WHITE PAPER Towards more effective EU merger control (Text with EEA relevance)
Date: 2014-07-09
Institutions: European Commission
Subjects: administrative formalities, administrative transparency, competitiveness, industrial restructuring, merger, merger control, simplification of formalities













EUR-Lex - 52014DC0449 - EN











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52014DC0449

WHITE PAPER Towards more effective EU merger control (Text with EEA relevance) /* COM/2014/0449 final */









WHITE PAPER
Towards more effective EU merger control
(Text with EEA relevance)

Table of
Contents
1............ Introduction. 4
2............ Substantive review of
mergers after the 2004 reform of the Merger Regulation. 4
2.1......... Substantive assessment 5
2.2......... Further fostering cooperation
and convergence. 7
2.3......... Conclusion. 8
3............ Acquisition of
non-controlling minority shareholdings. 8
3.1......... Why does the Commission
want to have jurisdiction to review non-controlling minority shareholdings?  8
3.1.1...... Theories of harm.. 9
3.1.2...... Articles 101 and 102 TFEU
may not be suitable for dealing with anti-competitive minority shareholdings  11
3.2......... Policy choices and
proposed measures for reviewing acquisitions of minority shareholdings  11
3.2.1...... Design and options – what
principles should apply to the system for the control of minority shareholdings
at the EU level?. 11
3.2.2...... The proposed system: a
"targeted" transparency system.. 12
3.2.3...... Details of the procedure. 13
3.2.4...... Scope of the assessment
under the Merger Regulation and relationship with Article 101 TFEU   14
3.3......... Conclusion on the review
of minority shareholdings. 15
4............ Case referrals. 15
4.1......... Objectives and guiding
principles for case referrals. 15
4.2......... The proposed measures
for case referrals. 16
4.2.1...... Article 4(5) of the Merger
Regulation: pre-notification referral from Member States to the Commission  16
4.2.2...... Article 22 of the Merger
Regulation: post-notification referrals from Member States to the Commission  17
4.2.3...... Article 4(4) of the Merger
Regulation: pre-notification referrals from the Commission to a Member State  18
5............ Miscellaneous. 18
6............ Conclusion. 19
                                                                                                                                                      
1.           Introduction
1.           In this White Paper, the
Commission, ten years after the major overhaul of the EU Merger Regulation[1] in
2004, takes stock of how the substantive test of "significant impediment
of effective competition" (SIEC) has been applied and provides an outlook
on how to further foster convergence and cooperation between and amongst the
Commission and the Member States. It also puts forward proposals for specific
amendments aimed at making EU merger control more effective. 
2.           The proposals relate to
two areas in particular:
-  
  ensuring that the Merger Regulation addresses
all sources of possible harm to competition, and thus consumers, caused by
concentrations or corporate restructuring, including those stemming from
acquisitions of non-controlling minority shareholdings; and
-  
  how to best ensure close cooperation between
the Commission and national competition authorities ("NCAs") and an
appropriate division of tasks in the field of merger control, in particular, by
streamlining the rules for transferring merger cases from Member States to the
Commission and vice versa.
3.           This White Paper is
accompanied by a Commission Staff Working Document, which analyses in more
detail the considerations underlying the White Paper and its policy proposals.
It is accompanied by an Impact Assessment, which analyses the potential
benefits and costs of various policy options, as well as an executive summary
of that Impact Assessment. The views of stakeholders have been sought through a
public consultation[2]
and are reflected in this White Paper and the Staff Working Document. 
2.           Substantive review of mergers after the 2004 reform of
the Merger Regulation
4.           After the adoption of the
first Merger Regulation in 1989, EU merger control has become one of the main
pillars of EU competition law and its basic features are now well established.
The re-cast Merger Regulation, which was adopted in 2004, has further
strengthened the functioning of merger control at the EU level in many ways, particularly
by introducing the SIEC test as a relevant criterion for examining mergers and
by enhancing the possibilities for referring merger cases from Member States to
the Commission and vice versa. 
5.           EU merger control makes an
important contribution to the functioning of the internal market, both by
providing a harmonised set of rules for concentrations and corporate
restructuring and by ensuring that competition and thus consumers are not
harmed by economic concentration in the marketplace. Judging from recent
experience, increasing globalisation of business activity and the deepening of
the internal market have caused EU merger control to focus even more on
cross-border cases and those which have an impact on the European economy.
6.           The large majority of
mergers investigated by the Commission do not raise competition concerns and
are cleared following an initial "Phase I" investigation. In less
than 5% of cases, an in-depth "Phase II" investigation is launched
based on initial concerns raised in Phase I. In about 5-8% of all notified
mergers, the Commission identifies concerns that the merger may impede
effective competition. In most cases, such concerns are alleviated through
remedies offered by the parties (either at Phase I or Phase II). The Commission
has only prohibited 24 mergers since 1990 and 6 since 2004, which is
significantly less than 1% of more than 5,000 mergers notified.
2.1.        Substantive assessment
7.           The most important change
in the 2004 Merger Regulation reform was the introduction of the SIEC test.[3] The
SIEC test maintained that SIECs most prominently arise through the creation or
strengthening of a dominant position. The test thereby allowed continued
building upon the precedents of the Commission and the case law of the European
Courts.
8.           As before, when assessing
the impact of a notified merger on competition, the Commission continues to
examine whether or not the merger would significantly impede effective
competition in the internal market or a substantial part of it. In particular, the
Commission seeks to determine whether the merger would create or strengthen a
dominant position.
9.           In addition, the SIEC
test’s objective was the elimination of a possible enforcement "gap",
because the previous test was not believed to clearly capture likely
anti-competitive effects resulting from a merger of two firms in an
oligopolistic market, where the merged entity would not have become dominant.[4] The
introduction of the SIEC test eliminated this uncertainty and allowed the
Commission to strengthen its economic analysis of complex mergers. The
assessment uses a combination of qualitative and, where available,
quantitative/empirical evidence.[5]

