Opinion of the European Economic and Social Committee on the "Proposal for a Council Regulation on the control of concentrations between undertakings (the EC Merger Regulation)" (COM(2002) 711 final — 2002/0296 (CNS))
Date: 2003-09-24
Institutions: European Economic and Social Committee
Subjects: competition, competition law, competition policy, economic concentration, merger control

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Opinion of the European Economic and Social Committee on the ‘Proposal for a Council
Regulation on the control of concentrations between undertakings (the EC Merger Regulation)’

(COM(2002) 711 final — 2002/0296 (CNS))

(2004/C 10/10)

On 14 January 2003 the Council decided to consult the European Economic and Social Committee,
under Article 308 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for the Single Market, Production and Consumption, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 3 September 2003. The rapporteur was
Mrs Sánchez Miguel.

At its 402nd plenary session of 24 and 25 September 2003 (meeting of 24 September) the European
Economic and Social Committee adopted the following opinion by 102 votes to 27 with 16 abstentions.

1.

Introduction

accepted, as the difficulties being encountered were detracting
from the effectiveness of the regulation.

The proposal for a regulation submitted by the Com-
1.1.
mission sets out to recast in a single text Regulation (EEC)
No 4064/89, the amendments made by the Act of Accession
of Austria, Finland and Sweden and Regulation (EC) No 1310/
97 amending the original regulation. The aim of this new
proposal is, on the one hand, to make the legal texts more
readily understandable to all
those involved in company
mergers with a Community dimension, and on the other hand
to comply with the requirements of the regulation itself for a
the turnover thresholds used for establishing
revision of
whether a merger has a Community dimension.

The Green Paper on the review of the regulation (1)
1.2.
identified three areas in which amendments were required: the
operation of the turnover thresholds, the substantive test to be
applied by the Commission for the review of concentrations
and procedural issues. The EESC drew up an Opinion on the
Green Paper (2), setting out its views on each of the above
aspects.

Since the regulation came into force the Court of
1.3.
Justice has issued a number of judgments significantly affecting
the interpretation of the merger rules and the assignment of
competence to the Member States or the Commission; this has
made it necessary to extend the reform proposed in the Green
Paper in order to comply with the requirements set out in that
document.

The result will have to be assessed once the new
1.4.
regulation enters into force. It appears from the Commission’s
consultation of the institutions that the need for reform is

1.5.
It would appear essential for the new regulation to be
adopted before EU enlargement. The economic concentration
which is likely to occur in many of the applicant countries will
be facilitated by simplifying procedures and, above all, by
defining the turnover thresholds applicable to Community
mergers.

2. Content of the proposal

In general terms the proposal for a new regulation

2.1.
covers the following issues:

— jurisdictional issues

— substantive issues

— procedural issues

— other proposed amendments.

2.2.

Jurisdictional issues

2.2.1.
In this area the Commission proposal envisages the
establishment of a system of streamlined referrals aimed at
optimising the allocation of competence between the national
authorities and the Commission, so that:

— the criteria for referrals can be improved, with a closer

‘mirroring’ of the criteria for referral in both directions;

(1) Green Paper on the Review of Council Regulation (EEC) No 4064/

89 (COM(2001) 745 final).
(2) OJ C 241, 7.10.2002, p. 130.

— the applicability of Articles 9 and 22 at the pre-notifi-
cation stage can facilitate the right of initiative of the
notifying parties at this stage of the procedure;

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— exclusive jurisdiction can be conferred on the Com-
mission, if all the Member States concerned, or at least
three of them, agree to a case being referred under
Article 22;

— the Commission can apply for a case to be referred, under
Article 22. In this way a formal right of initiative can be
established.

In the discussion of the substantive aspects account
2.3.2.
has been taken of
the efficiency of merger control, by
stipulating in Article 2(1)(b) that account shall be taken of the
development of technical and economic progress provided
that it is to consumers’ advantage and does not form an
obstacle to competition.

2.4.

Procedural issues

2.2.2.
The substantive criteria, especially regarding referral,
are improved by deleting in Article 9(2)(a) the reference to
the Member States assessing whether or not the proposed
concentration threatens to create a dominant position and
replacing it with a request for referral on the basis that
competition would be significantly affected on a distinct
market within a given Member State. Articles 9 and 22 would
also apply during the previous phase of the notification, at the
request of the merging parties or when at least three Member
States were affected.

