Recent Developments in Merger Control Enforcement

Table of Contents 1. Introduction: A new era in merger enforcement?

Pablo Solano Diaz and Lena Hornkohl 2. Is Planet Merger Control becoming uninhabitable? – Observations on the increasingly shaky statics of international merger control Tilman Kuhn 3. The renewed use of Article 22 : Casting Shadows of Uncertainty for Digital Market Players Heidi Jorkjend and Eivind Vesterkjær 4. Digital mergers under review Isabel Álvarez and Pablo Velasco 5. EU merger control in the digital sector: an expanding toolkit, an evolving practice Sean Mernagh 6. Two-Speed Merger Control Regime and the Digital Markets Act: Article 14 of the DMA in Catching Them All Alba Ribera Martínez 7. Damned if you do and damned if you don’t: how gun-jumping is growing teeth Inês Neves 8. Gun-jumping – Substantive integration before merger clearance Renella Reumerman 9. Not the right mix: the European Commission, Art. 3(4) EUMR and Austria Asphalt Daniel von Brevern and Maximilian-Philipp Schöps

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Introduction: A new era in merger enforcement?

Edited by Pablo Solano Diaz and Lena Hornkohl It is already commonplace that competition law in the broader sense is permanently under revision, but now, in the aftermath of the digital convulsion, it is time to take stock. After an initial phase characterised by denialism of the traditional antitrust playbook’s limitations in the digital era (Vestager, 2016), the shortcomings of, among other areas, merger control were voiced to the point of hyperbole on the political level (Crémer et al, 2019, pp. 110-125). This led to the proliferation of partial, even back-door solutions on the side of the Commission, stretching existing provisions and case law to capture new transactions on the jurisdictional front as well as new theories of harm (increase of market power in ecosystems – e.g., Meta/Kustomer, Case M.10262; accumulation of data to strengthen position in other markets – e.g., Google/Fitbit, Case M.9660; or killer acquisitions – e.g., Microsoft/Activision Blizzard, Case M.10646) on the substantive side. Next to a certain re-alignment of the Commission’s playbook, also the Court of Justice of the European Union (CJEU) played a decisive role in what some practitioners call ‘the new era of uncertainty’ in merger control. This symposium deals with several of the hot trends and tendencies in merger control enforcement.

Several key developments stemming from the Commission and largely backed by the Court of Justice characterised the last two years of merger enforcement. The Court of Justice endorsed national competition authorities’ jurisdictional powers to refer concentrations to the European Commission for review under Article 22 of Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (EUMR) (Illumina v Commission, Case T-227/21, ECLI:EU:T:2022:447) and to conduct abuse of dominance investigations on mergers (Towercast, Case C‑449/21, ECLI:EU:C:2023:207). It also allowed for sharpened gun-jumping prosecution by extending to parking structures the concept of interim transactions only carried out in view of, and thus being part of, the ultimate transaction (Canon v Commission, Case T‑609/19, ECLI:EU:T:2022:299). From the substantive perspective, it curtailed the authorities’ enthusiasm by rightly reinterpreting the Tetra Laval case law (Commission v Tetra Laval, Case C-12/03 P, ECLI:EU:C:2005:87). The Court of Justice underlined that there is just one standard of proof (balance of probabilities) and legal test (significant impediment to effective competition) while the quality of evidence required to pass this test to that requisite standard must of course be better where the cause-and-effect relationship underlying the theory of harm is less direct – such as in conglomerate effects or overall reduction of competitive pressure on the oligopoly (Commission v CK Telecoms, Case‑376/20 P, ECLI:EU:C:2023:561).

The tendency described above seems to be worldwide, as explained by Tilman Kuhn, who warns against differing and aggressive merger control approaches in major jurisdictions, the global proliferation of foreign direct investment regimes, the introduction of Regulation (EU) 2022/2560 of the European Parliament and of the Council of 14 December 2022 on foreign subsidies distorting the internal market, and the advent of outbound investment control creating a perfect regulatory storm. This surge of regionalism and nationalism appears to have created a bias against global mergers and acquisitions as opposed to others focusing on the strengthening of domestic industries and resilience, possibly aggravated by the lack of effective and timely judicial protection in merger control outside the United States.

