EN

|| COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 30.6.2009

SEC(2009) 808 final/2

CORRIGENDUM: Annule et remplace le document SEC(2009)808 du 18 juin 2009 (modifications apportées dans l'annexe 3)

STAFF WORKING PAPER accompanying the

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL Report on the functioning of Regulation No 139/2004 {COM(2009) 281 final}

TABLE OF CONTENTS

1........... Introduction. 3

1.1........ Background. 3

1.2........ Objective of the analysis. 4

1.3........ Methodology and structure. 5

Part I - Jurisdictional Thresholds. 6

2........... The thresholds under Article 1. 6

2.1........ Introduction. 6

2.2........ Views expressed by the NCAs. 7

2.3........ Views expressed by the stakeholders. 8

2.4........ Commission assessment of the thresholds under Article 1(2) 9

2.5........ Commission assessment of the thresholds under Article 1(3) 10

2.6........ The application of the two-thirds rule. 15

2.7........ Conclusion on the operation of the thresholds. 22

Part II - Referral Mechanisms. 23

3........... Pre-notification referrals. 23

3.1........ Referrals under Article 4(4) 23

3.2........ Referrals under Article 4(5) 29

3.3........ Conclusion on the operation of the pre-notification referral system.. 35

4........... Post-Notification Referrals. 38

4.1........ Referrals under Article 22. 38

4.2........ Referrals under Article 9. 42

Part III – General Conclusion. 44

ANNEX 1 Questionnaire for the consultation of NCAs

ANNEX 2 Questionnaire for the public consultation

ANNEX 3 Overview of two-thirds rule cases between 2001 and 2007

1. Introduction

1.1. Background

1. Council Regulation (EEC) No 4064/89, the "EC Merger Regulation", entered into force on 21 September 1990. One of the main principles of the EC Merger Regulation is the exclusive jurisdiction of the Commission to review concentrations which fall within its scope. According to its Article 1, the EC Merger Regulation thus applies to operations that satisfy two conditions. First, there must be a concentration of two or more undertakings within the meaning of Article 3 of the EC Merger Regulation. Secondly, the turnover of the undertakings concerned, calculated in accordance with Article 5, must satisfy the thresholds set out in Article 1 and which thus have a Community dimension in the sense of the EC Merger Regulation.

2. The concept that the Commission should have sole competence to review mergers with a Community dimension follows from the principle of subsidiarity. From the viewpoint of the European business community, the Commission's exclusive jurisdiction also provides a "one-stop-shop" advantage, which is widely regarded as an essential part of keeping the regulatory costs associated with cross-border transactions at a reasonable level. In addition, the Commission's exclusive jurisdiction to vet such mergers is an important element in providing a "level playing field" for the concentrations that were bound to result from the completion of the internal market. This principle is widely accepted as the most efficient way of ensuring that all mergers with a significant cross-border impact would be subject to a uniform set of rules.

3. In 1998, after a careful review of the experience gained, the EC Merger Regulation was amended through Council Regulation No 1310/97. The amendments concerned a large number of areas. In relation to Article 1, a new sub-paragraph - Article 1(3) - was introduced. The intention was to provide a solution to the problem whereby a significant number of cases failed to meet the turnover requirements of Article 1(2) and therefore had to be notified in several Member States ("multiple filings"). Many such concentrations had a significant cross-border impact but did not benefit from the "one-stop-shop" principle and therefore, the EC Merger Regulation had not fully succeeded in creating a level playing field and the application of coherent rules for this category of cases. Council Regulation No 1310/97 therefore introduced a new set of lower turnover thresholds in Article 1(3) with a view to capturing transactions which were of a Community dimension.

4. The adoption of the recast EC Merger Regulation on 20 January 2004[1] (also referred to as the "EC Merger Regulation") was the result of a far-reaching review and a broad debate with all concerned parties which was launched in 2001 with the Commission Green Paper.[2] The discussion covered a wide range of jurisdictional, procedural and substantive aspects of the Regulation. The new EC Merger Regulation introduced a number of substantive and procedural changes. While the turnover thresholds set out in Articles 1(2) and 1(3) were left unchanged, a set of voluntary pre-notification referral mechanisms was introduced in order to "further improve the efficiency of the system for the control of concentrations within the Community."[3]

5. The Commission Notice on Case Referral in respect of concentrations[4] sets out the guiding principles of the referral system. It specifies that decisions taken with regard to the referral of cases should take due account of all aspects of the application of the principle of subsidiarity, "in particular which is the authority more appropriate for carrying out the investigation, the benefits inherent in a 'one-stop-shop' system, and the importance of legal certainty with regard to jurisdiction. It also emphasises that "these factors are inter-linked and the respective weight placed upon each of them will depend upon the specificities of a particular case. Above all, in considering whether or not to exercise their discretion to make or accede to a referral, the Commission and Member States should bear in mind the need to ensure effective protection of competition in all markets affected by the transaction."[5]

6. On 10 July 2007, the Commission adopted a Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings.[6] The Consolidated Jurisdictional Notice replaces the previous four jurisdictional Notices, all adopted by the Commission in 1998 under the previous EC Merger Regulation.[7] The Consolidated Jurisdictional Notice covers all issues of jurisdiction relevant for establishing the Commission’s competence under the new EC Merger Regulation, including in particular, the concept of a concentration, the notion of control, the concept of full-function joint ventures and the calculation of turnover.[8]

7. It is in the context of the above instruments that the notification thresholds and the referral mechanisms are analysed and discussed in this staff working paper.

1.2. Objective of the analysis

8. Article 1(4) of the EC Merger Regulation requires the Commission to report to the Council on the operation of the thresholds and criteria set out in paragraph 1(2) and 1(3) by 1 July 2009.[9] Article 4(6) of the EC Merger Regulation stipulates that the Commission shall report to the Council on the operation of the pre-notification referral mechanisms under Article 4 by 1 July 2009.

9. The main purpose of the report is therefore, firstly, to discuss the operation of these thresholds in allocating cases between the Community level and the national level pursuant to the objectives of a "one-stop-shop", the "more appropriate authority", and ultimately the need to achieve a "level playing field". Secondly, to report on the operation of the pre- and post-notification referral mechanisms provided for by Articles 4, 9 and 22.

10. The division of competence between the Commission and the competition authorities of the Member States ("NCAs"), which is based on the concept of "concentration" in the EC Merger Regulation and the mechanical application of the turnover thresholds, includes three corrective mechanisms. The first corrective mechanism is the so-called "two-thirds rule" which applies to both Articles 1(2) and 1(3). The objective of this rule is to exclude from the Commission's jurisdiction certain cases which contain a clear national nexus to one Member State.

11. The second corrective mechanism is the pre-notification referral system introduced under the new EC Merger Regulation in May 2004. This allows for the re-allocation of jurisdiction at the initiative of the parties prior to notification and subject to approval by the Member States and/or the Commission.

12. The third corrective mechanism is the post-notification referral system whereby one or more Member States can request that the Commission assesses mergers that fall below the thresholds of the EC Merger Regulation under certain conditions (Article 22). Conversely, a Member State may, in cases that have been notified under the EC Merger Regulation, request the transfer of competence to its NCA if certain conditions are fulfilled (Article 9).

13. The analysis of this Staff Working Paper covers the turnover thresholds in conjunction with these corrective mechanisms with the aim of developing a comprehensive overview of the system of allocation and re-allocation of merger cases between the Commission and the Member States.

1.3. Methodology and structure

14. On 26 June 2008, DG COMP launched a consultation with the Member States' national competition authorities ("NCAs"). All NCAs replied and the Commission received a substantial amount of statistical data which was necessary for the analysis of the quantitative aspects of the report. Data were compiled on multiple filings, the operation of the two-thirds rule and the pre- and post-notification referral mechanisms. The NCAs were also invited to offer their views and share their experience in respect of the operation of the thresholds and the referral mechanisms as well as with regard to the operation of the EC Merger Regulation more generally. The questionnaire for NCA consultation is attached as Annex 1.

15. On 28 October 2008, DG COMP also launched a public consultation. This consultation was primarily designed to collect further information concerning the application of the thresholds in Article 1 and the referral mechanisms set out in Article 4. Furthermore, the respondents were invited to forward any comments or suggestions in relation to the functioning of the EC Merger Regulation more generally. Of the 30 replies received, 16 were from major law firms frequently involved in EU merger notifications. In addition, 13 commercial entities including companies and industry organisations replied, as well as a think tank. The replies are published on DG COMP's website.[10] The questionnaire for the public consultation is attached as Annex 2.

16. In addition to these consultations, DG COMP reviewed its own experience with the application of the jurisdictional thresholds and the referral mechanisms since the entry into force of the new EC Merger Regulation and the adoption of the Commission Notices on case Referrals and Jurisdictional issues.

17. PART I of this staff working paper will first analyse the functioning of the turnover thresholds set out in Article 1 of the EC Merger Regulation in the light of the comments received from NCAs and the respondents to the public consultation. The operation of the two-thirds rule will also be discussed in the light of the statistical data received from the NCAs and the experience of the Commission. PART II will examine the operation of the pre-notification referral system pursuant to Article 4 EC Merger Regulation. It also includes an examination of the operation of the post-notification referral mechanisms of Articles 9 and 22. PART III then presents some general conclusions.

Part I - Jurisdictional Thresholds

2. The thresholds under Article 1

2.1. Introduction

18. Article 1(2) of the EC Merger Regulation stipulates:

For the purposes of this Regulation, a concentration has a Community dimension where:

(a) the combined aggregate worldwide turnover of all the undertakings concerned is more than ECU 5000 million; and

(b) the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than ECU 250 million, unless each of the undertakings concerned achieves more than two-thirds of its aggregate Community-wide turnover within one and the same Member State.

