Opinion of the Economic and Social Committee on:

- the 'Communication from the Commission to the Council and to the European Parliament regarding the revision of the merger regulation`,

- the 'Proposal for a Council Regulation (EC) amending Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings`, and - the 'Proposal for a Council Regulation (EC) amending Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings - Articles 87 and 235` (97/C 56/13)

On 8 October 1996 the Council decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the above-mentioned communication and proposals.

The Economic and Social Committee decided to appoint Mr Bagliano as rapporteur-general for its opinion.

At its 339th plenary session (meeting of 31 October 1996), the Economic and Social Committee adopted the following Opinion by 70 votes to two with two abstentions.

1. Introduction

1.1. The Commission Communication concerns two proposals to amend Regulation 4064/89 of 21 December 1989:

a) the first proposal is pursuant to Article 1(3) of Regulation 4064/89, which provides for the review (by the end of 1993, subsequently extended to the end of 1996) of the turnover thresholds determining whether a merger has a 'Community dimension` and hence determining the field of application of the regulation itself;

b) the second proposal is based on Articles 235 and 87 of the Treaty of Rome, which empower the Commission and Council to adopt regulations or directives giving effect to competition principles. The proposal concerns other aspects of Regulation 4064 (delegation and cooperation with national authorities, joint ventures, and other procedural improvements).

1.2. The preliminary stage of the review of Regulation 4064 thus seems to have finally reached its conclusion. The Commission Communication follows the lengthy and extensive debate outlined in the Green Paper of 31 January 1996, on which the Committee adopted an Opinion on 10 July. This mammoth undertaking by the Commission deserves warm appreciation.

1.3. The task now is to assess the Commission's choices from the various options set out in the Green Paper, inter alia in the light of the Committee's 1996 Opinion and the two Opinions which it issued in 1994 and 1995 ().

2. Proposal amending Regulation 4064/89, pursuant to Article 1(3) of the Regulation

2.1. The Commission proposes lowering the thresholds for determining whether a merger has a Community dimension from ECU 5 billion to ECU 3 billion (world turnover) and from ECU 250 million to ECU 150 million (Community turnover).

The Committee endorses this.

The proposal steers the realistic, middle course recommended by the Committee (the lower thresholds originally proposed were 2 billion and 100 million respectively). The revised figures mean that a larger number of concentrations, being deemed to have 'significant cross-border effects`, will be defined as having a 'Community dimension` and will therefore be covered by the Regulation. They will thus come under the Community's sole jurisdiction, with all the attendant advantages of the 'one-stop shop`.

2.2. The 'two-thirds` rule is not being amended. Under this rule, the Regulation does not cover mergers where over two thirds of the turnover of the companies concerned is within a single Member State.

The Commission feels that if this rule were abolished (or the figure altered), 'cases with mainly national impact would likely be caught`.

The Committee Opinion on the Green Paper argued that 'the fact that a large part of turnover is derived in one country does not necessarily mean that a merger is not of Community significance`. However, the Committee acknowledges that national authorities are best placed to assess the impact of such mergers on market structure, so national competence can be justified under the subsidiarity principle.

Abolition of the two-thirds rule would also bring an increase in workload, possibly at the expense of efficacy and efficiency. The Committee will therefore not insist on this point, feeling that the prime considerations are the quality of the Commission's work and respect for subsidiarity.

2.2.1. The Commission also proposes that a Community dimension be deemed to exist when concentrations are subject to national filings in at least three Member States (multiple filings) and world turnover is between ECU 2 and 3 billion and Community turnover between ECU 100 and 150 million (applying the two-thirds rule), albeit with a prior 'check` at national level.

In the Green Paper this was mooted as a possible alternative to a generalized reduction in the thresholds. It is now being proposed as an adjunct to this reduction, thereby further extending the scope of the Regulation.

2.2.2. The Commission proposes to establish a procedural mechanism for checking whether the national thresholds are exceeded (or other criteria met).

Member States would have two weeks to respond to the Commission's information on the notifications received, in order to confirm whether or not the thresholds have been met. The deadlines for Member States' replies and the closure of the first stage have therefore also been extended by two weeks.

The Committee has some reservations about this.

2.2.2.1. Firstly, a concentration which is subject to filings in several Member States might only have significant effects in one State. Under the subsidiarity principle, the national authority which is most closely involved should be able to assess and check the most effectively. The mere existence of several filings is not enough to determine Community competence, and this is precisely why the Commission envisages a national checking mechanism.

Secondly, the Commission proposes a checking mechanism which makes Community competence not only conditional on national legislation but also on the interpretation given it by the national authorities in each individual case.