The abovementioned multijurisdictional drift (or convergence on more aggressive enforcement against global mergers lacking a significant domestic link) must be considered together with the possibility of referring concentrations to the Commission even if national thresholds are not met. The revival of the Dutch Clause – it never really went away, but at

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least it was dormant – has occupied merger practice and academia in recent years and leads to further uncertainty in the merger process, together with other developments described by our authors. The revised policy is set out in the indeed new Commission Guidance on the application of the referral mechanism set out in Article 22 of the Merger Regulation to certain categories of cases (Article 22 Notice), currently questioned before the Court of Justice (Illumina v Commission, Case C-611/22 P). A perspective from Norway, a Member State of the European Economic Area which has long had an equivalent power, is provided by Heidi Jorkjend and Eivind Vesterkjær. Both advice that preservation of the Union ex ante merger control regime requires that when a transaction is made known to the Commission it not be able to intervene based on subsequent referrals and parties be given the possibility to obtain legal certainty by actively approaching the Commission before closing and a deadline be set for post-closing intervention.

Such trend is particularly clear in digital environments, as pointed out by Isabel Álvarez and Pablo Velasco. They offer the perspective from a Member State of the EU as officials from the Spanish National Competition and Markets Commission.

The Spanish CNMC is also sailing through the specific jurisdictional and substantive challenges for merger control that come with the special economic features of digital economy. More specifically, Isabel and Pablo discuss the problems for market definition that the coexistence of online and offline channels, the multi-sided nature of digital platforms and the existence of zero-price services entail, the need to either rethink thresholds by taking inspiration from market shares as in Spain or transaction value as in Austria and Germany, or crystalise the softer solutions in the Article 22 Notice, the information obligation under Article 14 of Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on contestable and fair markets in the digital sector (DMA), and the Towercast case law, and the importance of international cooperation, gathering of internal documents , market tests and remedies to appropriately apply novel theories of harm.

Indeed, the result is that not only detection and jurisdictional tools have expanded to an exceptionally large extent in digital environments but also theories of harm have become extremely innovative, as remarked by Sean Mernagh. The paramount instance is the Article 22 Notice, which in practice is used after a cursory analysis by the Commission of below-threshold transactions identified through a combination of ex officio monitoring, complaints from competitors or customers, and consultations with merging parties. It has even led certain Member States, including Italy and Ireland, to introducing call-in provisions for below-threshold transaction. He describes the assessment of digital mergers as increasingly sophisticated and bold with theories of harm based on conglomerate interoperability degradation (Google/ Fitbit, M.9660), vertical access degradation (Meta/Kustomer, M.10262), accumulation of data (Apple/Shazam, M.8788), and ecosystem building (Booking Holdings/eTraveli Group, M.10615). He also explains how behavioural remedies still remain exceptional in digital mergers (Meta/Kustomer, Case M.10262) and sometimes even structural remedies were not enough (Booking Holdings/eTraveli Group, M.10615).

Particular attention deserves the obligation to inform of all concentrations between gatekeepers and any companies providing core platform services or any other digital or data-collection services under Article 14 of the DMA, which adds another puzzle piece in the complexity of merger control. This is discussed in Alba Ribera’s piece, which provides the lay of the land by describing the past, present and future of that provision from legislative inception to future application through most recent developments. She mentions that, although the designation of the first six gatekeepers in September 2023 entails that they must start complying with the DMA obligations by March 2024, Article 14 would be immediately applicable as inferred from the lack of explicit reference in the DMA and the fact that the Commission rushed to publish the implementation act without public consultation (Template relating to the obligation to inform about a concentration pursuant to article 14 of Regulation (EU) 2022/1925). She also refers to the compatibility between Article 14 of the DMA, on the one hand, and the Article 22 Notice and the Towecast case law, on the other hand, since these are separate tools. This means that the information obtained via Article 14 of the DMA in principle should not be used for merger