19. Article 1(3), which entered into force in 1998, extends the Commission's sole competence to assess certain transactions where the parties have less turnover but requiring notification in three or more Member States ("multiple filings"). Article 1(3) stipulates:

For the purposes of this Regulation, a concentration that does not meet the thresholds laid down in paragraph 2 has a Community dimension where:

(a) the combined aggregate worldwide turnover of all the undertakings concerned is more than ECU 2500 million;

(b) in each of at least three Member States, the combined aggregate turnover of all the undertakings concerned is more than ECU 100 million;

(c) in each of at least three Member States included for the purpose of point (b), the aggregate turnover of each of at least two of the undertakings concerned is more than ECU 25 million; and

(d) the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than ECU 100 million;

unless each of the undertakings concerned achieves more than two-thirds of its aggregate Community-wide turnover within one and the same Member State.

20. Article 1(3) tests whether significant turnover is achieved in three or more Member States. In principle, this means that the Article applies a test of cross-border effects. In this respect the intention of Article 1(3) could be interpreted as providing companies recourse to the "one-stop-shop" principle in situations where the cost of multiple notifications would otherwise be too high. In the discussions that led to the adoption of this amendment it was felt that the Community dimension would be more manifest in cases involving three or more Member States and that, as long as only two Member States were involved, potential conflicts could be avoided through bilateral contacts.

21. The turnover thresholds provided in Article 1(2) and 1(3) of the EC Merger Regulation have not been altered since their entry into force in 1990 and in 1998 respectively.

2.2. Views expressed by the NCAs

22. NCAs have consistently expressed the view that, as a whole, the system of both the turnover thresholds and the referral provisions functions well and appropriately assign jurisdiction. It is also the general perception that the pre-notification referral system has enhanced the jurisdictional flexibility of merger control in the EU, thus fine-tuning possible any shortcomings of the thresholds.

23. One respondent pointed out that while the system of thresholds and corrective mechanisms works well overall, the level of the thresholds should be adjusted for price inflation and should take into account the EU enlargement. One NCA also suggested that the need for such adjustments might be further explored. One NCA considered that such adjustment is not appropriate at this stage but should be considered in the future.

24. As regards specifically the operation of the thresholds of Article 1(3) the NCAs have made only a few comments. One NCA wondered whether these thresholds would contribute to a more effective enforcement of merger control in the EU and suggested abolishing Article 1(3) in the interest of simplification and transparency. One NCA pointed out that the threshold under Article 1(3) is quite complicated.

25. With regard to specific markets or economic sectors, most NCAs took the view that the thresholds of Article 1(2) and (3) function well as an effective means of properly identifying mergers of a Community dimension. However, one NCA noted that more guidance as to how the relevant turnover of the parties concerned should be calculated for the purposes of the jurisdictional assessment might be appropriate for some economic sectors. Another NCA remarked that the current rules could lead to an ineffective allocation of cases in the retail trade sector as such cases would be of a national or of a local dimension and therefore the NCAs would be the appropriate authorities for considering cases of this kind. Several Member States pointed out that in any event, the referral mechanism allows for effective fine tuning wherever appropriate.

2.3. Views expressed by the stakeholders

26. The public consultation raised the following questions:

A. Functioning of the turnover thresholds in Article 1(2) and (3) EC Merger Regulation

Question 1: Do you believe that Article 1(2) and (3) of the EC Merger Regulation is functioning as an effective means of distinguishing between those transactions which are most appropriately the subject to merger control at the Community level from those which are not? […]

Question 2: Are there any specific sectors or markets where, in your view, the turnover thresholds in Article 1(2) and (3) are not functioning in the manner intended, namely in identifying those transactions which are most appropriately the subject to merger control at the Community level?

27. Table 1 below gives a quantitative overview of the number of replies given on these questions.

Table 1: Overview of replies to the public consultation on the issue of thresholds

Questions || Total* || Commercial entities || Law firms || Association

Yes || No || Yes || No || Yes || No || Yes || No

Question 1: Is Art 1(2) and (3) appropriate instruments to determine Community dimension? || 12 || 3 || 4 || 2 || 8 || 1 || - || -

Question 2: Should there be special rules for specific economic sectors? || 7 || 5 || 5 || 2 || 3 || 3 || - || -

*All data refer to number of replies.

28. With regard to the system of jurisdictional thresholds under Article 1 generally, most respondents took the view that they provide a reasonably good proxy for which cases have a Community dimension. Considering that the turnover thresholds provide a simple and objective mechanism that can be handled directly by the companies involved in a merger in order to determine if their transaction has a Community dimension, respondents saw no need to change the turnover threshold system. However, many respondents underlined the importance of efficient referral mechanisms in order to be able to request the re-allocation of cases where appropriate.[11]

29. As regards the level of the thresholds in Article 1, whilst most respondents considered the thresholds appropriate, some suggested lowering them. A few respondents instead suggested that the thresholds should be raised to adjust for inflation.

30. Regarding the criteria in Article 1(3), a few respondents considered that this threshold is somewhat complex and captures few cases. Therefore, they question whether it is still necessary in its present form. In the same vein, some respondents went further and proposed to abolish Article 1(3) altogether while others welcomed a reopening of the debate regarding the introduction of a simpler "3+" rule. Various options of a "3+" rule have been proposed. Such suggestions could mean that a notification to the Commission would be compulsory or voluntary where a concentration is notifiable in at least three Member States, with more or less far-reaching Member States' powers to retain cases.

31. Several law firms and commercial entities pointed out that from their perspective the pre-notification referral mechanism under Article 4(5)[12] would obviate the need for the turnover threshold under Article 1(3).

32. Concerning particular rules for specific sectors, some respondents mentioned one or several possible sectors where this could be beneficial, including banking and financial services, investment funds, insurance, reinsurance, travel, airlines, energy, and defence. A few respondents merely proposed clarifications of the rules while a few respondents saw no need for sector-specific rules and advised against, arguing that such rules would make the thresholds too complicated.

33. Finally, most respondents consider that the current regime imposes excessive notification requirements with regard to JVs with limited or no activities and therefore little or no effect within the EU.[13] The review of such JVs is considered to be unjustified due to their limited nexus within the EU or somewhat disproportionate to their potential effects. Various proposals have been made as to how to address this perceived problem, ranging from explicitly excluding such JVs from review under the EC Merger Regulation to at least further simplifying the review process as regards scope, timing and stand-still obligation.

2.4. Commission assessment of the thresholds under Article 1(2)

34. Article 1(2) constitutes the legal basis for the great majority of all notifications under the EC Merger Regulation and has in the Commission's view operated in the way intended. This conclusion is generally shared by the NCAs and stakeholders alike. Furthermore, as will be discussed in more detail in the following sections, the limited use of referral mechanisms in the direction of the Member States supports this conclusion. In fact, these mechanisms provide for the possibility to refer for review by the NCAs concentrations which significantly affect competition in a market within a Member State, which presents all the characteristics of a distinct market.[14] The limited use of these mechanisms indicates that there are few concentrations where referral is deemed necessary. [15]

35. However, Article 1(2) does not catch a significant number of cases, which, in spite of their cross-border impact, are still dealt with by the Member States NCAs. This is particularly true in some industries where transactions involving companies with limited turnover may nevertheless affect the Common Market or a significant part of it. In fact, this was acknowledged already in the reform process leading up to the adoption of the additional thresholds under Article 1(3).

2.5. Commission assessment of the thresholds under Article 1(3)

36. The objectives of the adoption of Article 1(3) were first to address the problem that a significant number of cases failed to meet the turnover requirements of Article 1(2) and which therefore had to be notified in several Member States. Secondly, many such concentrations had a significant cross-border impact but did not benefit from the "one-stop-shop" principle and therefore, the EC Merger Regulation had not fully succeeded in creating a level playing field and the application of coherent rules for this category of cases. A discussion follows below as to what extent these objectives have been achieved by first examining cases that fell within this threshold and then those that fell outside Community jurisdiction.

2.5.1. Cases falling under Article 1(3)

37. In recent years, the number of notifications received under Article 1(3) was in the order of 20 to 50 per year, representing 5-15% of the total number of all notifications.[16] By their very nature, these cases would in most cases have been subject to multiple notifications in view of the way the threshold in Article 1(3) is designed. Thus, the threshold in Article 1(3) has decreased the number of potential multiple filings and has thus significantly decreased unnecessary parallel reviews of transactions with a potential impact within or across several Member States.

38. With a view to assessing the cross-border effects and impact on competition of cases notified under Article 1(3), a statistical comparison with cases notified under Article 1(2) was carried out. First, it was compared whether cases notified under Article 1(3) are more likely to be of national character with respect to their geographic impact. Secondly, it was assessed whether cases notified under Articles 1(2) and 1(3) may present differences as to their likelihood of raising competition concerns.

39. First, as far as the geographic impact of cases under Article 1(3) is concerned, this element can be said to provide one indication as to which competition authority is well placed to assess any given merger and to take remedial action when necessary. One element among others to consider when assessing their geographic impact is to look at the geographic market(s) affected by these mergers. In this exercise it first has to be stressed that this is only an approximation to be used in the absence of other readily available indicators. Furthermore, the Commission often leaves the question of geographic definition open if the merger in question does not raise any competition concern under any conceivable alternative market definitions.