10.         In the majority of cases,
the Commission has looked at possible anti-competitive effects resulting from
the merger of two undertakings active in the same market absent any
coordination with other competitors ("non-coordinated effects").
Commission investigations that look at whether a merger would enhance the risk
of coordination between the merged entity and other firms ("coordinated
effects")[6]
or whether a merger between firms active in vertically[7] or
closely related markets[8]
would lead to the foreclosure of competitors ("vertical effects" and
"conglomerate effects", respectively) have been much more rare.
11.         Since 2004, the Commission
has investigated a significant number of cases using the new SIEC test. For
instance, in Western Digital/Hitachi, the Commission looked at a
proposed acquisition in the market for hard disk drives ("HDDs"). The
transaction would have reduced the number of competitors active in the HDD
industry from 4 to 3 and from 3 to 2 in the market for 3.5-inch hard disk
drives. By analysing the combined quantitative and qualitative evidence, the
Commission concluded that, under the circumstances, removing Hitachi from the
market would likely have significantly impeded effective competition.[9]
12.         In order to improve the
transparency and predictability of the Commission's merger analysis under the
new test, the Commission published two sets of guidelines providing a sound
economic framework for the assessment of both horizontal[10] and
non-horizontal (i.e. vertical or conglomerate) mergers[11]
("Guidelines").[12]
13.         The Guidelines also
explain, in line with Recital 29 of the Merger Regulation, that mergers may
lead to efficiencies which counteract the merger’s harm to competition and, in
turn, consumers. If the merging parties claim such efficiencies, the Commission
will consider them provided they are verifiable, merger-specific and likely to
be passed on to consumers. For example, in UPS/TNT Express, competition
concerns were alleviated for a number of (though not all) Member States based
on, inter alia, efficiency considerations.[13] In Nynas/Harburg,
the merger’s efficiencies supported the conclusion that it was beneficial for
consumers given the likely alternative scenario that the acquired plant would
be closed.[14]

14.         The past ten years have
also shown that merger review can foster innovation, as competition leads to
better market outcomes. It does so not only by lowering prices or increasing
output, but also by improving product quality, variety, and innovation. In Intel/McAfee[15], for
example, the remedies helped preserve innovation in security software and
ensure that competitors were not foreclosed. 
15.         In 2008, the Commission
further developed its practice in the field of remedies with a revised Remedies
Notice.[16]
The Remedies Notice gives clear guidance on the design and implementation of
divestiture remedies (such as the sale of a subsidiary or a production facility
to a competitor), focussing on the effectiveness of the remedy. 
2.2.        Further fostering cooperation
and convergence
16.         The Merger Regulation has
been a veritable success in terms of introducing one-stop-shop scrutiny for
mergers with an EU dimension. However, Member States also play an important
role in merger enforcement in the EU. A truly functional system for the
scrutiny of mergers throughout the EU requires efficient work-sharing,
cooperation and convergence between the Commission and the 27 Member States that exercise merger control. 
17.         In 2009, following a public
consultation, the Commission submitted a report to the Council containing a
limited stocktaking exercise which concerned the allocation of cases between
the Commission and Member States ("the 2009 Report").[17] In the public consultation, stakeholders
stated that diverging merger rules and practices within the European Union may
add to the administrative burden on business and lead to ineffective merger
control enforcement, inconsistent outcomes, and an adverse impact on the
internal market.
18.         Although NCAs ordinarily
apply Articles 101 and 102 of the Treaty on the Functioning of the European
Union (“TFEU”) in conjunction with their national laws, merger control at the national
level is exclusively a matter of national law. The EU Merger Regulation has
been a model for many national legal systems in this area, which has led to
basic legislative convergence across jurisdictions, particularly regarding the
substantive test to apply.[18]
In addition, further convergence has been achieved on substantive and
jurisdictional issues through increased cooperation between NCAs and the
Commission, both in individual cases and through the Merger Working Group
established in 2010.[19]