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control purposes but there may an indirect way through cooperation in the European Competition Network under Article 38 of the DMA. The current uncertainty seems to be at odds with the surge in gun-jumping enforcement, fuelled by the lax stance taken by the Court of Justice when it comes to legal certainty and intentionality. Inês Neves delves into this by focusing on recent cases, which deem a broader notion of “operations contributing to a lasting change in control” than in previous cases (Ernst & Young, Case C‑633/16, ECLI:EU:C:2018:371) to meet legal certainty requirements. She holds that some unforeseeability is inherent in competition investigations and companies can always engage in consultation (Canon v Commission, Case T‑609/19, ECLI:EU:T:2022:299, and Mowi v Commission, Case C‑10/18 P, ECLI:EU:C:2020:149), even if jurisdiction is being debated before the Court of Justice (Illumina/Grail, Case M.10483). Those developments ushered in Advocate General Collin’s opinion in Altice v Commission (Case C‑746/21 P, ECLI:EU:C:2023:361), which endorsed the Commission’s tendency towards assessing all agreements or concerted practices between the parties to a concentration in light of Articles 4 and 7 of the EUMR instead of under Article 101 of the Treaty on the Functioning of the European Union (TEFEU) even where they fit the latter better is discussed by Renella Reumerman. She highlights that this entails that the developments in limiting by object restrictions under Article 101 of the TFEU cannot make their way into gun-jumping.

The climate of overenforcement described above is aggravated, in the view of Daniel von Brevern and Maximilian-Philipp Schöps, by the restrictive application of the full-functionality test to brown-field joint ventures in a reaction to Austria Asphalt (Case C‑248/16, ECLI:EU:C:2017:643). The authors elaborate on the seeming conflict between that ruling, where the Court of Justice extended the full-functionality test to changes from sole to joint control over existing (parts of) companies, and the Commission’s subsequent practice based on paragraph 91 of the Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings ( Jurisdictional Notice), whereby the new acquisition of joint control by third-party several companies over a company that they did not control before does not have to pass the full-functionality test to be a concentration.

The different regime could be justified by the distinction between change of control (i.e., the object of control exits one undertaking and enters another two or more – which would not need to pass the test under Austria Asphalt) and change in the quality of control (i.e., the object of control stays under the same control structure and the number of joint controlling companies increase – which would need to pass the test under paragraph 91 of the Commission Notice).

However, the authors opine that such difference is artificial and may lead to a proliferation of false negatives to be avoided especially given the dense lattice of existing screening mechanisms (DMA, Article 22 Notice, Towercast case law, and foreign investments and foreign subsidies regimes).

The emergence of endemic digital and platform economy business models has spurred a new swing of the merger control pendulum in the form of apparently disconnected national and Union, jurisdictional and substantive, enforcement trends. The contributions to this symposium clairvoyantly endeavour to make sense of them from the perspectives of competition authorities, academia, judiciary and private practice, and aim at finding a common pattern in order to provide the reader with an insight into the status of the main open debates that will shape the development of this moving plate of competition law in the coming years. After all, when it comes to merger control, the crystal ball must always be dusted off.

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Is Planet Merger Control becoming uninhabitable? – Observations on the increasingly shaky statics of international merger control Tilman Kuhn Merger and acquisition (M&A) transactions are facing ever longer regulatory reviews and an increasingly uncertain outcome. Less than a decade ago, it seemed we were on a clear path to substantial international convergence, and the “community” understood that it is difficult to hold transactions together over long periods of regulatory uncertainty, so various initiatives to speed up global deal reviews were considered. In global transactions, parties could rely on the global lead antitrust agencies coordinating with each other (including based on waivers from the parties) to come up with global solutions for difficult transactions.

But at the same time, new antitrust authorities started to appear on the map, which logically were facing a steep learning curve (colleagues have recently called this the “decentralization of antitrust enforcement”). Moreover, especially the European Commission (“EC”) started to introduce additional elements from the US review system, notably an increased focus on internal documents – despite keeping the tedious front-loaded written process with mandatory pre-notification and an extensive, descriptive notification form (Form CO) and often massive requests for information. And rather than the EC then cutting back on its traditional tools, unfortunately it looks like we are currently seeing the opposite trend – with the US agencies adding time on the front-end by exploring new ways to make the Hart-Scott-Rodino Antitrust Improvements Act form more like a Form CO. The EC was also the first major agency which increasingly delved into untested novel theories of harm, and generally ramped up intervention (starting in around 2015, its intervention rate jumped from less than 20% to around 30% today).