40. Nevertheless, it is instructive that in about a third of cases notified under Article 1(3) the proposed concentration clearly affected a relevant geographic market which was EU wide or wider than the EU (albeit the definition of the geographic scope was left open in most of these cases). More specifically, in 17 of 72 cases notified under Article 1(3) in 2007 and 2008 the affected geographic markets were EU wide or wider, and in 5 cases the geographic market was possibly world-wide.[17] A number of cases with national markets affected more than one national market.[18]

41. Consequently, based on the Commission's experience there are no indications that cases notified under Article 1(3) generally affect only a limited geographic area. On the contrary, these cases generally tend to affect markets broader than national or more than one national market.

42. Second, from a substantive viewpoint, for the years 2007 and 2008 it should be noted that competition concerns were found in four of the cases notified under Article 1(3). Three of these cases were cleared in the first phase by way of a decision under Article 6(2). One case was cleared by way of an Article 8(2) decision with commitments after a full second-phase investigation. Consequently, over the period in question, about 5 % of the transactions notified under Article 1(3) raised competition concerns. This is comparable to cases which were notified under Article 1(2), where competition concerns were also found in some 5 % of the cases.[19]

43. In conclusion, based on the available information, Article 1(3) has significantly contributed to a proper allocation of cases which are better dealt with at the European level. This is first due to the fact that it avoids multiple filings in a large number of cases which had a potential impact within or across several Member States. In addition, it appears that many mergers notified under Article 1(3) affect markets that are wider than national, which makes it even more likely that they have a Community dimension. Statistics also show that cases notified under Article 1(3) are as likely to raise competition concerns as those notified under Article 1(2).

2.5.2. Cases falling outside the scope of the EC Merger Regulation

44. As noted, one important aspect of analysing the operation of the turnover thresholds is to analyse cases that remain outside the scope of the EC Merger Regulation. The following section will examine the cases which are still notified in more than one Member State.

2.5.2.1. General statistics on multiple filings

45. NCAs were asked to indicate how many of the concentrations which were reviewed under their relevant national merger control laws during the year 2007 were also reviewed in at least one other EU jurisdiction. Information received from the NCAs shows that at least 241 transactions were reviewed by more than one NCA.[20] Filings were made in three or more Member States with regard to 102 (42%) of these transactions whilst the remaining transactions were reviewed in two Member States. The exact breakdown is shown in the chart below.

Chart 1: Breakdown of multiple filing transactions by the number of Member States

46. When comparing the numbers of multiple filings to the total number of cases reviewed by NCAs it appears that only 5% of all cases were reviewed by more than one NCA.[21]

2.5.2.2. Geographic scope of multiple filings

47. As regards the geographic scope of multiple filing cases, the following statistics (based on data provided by the NCAs) are indicative only, as the geographic scope of markets was often not reported or was left undefined. Of the 102 identified transactions reviewed by three or more NCAs, as many as 54 transactions (53%) involved markets which were wider than national or European-wide markets and 22 transactions (22%) involved worldwide markets.[22] By contrast, only 26 transactions were limited in their geographic scope to national markets (25%).

2.5.2.3. Substantive issues

48. The NCAs reported few competition problems with regard to multiple filing transactions. Indeed, of the 241 transactions (which gave rise to a total of 663 national cases) 10 transactions gave rise to competition concerns:

· One transaction was prohibited in one Member State after an in-depth investigation (a case reviewed by three NCAs);

· Three transactions led to a clearance conditional on remedies after phase 1 investigations (two of these cases were reviewed by three NCAs and one reviewed by two NCAs);

· Two transactions were abandoned;

· Four cases underwent an in-depth investigation leading to a clearance decision.

49. Of the in-depth cases, one involved five NCAs, one involved four NCAs, and the other two involved three NCAs. Hence, overall six out of the 102 transactions involving the review by three or more NCAs seemed to have presented competition concerns.

2.5.2.4. Views expressed by stakeholders regarding multiple filings

50. In the public consultation, interested parties were asked to indicate any concerns with respect to multiple filings. Many respondents pointed out that the issue of multiple filings must be assessed against the background of diverging jurisdictional, procedural and sometimes substantive rules in different Member States. In their view these divergences cause significant additional legal uncertainty, cost and delay when multiple filings are required. Some respondents also consider that there is not always a harmonious coexistence of national rules and EC rules. They would therefore welcome further measures to reduce the number of multiple filings and, to the very least, further initiatives by the Commission to foster harmonisation or further "soft law convergence" of national merger control laws to alleviate the negative consequences of parallel proceedings. Some pointed to the successful initiatives towards further convergence in the area of the application of Article 81 and 82 which resulted in the adoption of Regulation 1/2003 and the Commission's leniency model program as good role models.[23]

2.5.2.5. Commission assessment of multiple filings

51. While NCAs may be the "more appropriately" placed authorities to assess individual national markets, this is not necessarily the case where multiple filings are required. In fact, cases where the markets are national in scope may nevertheless have a Community relevance in view of the fact that the Commission may be well placed to make a comprehensive assessment of competition problems within several markets and, where necessary, take remedial action. Also, where the geographic scope of affected markets is wider than national, the likelihood of a case having a Community relevance is even greater.

52. In the year 2007, there were 241 concentrations that were reviewed under the competition laws of more than one Member State. 102 of these concentrations were reviewed by three or more NCAs (giving rise to about 360 parallel proceedings). The number of multiple filings clearly exceeded the number of cases notified to the Commission under Article 1(3) during the same period (i.e. 49 cases). This begs the question whether some of these transactions would have been better assessed exclusively by the Commission because of their potential competition impact within or across several Member States or simply because of the advantages of a "one-stop-shop". For the business community, the costs of engaging in diverging parallel proceedings (with their different procedural frameworks, different time schedules and multiple languages, and, at times, potentially diverging substantive rules) must be a consideration.

53. Indeed, the vast majority of these cases included at least one market that was wider than national and often markets which were EEA-wide or worldwide in geographic scope. If only 25% of the 102 transactions that were reviewed in three or more Member States were limited to national markets, then clearly a significant number of transactions with cross-border effects remain outside the scope of the EC Merger Regulation.

54. Furthermore, about 5-6% of transactions notified in more than one Member State presented competition problems (10 out of 241 concentrations, or 6 out of 102 concentrations). The need for to avoid parallel procedures and to take a common approach in enforcement is even more compelling in such cases, especially if remedies are required.[24]

55. In conclusion, in its current form, Article 1(3) has not entirely removed the need for multiple filings.

2.6. The application of the two-thirds rule

2.6.1. Introduction

56. Article 1 provides that transactions that fulfil the general turnover thresholds set out in paragraphs 2 and 3, are notifiable under the EC Merger Regulation unless each of at least two of the parties to the transaction achieve more than two thirds of their aggregate Community wide turnover within one and the same Member State. Below is an analysis of to what extent this provision has distinguished between cases of a Community relevance and those with a clear national nexus only.

2.6.2. General statistics

57. The number of cases that fell under the two-thirds rule for the period between 2001 and 2007 are provided in the table below.[25]

Table 2 Merger cases by Member State during the reference period 2001-2007[26]

Merger Cases Reviewed by NCAs

|| 2001 - 2005 || 2006 || 2007 || Total No. of Cases Reviewed || No. of 2/3 Rule Cases || 2/3 Rule Cases as % of Total

Austria || 1,500 || 274 || 341 || 2,115 || 2 || 0.1

Belgium || 285 || 15 || 19 || 319 || 1 || 0.3

Bulgaria*** || Na || Na || 79 || 79 || 0 || 0.0

Cyprus* || 14 || 25 || 29 || 68 || 0 || 0.0

Czech Republic**** || 104 || 61 || 60 || 225 || 0 || 0.0

Denmark || 70 || 6 || 13 || 89 || 0 || 0.0

Estonia* || 68 || 34 || 34 || 136 || 0 || 0.0

Finland || 406 || 39 || 35 || 480 || 5 || 1.0

France || 708 || 142 || 160 || 1,010 || 27 || 2.7

Germany || 6,250 || 1,829 || 2,240 || 10,319 || 17 || 0.2

Greece || 76 || 13 || 17 || 106 || 2 || 1.9

Hungary* || 351 || 43 || 46 || 440 || 0 || 0.0

Ireland || 212 || 98 || 72 || 382 || 0 || 0.0

Italy || 3,053 || 717 || 864 || 4,634 || 34 || 0.7

Latvia* || 22 || 27 || 78 || 127 || 0 || 0.0

Lithuania* || 97 || 61 || 78 || 236 || 0 || 0.0

Luxemburg***** || Na || Na || Na || Na || Na || Na

Malta* || 13 || 12 || 5 || 30 || 0 || 0.0

Netherland** || 300 || 135 || 108 || 543 || 11 || 2.0

Poland* || 574 || 265 || 263 || 1,102 || 2 || 0.2

Portugal || 325 || 67 || 91 || 483 || 0 || 0.0

Romania*** || 280 || 106 || 45 || 431 || 0 || 0.0

Slovak Republic* || 107 || 42 || 49 || 198 || 0 || 0.0

Slovenia* || 252 || 47 || 50 || 349 || 0 || 0.0

Spain || 464 || 132 || 127 || 723 || 14 || 1.9

Sweden || 385 || 113 || 110 || 608 || 4 || 0.7

United Kingdom || 1,000 || 155 || 116 || 1,271 || 7 || 0.6

Total || 16,916 || 4,458 || 5,129 || 26,503 || 126 || 0.5%

* 01.05.2004 – 31.12.2007 ** 01.01.2002 – 31.12.2007 *** year 2007 only **** number of cases in 2007 based on extrapolation of previous years *****no merger control regime

58. As can be seen from the above table, there were at least 126 cases that qualified under the two-thirds rule threshold during the reference period. These cases therefore represent a very small proportion (at least around 0.5%) of the total case load at the Member State level of about 26,500 cases. These statistics should be viewed with some caution. In fact, many Member States did not keep record of the number of two-thirds rule cases prior to 2004. Given the incomplete data available prior to 2004,[27] it is difficult to be precise about the exact number of cases falling into this category. If anything, the data underestimates the total number of two-thirds rule cases. For the same reason, it is difficult to draw any firm conclusions as to trends over time with respect to the number of two-thirds rule cases. Nevertheless, since 2005 more than 20 cases per annum have been reported. An overview of all two-thirds rule cases reported between 2001 and 2007 is provided in Annex 3.