19.         Despite this progress,
there remains room for further cooperation and convergence, especially on the
development of substantive tests for guidance documents (such as the
Commission's Horizontal and Non-Horizontal Merger Guidelines) and their
applications and interpretations by competition authorities and courts
exercising judicial review. Among the notable points of divergence are national
laws that still allow a government to overrule an NCA's competition-based
decision and authorise an anti-competitive merger on the basis of other
public-interest considerations.[20]
Remedies and procedures, such as timeframes for merger review and stand-still
rules, also frequently differ. 
20.         Greater convergence between
the Commission and NCAs and among the NCAs is important to create a truly level
playing field and to avoid inconsistent outcomes.[21] In
line with suggestions from some NCAs, this can be achieved by increasing
cooperation and sharing experience, using all available tools and forums such
as the Merger Working Group, and by intensifying cooperation between NCAs in
individual cases. 
21.         NCAs can avoid inconsistent
outcomes in any event by referring cases to the Commission. The proposals to
reform post-notification referrals to the Commission according to Article 22 of
the Merger Regulation, discussed below in Section 4.2.2, suggest setting up a
system based on an early information notice. Such a system should also
facilitate practical cooperation among the NCAs in cross-border and
multi-jurisdictional cases. 
22.         Beyond the successful
"soft convergence" already achieved, which should be maintained and
strengthened as outlined above, the Commission and the NCAs should consider
moving towards a system where each applies the same substantive EU law, similar
to the current framework for antitrust enforcement.[22] This
would, however, require a more ambitious overhaul of the current system of
merger control law within the European Union.
2.3.        Conclusion
23.         The above overview shows
how merger control at the EU level was strengthened by the 2004 Merger
Regulation reforms, particularly the introduction of the SIEC test. In the long
run, the Merger Regulation system should be further developed into a true
"European Merger Area", in which a single set of rules applies to
mergers examined by the Commission and NCAs. More immediately, however, there
are two main ways to improve the Merger Regulation through more limited
amendments. First, the Commission considers bringing acquisitions of
non-controlling minority shareholdings into the scope of EU merger control. Second,
there is room to further streamline case referrals in the light of the
Commission’s experience with the 2004 reform.[23]
3.           Acquisition of non-controlling minority shareholdings 
3.1.        Why does the Commission want
to have jurisdiction to review non-controlling minority shareholdings? 
24.         Effective and efficient competition
policy requires appropriate and well-designed means to tackle all sources of
harm to competition and thus consumers. As it currently stands, the Merger Regulation
only applies to “concentrations”. These are defined as acquisitions of control
by one or more person(s) or undertaking(s) over one or more other undertakings
or parts of undertakings. 
25.         Now, when the acquisition
of a minority shareholding is unrelated to an acquisition of control, the
Commission cannot investigate or intervene against it. The Commission can only
intervene against a pre-existing minority shareholding held by one of the
merging parties when control is specifically acquired. For example, the
Commission can intervene if the undertaking in which one party has a minority
stake is a competitor of the other merging undertaking. If the minority shareholding
is acquired subsequent to the Commission's investigation, however, the
Commission has no competence to deal with possible competition concerns arising
from it despite the fact that the competition concerns arising from the
minority shareholding may be similar to those that arise when control is
acquired. 
26.         The experience of the Commission,
Member States' and third countries' authorities, as well as economic research,
show that the acquisition of a non-controlling minority shareholding may harm
competition, and thus consumers, in some instances. 
27.         In
the European Union, Austria, Germany and the United Kingdom currently have
competence to review acquisitions of minority shareholdings.[24] In
all three Member States, the NCAs have intervened against such acquisitions where
they raised competition concerns. Many jurisdictions outside the EU, such as Canada, the United States and Japan, are also competent to review similar structural links under their
respective merger control rules. 
3.1.1.     Theories of harm
28.         Several types of competition
concerns can arise when a minority shareholding is acquired. These concerns are
based on similar theories of harm to those relevant for acquisitions of control
and, in general, require that the transaction significantly increase market
power.[25]
29.         Acquiring a minority
shareholding in a competitor may lead to non-coordinated anti-competitive
effects because such a shareholding may increase the acquirer's incentive and
ability to unilaterally raise prices or restrict output. If a firm has a
financial interest in its competitor's profits, it may decide to 'internalise'
the increase in those profits, resulting from a reduction in its own output or
an increase in its own prices. This anti-competitive effect may materialize
whether the minority shareholding is passive (giving it no influence in the
target's decisions) or active (giving it some influence over the target's
decisions).
30.         The acquisition of a
minority shareholding may also raise competition concerns when the acquirer
uses its position to limit the competitive strategies available to the target, thereby
weakening it as a competitive force. The Commission and Member States have found that competition concerns are more likely to be serious when a minority
shareholding possesses some degree of influence over the target firm's
decisions, as in the case studies below.
31.         Siemens/VA Tech
demonstrated both the "financial incentive" theory of harm and risk
created when an undertaking holds influence and voting rights in a competitor.[26] In
that case, Siemens held a pre-existing minority shareholding in SMS Demag, a
competitor of one of VA Tech's subsidiaries. The Commission determined that the
merger would lead to a reduction of competition in the metal plant-building
market due to a combination of financial incentives and
information rights stemming from the minority shareholding in SMS Demag.[27]
32.         Another example of a
minority shareholding granting the acquirer influence over the target is when
the acquirer is able to exercise influence over the outcome of special
resolutions. Such resolutions may be required for approving significant
investments, raising capital, changing the product or geographic scope of the
business, and engaging in mergers and acquisitions.
33.         This theory of harm was at
the core of the UK authorities' inquiry into the Ryanair/Aer Lingus case.
In Ryanair/Aer Lingus I, Ryanair had already acquired a significant
minority shareholding in its competitor, Aer Lingus, when it notified the Commission
of its proposal to acquire control in 2006. The Commission prohibited the
acquisition due to serious concerns that it would hurt competition by creating
or strengthening Ryanair's dominant position on a number of routes.[28]
However, it had no jurisdiction to review Ryanair's minority shareholding in
Aer Lingus, which the UK Competition Commission proceeded to do.[29] 
34.         This theory of harm was
also the focus in Toshiba/Westinghouse[30],
where the Commission found that the transaction could lead to a possible
elimination of competition in the market for nuclear fuel assemblies. In
reaching its decision, the Commission considered that Toshiba could use its
minority shareholding and veto rights in GNF, a competitor of Westinghouse, to
prevent it from expanding into fields in which it would compete with
Toshiba/Westinghouse.
35.         Minority shareholdings in competitors
may also lead to coordinated anti-competitive effects by impacting a market
participant’s ability and incentive to tacitly or explicitly coordinate in
order to achieve supra-competitive profits.[31]
The acquisition of a minority shareholding may enhance transparency due to the privileged
view it offers the acquirer into the commercial activities of the target. In
this way, it may also increase the credibility and effectiveness of any threat of
retaliation in the event that the target deviates from the collusive behaviour.[32]
36.         Finally, non-horizontal acquisitions
of minority shareholdings that also provide material influence may raise competitive
concerns of input foreclosure. For some minority shareholdings, foreclosure may
even be more likely than when control is acquired because the acquirer of the
minority shareholding only internalises a part, rather than all, of the
target’s profits the target lost as a consequence of the foreclosure strategy. 
37.         Input foreclosure was a
concern in IPIC/MAN Ferrostaal.[33]
The acquisition of MAN Ferrostaal by International Petroleum Investment Company
("IPIC") was approved by the Commission in 2009 subject to
conditions. The Commission found that the transaction gave rise to a
foreclosure risk regarding the only existing non-proprietary technology for
melamine production in the world. The technology was owned by Eurotecnica, a
company in which MAN Ferrostaal had a 30% stake. Given that IPIC already
controlled AMI, one of two major melamine producers world-wide, it agreed to divest
its minority shareholding in Eurotecnica in order to minimize any risk of
foreclosing AMI's competitors. 
38.         In
addition, in the public consultation and recent media reports, other acquisitions
of minority shareholdings on both the EU and Member State levels have emerged
where the shareholding was acquired in a competitor or a vertically related
company.[34] 
3.1.2.     Articles 101 and 102 TFEU may
not be suitable for dealing with anti-competitive minority shareholdings
39.         The Commission has
considered whether the competition rules on restrictive agreements and the
abuse of a dominant position, laid down in Articles 101 and 102 TFEU respectively,
could be used to intervene against anti-competitive acquisitions of minority
shareholdings. However, the uses of Article 101 and Article 102 in this regard
are limited.
40.         Regarding Article 101 TFEU,
it is not clear whether acquiring a minority shareholding would constitute an
“agreement” having the object or effect of restricting competition in all
cases. For example, in the case of a series of acquisitions of shares via the
stock exchange, it may be difficult to argue that the different purchase
agreements meet the criteria of Article 101 TFEU. The same is probably true for
the articles of association of a company, the purpose of which is generally to
determine the corporate governance of the company and the relationship between
it and its shareholders. In order for the Commission to intervene using Article
102 TFEU, the acquirer of the minority shareholding would need to hold a
dominant position, and the acquisition would need to constitute an abuse. The
circumstances under which the Commission can intervene against competitive harm
arising from acquisitions of minority shareholdings are therefore quite narrow.[35] 
41.         Furthermore, as explained above, the theories of harm arising
from acquisitions of minority shareholdings are similar to those arising from
acquisitions of control, i.e. horizontal, non-coordinated and vertical effects.