More recently post-Brexit, the UK Competition and Market Authority (“CMA”) has started asserting itself as one of the most, if not the most aggressive merger regulator in the world, the Chinese authority (“SAMR”) remains much of a black box, the EC continues its interventionist trend in a myriad of ways (unfortunately increasingly endorsed by deferential EU courts). And the US agencies have overtaken the EC in pursuing novel and aggressive theories of harm (and seem willing to revive theories based on decades-old cases), delving into new spheres such as a transaction’s impact on labor markets, and rejecting consensual resolutions over a preference for litigation. Interestingly, even though the UK Competition Appeal Tribunal dismissed the Facebook/GIPHY appeal, it still commented that the CMA should be careful about interfering in global mergers (Case No. 1429/4/12/12, para. 127 (2)).

For parties considering M&A transactions, these merger control trends, the global proliferation of foreign direct investment (FDI) regimes, the introduction of the Foreign Subsidies Regulation, and the advent of outbound investment control are creating a perfect regulatory storm. Many clients, especially in tech and pharma/life sciences industries, report that a substantial portion of transactions initially considered do not move to actual deal negotiations primarily due to the uncertainty about regulatory outcomes and timing. In jurisdictions like the EU, basic principles of good administration such as equality of arms and impartial reviews without prosecutorial/confirmation bias, as well as effective legal redress have long been strongly underdeveloped, and prospects are not great. Overall, there seems to be an emerging global consensus among the antitrust agencies to discourage M&A, especially in certain industries. By contrast, massive subsidy programs are trying to strengthen domestic or regional industries, attract foreign investment, and build resilient supply

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chains. This strongly disincentivizes companies to consider transformative M&A deals in the first place, including transactions that are the best, or even the only option, to accelerate market adoption of novel technologies and/or to ensure the survival of start-ups, all of which may well have a detrimental impact on innovation in the long run.

1. Selected recent trends and old problems Below threshold interventions While the US has had the option of reviewing below-threshold deals for a long time, the EC had long discouraged referrals of transactions pursuant to Article 22 EUMR if they did not meet any national filing thresholds. With its new policy announced in March 2021 (Communication from the Commission, (2021/C 113/01)), it is now encouraging (or actually lobbying for) such referrals in cases that it deems appropriate. At the time of writing, there have been three such referrals for cases that did not require any national filings in the EU: the “procedural rollercoaster” Illumina/ Grail (M.10483, M.10188, M.10493 and M.10939) – in which the EC recently imposed a gun jumping fine of around EUR 432million; Qualcomm/Autotalks (M.11212; EC daily news); and EEX/NASDAQ (M.11241; EC daily news).

With the ECJ’s Towercast judgment (C-449/21), national competition authorities (“NCAs”) also obtained a new tool for an ex-post review of below-threshold transactions. The Court clarified that transactions that fall below EU and national merger control thresholds, and at the same time have not been referred to the EC pursuant to Article 22, may be subject to ex-post intervention based on Article 102 TFEU. At the same time, the Court specified that strengthening a dominant position in itself is not sufficient to establish an abuse under Article 102 TFEU. It rather “must be established that the degree of dominance reached through the acquisition would substantially impede competition”, implying that the merger leads to a material difference in the competitive landscape not only quantitatively with a market share increment but also qualitatively. Applying this threshold is far from straightforward, the standard is not well developed. Not even a week after the judgement, the Belgian Competition Authority (“BCA”) announced the review of Proximus/EDPnet, expressly with reference to the Towercast judgment (the only known “Towercast procedure” so far). In June 2023, after finding the takeover constituted a prima facie abuse of dominance by Proximus, the BCA imposed interim measures to ensure the operational autonomy of EDPnet including the supervision of an independent trustee for a duration of 15 months (BCA press release).

Despite a voluntary filing regime, the UK CMA can call in mergers on its own initiative. It takes an increasingly aggressive approach to merger review post-Brexit by generously exercising this power and applying a low standard to assert jurisdiction (c.f. the share of purchase test which is not a market share test and allows for wide discretion in describing goods or services; we are seeing arguments like “the downstream products may become important for UK customers”, and the like).

International divergence and new alliances There is also an increasing number of deals that some of the global lead authorities clear (subject to remedies), while others block them or require commitments to be offered – something that would have been more or less unthinkable not long ago.

