COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document WHITE PAPER Towards more effective EU merger control
Date: 2014-07-09
Institutions: European Commission
Subjects: administrative formalities, competitiveness, industrial restructuring, merger, merger control, simplification of formalities, single market













EUR-Lex - 52014SC0218 - EN











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52014SC0218

COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document WHITE PAPER Towards more effective EU merger control /* SWD/2014/0218 final */









COMMISSION
STAFF WORKING DOCUMENT
EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT

Accompanying the document
WHITE PAPER
Towards more effective EU merger
control

1.                      
Introduction 

1.                      
The aim of the EU merger control system is to
ensure effective competition in the internal market. Since 1989, the EU Merger
Regulation has been regularly reviewed to improve the system and to take into
account evolving practices. Almost a decade after the most recent reform, and following
the Commission's 2009 report evaluating the operation of the Merger Regulation
("the 2009 Report"), the Commission considers it appropriate to
reflect on possible further improvements. 
2.                      
On 20 June 2013, the Commission published the
Staff Working Document entitled "Towards more effective EU merger control"
("the Staff Working Document"). A number of amendments to the Merger
Regulation were proposed, focussing in particular on minority shareholdings and
the case referral system. The Commission received feedback to the proposals
from a large number of stakeholders, including Member States. The White Paper further explores the proposals, taking this
feedback into account, but also looks more broadly at how EU merger control has
worked during the ten years since the 2004 reform of the Merger Regulation, with
a particular focus on the development of the substantive assessment of mergers
applied by the Commission, as well as on fostering the level playing field,
cooperation and convergence between the Commission and NCAs in the field of
merger control. 

2.                      
Acquisitions of non-controlling minority
shareholdings
2.1.                
Problem definition

3.                      
An effective and efficient competition policy
requires appropriate tools that are well-designed for tackling all sources of
harm to competition and consumers. The Merger Regulation currently only applies
to “concentrations”, that is acquisitions of control. The Commission has
exclusive jurisdiction to review such concentrations, provided that they meet
certain turnover thresholds, in order to assess whether they may lead to a
significant impediment of effective competition.   
4.                      
The experience of the Commission, the Member States and third countries, as well as economic research, all show that in some
instances the acquisition of a non-controlling minority shareholding can harm
competition and consumers. The theories of harm associated with such
acquisitions are, in general, of a similar nature to those associated with
acquisitions of control. Namely, the acquisition of a minority shareholding
may: 
–              
lead to horizontal unilateral effects due to an
increase in the parties' ability and incentive to unilaterally raise prices or
restrict output (see e.g. case Siemens/VA Tech). 
–              
enable the acquirer to gain a competitive
advantage in the market by increasing its rival’s costs. 
–              
enable the acquirer to use its position to limit
the competitive strategies available to the target firm, thereby weakening it
as a competitive force (see e.g. Ryanair/Aer Lingus and Toshiba/Westinghouse).
–              
enhance the ability and incentive of market
players to coordinate in order to achieve supra-competitive profits (due to
increased transparency and threat of retaliation). 
–              
lead to foreclosure, particularly input
foreclosure, given that the acquirer only internalises a part, rather than all,
of the loss in the target firm’s profits (see e.g. IPIC/MAN Ferrostaal).

5.                      
The Commission is currently only able to review
pre-existing minority shareholdings held by one of the merging parties to a
notified concentration. 
6.                      
The public consultation showed that stakeholders generally agree that non-controlling
minority shareholdings may lead to competitive harm. Although many stakeholders
suggested that Articles 101 and 102 TFEU be used to tackle such harm, these
tools would only capture acquisitions of minority shareholdings in limited circumstances.

7.                      
Within the European Union, Austria, Germany and the United Kingdom all have jurisdiction to intervene against acquisitions of minority
shareholdings. Equally, many jurisdictions outside the EU have such
jurisdiction under their merger rules, such as Canada, the United States and Japan. 
8.                      
Using information from Member States and the
Zephyr database, it is roughly estimated that on the basis of a targeted
competence around 20-30 acquisitions of minority shareholdings would meet the EU
turnover thresholds per year.

2.2.                
Objectives of the EU initiative

9.                      
The objective of the proposal is to increase the
effectiveness of EU merger control by preventing harm to competition and
consumers resulting from acquisitions of non-controlling minority shareholdings.
The system should be designed to:
–              
catch only the potentially problematic cases;
–              
avoid any unnecessary administrative burden; and
–              
fit with the existing EU and Member State merger control regimes. 

2.3.                
Policy options

10.                  
The following policy options are assessed
against the baseline scenario of no action.
11.                  
Option 1 – self-assessment system: The parties could proceed with an acquisition of a minority
shareholding without prior approval from the Commission. The Commission could investigate a transaction
on the basis of its own market intelligence and complaints. Parties would be
able to voluntarily submit a notification in order to achieve legal certainty. 