2.2.2.2. For these reasons, the Committee asks the Commission to consider adopting a different parameter from the number of notifications. It thinks that turnover (by at least two parties in each of two or more Member States affected by the concentration) of over a certain threshold could be an objective criterion that would not require any system of referral to national legislation.

In its Opinion on the Green Paper, the Committee called for 'rapid procedures, simple forms and shorter deadlines, so as to keep costs below those involved in notifications to several Member States`. The Commission's proposed mechanism for assessing Community competence for mergers that are subject to multiple notifications appears neither practical (because it is slower, bureaucratic and costly) nor legally proper (because it ignores the subsidiarity and proportionality principles).

2.2.3. As regards the number of Member States, the Committee Opinion on the Green Paper noted that 'there are no reasons for limiting the definition of significant cross-border effects and thus the concept of "Community dimension" to cases involving a minimum of three Member States`. Although the Commission acknowledges that 'a transaction coming within the jurisdiction of two national systems is, generally speaking, likely to have cross-border elements`, it feels that 'bilateral coordination between the national authorities concerned should alleviate to a large extent the complexities of multiple notification`. The Committee does not find this a cogent justification. It is not so much a matter of coordination as of 'contributing to the creation of a level playing field across the Community`, as the fourth recital of the proposal states. The recital also recognizes that 'multiple notification of the same transaction increases legal uncertainty (...) and may lead to conflicting assessments`.

Hence it is not a question of coordination between national administrations, but rather of ensuring the benefits of the one-stop shop.

3. Proposal amending Regulation 4064, based on Articles 87 and 235 of the Treaty of Rome

3.1. The second proposal focuses on joint ventures and calculation of the turnover of credit and financial institutions. It also makes some procedural improvements, including delegation and cooperation with national authorities and commitments made in the first stage.

3.1.1. Joint ventures. The Commission proposes to extend the definition of 'concentration` (Article 3 of Regulation 4064) to cover all full-function joint ventures, including those of a cooperative nature (hitherto excluded). The latter would thus also enjoy the substantive and procedural benefits of the Regulation. However, where a joint venture gives rise to coordination of competitive behaviour between undertakings which remain independent, or between them and the joint venture, the Commission may (again under Regulation 4064) apply the criteria of Article 85 (1) and (3) of the Treaty in order to determine whether the operation is compatible with the common market.

3.1.2. The Committee has serious doubts about applying the evaluation criteria of both Article 2 of Regulation 4064 and Treaty Article 85 (1) and (3), as they are extremely different. This mixture of criteria and aims does nothing to improve legal clarity and certainty.

Mindful of the complexity and urgency of the problem, the Committee has already suggested a procedural solution (an ad hoc Regulation).

3.1.3. In any case, the approach suggested by the Commission does not resolve the procedural problems for all joint ventures of a cooperative nature.

It is not just the full-function joint ventures, mentioned by the Commission, which have an irreversible structural impact on undertakings and/or the market. Cooperative, full-function joint ventures do not perhaps account for the majority of structural joint ventures, and are not necessarily the most important. There are numerous examples in past editions of the annual report on competition policy of cases where Article 85(3) has been applied to joint ventures: non full-function, linked production, construction of new plant (large investment) for manufacturing a new product, sharing know-how, etc.

The Committee feels that an ad hoc regulation could best resolve the procedural problems of this broad category of structural, 'non full-function` joint ventures.

3.2. The Committee endorses the other proposed amendments, notably those concerning cooperation with the Member States, calculation of banking turnover, and commitments in the first stage, as being in keeping with its Opinion on the Green Paper.

However, the Committee cannot hide its concern at the Commission's declared intention 'to consider the possible charging of [...] registration fees. On the basis of some 200 notifications a year, potential revenue would be ECU 1 200 000 (assuming a charge of ECU 6 000 per notification)`. This is stated in the 'financial statement`, which is not, in fact, an official part of the proposal; the 'transparency` criterion, which ought to underpin the framing of legislation, thus goes unheeded.

4. Conclusions

The Economic and Social Committee

- recognizes the Commission's considerable efforts to propose ways of improving the implementation of the merger Regulation, which furthermore has hitherto operated very effectively;

- readily confirms its support for the lowering of the turnover thresholds to ECU 3 billion and ECU 150 million, but has serious doubts about the soundness of the proposed system for extending the scope of the Regulation to multiple filings;

- considers that the solution adopted for joint ventures does not resolve the problem of legal certainty and equal treatment for all cooperative joint ventures;

- endorses the various other alterations already put forward in the Green Paper.

Brussels, 31 October 1996.

The President of the Economic and Social Committee

Tom JENKINS

() ESC opinions (Rapporteur: Mr Petersen) in OJ No C 388, 31. 12. 1994 and OJ No C 18, 22. 1. 1996.