Specifically, the parties called off the Cargotec/Konecranes merger after the EC cleared but the CMA blocked the deal despite the exact same remedy offer. The Microsoft/Activision Blizzard deal took even more surprising turns. With the EC clearing the deal, accepting long-term licensing commitments as a remedy, and the CMA blocking it, not being convinced by the same remedies that convinced the EC, the closing of the deal appeared improbable at first. Microsoft then appealed the CMA’s decision in May 2023. In the course of the proceedings, the CMA agreed on a suspension

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and entered into negotiations with the parties to find a competitively viable solution for the deal, allegedly focusing on structural remedies (as opposed to the EC’s behavioral remedies). Microsoft re-filed a substantially different deal with the CMA, proposing a fix-it-first divestiture remedy by opting to divest the cloud streaming rights to all current and future Activision games released over the next 15 years outside the EEA to Ubisoft (instead of acquiring those) (GCR article), which the CMA is now market testing with some positive communication around it (GCR Article). Moreover, the FTC withdrew its lawsuit against the merger in the US and the parties postponed their closing deadline up until October. By contrast, the CMA cleared Meta/Kustomer, while the EC required commitments, which seems to indicate that the way the agencies take a particularly subjective view on the counterfactual in digital markets. Booking/eTraveli (M.10615) seems to be the next example, with the FTC and the CMA clearing the deal while the EC just blocked it.

At the same time that the agencies are becoming confident to reach diverging views, new alliances are forming. One recent example is EEX/NASDAQ, where the Nordic competition authorities of Denmark, Finland, Sweden and Norway rallied to convince the EC to review the deal and had their referral requests accepted in late August 2023 (c.f. GCR article for reference). Separately, there were rumblings about the US and the Commonwealth agencies coordinating the Cargotec/ Konecranes merger block despite the EC’s openness to the deal. Even more spectacularly, in Illumina/Grail, the FTC withdrew its application for preliminary injunction on May 20, 2021 - just shortly after the EC asserted jurisdiction over the deal on April 19. This timeline alone raises doubts if the FTC really acted independently and guided by objective and impartial motives or if they withdrew their application comfortably, knowing that the EC would apply its standstill provision, extensively review and probably block the deal or at least require some form of remedy.

This new mix of international divergences and ad hoc alliances creates additional uncertainty about how to navigate global deals.

Novel “offenses” – “make or buy” decisions under fire, and increasing focus on vertical and conglomerate “ecosystem” theories of harm Mergers like Meta/Within, Adobe/Figma and Amazon/Deliveroo are examples for growing regulator skepticism towards so-called make-or-buy decisions (i.e., one party decides to buy (parts of) a business with a certain technology or a product rather than trying to develop it itself). Without success, the FTC sued to block Meta/Within, essentially complaining the deal killed the acquirer’s own innovation efforts/incentives, which harmed competition (see paras. 102 et seq. of the FTC’s lawsuit (Link).

This approach is remarkable. Large corporate acquirers typically have ample activities and ongoing research and development (R&D) projects, and they typically try to leverage existing resources and technologies to make improved or new products. They are necessarily not as nimble as smaller companies that may focus on one or only a few selected projects but have a large and costly R&D organization where there is competition for several projects in parallel, especially for publicly listed companies with clear investor profitability expectations. They simply cannot pursue every single project to enter a segment themselves. Conversely, start-ups require venture capital (VC) funding to get started, and for VC investors, the option to sell their stakes later on profitably to a strategic acquirer is the key incentive to provide initial funding in the first place. (This is why characterising incumbents buying start-ups as “killer acquisitions” is often inappropriate, especially in digital industries, because the deal rationale is not to “kill” the target, but to keep it alive - I have accordingly dubbed these cases “zombie acquisitions”. The regulator concern is more about the acquiror’s own innovation efforts (see above), a somewhat more vague strengthening of its ecosystem, a broader issue about start-ups only innovating “around” and “in the vicinity” of the incumbents’ business models in order to bought out at some point, a prevention of future competition from a business model that is complementary and not directly competitive today,

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and/or more classical tying or bundling concerns.) Even more puzzling are the increasing regulator concerns about the potentially “chilling impact” of an M&A deal on innovation efforts and incentives of third parties – something hardly empirically proven or measurable in a predictive art like merger control.