Chart 2: Annual overview two-thirds rule cases per Member State

59. As can be seen from the above chart, the number of two-thirds rule cases varies significantly by year and by Member State. Nevertheless, these data clearly show that as a whole, and with few exceptions, the two-thirds rule is mainly applicable with regard to the larger Member States. In fact, over the six year period, France, Germany, Italy and Spain are the Member States with the largest number of such cases.[28] This is a result of the design of this threshold. It is generally unlikely that two of the parties to the transaction would meet the general thresholds provided for by Article 1 while still having two thirds of their turnover in a small Member State. As regards the economic sectors where this rule applied, the most important are financial services (33 %), followed by energy (10 %) and telecommunications (6 %).

60. Concerning the geographic scope of the markets analysed, as seen from the chart below, in most of the 126 cases the relevant market was defined as national or narrower. In only 12 cases (i.e. 10%), the geographic market was defined as wider than national or EEA-wide. Five of these cases involved mergers in the financial services sector and three concerned mergers in the energy sector. The other cases concerned mergers in various sectors such as e-commerce, the air-transport supporting services sector, chemicals and automotive.

Chart 3: Geographic scope of two-thirds rule cases

61. Out of total reported two-thirds rule cases, only 13 (around 10 %) are reported to have involved filings in one or more additional Member States.[29] Half of these cases related to the financial services sector while the remaining cases were evenly spread across different sectors.

2.6.3. Procedure and outcome

62. As regards procedures and outcome of the review, the table below shows that 17 cases (about 13%) were subject to in-depth investigation between 2001 and 2007. As regards regulatory intervention, one concentration was prohibited and 11 were conditionally cleared (about 10% of total cases).

Table 4: Two-thirds rule cases: Procedures and outcome

Investigation || Outcome

first phase || in-depth || clearance || clearance with remedies || prohibition || withdrawal || other

109 || 17 || 107 || 11 || 1 || 3 || 4

83% || 13% || 82% || 8% || 1% || 2% || 3%

2.6.4. Comments by the NCAs

63. Most NCAs express satisfaction with the way the two-thirds rule has operated. However, a few respondents consider that the two-thirds rule may not always appropriately allocate cases between the EU level and the Member State level. In particular, one respondent acknowledged that the current regime of case allocation could (in particular circumstances and in certain sectors) prevent the Commission from accomplishing its obligations in the construction of the single market. Therefore, it would not oppose the adoption of additional jurisdictional safeguards to ensure that the internal market is not compromised, in particular in relation to mergers within recently liberalised sectors (e.g. the energy sector), some of where favouring of national champions has been an issue.

2.6.5. Comments by the stakeholders

64. The majority of respondents did not express concerns about the two-thirds rule. A few respondents consider it to be a useful tool to single out transactions that do not have a Community relevance.[30]

65. Nevertheless, some respondents consider that as a result of increased market integration this provision is outdated. In fact, it is seen as capturing cases which, although having a focus in a particular Member State, have potentially important effects within the Common Market. For example in the energy sector (which they note is becoming increasingly integrated and liberalised) there could be an important risk of foreclosure of markets if two major energy providers in already highly concentrated markets are allowed to merge. In the view of some respondents, the Commission would therefore be better placed to review such cases. A few respondents also expressed the concern that, in some circumstances, national merger control laws have been applied in potential conflict with competition law objectives with regard to mergers of strategic importance that fell under this threshold.

66. Some respondents would therefore be in favour of abolishing this provision. Many of them pointed to the availability of referral mechanisms, which in their view provide a more suitable mechanism for adjusting the allocation of cases when it is clear that a case has a purely national nexus. Finally, a few respondents consider that the two-thirds provision serves its purpose but that it could be modified to allow for a better calibration in the selection of cases that do not have a Community relevance.[31]

2.6.6. Assessment of the operation of the two-thirds rule

67. Having regard to the small number of cases involving multiple filings and their likely impact based on geographic scope, one can conclude that, in most cases the two-thirds rule appears to have served as a reasonably effective proxy for identifying the "more appropriate" jurisdiction.

68. However, there is a small number of important merger cases having a potentially significant cross-border impact (even in some cases where the market was defined as national in scope) which, as a consequence of the application of the two-thirds rule were examined by the NCAs. In addition, the jurisdictional aspects of the two-thirds rule, i.e. the way it has allocated cases between the Community level and the Member State level, cannot be assessed in isolation from how the cases that fall under this threshold are liable to be handled in a substantive respect.

69. It is unavoidable that some of the transactions between large firms falling under the two-thirds rule are capable of having a significant impact on market structures and on competition beyond the confines of a single Member State. In fact, mergers involving national markets but which, due in particular to high concentration levels as well as entry barriers, may result in increased foreclosure effects, clearly have a cross-border impact. Cases with cross-border effects are of particular importance from a Community perspective if they concern markets which are in the process of Community-driven liberalisation or where intra-EU barriers are being eroded. The geographic scope of such markets may be in the process of evolving towards a dimension which is wider than national, or Community-wide, in scope. Furthermore, mergers giving rise to possible competition concerns in a series of national or regional markets or being subject to multiple filings may also be considered cross-border in their impact.

70. These considerations are well illustrated by some recent cases in the energy sector (which represents the second largest portion of two-thirds rule cases). In cases such as Eon/Ruhrgas,[32] Gas Natural/Endesa,[33] Gas Natural/Iberdrola[34] and a recent transaction involving around 10 electricity producers and distributors in Poland,[35] the competition structure of the whole national market was substantially affected. In these types of cases potential effects on cross-border trade cannot be excluded. These examples also indicate that the two-thirds rule has sometimes functioned in a way to allocate jurisdiction to the NCAs in cases of domestic energy mergers within the larger Member States. In fact, it appears somewhat paradoxical that in the same sector and over the same time period, similar operations (but taking place in other parts of the EU) did not fall under the two-thirds rule and were assessed by the Commission. Significant examples are the EDP/ENI/GDP,[36] EON/MOL,[37] DONG/Elsam/Energi E2,[38] and the GDF/Suez cases.[39]

71. It goes beyond the scope and purpose of the report to examine the merits of these cases or whether it would be necessary, appropriate or possible to take measures at Community level. In any case, for future reference it may be a useful exercise to analyse the need for and the possibilities of introducing more efficient and flexible mechanisms for the re-allocation of certain two-thirds rule cases than those currently provided by the EC Merger Regulation.

2.6.7. Some recent developments with regard to cases falling or potentially falling within the scope of the two-thirds rule

72. Some recent developments at the national level deserve particular attention. For instance, it appears that in the above-mentioned Polish energy case, the NCA found that the transaction would lead to dominance in several markets (both with regard to the supply and wholesale of electricity). However, for reasons notably of ensuring security of supply of energy, the transaction was eventually approved. While mostly involving national or narrower markets, the impact of such mergers would appear to have effects beyond the territory of that Member State as a result of maintained or reinforced entry barriers in the energy sector across national borders.

73. Similar considerations applied in the Lloyds TSB/HBOS-case,[40] where the OFT reviewed the transaction and recommended its referral to the UK Competition Commission in view of the potential competition concerns raised. This concentration appeared to have its main effects in the UK retail banking sector, but there may be a risk of foreclosure effects in the supply of retail banking services generally because of the very significant concentration level that resulted from the transaction along with the potential increase of entry barriers. However, the UK Secretary of State exercised statutory powers[41] to intervene and decided, on the basis of financial stability considerations, not to refer the concentration to the Competition Commission.

74. There have also been situations where the NCA may not have been in a position to carry out an effective review. In the CAI/Alitalia/AirOne-case, which concerned a proposed restructuring of Alitalia's and AirOne's air transportation activities, the Italian NCA was barred by decree from carrying out a review of the case under the normal procedure provided for by the relevant legislation. The only remedial powers left with the NCA were those of imposing behavioural commitments in case competition concern should arise.[42]

75. Finally, in some Member States, specific legislation introduced to deal with the financial crisis has excluded certain State rescue measures within the financial services industry from the scope of application of national merger regimes. In certain instances the applicability of antitrust law has also been limited. The following examples bear mention.

76. In Germany, national merger control is suspended for operations within the scope of the Financial Market Stabilisation Act[43] which covers financial institutions. However, this does not exclude merger control being applied to operations by the Federal states and by foreign states, as those measures do not fall under this Act.

77. Similar initiatives were reported in Ireland, under the Anglo Irish Bank Corporation Act.[44] Also in Portugal, national merger control has been rendered inapplicable on a temporary basis in respect of nationalisations of financial institutions, and onward sale by the State of the same undertakings is also exempt from the standstill obligation under national merger control law.[45]

78. It is desirable that, independently of which authority is the reviewing agency, merger control across the EU ensures the protection of undistorted competition.