3.2.        Policy choices and proposed
measures for reviewing acquisitions of minority shareholdings
3.2.1.     Design and options – what principles should apply to the
system for the control of minority shareholdings at the EU level?
42.         A
system for controlling acquisitions of non-controlling minority shareholdings
should take into account the following three principles:
                it should
capture the potentially anti-competitive acquisitions of non-controlling
minority shareholdings; 
                it should avoid
any unnecessary and disproportionate administrative burden on companies, the
Commission and NCAs; and
                it should fit
with the merger control regimes currently in place at both the EU and national
level.[36]
43.         The Consultation Paper put
forward three procedural options for the control of minority shareholdings: 
                A notification
system, which would extend the current system of ex-ante merger control to
acquisitions of non-controlling minority shareholdings under certain
conditions.  
                A transparency
system, which would require parties to submit an information notice informing
the Commission of acquisitions of non-controlling minority shareholdings. The
information notice would enable the Commission to decide whether to further
investigate the transaction, enable the Member States to consider a referral
request, and enable potential complainants to come forward.
              A self-assessment
system, which would not require parties to notify acquisitions of
non-controlling minority shareholdings in advance of completion. The Commission could, however, initiate an
investigation of potentially problematic minority shareholding acquisitions on
the basis of its own market intelligence or complaints. 
44.         The scope of the Commission's jurisdiction relates directly
to what procedure is appropriate and adequate. For example, if the
Commission has jurisdiction over all acquisitions of minority shareholdings
above a certain threshold, a pre-merger notification system would create a
heavy burden on businesses because unproblematic transactions would also be
covered. Giving the Commission jurisdiction over all acquisitions of minority
shareholdings above a certain threshold might therefore be more appropriate
under a self-assessment system, where the Commission is free to investigate
transactions on its own initiative. On the other hand, the administrative
burden imposed by a notification or transparency system would be much lower if
the Commission's jurisdiction were limited to only potentially problematic
transactions. The relationship between the design of the procedural system and
the scope of jurisdiction arose frequently in responses to the public consultation.