There is also an increasing focus on vertical and conglomerate “ecosystem” theories of harm (non-price effects in general - c.f. Haucap and Stibale) and growing skepticism towards behavioral remedies in case of non-horizontal concerns, as these are gauged as insufficient more frequently. With Illumina/Grail, the EC for the first time blocked a purely vertical merger and rejected the proposed behavioral remedies. Moreover, in the EC blocked Booking/eTraveli (M.10615) on September 25, 2023, based on an “ecosystem” theory of harm according to which the deal would strengthen Booking. com’s existing dominant position on the hotel online travel agencies market by acquiring a major customer acquisition channel, which would have allowed Booking.com to expand its travel services ecosystem. Increasing traffic and sales

by Booking.com’s platforms would have, according to the EC, increased barriers to entry and expansion, and led to higher costs for hotels and possibly consumers. The proposed behavioral remedies did not persuade the EC (EC press release). The jury is still out as to whether “strengthening” of an ecosystem is just a new label, as the EC seems to be arguing in Booking.com/eTraveli (it is speaking of reverse conglomerate effects or leveraging from the weaker to the stronger position and thereby strengthening pre-existing dominance), or whether it is a new tool (see e.g., the Federal Cartel Office’s remark on Meta/Kustomer effectively saying that it wished it could look at ecosystem strengthening as a theory of harm, but it could not under the current state of the law) and what the limiting principles and approach to evidence are.

Recent court endorsements strengthen the EC One balancing factor ought to be the courts. While judicial reviews of merger vetos are basically unheard of in China, the US agencies seem to be losing frequently before the courts.

In the EU, recent court endorsements will, however, likely further invigorate the EC. First, the General Court (“GC”) explicitly confirmed the EC’s new Article 22 policy in in Illumina/Grail (press release and T-227/21) and found the referral request to still be in time (within 15 working days), although the deal was announced in September 2020 and the referral request by the French competition authority was only sent in March 2021. While remarkable at first sight, this results from the GC’s interpretation of a transaction having been “made known” to a Member State within the meaning of Article 22 as requiring the active transmission of information to the Member State concerned that enables the Member state to assess whether the criteria of Article 22 are met, which was in this case in the GC’s view only the EC’s invitation letter in February 2021 since the parties did not otherwise notify any Member State of the deal. Still, the GC found – inconsequentially, however - that the EC sent its invitation letter “within an unreasonable period of time”, violating the objectives of effectiveness and speed pursued by the EU merger control system but did, however, not annul the EC’s acceptance decision since the parties failed to establish that this infringed their rights of defence.

Second, the ECJ provided the EC with tailwinds in applying the SIEC test below the dominance threshold (so-called “gap cases”) in its CK telecoms judgment (C-376/20 P), only requiring a “more likely than not” standard for a merger to result in a significant impediment to effective competition (SIEC) rather than the “strong probability” that the GC had suggested earlier (T-399/16) (for criticism, see Kuhn). The ECJ also disagreed with the GC’s criticism that the EC had applied a too low standard for considering the parties close competitors and important competitive forces and rejected a standard efficiencies assumption for horizontal mergers – a major set-back for merging parties given that in practice, the burden of proof that the EC applies for efficiencies offsetting the assumed price increase is insurmountable and entirely assymetrical to the standard the EC applies to find that competitive harm is more likely than not to occur.

Third, the GC recognized a broad margin of discretion in the EC’s evaluation of effects and remedies in two rulings in 2022, upholding two prohibition decisions – Wieland/ ARP/ Schwermetall (T-251/19) and ThyssenKrupp/ Tata Steel

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(T-584/19). In those cases, the GC discussed fundamental issues like the required standard of proof and the assessment of evidence and remedies, also bolstering the EC’s approach.

Procedural points – especially review timing, equality of arms, and the approach to evidence Key procedural issues I have discussed in some detail at other occasions have not been addressed. First, despite repeated revisions of the EUMR Implementing Regulation (Commission Implementing Regulation (EU) 2023/914 of 20 April 2023 implementing Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings), a new Form CO, and the expansion of the simplified procedure, cases that obviously do not raise issues are still taking too long and the review process subjects the parties to undue burdens.

Even for the simplest transactions, we are still seeing extensive data requests for all plausible markets and lengthy prenotification. Also in complex cases, too much time is spent on non-core issues. But in my experience, every case, even the most complex ones, effectively turns on a few key issues. The agencies would seem better advised to focus more on getting the core issues right, e.g., by seeking witness statements, independent experts, etc., and try to fully appreciate the balance of evidence.