2.7. Conclusion on the operation of the thresholds

79. In conclusion, it appears that the threshold criteria in Article 1(2) and 1(3), seen in conjunction with the various referral mechanisms, operate in a satisfactory way in allocating jurisdiction. In fact, based on the Commission's own experience and the views expressed by NCAs and stakeholders there appears to be a consensus that the right cases are generally being reviewed at the Community level. The low degree of referrals in the direction of the Member States also supports this conclusion.

80. However, the analysis of data on multiple filings provided by the NCAs indicates that in the year 2007, some 102 multiple filing cases had to be notified in three or more Member States. The analysis of the geographic scope of these cases indicates that a large majority of them include markets which are wider than national.

81. One can therefore conclude that a number of transactions with significant cross-border effects (and therefore having Community relevance) would appear to remain outside the scope of the EC Merger Regulation. As has been pointed out in numerous ways by the respondents to the public consultation, any perceived need to change or amend the current turnover thresholds must be assessed in the context of the corrective mechanisms provided for by the EC Merger Regulation. As will be discussed in Part II, in many stakeholders view, although the turnover thresholds do not always distinguish cases that have Community relevance from those that do not, this could be alleviated by the existence of efficient pre-notification referral mechanisms between the national level and the Community level.

82. The two-thirds rule has, in most cases appropriately distinguished between concentrations having Community relevance and those that do not. However, there are a small number of cases with potential cross-border effects in the Community. More generally, it is desirable that, independently of which authority is the reviewing agency, merger control across the EU ensures the protection of undistorted competition.

83. Finally, the majority of stakeholders have indicated that, generally, increased convergence of merger control rules at the national level and between the EU level and the national level of the like achieved in the antitrust field would be an important way to improve the effectiveness of the merger control system across the EU.

Part II - Referral Mechanisms

3. Pre-notification referrals

84. With the adoption of the revised EC Merger Regulation in 2004, a set of voluntary pre-notification referral mechanisms were introduced in order to "further improve the efficiency of the system for the control of concentrations within the Community."[46] The principles guiding the system where those that decisions taken with regard to the referral of cases should take due account "in particular which is the authority more appropriate for carrying out the investigation, the benefits inherent in a "one-stop-shop" system, and the importance of legal certainty with regard to jurisdiction."[47] In the following, the operation of the pre-notification referral mechanisms after five years of application will be examined considering these guiding principles.

3.1. Referrals under Article 4(4)

85. Article 4(4) of the EC Merger Regulation provides a mechanism allowing concentrations that are notifiable under the EC Merger Regulation to be referred to the Member States at the request of the parties if certain conditions are fulfilled. Namely, unless the Member State disagrees, the Commission, when it considers that the concentration may significantly affect competition in a market within a Member State which presents all the characteristics of a distinct market, may decide to refer the whole or part of the case to the competent authorities of that Member State with a view to the application of that State's national competition law. The application of this provision is examined in the following on the basis of quantitative and qualitative elements.

3.1.1. Statistics of a general nature

3.1.1.1. Cases referred – geographic and sectorial scope

86. The number of referrals on the basis of this provision is illustrated by the chart below.

Chart 4: Article 4(4) referrals per year (2004-2008)

87. The above chart serves to illustrate that between 2004 and 2008, 43 Article 4(4) referrals were requested of which one was refused and two were withdrawn. Apart from of one partial referral, in all the 40 cases the entire case was referred to one or exceptionally two Member States. The flow of referrals over the period has been volatile, with only two referrals in 2004 while reaching a peak in 2006 with 13 referrals. The major recipients of Article 4(4) referrals cases were the UK, followed by Germany and France. An overview of referrals by country is provided in the chart below.

Chart 5: Article 4(4) referrals per Member State (2004-2008)

88. With respect to the geographic scope, the overwhelming majority of referral cases involve markets that are clearly national in scope. In fact, between 2004 and 2007, all cases involved at least one or more local or national markets. Conversely, only three cases (or less than 10%) involved at least one market broader than national or EEA-wide. These statistics provide a good indication that from the point of view of geographic scope of the markets involved, the appropriate kind of cases are being referred to the Member States.[48] In fact, it is clear from these cases that their locus was essentially within individual Member States.

89. As regards the sectors involved, no particular sector can be singled out as being particularly prone to referral cases. There is a wide spectrum of industries where the parties have chosen this mechanism, notably in relation to consumer goods, food and drink and pharmaceuticals.

3.1.1.2. Procedure, outcome and review periods

90. Over the period between 2004 and 2007, about a third of the decisions were taken after an in-depth procedure and the remaining decisions where adopted in phase I. As illustrated by the chart below, only one case led to a prohibition decision, whereas about a third of the cases led to conditional clearances.

Chart 6: Outcome of Article 4(4) referral decisions (2004-2008)

91. Statistics with regard to the duration of review periods is set out in the chart below. Based on a study of cases between 2004 and 2007, the median review period for referral cases subject to first phase proceedings was 61 to 70 working days from the submission of the Form RS to the adoption of a decision. For in-depth cases, the equivalent time period was 101 to 110 days. These statistics do not take into account pre-notification discussions prior to submission of the Form RS. Many factors will influence the total length of the review period, for example the time it takes between receipt of the submission by the Member States and the moment when referral is decided upon as well as when a complete filing is submitted before the NCA.

Chart 7: Case duration of Article 4(4) referrals (2004-2007)

3.1.2. Assessment of the functioning of the referral system under Article 4(4)

92. The NCAs of the Member States and stake holders were invited to express their views generally on the functioning of Article 4(4) (see questionnaires in Annexes 1-2). Their answers and general comments are summarised in the following.

3.1.3. Views expressed by the NCAs

93. Among the NCAs, there appears to be a consensus that the referral system provided by Article 4(4) generally functions effectively as a means of re-allocating "original" jurisdiction from the Community level to the national level on the basis that a case is more appropriately dealt with in the national jurisdiction. The objection was however raised by one respondent that the conditions for when referral is available could be clarified by reference to their impact on any given market. No respondent rejected the proposition that the right kind of cases are being referred to the Member States in terms of their likely impact on competition and in terms of the likely geographic scope of any such impact.

94. Most NCAs consider that the current referral system under Article 4(4) is functioning as effectively as it could in a procedural respect. A few respondents however expressed the view that there is scope for shortening the deadlines at least as regards the Commission while one respondent would not oppose such shortening. Nevertheless, the general view is that the time periods attributed to the member States are necessary for an examination of the submission and an internal consultation within the competent competition agency and government bodies.

3.1.4. Views expressed by the stakeholders

95. Virtually all respondents consider that the introduction of a pre-notification referral system, both as regards referrals to and from the Commission, is a welcome mechanism that has considerably enhanced the flexibility of merger control within the Community.

96. Nevertheless, there are a number of issues which are cause for concern. According to some respondents, the wording of the condition that a referral to the Member States is available when a transaction is likely to "significantly affect competition" within one Member State provided for by Article 4(4) acts as a disincentive to making such a request. Notwithstanding the fact that the effect on competition must not be adverse as clarified in the referral notice, it may be perceived as somewhat "self incriminating" giving rise, therefore, to a presumption that a transaction is harmful to competition. It has been suggested that this may be a factor contributing to the limited flow of cases to the Member States compared to the opposite direction. Therefore, some would welcome that this part of the test is abolished or that at least a more neutral language is used. For example, some propose that it should be sufficient to establish that the concentration "has effects" in a distinct market within a Member State.

97. Many respondents would also welcome more guidance as regards the motives for either the Member States or the Commission accepting or refusing a referral. In fact, the set of indicative factors for when a referral is appropriate as set out in the referral notice are in many respondents' view not put into practice. Also, since the Member State's decision whether to accept or to refuse a referral are neither reasoned nor published there is a perceived lack of transparency which makes it difficult to predict whether a referral will take place or not. This uncertainty surrounding whether a referral will eventually be accepted is therefore a source of legal uncertainty.

98. As regards the procedure, most respondents expressed the view that the length of the process and the amount of information requested in the Form RS, are an important disincentive for the parties to request referrals. Many respondents consider it unfortunate and unjustified that it takes the same time to decide on a referral as it takes to decide on the substance in first phase case with the Commission. Therefore, it has been suggested that the parties often chose to remain with the Commission even though the concentration would be more appropriately reviewed at a national level. Thus virtually all respondents would welcome a shortening of the 15 working days available to the Member States and the 10 working days available to the Commission.

99. Furthermore, many respondents consider that the starting date of the 25 working days period within which a referral decision must be taken is unclear. In starts only from the moment when the Member States receive the referral request. However, there is no clearly defined timeframe within which the Commission must transfer the request to the Member States (the Commission must do so "without delay"). As a result, the overall timing of the review process is unpredictable. It has therefore been proposed that this provision be modified to specify the time limit within which the Commission must send the referral request to the Member States, or alternatively, that the time period should start running from the moment the Commission receives the Form RS.

100. An additional cause for concern relates to the scope of the information requested for the referral assessment. Virtually all respondents consider that the amount of information requested in the Form RS (according to some respondents, fully comparable to the volume of information requested in a full Form CO) is disproportionate for the purpose of the jurisdictional assessment. Various proposals have been presented in order to address this. Some respondents would be in favour of decreasing the amount of information requested in the Form RS. Others have proposed that the Form RS should be considered sufficient to comply with national notification requirements, in order to avoid losing time when converting it into a national filing.

101. It has been suggested that such measures would make referrals a more attractive option and that the principle of "more appropriate authority" would be better fulfilled.