12.                  
Option 2 -
targeted notification system: The existing system of ex-ante merger control would be extended to
potentially problematic acquisitions of non-controlling minority shareholdings.
An acquisition would be considered potentially problematic if the shareholding
is:
–              
acquired in a competitor or a vertically related
company; and
–              
either (i) above a
certain higher level of, for example, 20% or (ii) 5% or more and accompanied by
rights such as board representation, the right to block special resolutions and
information rights.
13.                  
The normal
standstill obligation would apply.
14.                  
Option 3 –
targeted transparency system: The parties would be required to submit an information notice for
potentially problematic transactions (using the criteria set out in paragraph
15). The information notice would enable the Commission to decide if it wants
to further investigate the transaction and Member States to decide whether to
request a referral. These decisions would be taken within a waiting period of,
for example, 15 working days. After that, if neither the Commission nor a Member State will investigate the transaction, the parties may proceed with its implementation.
In the interest of legal certainty, parties would be able to proceed
voluntarily to full notification.
15.                  
The following table presents an overview of the
three options.
 Overview of the options on minority shareholdings 
 Parameter || Option 1 Self-assessment || Option 2 Targeted notification || Option 3 Targeted transparency system 
 Scope of the Commission's jurisdiction || (1)                                       Any acquisition of a minority shareholding above safe harbour of 5% || (2)                                       Acquisition of a minority shareholding in a competitor / vertically related company above 20% or 5% with rights || (3)                                       Acquisition of a minority shareholding in a competitor / vertically related company above 20% or 5% with rights 
 Obligation to submit a full notification || no || yes || No 
 Obligation to submit an information notice || (4)                                       no || (5)                                       n/a || (6)                                       yes 
 Voluntary notification available || n/a || n/a || yes 
 Stand-still obligation || no || yes || no 
 Waiting period || no || n/a || yes 
 Obligation of the Commission to issue a decision || (7)                                       No, only in the event that the Commission initiates an investigation || (8)                                       yes || (9)                                       No, only in the event that the Commission initiates an investigation 
 Possibility for Member States to request a referral || (10)                                     yes || (11)                                     yes || (12)                                     yes 

2.4.                
Assessment of impacts and comparison of options
2.4.1.          
Assessment criteria

16.                  
In line with the objectives set out above, the
impact of the policy options has been assessed against the following criteria:
–              
preventing harm to competition and consumers;
–              
legal certainty;
–              
administrative burden on business; 
–              
public enforcement costs;
–              
consistency with the current EU and national merger
control regimes; and 
–              
allocation of cases to the more appropriate
authority. 

2.4.2.          
Comparison of options

17.                  
The table below sets out a comparative overview
of the different policy options against these assessment criteria. 
 Comparison of minority shareholding options 
 Criteria   || Impact compared to baseline scenario (- - - to +++) 
 Option 1 || Option 2 || Option 3 
 Self-assessment system || Targeted notification system || Targeted transparency system 
 1. Preventing harm to competition and consumers || + || + + + || + + + 
 2. Legal certainty || + + || + + || + + 
 3. Administrative burden on businesses || - || - - || - 
 4. Public enforcement costs || - - - || - - || - 
 5. Consistency with the existing merger control system on an EU and Member State level and allocation to the more appropriate authority || - || + + || + 
18.                  
Option 3 is the preferred option because it (i)
captures the potentially problematic cases, (ii) avoids any unnecessary
administrative burden and (iii) fits with the current EU and national merger
control regimes. While Option 3 captures the potentially problematic
transactions, it allows those transactions which are most likely innocuous to
proceed without review. The administrative burden on businesses is also limited
by requiring less information to be submitted to the Commission in the first
instance and the number of cases covered by the Commission's competence would
be limited. Finally, Option 3 fits with the current EU
and national merger control regimes, as the information notice enables Member
States to request a referral. It could also be considered to introduce a three
weeks waiting period to ensure that Member States with a notification system
and stand-still obligation are not faced with already implemented transactions
before they start their investigations.

2.5.                
Analysis of subsidiarity

19.                  
Many of the acquisitions of minority
shareholdings previously reviewed by Member States clearly had a cross-border
dimension, meaning that the Commission would likely have been the more
appropriate authority  to investigate them. 

3.                      
Case referrals between national competition
authorities and the Commission
3.1.                
Problem definition

20.                  
The 2009 Report found that a significant number
of cross-border cases are still reviewed in three or more Member States, and
that this may be due to the procedural burden associated with a referral. 

3.1.1.          
Pre-notification referral from Member States to
the Commission, Article 4(5)

21.                  
Article 4(5) of the Merger Regulation allows the
merging parties to request the referral of a case to the Commission before
notification. Parties must first submit a "reasoned submission" requesting
a referral. Provided that no Member State opposes the referral, the Commission
obtains jurisdiction for the entire EEA and the parties must then submit a
notification to the Commission. 
22.                  
The experience over the last 10 years shows that
the requirement for two separate submissions is burdensome and time-consuming,
which may have led to a resistance by companies to make use of Article 4(5).