3.2.2.     The proposed system: a "targeted" transparency system
45.         In
light of the above, an alternative "targeted" transparency system may
be most appropriate for dealing with acquisitions of minority shareholdings.
The Commission believes that such a system would be in line with the three
principles set out above. It would allow potentially problematic transactions
to be targeted from the outset, namely through the identification of transactions
which create a "competitively significant link", and it would ensure
that the transactions thus identified can be effectively controlled by the
Commission, even without the need for a full notification obligation. 
46.         In view of the theories of
harm discussed above, a "competitively significant link" would arise
where there is a prima facie competitive relationship between the
acquirer's and the target's activities, either because they are active in the
same markets or sectors or they are active in vertically related markets. In
principle, the system would only be triggered when the minority shareholdings
and the rights attached to it enable the acquirer to influence materially the
commercial policy of the target and therefore its behaviour in the marketplace
or grant it access to commercially sensitive information. However, above a
certain level the shareholding itself might result in a change in acquirer's
financial incentives in a way that the acquirer would adjust its own behaviour
in the market place, irrespective of whether it gains material influence over
the target. Only acquisitions of a "competitively significant link"
would require the submission of an information notice to the Commission.
47.         In order to provide parties
with legal certainty, only a transaction which meets the following cumulative
criteria would fall within the definition of a "competitively significant
link": 
-  
  acquisitions of a minority shareholding in a
competitor or vertically related company (i.e. there needs to be a competitive
relationship between acquirer and target); and 
-  
  the competitive link would be considered
significant if the acquired shareholding is (1) around 20%[37] or
(2) between 5% and around 20%, but accompanied by additional factors such as
rights which give the acquirer a "de-facto" blocking minority[38], a
seat on the board of directors, or access to commercially sensitive information
of the target. 
48.         The parties would be
required to self-assess whether a transaction creates a "competitively significant
link" and, if so, submit an information notice. In the event that an
information notice is submitted, the Commission would then decide whether to
investigate the transaction and the Member States would decide whether to make
a referral request. 
3.2.3.     Details of the procedure
49.         Under the targeted
transparency system, an undertaking would be required to submit an information
notice to the Commission if it proposes to acquire a minority shareholding that
qualifies as a "competitively significant link". The information
notice would contain information relating to the parties, their turnover, a
description of the transaction, the level of shareholding before and after the
transaction, any rights attached to the minority shareholding and some limited market
share information. As set out above, the Commission will decide whether further
investigation of the transaction is warranted and Member States would consider whether
to request a referral on the basis of this information notice. The parties
would only be required to submit a full notification if the Commission decided
to initiate an investigation and the Commission would only issue a decision if
it had initiated an investigation. In order to provide parties with legal
certainty, they should also be able to voluntarily submit a full notification. 
50.         The Commission could also
consider proposing a waiting period once an information notice has been
submitted, during which the parties would not be able to close the transaction
and during which the Member States have to decide whether to request a referral.
Such a waiting period could last 15 working days, for example. This would also
align it with the deadline under Article 9 for a Member State referral request
following a full notification. Such a system would ensure that transactions
which are referred to Member States are not yet implemented and can be handled
by the Member States under their normal procedure, as they might foresee a
stand-still obligation and not be equipped to deal with consummated transactions.
More generally, the referral system should ensure that the existing level of
protection provided by the national merger regimes already capturing
non-controlling minority shareholdings will be maintained and that enforcement
gaps will be avoided.
51.         The Commission would also
be free to investigate a transaction, whether or not it has already been
implemented, within a limited period of time following the information notice.
Such a period could be 4 to 6 months, and would allow the business community to
come forward with complaints. It would also reduce the risk of the Commission initiating
an investigation on a precautionary basis during the initial waiting period.
52.         In the event that the Commission
initiates an investigation of a transaction which was already (fully or
partially) implemented, it should have the power to issue interim measures in
order to ensure the effectiveness of a decision under Articles 6 and 8 Merger
Regulation. Such power could take the form of a hold separate order, for
example.[39] 

3.2.4.     Scope of the assessment under
the Merger Regulation and relationship with Article 101 TFEU 
53.         Any agreements entered into
between the acquirer of the minority shareholding and the target remain subject
to assessment under Articles 101 and 102 TFEU unless they constitute
"ancillary restraints". Only ancillary restraints, i.e. "restrictions
directly related and necessary to the implementation” of the acquisition of
the shareholding,[40]
are deemed to be covered by the clearance decision and are therefore not caught
by Article 101 and Article 102 TFEU. 
54.         However, as is currently
the practice for acquisitions of control, the agreements between the acquirer
of the minority shareholding and the target would be taken into account during
the substantive assessment of a transaction under the merger control rules.
This is because they are relevant to the current and future market conditions (for
example, the existence of long-term contracts) which the Commission takes into
account as part of its substantive assessment.[41]
3.3.        Conclusion on the review of
minority shareholdings
55.         The Commission does not
currently have adequate tools for dealing with anti-competitive acquisitions of
minority shareholdings. A targeted transparency system appears to be well
suited to capture such transactions and to prevent consumer harm arising from
them and would be in line with the three principles outlined in paragraph 42.
56.         First, potentially harmful
transactions would likely come to the attention of the Commission and Member
States while innocuous transactions, such as those entered into for investment
purposes only, would not. 
57.         Second, the targeted
transparency system would limit the administrative burden on businesses,
because the Commission would only need to be informed of a limited number of
cases, namely those which create a "competitively significant link".
Parties would only be required to provide the Commission with a limited amount
of information regarding such transactions by way of an information notice,
after which the Commission could decide whether to request a full notification.