2.4.1.
In Article 4 (1) the reference to one week for the
prior notification of a concentration is dropped, but the
requirement for prior notification is clearly spelt out.

2.4.2. With regard to the suspension of the implementation
of concentrations until a final clearance decision has been
taken by the Commission, two automatic derogations are
provided for in respect of:

2.2.3.
The clarification and rationalisation of the procedural
rules for joint referrals, laying down deadlines for Member
States to request referral or lend their support to such a
request, will make it possible to adapt Commission procedures
in specific cases (1).

— acquisitions through the stock market;

— simplified procedure cases.

2.4.3.

Deadlines are stated in working days.

2.2.4.
The general definition of concentration in Article 3(3)
has been amended so as to explicitly include the criteria
according to which a concentration requires a change in
control and that this control has to take place on a lasting
basis. It is also proposed that multiple transactions or those
which are conditional on one another or closely connected be
deemed to constitute a single concentration.

2.3.

Substantive issues

2.3.1.
The substantive criteria on which Commission inter-
vention is based were debated in the Green Paper, especially
substantial lessening of competition. In order to improve legal
certainty, a new Article 2(2) is proposed clarifying the concept
of dominance, in accordance with the criteria laid down by the
Court of Justice (2), to cover suspected oligopolies (in the
absence of concerted practices) (3).

(1) Cases: Promatech/Sulzer Textil, decision of
24.7.2002 and GEES/Union, decision of
17.4.2002.

the Commission
the Commission

(2) Footnotes 17 and 18 (COM(2002) 711 final — 2002/0296

(CNS)).

(3) With regard to horizontal concentrations, a draft Commission
communication has been published in accordance with Regulation
(EEC) No 4064/89 (OJ C 331, 31.12.2002, p. 18), on which the
EESC is drawing up an opinion.

2.4.4.
The timetable is made more flexible in both Phases I
and II, as experience has shown that in some complex cases
time may be short. The following are proposed:

— Phase I: 35 working days if remedies are proposed;

— Phase II: optional extension of the deadline by 20 working
days and automatic extension by 15 working days.

2.4.5. With regard to the procedure following annulment
by the European Courts,
it is proposed that Article 10(5)
be clarified to take account of the new requirements for
concentrations.

2.4.6.
The enforcement provisions, both in relation to
procedure and to the sanctions provided, have been spelt out,
inter alia, as follows:

— as a general principle, the enforcement provisions will be

kept in line with antitrust rules;

— the ceilings for fines and periodic penalty payments

related to ‘fact-finding’ will be increased;

— the ceilings for periodic penalty payments related to the
enforcement of certain types of Commission decision will
also be increased;

— the Commission is empowered to request information

from private individuals.

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2.5. Other proposed amendments

2.5.1.
Report from the Commission to the Council on the
operation of the thresholds. The Commission is required to
report to the Council by 1 July 2007.

2.5.2.
for pre-notification referral
amended in accordance with the provisions of Article 1.

The deadlines

are

2.5.3. With regard to the Commission’s power to prohibit
a concentration after the event, Article 8(4) allows the
Commission to require the separation of assets brought
together, the cessation of joint control or any other action
that may be appropriate to restore conditions of effective
competition.

2.5.4.
The treatment of ancillary restraints is directly related
to that of concentrations, and it is intended that these should
be covered by the Commission’s clearance decision.

3. General comments

3.1.
The EESC welcomes the proposal for a new Com-
munity merger control regulation which, in accordance with
the principle of legislative simplification, recasts various legal
texts to facilitate their application in the single market (1). The
consultations carried out in connection with the Green Paper
have highlighted the need to seek flexible and comprehensible
rules, facilitating both the work of the Commission and that
of the authorities of the Member States but more especially the
use of the legal instrument by firms, preventing legal uncer-
tainty and damaging consequences for all merging parties.