3.2. Referrals under Article 4(5)

102. Article 4(5) of the EC Merger Regulation provides a voluntary mechanism in the hands of the parties which allows for concentrations which do not meet the thresholds under Article 1 and which are capable of being reviewed under the national competition laws of at least three Member States to be referred to the Commission unless any Member State competent to examine the concentration under its national competition law expresses its disagreement. In the absence of such disagreement the concentration is deemed to have a Community relevance and is thus referred to the Commission. The application of this provision is examined in the following on the basis of quantitative and qualitative elements.

3.2.1. Statistics of a general nature

3.2.1.1. Cases referred – geographic and sectorial scope

103. The number of referrals made on the basis of this provision is illustrated by the chart below.

Chart 8: Article 4(5) referrals per year (2004-2008)

104. The chart below serves to illustrate that between 2004 and 2008, 160 Article 4(5) referrals were requested of which 151 were granted, five were withdrawn and four were refused. The trend over the reference period has also been towards the increasing use of this mechanism in line with increased merger activity in general: from only 24 referrals in 2005 to 39 in 2006 and 50 in 2007. However, there has been an important decrease in 2008 with only 22 referrals (again in line with the general decrease of merger activity). Overall, Article 4(5) cases represented almost 10% of the Commission's total merger case load over the reference period.

Chart 9: Article 4(5) referrals: Notification requirements per Member State (2004- 2008)

105. As can be seen from the figure above, the countries which is the largest source of referrals under Article 4(5) is Germany which between 2004 and 2008 was among the referring jurisdictions in 94% of the cases followed by Austria (66%) and Italy (51%). As regards the number of jurisdictions in which the thresholds were met, the median transaction was notifiable in five countries. There is however a large variation between transactions. Notification was required in five Member States in 25% of cases and in 10 or more Member States in 10% of the cases as illustrated by the below chart.

Chart 10: Article 4(5) referrals: Notification requirements per transaction (2004-2008)

106. As noted, only four referrals were refused during the reference period. The significance of the low number of refusals should be treated with some caution. In fact, it may be the case that the parties to a transaction whose centre of gravity is in a certain Member State may choose not to use the Article 4(5) route unless they are sure that the competent authorities of that Member State would not oppose the referral. Also, anecdotal evidence suggests that there are cases were the Member States manifested their disapproval on an informal basis in pre-notification discussions. Therefore, it is likely that the total number of effective refusals exceeds those arising formally under Article 4(5). The precise extent of this practice is unknown.

107. As regards the geographic scope, the overwhelming majority of referral cases involve markets which are broader than national. In 2007, 30 cases involved markets that were broader than national (i.e. possibly EEA-wide or Global). Conversely, only 4% of the cases involved markets that are national or narrower in scope (the remaining cases being national or broader in scope). These statistics provide a good indication that from the point of view of the geographic scope of markets involved, the appropriate kind of cases have been referred to the Commission.[49]

108. As regards sectors involved, no particular economic sector can be singled out as being particularly prone to referral cases. There is a wide spectrum of industries where the parties have often chosen this mechanism most notably in area such as telecommunications, chemicals, consumer electronics, financial services and packaging.

3.2.1.2. Procedure, review periods and outcome

109. Based on available statistics with regard to the 151 cases referred to the Commission under Article 4(5) between 2004 and 2008, around 7% were subject to an in-depth assessment, about 50% were reviewed under a first phase procedure and a third qualified for the simplified procedure (the remaining cases were withdrawn). While a large number of cases are simplified under Article 4(5) it is still lower than for the Commission case load as a whole (which is about 60% of cases). Furthermore, the proportion of in-depth cases is much higher for cases referred under 4(5) compared to the Commission caseload as a whole where the corresponding number for the same period was about 3%. Out of 14 Article 8 decisions adopted in 2008, six were referred under Article 4(5). For 2007, the corresponding number was four out of a total of nine decisions.

110. Indeed, among the most prominent examples of complex cases referred under Article 4(5) during 2008 were: Google/DoubleClick, Tomtom/TeleAtlas and IBM/Telelogic. These Phase II cases each involved high tech markets, most of which have not been assessed by the Commission before.[50] In these cases, extensive market investigations were conducted in in-depth proceedings leading to unconditional clearance.[51]

111. The chart below (which covers the period between 2004 and 2008) shows the outcome of cases referred under Article 4(5). Four percent of the cases led to conditional clearance decisions and almost 85% to unconditional clearance decisions (whether in Phase I or in Phase II). The remaining cases were withdrawn or were pending. So far no Article 4(5) case has led to a prohibition decision.

Chart 11: Outcome of Article 4(5) referrals (2004-2008)

112. As can be seen from the chart below the median review period for referral cases subject to first phase proceedings in 2007 was 46 to 60 working days between date of submission of the Form RS to issuance of the decision. For in-depth (i.e. Phase II) cases the equivalent time period was 81 to 100 days. These statistics do not take into account pre-notification discussions prior to submission of the Form RS.

Chart 12: Duration of Article 4(5) referral cases (2007)

3.2.2. Assessment of the functioning of the referral system under Article 4(5)

113. The Member State's competition authorities and stakeholders were invited to express their views on the functioning of Article 4(5) generally (see the questionnaires in Annexes 1-2). Their answers and their general comments are summarised in the following sections.

3.2.2.1. Views expressed by the NCAs

114. Among the NCAs of the Member States, there appears to be a consensus that the referral system provided by Article 4(5) is in general functioning effectively as a means of re-allocating jurisdiction from the national level to the Community level on the basis that a case is more appropriately dealt with by the Commission. Two NCAs however regretted that there are still a significant number of multiple filing cases despite the availability of this mechanism. Virtually all the respondents agreed that the right kind of cases are being referred to the Commission bearing in mind their likely impact on competition and the likely geographic scope involved.

115. As regards procedural aspects, most NCAs consider that the current referral system under Article 4(5) is functioning as effectively as it could. A few respondents expressed the view that there is scope for shortening the deadline of 15 working days in Article 4(5). However, the general view appears to be that such duration is necessary in order to carry out the thorough examination and internal consultation which, at times, also involves discussions with competent government bodies.

3.2.2.2. Views expressed by the stakeholders

116. Similar to the opinions expressed with regard to referrals under Article 4(4), virtually all respondents take issue with what they consider to be lengthy review periods and cumbersome information requirements for referrals under Article 4(5). Some respondents also consider that the scope of the information requested is even more disproportionate given that the test for when referral is possible is simply that the transaction is notifiable in at least three Member States. Thus, some of the information requested in the Form RS (for example with regard to the affected markets) appears to be of little relevance for establishing jurisdiction. Therefore, they conclude that the Form RS should be reduced. Only the minimum amount of information of a substantive nature should be required and should also be limited only to those Member States where a filing is required. At the very least, a "short form" RS should be introduced for cases which clearly do not raise competition issues and whose notification is therefore, more of an administrative matter.

117. Some respondents expressed concerns (apart from the general length of the formal procedure) that a practice has arisen which entails what is referred to as a "double consultation". In other words, the Commission often engages the parties in pre-notification discussions regarding the completeness and scope of both the Form RS and the Form CO with the risk of duplication and an unnecessarily long time lag.

118. Many respondents also consider that the discretionary refusal powers in the hands of the Member States are not exercised in a clear way. In fact, since the Member State's decision whether to accept or refuse a referral is neither reasoned nor published, there is a lack of transparency which makes it difficult to predict whether a referral will take place. The uncertainty surrounding whether or not a referral will eventually be accepted is therefore a source of legal uncertainty. Together with the timing issue, this unpredictable risk is an additional disincentive to refer. Although the possibility of refusal is not high for most cases, the significant amount of time that would be lost if indeed it were to be exercised dissuades the parties from using this mechanism.

119. A recurrent view is therefore that, having regard to these factors, the parties often prefer to file in multiple jurisdictions unless a very significant number of filings are required. A few respondents even provided examples where as much as eight or even ten national filings were the preferred option.

120. Some respondents therefore proposed that the existence of or at least the scope of the Member States' refusal right should be revisited. Some consider that due to the small number of refusal rights exercised during the reference period, one could question whether the refusal process is indeed warranted. Some respondents would welcome the complete abolition of the referral system and introduce an outright "3+" jurisdictional threshold providing for a mandatory or voluntary notification when a transaction is notifiable in at least three Member States (with or without a Member State right to have a case referred back to it). Various intermediate suggestions have also been made by a few respondents. For example, a system whereby referral would be automatically available unless one or a majority of Member States oppose it or making the referral automatic in case the transaction is reviewable in five or more Member States.

121. A few respondents also pointed out that the diverging national merger control regimes is a source of legal uncertainty in the context of the referral process. In particular, it is argued that the very low notification thresholds in some Member States - which catch a large number of transactions - give these countries a disproportionate influence on the referral process. These respondents argue that, as a result, the relative influence of some Member States on the referral process may not necessarily be a reflection of the effects of the transaction in their jurisdiction. A solution proposed to this problem would be to limit the refusal right not only to those Member States that are competent to review the case but also require that the transaction gives rise to affected markets in those Member States.