58.         Finally, the targeted
transparency system would fit with the merger control regimes currently in
place at the EU and national level. The information notice would be sent on to
Member States to inform them of acquisitions of minority shareholdings,
enabling them to request a referral at that stage. In contrast, a
self-assessment system would be more difficult to reconcile with the Member State regimes, as there would be uncertainty as to whether the Commission would
investigate a transaction. 
4.           Case referrals 
4.1.        Objectives and guiding
principles for case referrals
59.         The Merger Regulation has
established a "one-stop-shop" system, whereby concentrations with a
European Union dimension (as defined by the turnover thresholds laid down in
Article 1) are reviewed exclusively by the Commission, thus avoiding multiple
review procedures at the Member State level. While the turnover thresholds
serve as a "bright-line test" for whether or not a merger is likely
to have a European or cross-border dimension, the Merger Regulation also allows
for cases to be referred from the Commission to one or more Member States and
vice versa. This mechanism, which was made more effective by the 2004 reform,
allows a case to be reviewed by the more appropriate authority if it is not
already allocated to that authority by applying the turnover thresholds both
before and after notifying a competent authority of the transaction.
60.         The 2009 Report to the
Council described above concluded that, overall, the turnover thresholds and
rules on case referrals laid down in the Merger Regulation worked well. There
was, however, room for improvement, given that a significant number of cases
were still subject to reviews in three or more Member States (240 cases in
2007).
61.         The case referral system could
be enhanced to better serve the purpose of departing from the results of the
turnover tests when necessary. There is especially room for improvement with
respect to referrals from Member States to the Commission, both before and
after notification. 
62.         Indeed, experience has
shown that the current process for pre-notification referrals from Member
States to the Commission under Article 4(5) by notifying parties tends to be
cumbersome and time-consuming.[42]
This is because it involves first the filing of a "reasoned
submission" to request a referral in the first instance, and a subsequent
notification once a referral has been approved. For this reason, parties may
have chosen not to make a referral request in some cases that might have been
good candidates for referral to the Commission. The Commission therefore
suggests simplifying Article 4(5) referrals by abolishing the current two-step
procedure.
63.         Furthermore, the current
rules for post-notification referrals from Member States to the Commission
under Article 22 only grant the Commission jurisdiction for the Member States
which have made or joined a referral request. In some cases, this has led to
parallel investigations by the Commission and NCAs contrary to the
one-stop-shop principle.[43]
The Commission therefore proposes streamlining Article 22 referrals so as to
give the Commission EEA-wide jurisdictions in cases referred to it and better
implement the one-stop-shop principle.
4.2.        The proposed measures for
case referrals
64.         The aim of the proposed
modifications to the case referral system is to facilitate referrals in order
to make the system more effective on an overall basis without fundamentally
reforming the features of the system. 
4.2.1.     Article 4(5) of the Merger
Regulation: pre-notification referral from Member
States to the Commission
65.         Given the low number of Article 4(5) requests that were vetoed by a Member State since 2004[44], the Commission proposes abolishing the
current two-step procedure (a reasoned submission followed by a notification). This
change would speed up Article 4(5) referrals and make them more efficient while
maintaining the ability of Member States to veto a request in the rare event
that they consider it necessary. 
66.         Accordingly, parties would
notify a transaction directly to the Commission. The Commission would then
forward the notification to the Member States immediately, giving those Member
States that are prima facie competent to review the transaction under national
law the opportunity to oppose the referral request within 15 working days. Unless
a competent Member State opposes the request, the Commission would have
jurisdiction to review the whole transaction. 
67.         In the event that at least
one competent Member State opposes the jurisdiction of the Commission, the
Commission would renounce jurisdiction entirely and Member States would retain
jurisdiction. In such circumstances, the Commission would not have any
discretion, and would adopt a decision stating that it is no longer competent. It
would then be up to the parties to determine in which Member States they must notify.
68.         In order to facilitate the information
exchange between the Member States and the Commission, the Commission proposes
sending the parties' initial briefing paper or the case allocation request to
the Member States to alert them about the transaction during the
pre-notification contacts. 
4.2.2.     Article
22 of the Merger Regulation: post-notification
referrals from Member States to the Commission
1.                      
The procedure under Article 22 is proposed to be
amended as follows:
-  
  One or more Member State(s) that are competent
to review a transaction under their national law could request a referral to
the Commission within 15 working days of the date it was notified to them (or
made known to them).[45]

-  
  The Commission would be able to decide whether
or not to accept a referral request. For example, the Commission may decide not
to accept the request if the transaction has no cross-border effects, in line
with Art. 22(1) first subparagraph EUMR. If the Commission decided to accept a
referral request, it would have jurisdiction for the whole of the EEA. 
-  
However, if one (or more) competent Member State  (s) opposed the referral, the Commission would renounce jurisdiction for the
whole of the EEA, and the Member States would retain their jurisdiction. The Member State would not need to give reasons for opposing the referral. 
70.         In
order to make the above proposal work, two issues need to be addressed. First, a
timing problem could arise if the referral request is made after another Member State has already
cleared the transaction in its territory. In this case the Commission would no
longer be able to take EEA-wide jurisdiction. Second, other Member States might
not have enough information to ascertain whether they are competent and would
have the right to oppose the referral, or if they were competent, to make an
informed choice whether or not to veto the referral as they may not yet have
received a notification. 
71.         In order to address these
issues to the fullest extent possible, the Commission suggests that the NCAs