3.2.
It should be pointed out that the case law laid down
by the Court of Justice during the period of validity of the
amended rules has been incorporated into the proposal for a
regulation. This gives the proposed regulation a practical slant,
as the cases studied, which had been brought by companies
before the Court of Justice, derived from interpretation prob-
lems arising from the lack of precision of certain articles of the
regulation with regard to (i) the allocation of competence
between the various authorities concerned and (ii) the criteria
used to establish the existence of an economic act falling
within the field of competence of the Commission.

(1) In addition to the legal texts already referred to the Commission
has published a broad range of interpretative notices in response
to the complexity of the texts, including the Commission Notice
on the concept of full-function joint ventures (OJ C 66, 2.3.1998),
the Commission Notice on the concept of concentration (OJ C 66,
2.3.1998), the Commission Notice on the concept of undertakings
concerned (OJ C 66, 2.3.1998) and the Commission Notice on
the calculation of turnover (OJ C 66, 2.3.1998) etc.

The EESC considers that reviews carried out under the
3.3.
merger control rules are necessarily complicated and are
increasingly being impeded by rapidly changing economic
conditions as a result of other aspects of globalisation. All
these circumstances make it necessary to develop economic
and productive structures guaranteeing greater competi-
tiveness of the Community economy.

economy,

the global

3.4. Merger control also has to be analysed against the
background of
required by
in order to take account of the constant
Article 1(3)(a),
and growing international competitive pressure on European
companies. The EESC would stress the importance of ensuring
that reviews of takeovers are based on a detailed analysis of
the global market, rather than being restricted to conditions in
Europe.

as

3.5.
In the light of this, the impact on competitiveness must
continue to be a central focus of reviews carried out in
connection with merger control. Competitiveness should be
assessed not only in terms of the European market but also, as
suggested in point 3.4, in an international perspective, with
greater account taken of world-level economic considerations.
One of the objectives of competition policy is to safeguard the
interests of consumers. The EESC is of course aware of the
great variety of economic and social issues raised by structural
change and is broadening its focus to include other market-
related subjects.

3.6.
One general point to which attention should be drawn
is the lack of complete consistency between the recitals and
the corresponding articles; some of the comments made on
the Green Paper and during the consultation of the economic
and social
interest groups and other players, have been
incorporated into the recitals but not into the operative part
of the regulation. One striking example of this is recitals 32
and 42, concerning the rights of workers of firms involved in
mergers; the text of the articles, however, makes no mention
of these rights, which are nonetheless enshrined in the Treaty
itself (2), in recognition of the fact that mergers often have
significant economic consequences in terms of employment at
the firms concerned. The Commission should carry out its
review with an eye to the fundamental objectives laid down in
Article 2 of the Treaty, including the objective of strengthening
economic and social cohesion (see also Article 158).

(2) Article 127(2) of the EC Treaty states that ‘The objective of a high
level of employment shall be taken into consideration in the
formulation and implementation of Community policies and
activities’.

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There are also discrepancies between the various
3.7.
language versions of the proposed texts; this question is highly
relevant to the correct application of the regulation, as each
individual language version constitutes the authentic text in
the Member State in question.

that a concentration has a
the entrepreneurs concerned,
Community dimension, the Member States should not be
given the power of veto and the concentration should be
examined at Community level only.

3.8.
In examining the proposed rules, we will follow the
same thematic approach used by the Commission to facilitate
comparison with the EESC’s Opinion on the Green Paper. At
all events, the recasting of the previous legal texts will provide
a more systematic overview of each of the subjects as well as
facilitating application, with the promise of better results.

3.9.
The jurisdictional issues have been the subject of a
wide-ranging debate in the proposals set out in the Green
Paper. The proposals relating to the concept of concentration,
the regulation of referral (although the question as to whether
a concentration should be deemed to have a Community
dimension when it affects two or more states, as proposed in
the Green Paper, perhaps needs further consideration) and
thus the allocation of competence between the Commission
and the Member States can all be considered reasonably
satisfactory. Two comments should, however, be made.

In order to determine whether a concentration
3.9.1.
involving one or more Member States, whose authorities
might be better placed to scrutinise the operation, should be
referred, the Green Paper proposed that in Article 9(2)(b) the
requirement that the concentration should ‘not constitute a
substantial part of the common market’ be replaced by a
requirement for proof that ‘the effects do not extend beyond
the Member State’s borders’. This change does not, however,
appear in the proposal. The EESC considers that it should be
incorporated, as it facilitates the more effective allocation of
competence between the Community and national authorities.