But unfortunately, the GC has recently broadly endorsed the EC’s use and probative value of internal documents in the cases mentioned above, but in my view, using them as key evidence without hearing witnesses such as the authors or recipients of the documents seems to be suboptimal to get to the truth. Moreover, a key challenge for the parties remains that whatever the parties say is treated as advocacy, what complainants say is evidence (“market test”), and the parties have no way of countering this with witnesses of their own, as they would in the US process. And this is despite the parties being subject to the sanctions for incorrect or misleading information pursuant to Article 14 EUMR. Frankly, it is difficult to understand why that is not even possible in appeals in front of the Luxembourg courts, while in the US, executive testimony has long been treated as key evidence– and rightly so.

This imbalance and lacking equality of arms can be particularly cruel under the new Article 22 EUMR policy. As recent cases indicate, the EC is frequently alerted to transactions by complainants. While it does occasionally send early RFIs to parties (insisting Articles 11 and 14 EUMR already apply at that stage), its “invitation letters” to member states pursuant to Article 22(5) EUMR can be based largely on the perceived fact pattern as described by the complainants without properly taking into account the parties’ evidence and observations. The NCAs then repeat this fact pattern in their referral letters without having done much of an impartial own investigation. The EC then takes jurisdiction on this basis, with the NCAs issuing press releases perpetuating the same fact base that started the process. With “information gathering” of the specialized press, this establishes a somewhat collusive public narrative that creates a genuinely antitransaction environment.

Again, there is hardly anything that the parties can do here, given the case-law that these referral decisions and the EC taking jurisdiction basically cannot be appealed but for a failure to meet the 15 working day deadline. However, that is not of much help either, because based on the GC’s Illumina/Grail judgment, the only way to safely trigger this deadline is to make “mini-notifications” to each member state (in fact, we have seen cases in which the NCAs have stated that even the EC invitation letter and 15 working days were not enough time for them to form a view of whether the criteria of Article 22 EUMR are met in the case at issue).

Share purchase agreements (SPAs) often provide for long-stop dates at which one or both parties can walk away, breakup fees if a deal is not closed by a specific point in time, etc. All of the abovementioned procedural issues extend the real review timetable, add deal uncertainty, and allow the agencies to let the clock run out on the parties, thereby effectively blocking deals without having to issue a reasoned decision that could be appealed. This is apparently what triggered

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Illumina to close the Grail deal despite the EC’s pending review, it recently happened with a view to the SAMR review of the Intel/Tower Semiconductor deal, and under the German FDI regime in Global Wafers/Siltronic. The parties are left essentially defenceless in the face of such administrative power tools.

Add to this that effectively the EC is still prosecutor and judge in one person, and a final court verdict on an M&A transaction will still take more than four years (so that parties are pressed to accept extensive remedies, which creates a body of case-law precedent unchecked by independent courts), one may wonder who really thinks this is a fair system that likely leads to the right results.

2. Conclusion The described developments have created a regulatory enforcement environment in which it is increasingly difficult even to consider doing non-trivial international deals. New tools and theories create massive uncertainty, and reviews take longer and longer. The general sense that most mergers are good because they create efficiencies, or at least neutral, from a competition perspective seems to vanish among regulators.

It seems like the new regionalism or nationalism has led to an unspoken consensus among governments and agencies that state investment trumps private investment, and vast subsidies to strengthen regional or domestic industries and resilience seem preferable to transactions involving large international corporates.

So we live in an age in which regulatory authorities are increasingly skeptical towards M&A deals, and at the same time they have an unprecedented and expanding degree of power. But this expansion of power should come with a special responsibility, and there need to be limits, especially where timely judicial review is not possible. In particular, where the agencies enter uncharted territory, they should be particularly impartial and convincing on both the theory and the evidence, and predictability and legal certainty are key for companies considering a transaction. The agencies should hold themselves to a very high standard of impartiality, openness and persuasiveness.

To my mind, the root of the problem is the system’s architecture and especially the lack of effective and timely judicial protection in merger control outside the US (and that it is basically inexistent in FDI). Therefore, as I have argued elsewhere, a US-style system that requires the agencies to sue in court to block a deal seems like the only conceivable way to get there. It would require a streamlined application for an injunction, focusing on the key evidence and arguments.

It should also involve the ability to hear and cross-examine witnesses, especially where the EC relies extensively on the parties’ post-merger incentives and its own interpretation of the parties’ internal documents.