circulate early information notices for multi-jurisdictional or cross-border cases
or cases concerning markets that are prima facie wider than national as
soon as possible after a Member State receives the notification or otherwise
learns of the transaction. The NCA would indicate in this notice if it is
considering making a referral request. In that case, the notice would trigger the
suspension of the national deadlines of all Member States which are also
investigating the case. Alternatively, if the Commission itself believes that
it could be the more appropriate authority it would invite the Member State to request a referral under Article 22(5) and such an invitation would equally
suspend all national deadlines. 
72.         Such a procedural solution
should reduce the risk that an NCA makes a referral request to the Commission
when another NCA has already issued a decision clearing the transaction. However,
in the unlikely event that a Member State has adopted a clearance decision
before a referral request occurs, the clearance decision would remain in force
and the case would be referred by the remaining Member States only.  
73.         The circulation of such an
information notice would also facilitate cooperation and coordination between
all the agencies involved in the review process and foster convergence, even if
a referral to the Commission does not take place.  
4.2.3.     Article 4(4) of the Merger
Regulation: pre-notification referrals from the Commission to a Member State
74.         The Commission proposes
clarifying the substantive thresholds for pre-notification referrals from the
Commission to a Member State under Article 4(4). 
75.         In order to encourage the use
of that provision, the Commission proposes adapting the substantive test in
Article 4(4) so that parties are no longer required to claim that the
transaction may "significantly affect competition in a market"
in order for a case to qualify for a referral. Show that the transaction is
likely to have its main impact in a distinct market in the Member State in question would suffice. Removing the perceived "element of
self-incrimination" may lead to an increase in the number of Article 4(4)
requests.
5.           Miscellaneous
76.         Finally, the Commission
believes that there is room to improve and streamline some further provisions
of the Merger Regulation, particularly with a view towards simplifying
procedures. In the context of merger control, the Commission has always sought
to limit the administrative burden on undertakings to a minimum. In December
2013, it took a major step towards making EU merger control more efficient
without amending the Merger Regulation itself through the adoption of a
Simplification Package.[46]
This package of measures brought significantly more merger cases under the
so-called simplified procedure for unproblematic mergers and streamlined all
the forms prescribed for notifying mergers to the Commission, leading to a
substantial net reduction in information requirements.
77.         Further streamlining and
simplification of EU merger procedures, beyond the achievements of the 2013
Simplification Package, and improvement to certain provisions of the Merger
Regulation require amending the Merger Regulation itself. The Staff Working
Document accompanying this White Paper discusses these proposals in detail, but
two points are worth highlighting here:
-  
  The Merger Regulation could be amended so that
the creation of a full-function joint venture located and operating totally
outside the EEA (and which would not have any impact on markets within the EEA)
would fall outside its scope. Thus, such joint ventures would not have to be
notified to the Commission, even if the turnover thresholds of Article 1 are met.
-  
  In order to further simplify merger
procedures, the Commission could be empowered to exempt from notification
certain categories of transactions that normally do not raise any competition
concerns (such as those transactions which do not involve any horizontal or
vertical relationships between the merging undertakings and are currently dealt
with under a simplified procedure) from mandatory prior notification. Such
cases might be subject to a procedure similar to the "targeted
transparency system" envisaged above for dealing with acquisitions of
non-controlling minority shareholdings.
6.           Conclusion
78.         Overall, the revised Merger
Regulation adopted in 2004 provides a good framework for effectively protecting
competition and thus consumers from anti-competitive effects of mergers and
acquisitions in the internal market. The framework provides for such protection
whilst allowing the large majority of unproblematic transactions to be cleared
quickly. The introduction of the SIEC test in 2004 also enabled the Commission
to review non-coordinated effects of transactions where the merged entity would
not acquire a dominant position. Finally, improvements to the case referral
system have significantly contributed to allocating cases to the more
appropriate authority.
79.         However, as set out above,
there is room to further improve EU merger control.[47] In
particular, this White Paper proposes expanding the Commission's jurisdiction
to include review of potential anti-competitive effects resulting from
acquisitions of non-controlling minority shareholdings using a targeted and
non-intrusive transparency system, and making the case referral system more
efficient and effective by streamlining the Article 4(5) procedure and amending
Article 22 so that it enhances adherence to the one stop shop principle.
The Commission invites comments on this White Paper. The Commission
would in particular invite comments on the proposals and the questions raised
in the White Paper and in the Staff Working Document accompanying the White
Paper. They may be sent by Friday 3 October 2014, either by e-mail to:
comp-merger-registry@ec.europa.eu
or by post to:
European Commission
Directorate-General for Competition, Unit A-2
White Paper "Towards more effective EU merger control"
B-1049 Brussel/Bruxelles.
It is standard practice for DG Competition to publish submissions
received in response to a public consultation. However, it is possible to
request that submissions, or parts thereof, remain confidential. Should this be
the case, please indicate clearly on the front page of your submission that it
should not be made public and also send a non-confidential version of your
submission to DG Competition for publication.
[1]               Council Regulation (EC) No 139/2004 of 20 January
2004 on the control of concentrations between undertakings (OJ L 24, 29.1.2004,
p. 1). The current Merger Regulation is the result of a re-cast of the original
Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of
concentrations between undertakings (OJ L 395, 30.12.1989, p. 1).
[2]               See Commission Staff Working Document "Towards
more effective EU merger control", SWD (2013) 239 final (hereafter
"the Consultation Paper") and the comments received, available at:
http://ec.europa.eu/competition/consultations/2013_merger_control.

