test a transaction with competitors or customers) and its drafting of clearance decisions. In simplified cases, these decisions are usually no longer than two pages, providing only basic information on the parties, the nature of the concentration and the economic sectors concerned, as well as a statement that the concentration is approved — without providing a detailed, competitive analysis.
The latest revisions to the simplified procedure rules are a welcome step in the right direction. Whether they will indeed ‘contribute to achieving the Commission’s objective to reduce reporting requirements by 25%, as announced in its Communication on Long-term competitiveness of the EU’ remains questionable. After all, the Commission’s recent initiatives to roll out the Digital Markets Act or the Foreign Subsidies Regulation or to bring non-notifiable transactions within its jurisdiction, are set to significantly increase reporting requirements for many investors doing business in Europe. Many of them are unlikely to feel appreciable relief brought about by the addition of two new categories to the simplified procedure catalogue. Today’s press release heralds the revision of the simplified procedure rules as a measure to ‘further cut red tape for merging businesses’. Unfortunately, this latest cut is not the deepest. It will not offset the administrative burden that the Commission has created in the form of other regulatory hurdles that are set to make M&A activity in Europe far more complex in the future.
This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Riccardo Celli, an O'Melveny partner licensed to practice law in Brussels-Capital Region, Law Society England & Wales, and Roma, and Christian Peeters, an O'Melveny Of Counsel licensed to practice law in Brussels-Capital Region and Germany, Rechtsanwalt, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.
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