3.9.2.
The new Article 4(4) allows the notifying parties to
ask the Commission for referral to the national authorities
prior to notification. The question arises as to whether
the wording is appropriate to the desired objective, as the
Commission reserves the right not only of total but also of
partial referral of a matter to those authorities. In the event of
partial referral, the parties, wanting the matter to be examined
by a single authority, would find themselves in a situation
where it was being analysed by the two different bodies. The
EESC considers that the only provision made should be for
total referral to the national authorities by the Commission.
Similarly, if the Commission decides, following a request by

3.10.
The substantive issues concern the criteria on which
competition policy is based, particularly ‘dominant position’
and ‘substantial lessening of competition’, which have been
interpreted by the Court of Justice (1) so as to include areas
previously considered borderline as regards application of the
regulation, such as oligopolies. We therefore consider that the
new Article 2(2) fulfils its intended objective of clarification,
although the quantitative thresholds set out in Article 1
would exclude from Community review a large number of
concentrations which would nonetheless have clear economic
repercussions for the common market. At all events, when
analysing these substantive issues, account should be taken of
the arguments put forward in points 3.4 and 3.5 above.

3.10.1.
However, the EESC considers that, if the operative
part of the regulation is to be brought into line with the
recitals, the part of the regulation dealing with the evaluation
of concentrations should take account of the interests of
workers and the impact on employment, as EU workers’ right
to information and consultation cannot be ignored.

3.10.2.
At the same time, Articles 3(4) and 5(2) should be
brought into line. The first of these stipulates that when ‘two
or more transactions which are conditional on one another or
are so closely connected that their economic rationale justifies
their treatment as a single transaction shall be deemed (by the
Commission) to constitute one and the same concentration’.
The provisions of Article 5(2) relating to the calculation of
turnover thresholds should make reference to the above
provision.

The procedural

issues have undergone a radical
3.11.
revision. In fact, not only have the legal texts been recast but
they have also been corrected in order to adapt and simplify
the request and notification procedures.

3.11.1.
The proposal for a regulation has introduced certain
changes to the deadlines for referral to the national authorities
(Article 9(4) et seq.). Thus, the deadlines for resubmission have
been considerably extended to facilitate application, as these
could constitute an obstacle in the light of the considerable
time taken for each of the phases of the procedure.

(1) The ECJ clarified the definition of dominant position in Case T —

112/96 Gencor/Commission.

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3.11.2. Moreover, the deadline within which the parties are
required to request extension of the Phase II time limit, 15
working days following the beginning of the phase, is rather
rigid, given that the request has to be presented at a very early
stage of the procedure, at which time the parties probably
have no detailed knowledge of the objections which the
Commission might make to the notified operation. It should
also be made clear whether the 15 and 20-day deadlines can
run consecutively or whether the second deadline begins from
the time an extension decision is taken. In the former case, if
it is the Commission which takes a decision on extension, this
could mean a substantially longer timeframe.

3.12.
The other proposed amendments are generally satis-
factory, reflecting issues of major significance for competition
in the single market. There are, however, two issues which the
EESC considers should be the subject of revision:

First, ancillary restraints, where these are necessary,
3.12.1.
will be covered by Commission clearance, although it is not
obliged to make any express declaration on the subject. Under
this approach firms will be deprived of the legal certainty of a
specific declaration. The ancillary nature of the restraints might
then be questioned by the national authorities, thus, if these
authorities were to judge them independent restraints, obliging
the merging parties to provide proof of their legality in the
course of a national procedure.

3.12.1.1.
It would therefore be desirable, in line with the
case law of the Court of Justice (1), for the Commission to
continue to be obliged to make a specific declaration on the
ancillary nature of restraints identified as such by the parties.

If, however, this requirement is not retained,

it
3.12.2.
would be advisable, in order to ensure an acceptable level of
legal certainty for: (i) the burden of proof as to the non-
ancillary nature of the restraint to lie with the third-party
plaintiff (ii) the principles and guidelines published by the
Commission to be given force of law (2).