[3]               See Article 2(2) and 2(3) of the Merger Regulation.
[4]               See Recital 25 of the Merger Regulation.
[5]               There are several recent examples of cases where a
range of sophisticated economic analysis was used to assess the existence of
SIEC like in: COMP/M.6570 – UPS/TNT Express, decision of 30 January
2013; COMP/M.6458 – Universal Music Group/EMI Music, decision of 21
September 2012; COMP/M.6471 – Outokumpu/Inoxum, decision of 7
November 2012; or COMP/M.6663 – Ryanair/Aer Lingus, decision of
27 February 2013.
[6]               For example COMP/M.4980 – ABF/GBI Business,
Commission decision of 23 September 2008.
[7]               Such as in COMP/M.4942 – Nokia/NAVTEQ,
Commission decision of 2 July 2008, or COMP/M.4854 – Tom Tom/TeleAtlas,
decision of 14 May 2008.
[8]               For instance in COMP/M.5984 – Intel/McAfee,
Commission decision of 26 January 2011.
[9]               COMP/M.6203 – Western Digital/Hitachi, Commission
decision of 23 November 2011, recital 1038.
[10]             Guidelines on the assessment of horizontal mergers
under the Council Regulation on the control of concentrations between
undertakings (OJ C 31, 5.2.2004, p. 5).
[11]             Guidelines on the assessment of non-horizontal mergers
under the Council Regulation on the control of concentrations between
undertakings (OJ C 265, 18.10.20087, p. 6).
[12]             The Guidelines have also been referred to by the EU
Courts as benchmarks for reviewing the substantive legality of the Commission's
analysis of mergers, see for instance Case T-282/06 Sun Chemical e.a. v
Commission [2007] ECR II-2149.
[13]             COMP/M.6570 – UPS/TNT Express, Commission
decision of 30 January 2013.
[14]             COMP/M.6360 – Nynas/Harburg, Commission decision
of 2 September 2013.
[15]             COMP/M.5984 – Intel/McAfee, decision of 26
January 2011.
[16]             Commission Notice on remedies acceptable under Council
Regulation (EC) No 139/2004 and under Commission Regulation (EC) No 802/2004
(OJ C 267, 22.10.2008, p. 1).
[17]             Communication from the Commission to the Council,
Report on the functioning of Regulation No 139/2004, 18 June 2009, COM (200)
281 final, accompanied by Staff Working Paper SEC (200) 808 final/2.
[18]             For instance, in 2013 Germany replaced the previous
dominance test with the SIEC test as laid down in Article 2(2) and 2(3) of the
Merger Regulation.
[19]             See EU Merger Working Group, Best Practices on
Cooperation between EU National Competition Authorities in Merger Review, 8
November 2011.
[20]             Although such interventions are rare in general,
examples of Member States in which such a regime exists are France, Germany, Italy, Spain and the United Kingdom.
[21]             See Recital 14 of the EUMR that emphasizes cooperation
and deals with referral and competence.
[22]             Mario Monti, A New Strategy for the Single Market at
the Service of Europe's Economy and Society, Report to the President of the
European Commission José Manuel Barroso, 9 May 2010. See also more recently
Autorité de la concurrence, Rapport au Ministre de l'Économie et des Finances.
Pour un contrôle plus simple, cohérent et stratégique en Europe, 16 December
2013.
[23]             The present review is without prejudice to any further
improvements of the Merger Regulation.
[24]             See Annex I to the Consultation Paper.
[25]             See para. 8 of the Horizontal Merger Guidelines and
para. 10 of the Non-horizontal Merger Guidelines.
[26]             COMP/M.3653 – Siemens/VA Tech, Commission
decision of 13 July 2005.
[27]             http://ec.europa.eu/competition/mergers/cases/decisions/m3653_20050713_20600_en.pdf.
[28]             Case COMP/M.4439 – Ryanair/Aer Lingus I, Commission
decision of 27 June 2007, confirmed by the General Court in Case T-342/07 Ryanair
v Commission [2010] ECR II-3457. See also case COMP/M.6663 – Ryanair/Aer
Lingus III, Commission decision of 27 February 2013, where the Commission
declared another project of acquisition of control by Ryanair over Aer Lingus
incompatible with the internal market. 
[29]             Final report of 28 August 2013, http://www.competition-commission.org.uk/assets/competition
commission/docs/2012/ryanair-aer-lingus/130828_ryanair_final_report.pdf. Ryanair
has appealed the decision but the Competition Appeal Tribunal rejected the
appeal on 7 March 2014.
[30]             COMP/M.4153 – Toshiba/Westinghouse, Commission
decision of 19 September 2006.
[31]             See for example case COMP. M.1673
- VEBA/VIAG, Commission decision of 13 June 2000.
[32]             See also Annex 1 of the Consultation Paper.
[33]             COMP/M.5406 – IPIC/MAN Ferrostaal, Commission decision
of 13 March 2009.
[34]             See for example the minority stakes recently acquired
by Telefónica in Telecom Italia, by Air France in Alitalia, by Intel in ASML, a manufacturer of lithography systems for the
semiconductor industry, by Marine Harvest in Grieg Seafood or by VW in Suzuki. Regarding minority
shareholdings in vertical relationships, examples include the 10% minority
shareholdings of Nestlé in Givaudan (which was recently sold) or the 15%
shareholding of BMW in SGL Carbon (in addition to the 29% shareholding of the Quandt/Klatten
family who holds a large stake in car manufacturer BMW). Obviously, these
examples only show that minority shareholdings between competitors and
vertically related companies do occur, but they are mentioned here without
prejudice as to whether they would have raised any competition concerns.
[35]             See also Case T-411/07 Aer Lingus v Commission
[2010] ECR II-3691, in particular para. 104, and Case 6/72 Continental Can v
Commission [1973] ECR 216.
[36]             See Article 1(2), (3) of the Merger Regulation. It is
proposed that the same turnover thresholds which currently apply to
acquisitions of control would also apply to the acquisition of non-controlling
minority shareholdings. The referral system would also equally apply to the
acquisitions of minority shareholdings to allow for allocation of cases to the
more appropriate authority. 
[37]             The OFT has set a threshold at 15% above which it may
examine any case (see OFT, "Mergers- Jurisdictional and procedural
guidance", para. 3.20). This might also serve as a clear-cut threshold above
which a shareholding would be considered a "competitively significant
link". 
[38]             The UK case, BSkyB/ITV (2007), provides a good example
of a de facto blocking minority shareholding (which is not enough to
qualify as de facto control). A shareholding of 17.9% was found to be sufficient
to give BSkyB material influence over ITV on the basis that it enabled it to
influence ITV's strategic decision-making. The case was cleared subject to a
divestiture of the shareholding down to 7.5%. 
[39]             The "hold separate" obligation would require
the assets to be ring-fenced, a hold separate manager to be appointed, etc. It
would follow a similar practice as that which currently occurs for divestiture
commitments during the divestiture periods or the conditions and obligations
under Article 7(3) of the Merger Regulation. 
[40]             By extension to minority shareholdings of Article
6(1)(b) subparagraph 2, Article 8(1) subparagraph 2 and Article 8(2)
subparagraph 3 of the Merger Regulation.
[41]             See for instance, case COMP/M.6541 - Glencore/Xstrata,
para. 26.
[42]             See e.g. paragraph 19 of the 2009 Report.
[43]             For instance in COMP/M.5828 – Procter &
Gamble/Sara Lee, Commission decision of 17 June 2010.
[44]             Only 6 of the 261 Article
4(5) requests made since 2004 were vetoed by a Member State.
[45]             In contrast to the current system, only Member States
which are competent to review the transaction under their national law could
request a referral.
[46]             Commission Implementing Regulation (EU) No 1269/2013 of
5 December 2013 (OJ L 336, 14.12.2013, p. 1) and Commission Notice on a simplified
procedure for treatment of certain concentrations under Council Regulation (EC)
No 139/2004 (OJ C 366, 14.12.2013, p. 5, corrigendum: OJ C 11, 15.01.2014,
p.6).
[47]             The scope chosen for this White Paper is without
prejudice to additional evaluations of other important aspects of EU merger
control by the Commission. The Commission will consider appropriate topics for
an ex-post evaluation of some of its practices in merger control.