3.3. Conclusion on the operation of the pre-notification referral system

122. In conclusion, the available statistics, the Commission's own experience as well as the reactions from the NCAs and stakeholders clearly support the view that the referral mechanisms introduced in 2004 have considerably enhanced the efficiency and jurisdictional flexibility of merger control in the EU. They have substantially improved the allocation of cases between the Commission and the Member States taking into account the principles of "one-stop-shop" and "more appropriate authority". In fact, available information clearly supports the view that these mechanisms have allowed the appropriate authority to handle cases whilst also avoiding unnecessary parallel procedures and inconsistent enforcement efforts. In fact, it is estimated that the mechanism under Article 4(5) has allowed for the reduction of the number of proceedings to around 150 from around 970 parallel proceedings in the period between 2004 and 2008. Furthermore, the mechanism under Article 4(4) has allowed for the re-allocation of 40 cases from the Commission to the Member States over the same period. Referrals were refused only in four cases under Article 4(5) and in one case under Article 4(4).

123. Nevertheless, some problems have been highlighted, in particular with regard to the procedure. Stakeholders have expressed concerns with regard to the overall timing and cumbersomeness of the referral process. These factors have been identified as the main cause of the parties' decision not to request referral in a large number of cases.

124. In this regard and in order to quantify to what extent this mechanism is effectively used, it is necessary to measure the number of effective referrals against the total number of cases that meet the conditions under Articles 4(4) and 4(5). As regards referrals to the Member States, data with regard to concentrations which meet the conditions in Article 4(4) are not readily available. Concerning referrals to the Commission, as noted in part I, available data for 2007 indicate that there were about 102 transactions which were notifiable in at least three Member States. It can be estimated that these concentrations together required more than 360 parallel investigations by the NCAs in one year. Available data also suggest that a large number of these cases would be appropriate for referral. Among the 102 transactions which meet the three Member State notification test, the majority involve markets with a geographic scope that is broader than national and as many as 20% involved global markets.

125. While the geographic scope of the case is only one relevant factor amongst others for the referral assessment,[52] this is an indication that a large number of additional concentrations are appropriate candidates for referral to the Commission not only from the point of view of a "one-stop-shop" but also when considering the principle of the "more appropriate authority". This is particularly relevant for those cases which raise substantive competition issues. In fact, the negative consequences of duplication and the potential of a contradictory outcome in different Member States is particularly important in such cases. As noted in Part I, available data suggest that around 6% of the cases notifiable in at least three Member States gave rise to competition concerns. Against this background, one can conclude that there is further scope for a "one-stop-shop" review of cases that fulfil the three Member State condition.

126. As noted, data is not readily available as regards further potential use of the referral mechanism under 4(4). One cannot, however, exclude that there is further potential to also use this mechanism and therefore further scope for reinforcing the principle of the “more appropriate authority,” considering for example several stakeholders' concern that the criteria for referrals under this provision may in fact be a disincentive for referral. Indeed, it may be useful to further examine more generally what measures could be envisaged to ensure an improved case re-allocation to the Member States.

127. Against this background, the appropriateness of measures to improve the current pre-notification referral system would merit further examination. While such analysis goes beyond the scope of the report, a few preliminary remarks bear mention and should be considered for future reference.

128. In the context of assessing the need or possibilities for improvements of the system in order to further reduce multiple filings one could also envisage to examine to what extent any perceived problem linked to multiple filings could be partially addressed by Member States reviewing the applicable jurisdictional thresholds under their national laws[53] rather than by simply increasing the number of cases reviewed by the Commission.

129. Furthermore, it must be recalled that the Member States' refusal powers under article 4(5) have been rarely used whilst stakeholders have pointed to cumbersome, time consuming and therefore costly referral processes. Many stakeholders therefore consider, having regard to the experience they acquired over the past years, that one should re-examine the possibilities of shifting to a system of automatic notification under the EC Merger Regulation when the three Member State criterion is met (or other intermediary solutions) as was initially proposed in the process leading up to the current system. This would, in their view, significantly increase transparency while lowering the cost and time of the review.

130. As regards timing, available data confirm that more than twice as much time is needed for cases involving referrals compared to own jurisdiction cases. However, it may be difficult to shorten the time periods for the referral process provided for by the EC Merger Regulation as has been suggested by stakeholders. Virtually all of the NCAs of the Member States have indicated that the 15 working days mentioned under both Article 4(4) and 4(5) is necessary for their assessment. The same applies in the Commission’s view with regard to the 10 working days period within which the Commission must decide on referral under Article 4(4). It should also be recalled that the referral system is voluntary and the parties have the option of choosing the referral mechanism where suitable, taking into account the overall timing of the transaction and other factors specific to the case. In this respect, the reporting requirements and additional time needed for a referral process must be weighed against the additional benefits of achieving a "one-stop-shop" or of having the "more appropriate authority" reviewing any given case. As regards information requirements, the purpose of the data requested in the Form RS is to allow the Member States (and in case of Article 4(4), the Commission) to determine whether the referral should be made or not. Therefore, any efforts to reduce the scope of information requested in the Form RS must not undermine the NCAs and the Commission's ability to make such assessments.

131. Finally, the issue of legal uncertainty raised by a large number of respondents - essentially as regards the scope of and the exercise of a Member State power of refusal - must be assessed against the actual number of refusals in the past five years. Although the number of formal refusals (one under Article 4(4) and four under Article 4(5)) probably underestimates the total number of actual refusals, it still gives some indication that, overall, there is a low probability of refusal in the great majority of cases, at least for unproblematic cases involving notifications of an “administrative” nature. Also, for the more problematic cases, there is always the possibility of seeking informal guidance from the concerned Member State (s) at an early stage in the process. Furthermore, the refusal power is limited to the jurisdictions in which the transaction is reviewable. Therefore, any concern raised by stakeholders in relation to the lack of impact with regard to any given transaction in a particular Member State having refusal power is in essence a criticism of the design of the jurisdictional thresholds in that Member State as such rather than of the scope of the refusal power provided by the EC Merger Regulation.

4. Post-Notification Referrals

132. Whilst the EC Merger Regulation does not require the Commission to report on the operation of the post-notification referral mechanism, it is appropriate to also evaluate these mechanisms in order to have a comprehensive view of the operation of the thresholds and their corrective mechanisms generally.

4.1. Referrals under Article 22

4.1.1. Introduction

133. Article 22 is a referral provision of the EC Merger Regulation which is at the disposal of the Member States, post notification. The historical background to Article 22 is that it was intended to allow Member States without merger control legislation to refer a case to the Commission (the "Dutch clause"). The new version of Article 22 makes provision for the referral of cases where a concentration affects more than one Member State. It allows other Member States to join a referral request already made. It also describes the deadlines within which such referrals may be made or joined by Member States as well as acceded to by the Commission. A Member State joining a referral will now automatically relinquish its jurisdiction. The EC Merger Regulation does not distinguish between Member States that have jurisdiction to assess the transaction and those that do not. Article 22(2) states that any other Member State shall have the right to join the initial referral and, unlike Article 4(5) there is no minimum number of jurisdictions necessary in order to complete the referral process.[54] Finally, the scope of a referral is also different since the Commission can only take jurisdiction for the part of a transaction which was referred by one or several Member States, the non-referred parts remaining with other Member States.

134. In order for a Member State's request for referral to be admissible, two legal pre-conditions must be fulfilled. The concentration must: (i) affect trade between Member States; and (ii) it must threaten to significantly affect competition within the territory of the Member State(s) making the request.[55] This is in contrast to the procedure that the parties use to refer cases to the Commission under Article 4(5) where the case must be capable of being reviewed under the national competition laws of at least three Member States and where they must also inform the Commission by means of a reasoned submission before notifying in any competent Member State.[56] Article 22, is also used by Member States to curtail parallel procedures: when a Member State joins a referral, it thereby elects to no longer apply its own national competition laws to the concentration.

135. Since the EC Merger Regulation was recast with effect from 1 May 2004,[57] there have been only 14 referrals under the new Article 22. Of the 14 requests for referral, the following data was gathered:

Table 5: Article 22 Referrals 2004-2008

Total No. of Referral Requests || Ensuing Procedure || Relevant Markets || Geog. Scope of Markets || Referring Countri-es || Joining Countries || Cases with 3 or more Countries involved || Cases with less than 3 Countries involved

14 || Phase II (6); Phase I (5); Refused (2); Withdrawn (1); || Chemicals (8); Satellite Equipment (2); Energy (1); Paper (1); Explosives (1); Soft Drinks (1); || Greater than National (12); National (2); || UK (4); DE (3); E (2); FR (1); FI (1); PT (1); CY (1); S (1); || DE (4); FR (3); UK (2); S (2); PL (1); NO (1); AU (1); IT (1); PT (1); || 5 || 9

136. The fact that 6 of the 14 cases referred under Article 22 entered into Phase II proceedings clearly indicates that Article 22 is mainly used for cases which are critical and which have a Community relevance (most of the relevant geographic markets were greater than national in scope). One should bear in mind that of all the cases notified to the Commission, those entering Phase II would normally only account for only about 5% of the total. A corollary to this is the fact that no simplified cases have ever been referred to the Commission under this provision. This contrasts sharply with the number of standard notifications that are made directly to the Commission, of which, during the last five years, about 60% consistently qualify for treatment by the simplified procedure. There are more cases referred to the Commission under Article 22 involving less than three Member States than there are involving three Member States or more and this statistic serves to underline the complementary nature of Article 22 to Article 4(5).

4.1.2. Views expressed by the NCAs

137. The NCAs generally regard Article 22 as functioning effectively and that the appropriate cases are being referred to the Commission[58]. Table 5 above shows that since 1 May 2004 as many as eight different Member States have requested a referral and that nine have joined a referral request at least once. Several of the responding NCAs (who have been actively involved in at least one referral process) made the point that they felt that there was no scope for shortening the deadlines mentioned in Article 22.