The provisions of Article 20 of Council Regulation
3.13.
(EC) No 1/2003 of 16 December 2002 have been incorporated
into Article 13 of the proposal for a regulation. Although the
Commission’s powers of
inspection must be broad and
undisputed, individual circumstances may differ, at least where
voluntary notification is concerned, so that some limitation of
these powers should be considered; they would, however,

(1) Judgment

T-251/00

Lagardère

v Canal

+/Commission

20.11.2002.

(2) Communication of 27.6.2001.

apply in cases involving suspected failure to notify when
required to do so or failure to comply with procedural
obligations, as well as in all cases where the Commission’s
action is directed against third parties separate from the
notifying companies.

3.14.
Article 23(1)(e) provides that the Commission may
impose administrative fees for submission of notifications,
which is unacceptable.

Lastly, the Committee feels that the Commission
3.15.
should take the opportunity of the new Regulation to give a
stronger legal basis to the various concepts and a more solid
operational basis to the explanatory guidelines for merger
assessment, which are contained in certain of its communi-
cations on this subject, particularly its December 2002 draft
Communication OJ C 331, by incorporating these points in
the definitions and procedural rules set out in the draft
Regulation.

4. Proposed amendments

The EESC, with a view to more effective application of the
regulation, and above all in order to ensure that the develop-
ment of the regulation is as beneficial as possible to all
parties concerned, proposes the following changes to the
Commission’s text:

4.1.
Recital 17: The second and third sentences (‘The
Commission should not be obliged ... compatible with the
common market.’) should be deleted, in view of our comments
in point 3.12.1.

4.2.

The Spanish text of Article 1(2)(b) should be amended.

4.3.

Article 2(1)(b) should read as follows:

‘(b)
the market position of the undertakings concerned
and their economic and financial power, the alternatives
available to suppliers and users, their access to supplies or
markets, any legal or other barriers to entry, supply and
demand trends for the relevant goods and services, the
interests of the intermediate and ultimate consumers,
employment trends in the economic sector and in the
areas in which the merging companies’ productive facilities
are located, and the development of technical and econ-
omic progress provided that it is to consumers’ advantage
and does not form an obstacle to competition.’

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In Article 3(6)(a) replace ‘financial

4.4.
‘investment firms’.

institutions’ by

4.5.

Add the following paragraph to Article 4(2):

‘Simultaneously with, or immediately following, notifi-
the notifying persons or
cation of
enterprises
the
employees of the enterprises involved in the concentration.’

shall also notify representatives of

the Commission,

In the final line of the first paragraph of Article 4(4)

4.6.
the words ‘or in part’ should be deleted.

In the first line of the third paragraph of Article 4(4)
4.7.
the words ‘unless the Member State concerned disagrees’
should be deleted.

The fourth paragraph of Article 4(5) should read as

4.8.
follows:

‘Where all the Member States concerned, or at least three
two such Member States, have requested the Commission
to examine the concentration, the concentration shall be
deemed to have a Community dimension and shall be
notified to the Commission in accordance with para-
graphs 1 and 2 of this Article.’

The penultimate paragraph of Article 4(5) should read

4.9.
as follows:

‘Where the Commission decides to examine the concen-
tration, it may request the submission of a notification
pursuant to paragraphs 1 and 2. The Member States or
States having made the request to the Commission affected
shall not apply their national legislation on competition to
the concentration.’

4.10.
follows:

The first paragraph of Article 5(2) should read as

or not constituted as legal entities, of one or more
undertakings, only the turnover relating to the parts which
are the subject of the concentration shall be taken into
account with regard to the seller or sellers; account shall,
however, be taken of the interdependence of, or links
between, other parts of the merging companies, in accord-
ance with Article 3(4), in aggregating their turnovers.’

4.11.

The title of Article 5(3)(a) should read:

‘Income from equity capital investments.’

4.12.
financial institutions’ with ‘investment companies’.

In Article 5(3)(a) replace the references to ‘other

4.13.
as follows:

The second paragraph of Article 6(1)(b) should read

‘A decision that a concentration is compatible with the
common market shall also cover the restraints directly
connected with, and necessary for, the concentration, as
indicated in the notification or the Commission decision.’