3.1.2.          
Post-notification referral from Member States to
the Commission Article 22

23.                  
Article 22 allows one or several Member States
to request a referral of a case to the Commission. If accepted, the Commission only
takes jurisdiction for the territory of the Member State(s) requesting (or
supporting) the referral request. This is contrary to the “one-stop-shop” principle
as it leads to a patchwork of competences. 

3.2.                
Objectives of the EU initiative

24.                  
The objective of the proposal is to increase the
effectiveness and efficiency of European merger control by simplifying the case
referral procedure. More specifically, the proposal involves 
–              
abolition of the requirement to file both a
reasoned submission and a notification under Article 4(5); and
–              
ensuring that the Commission is in a position to
examine the effects of a merger in the whole of the EEA territory following an
Article 22 referral.

3.3.                
Policy options

25.                  
With regard to both Article 4(5) and for Article
22, only one proposal for amendment is presented below. Both proposals received
very strong support from stakeholders during the public consultation. 
26.                  
The proposal to amend Article 4(5) involves the abolition
of the requirement for the parties to file a "reasoned submission".
The parties would notify the transaction directly to the Commission. If one or
more competent Member State opposes the referral, the Commission would renounce
jurisdiction and Member States would retain theirs. 
27.                  
The proposal to amend Article 22 involves the
following:
–              
One or more competent Member State(s) could request a referral to the Commission. 
–              
The Commission may decide whether to accept a
referral, upon which it would obtain jurisdiction for the whole of the EEA. 
–              
However, if one or more competent Member State  (s) opposes the referral, all Member States would retain their jurisdiction. 

3.4.                
Assessment of impact and comparison of options
3.4.1.          
Assessment criteria 

28.                  
In line with the objectives set out above, the
impact of the policy options has been assessed against the following criteria:
–              
preventing harm to competition and consumers;
–              
legal certainty;
–              
administrative burden on business;
–              
public enforcement costs;
–              
fits with the principles of the Merger
Regulation.

3.4.2.          
Identifying and assessing the impact of each
option

The table below sets out the Commission’s
assessment of the likely positive and negative impact of the proposal against
the baseline scenario. 
 Criteria || Impact against baseline scenario (- - - to + + + ) || Explanation of rating and aspects of the policy option most relevant 
 Article 4(5) referrals 
 1. Preventing harm to competition and consumers || + + || The proposal encourages the use of Article 4(5) where the Commission is the more appropriate authority. 
 2. Legal certainty || + + || The proposal is clear and precise. Any uncertainty arising from the possibility of a Member State veto following notification to the Commission is outweighed by the time and cost-savings achieved by the proposal. 
 3. Administrative burden on businesses || + + + || Abolition of the two-step procedure significantly reduces the administrative burden on business. 
 4. Public enforcement costs || + + + || Abolition of the two-step procedure will reduce public enforcement costs. A potential increase could occur if parties opt for a referral request more often. However, this would be off-set by a reduction of workload at national level. 
 5. Compatibility with the principles of the Merger Regulation || + + || The proposal encourages the use of Article 4(5) where the Commission is the more appropriate authority. It is also in line with the one-stop principle as the Commission would be competent for the entire EEA territory. 
 Article 22 referral || 
 1. Preventing harm to competition and consumers || + + || The proposal enables the Commission to review referred mergers for the entire EEA territory. || 
 2. Legal certainty || + + + || The option is clear and precise. Limiting referral requests to competent Member States increases legal certainty for parties. || 
 3. Administrative burden on businesses || + + + || Upon referral, the Commission would obtain EEA-wide jurisdiction, thereby avoiding a patchwork of competences. Further, an investigation can no longer be triggered by referral requests from Member States that are not competent. || 
 4. Public enforcement costs || + + || The proposal avoids parallel investigations by multiple authorities. No increase in the Commission's workload is foreseen as the number of cases with cross-border effects is not expected to increase. || 
 5. Compatibility with the principles of the Merger Regulation || + + + || Upon referral, the Commission would obtain EEA-wide jurisdiction, in line with the one-stop-shop principle. || 
29.                  
In light of the above, the proposals are
considered to have a positive impact as compared with the baseline scenario. 

3.5.                
Analysis of subsidiarity

30.                  
The proposals encourage further adherence to the
principle of the more appropriate authority which emanates from the principle
of subsidiarity. 

4.                      
Monitoring and evaluation 

31.                  
The Commission will continue to monitor the
application of the Merger Regulation going forward. It will decide whether to
take further steps toward a legislative proposal to amend the Merger Regulation
based on feedback on the White Paper and its on-going dialogue with
stakeholders.