138. On the issue of whether or not a Member State should be able to make or join a referral without having jurisdiction in the case, five thought that it should be allowed while nine thought that it should not. This does raise the question of whether or not a Member State should be able to refer a case when its jurisdiction is not triggered but where the activity of the parties does have an effect in that Member State.

139. All of the respondents who addressed the issue of whether or not "lone referrals"[59] by a single Member State should be permitted agreed that this practice should continue. On the subject of whether or not it should still be possible to refer an already implemented (or partially implemented) transaction under Article 22, a majority of respondents thought that it should be.

4.1.3. Views expressed by the stakeholders

140. The issue of referring with or without jurisdiction was mentioned often in the public consultation where some of the respondents proposed that a Member State without jurisdiction should not be able to refer or to join a referral under Article 22. Some respondents referred to what they described as the unpredictability (or the "legal uncertainty") of the Article 22 procedure and others questioned the need for it altogether, citing in support of their argument, the greater number of Article 4(5) referrals compared to those under Article 22. However, such suggestions must make the assumption that the scope, objectives and function of both provisions are identical, which is clearly not the case. Firstly, Article 4(5) referrals are at the instigation of the parties, whereas Article 22 referrals are initiated by Member States: two completely different starting points. Secondly, as mentioned above, an Article 4(5) referral requires that a concentration be capable of being reviewed under the competition laws of at least three Member States. This is not a requirement of an Article 22 referral.

141. Respondents also pointed out that as all but one Member State now has a merger control regime, the original rationale for having an Article 22 has largely disappeared. There were repeated proposals for harmonising the procedural differences between Article 22 and Article 4(5) referrals with respect to the number of Member States where filing was necessary. Some suggested that, as with Article 4(5) referrals, the Commission should only be able to accept Article 22 referrals when they are notifiable in three or more Member States. Whereas the present arrangement may give the Member States under Article 22 a broader discretion when referring to the Commission than the parties enjoy when referring under Article 4(5),[60] the outcome of the questionnaire sent to NCAs clearly values the need to be able to refer cases which have only been notified in one Member State but which also have a Community relevance. Some respondents also raised the point that a case with cross-border characteristics which is notified to Member States might not be able to benefit from a cross-border remedies package. Nor indeed would there be the essential central influence necessary to obtain and collate from all jurisdictions the required market information upon which to make a proper assessment of the effects of the transaction.

142. But by far the most popular Article 22 topic raised was the difficulty that notifying parties have with the length of time a referral can take.[61] There is a trend of opinion that considers that the aggregate of all the time periods for assessment in Article 22 (added to another likely six weeks devoted to pre-notification discussions and the preparation of a Form CO) delays the implementation of a transaction for an unduly long period of time. And delays also mean increased costs for business. Therefore, the public consultations responses contain suggestions for reducing all assessment periods. This is clearly at odds with the position expressed by NCAs who feel that there is no scope for shortening deadlines (see above).

4.1.4. Conclusion on the operation of the referral mechanism under Article 22

143. Clearly Article 22 is used by Member States where cases are complex and not simplified. Even though the original reason for the existence of Article 22 has become almost obsolete,[62] it clearly serves a purpose where a Member State, after a period of assessment of a transaction, forms the opinion that a case would be better assessed by the Commission. This may be based upon factors such as the nature of the relevant markets - which may turn out to have a Community relevance and consequently require a corresponding market investigation - as well as the possibility of an appropriate cross-border remedies package which the Commission would be better placed to negotiate.

144. On the matter of whether or not a Member State should be able to make a referral request without having jurisdiction in the case, there are two issues deserving mention. Firstly, Article 22(1) of the EC Merger Regulation clearly states that in order to be able to refer a case, the concentration must threaten to "significantly affect competition within the territory of the Member State making the request."[63] The requirement here is unambiguous: there should be some significant effect on competition within the Member State making the referral. And this brings us to the second issue: it is possible that a Member State may still have cause to refer a case which has a significant effect within its borders but which was not caught by its own jurisdictional thresholds. Under such circumstances, a request for referral would not be automatically excluded by the EC Merger Regulation.

145. When a referral is joined, no distinction is made between Member States who have and who do not have jurisdiction. Joined referrals under Article 22 also reduce parallel procedures in that the jurisdiction of joining Member States is surrendered. Equally, with respect to lone referrals, the EC Merger Regulation is silent on the issue of whether or not a referral must be joined.

146. On balance, although the original purpose of this referral process has been overtaken by events, the benefits of being able to re-allocate to a more appropriate jurisdiction are significant and this mechanism continues to serve an important purpose.

4.2. Referrals under Article 9

4.2.1. Introduction

147. Article 9 of the EC Merger Regulation provides a mechanism for referring cases to Member States (which have already been notified to the Commission) in circumstances where it is felt that the Member State is better positioned to carry out the investigation.[64] A referral may be made of the whole case or of portions of it, depending on the effect of the concentration in the relevant markets. A Member State may request (at its own initiative or after an invitation to do so by the Commission) that a case be referred to it in either of the following circumstances: (i) the concentration must "threaten to affect significantly competition in a market" and the market in question must be within the requesting Member State and "present all the characteristics of a distinct market",[65] or (ii) the concentration must "affect competition in a market" and the market in question must be within the requesting Member State and "present all the characteristics of a distinct market" and "does not constitute a substantial part of the common market".[66] Sometimes both circumstances are argued.

Table 6: Article 9 Referrals 2004-2008

Country || No. of Referral Requests || Comments

Germany || 8 || 1 request not renewed; 1 notification withdrawn

United Kingdom || 4 || 1 withdrawn

Poland || 3 || 2 withdrawn

Italy || 2 ||

Spain || 2 || 1 withdrawn

Bulgaria || 1 || 1 request rejected

Ireland || 1 ||

Czech Republic || 1 ||

Belgium || 1 || 1 withdrawn

France || 1 ||

Slovakia || 1 ||

|| Total 25 ||

148. The table above shows that between 2004 and 2008, there were a total of 25 Article 9 referral requests by Member states of which six were withdrawn and one not renewed following the opening of Phase II proceedings. In only one case was a referral rejected by the Commission. In ten cases, the new article 9(2)(b) was argued.[67] Requests were made for 13 full and 12 partial referrals.

149. The assortment of relevant product markets was diverse with 14 different relevant product markets concerned ranging from scrap metal to casinos.[68] The Member States most active in requesting referrals were Germany and the UK.

4.2.2. Views expressed by the NCAs

150. The NCAs generally regard Article 9 as functioning effectively and that original jurisdiction is being re-allocated from the European Community to the appropriate Member States. Two NCAs expressed reservations about the length of time it takes and one proposed a reduction in the assessment periods. However this is a minority view and the greater trend of opinion is that there is no scope for shortening assessment periods. It is also the opinion generally of the NCAs that the appropriate kind of cases are being referred to Member States.

151. Statistically, there has been a small reduction in the number of Article 9 referrals since the introduction of Article 4(4). The average of about eight per year in the five years preceding the new EC Merger Regulation has gone down to roughly five per year since then. However, the clear view of the NCAs is that this trend is not because these two provisions are mutually exclusive: they are viewed as two complementary instruments and in many cases Article 9 is regarded as a safeguard (or even a "corrective" mechanism) for appropriately re-allocating jurisdiction.

4.2.3. Views expressed by the stakeholders

152. On balance the response to the public consultation indicates that the Article 9 referral mechanism is a functional vehicle for re-allocating jurisdiction to a Member State. However, there are many instances where shortcomings are highlighted. The most prevalent of these concerns the time a referral request can take and the ensuing disruption it can have on the transaction's timetable. Clearly, from the point of view of the notifying parties, an Article 9 referral is not part of their objective as otherwise, they would have already used the Article 4(4) provision. And this is where the debate centres: between the advantage of a "one-stop-shop" that a central filing provides and the principle of assessment by the "more appropriate authority" that underpins a referral to a Member State. Regardless of the inconvenience of the re-allocation of a case to another jurisdiction (including the need to re-notify under the national laws of that Member State) there are many responses which describe the Article 9 assessment periods as too long. This, allied to the legal uncertainty resulting from a change of jurisdiction, the lack of precision in paragraphs 9(6)[69] and 9(8),[70] and the resulting extra costs for the undertakings involved make an Article 9 referral protracted and unpredictable in the eyes of the parties.

153. There are also some suggestions from the public consultation for mitigating the effects of a referral request, such as: (i) giving the parties a right to be heard when such a request is submitted; (ii) adding more transparency to the process by providing access to key documents from the Commission's case file to the parties; (iii) allowing the parties to use the same Form CO to notify to the Member State concerned rather than having to re-assemble more market information in another form to notify in the Member State. There are also suggestions to outlaw partial referrals in an effort to curtail parallel proceedings. Another respondent opined that a more streamlined Article 4(4) (i.e. with respect to the information burden and the length of time it can take) would make Article 4(4) referrals more appealing and therefore ultimately reduce the number of Article 9 referrals. As discussed above, the NCAs differ slightly in their view on this point, regarding the two provisions as complementary rather than mutually exclusive.

4.2.4. Conclusion on the operation of the referral mechanism under Article 9

154. One may conclude therefore that, on balance, Article 9 is a useful tool underpinned by the principle of the "more appropriate authority". Nevertheless, the limited use of this referral mechanism indicates that in most situations the right kind of cases are being allocated to the Commission on the basis of the current thresholds. There are a significant number of stakeholders of the opinion that the referral process could be made more business friendly with regard to cutting down delays, the resulting costs, and the uncertainty of the outcome.

Part III – General Conclusion

155.