4.14.
follows:

The third paragraph of Article 8(2) should read as

‘A decision that a concentration is compatible with the
common market shall also cover the restraints directly
connected with, and necessary for, the concentration, as
indicated in the notification or the amendment thereto, or
in the Commission decision.’

4.15.

Article 9(2)(b) should read as follows:

‘(b)
a concentration affects competition on a market
within that Member State, which presents all the character-
istics of a distinct market and which does not constitute a
substantial part of the common market extend beyond the
frontiers of the Member State in question.’

‘2.
By way of derogation from paragraph 1, where the
concentration consists in the acquisition of parts, whether

4.16.
Article 9(4): In view of the arguments set out above,
it would be advisable to shorten the deadlines laid down here.

Brussels, 24 September 2003.

The President

of the European Economic and Social Committee

Roger BRIESCH

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APPENDIX

to the opinion of the European Economic and Social Committee

The following amendments, which obtained more than one quarter of the votes cast, were rejected during the
discussions:

Point 3.6

Delete.

Reason

The criticism in point 3.6 is unjustified. The balance struck in the Commission proposal is reasonable. It is quite
appropriate for the recitals to include self-evident remarks to the effect: (a) that the Regulation must be interpreted
and applied without prejudice to fundamental rights and principles and (b) that it does not detract from ‘the collective
rights of employees, as recognised in the undertakings concerned, notably with regard to any obligation to inform or
consult their recognised representatives under Community and national law’. Such remarks are unnecessary in the
text of the Regulation proper and, if anything, their inclusion could give rise to uncertainty as to the aims of the
Regulation.

Result of the voting

In favour: 48, against: 71, abstentions: 11.

Point 3.10

Replace with the following:

On the substantive side, the Commission proposes the retention of the dominance criterion. The Committee
‘3.10.
agrees that there should not be a transition to the “substantially less competition (SLC) test”. (1) However, the
definition introduced in Article 2(2) alters the content of the concept. Under the proposal, any undertaking which
can influence appreciably and sustainably the parameters of competition is deemed to be in a dominant position.
This seems to be a particularly vague and elastic definition. The Committee feels that it would lead to a significant
and unwarranted extension in the scope of control. It would also be a source of considerable uncertainty, with
potentially adverse consequences for structural change. It is obvious that predictability is vital in this regard.

3.10.1.
A lack of clarity in the concentration rules may have serious and undesirable deterrent effects; it is not just
acquisitions that are really harmful to the economy that are to be held back, but also business transactions that are
quite legitimate, beneficial and necessary. In the Committee’s view it is precisely this which must be avoided.
Therefore the Committee feels that the current definition of dominant position must be retained so that the system
remains stable and stays within reasonable limits. It can be noted that if the aim is specifically to extend the scope to
non-synergy oligopolies (which, it must be said, is an unlikely situation), this can be achieved by adding a provision
clarifying the scope.’

Reason

The original wording of the first sentence in 3.10 does not appear to be correct; as far as we are aware, the Court of
Justice has not interpreted the ‘substantially less competition’ test. In general: self-explanatory.

Result of the voting

In favour: 39, against: 86, abstentions: 9.

(1) See also the EESC opinion of 17 July 2002, point 3.2.13, OJ C 24, 7.10.2002.

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Point 3.10.1

Delete.

Reason

Employee rights to information and consultation are regulated by other provisions. It is up to the Commission to
decide how it obtains the information it needs to take a decision. In most cases assessments by, inter alia, workers’
organisations should be included in the grounds for the decision. It seems unnecessary to incorporate provisions on
this in the Regulation.

The impact on employment must never in itself be a reason for opposing a planned merger. The Regulation should
only be used to prevent concentrations that would clearly impede competition.

Result of the voting

In favour: 45, against: 84, abstentions: 11.

Point 4.3

Delete.

Reason

The impact on employment must never in itself be a reason for opposing a planned merger. The Regulation should
only be used to prevent concentrations that would clearly impede competition. The proposed addition to
Article 2(1)(b) could cause confusion and make decisions under the Regulation much more difficult to predict.

Result of the voting

In favour: 53, against: 76, abstentions: 8.