Until that happens, we will need to play the cards we were dealt and accept that times have changed quite a bit. This means that major M&A transactions will require even longer and more complex advance planning, framing, and a different combination of advisory skills. But the increased complexity and uncertainty makes addressing these fundamental imbalances ever more important. Stakeholders who share the above concerns should collaborate to build a new consensus, fix the parts of the system that are broken, and help rebuild an environment in which investment and innovation can flourish without relying mainly on state subsidies.

Tilman Kuhn is an antitrust and FDI partner at a global law firm in Düsseldorf and Brussels, and also heads the firm’s the Global

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Consumer & Retail Industry Group. He has around two decades of experience in handling international merger control cases, including landmark deals such as Dow’s $130 billion merger of equals with DuPont, Metso’s merger with Outotec, GlobalWafers’ attempt to take over its rival Siltronic, and many others. His views expressed here are strictly personal and should not be attributed to his law firm, its affiliates or clients.

(fn. 1) See Kuhn, The 16th Anniversary of the SIEC Test Under the EU Merger Regulation, available at SSRN (Link). (fn.21) Kuhn, The 16th Anniversary of the SIEC Test Under the EU Merger Regulation as referenced in footnote [1].

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The renewed use of Article 22 : Casting Shadows of Uncertainty for Digital Market Players Heidi Jorkjend and Eivind Vesterkjær Introduction The uprising of digital markets and big tech companies have spurred countless debates and new EU policies aimed at ensuring healthy competition in the internal market. One particular concern is that some transactions, in digital markets, may escape review under both EU and Member States’ merger control regimes, thus leading to transactions potentially restricting competition being implemented without scrutiny.

The concern stems from the differentiated features of concentrations in digital markets, including special network effects, multi-sidedness, and their fast-moving, non-monetary-price nature. Digital players also tend to operate within massive economies of scale and attract great value in the collection of data. Because of these features, competitiveness and market power of tech companies are not necessarily reflected by the companies’ turnover figures.

To combat the enforcement gap, the European Commission (‘EC’) has repurposed Article 22 , which allows Member States to refer transactions that do not meet European Union or national notification thresholds to the EC. In its Guidance on the application of Article 22 (the ‘Guidance‘), the EC now encourage all Member States to make referrals under Article 22, also in already closed transactions. Referral requests were previously discouraged and originally only made by Member States without an operational merger control regime (Illumina/Grail, para. 111), a practice notably based on the idea that transactions falling outside national turnover thresholds were generally not likely to have a significant impact on the internal market (see para 8 of the Guidance).

Leaving the question of whether this radical change should require the involvement of the EU law makers, this piece seeks to explore some of the practical consequences for merger parties in fast-moving markets. However, this also raises the question of whether the EC should call for a new and improved legal framework, rather than repurposing rules originally intended for other situations. We also look to the Norwegian merger control regime where below threshold jurisdiction has been in force a long time.

Mission impossible: eliminating risk of intervention before closing The new policy means that undertakings can no longer rely on a traditional jurisdictional analysis but need to consider whether the substantive conditions of Article 22 may be met in one or more Member States.

Under Article 22, Member States may request the EC to examine any concentration within 15 working days of the date on which the concentration was notified or, if no notification was required, otherwise made known to the Member State concerned. The starting point for notified transactions is clear, in contrast to non-notified transactions where the fifteen-day deadline depends on the interpretation of when it is deemed that a transaction has been ‘made known’ to a Member State.

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According to the General Court in Illumina/GRAIL, the concept of a concentration being ‘made known’, as regards its form, consists of the active transmission of relevant information to the Member State concerned, and, as regards its content, contains sufficient information to enable that Member State to carry out a preliminary assessment, cf. . The General Court implied that the content of the information should be comparable to what is given in a notification, cf. para 198.

The merging parties thus appear to have to provide a considerable amount of information in order to trigger the Member State’s deadline. The judgment has been appealed by Illumina which claims, amongst other things, that the General Court erred in law by misinterpreting the meaning of the words ‘made known’ (see . The legal situation is thus still unclear. The other referral cases Qualcomm/Autotalks (see press release here) and Nasdaq Power/EEX (see press release here) are, at the time of writing, not publicly available and it is uncertain whether these cases will provide further clarity.

Going forward, with the coming guidance from the Court of Justice, it must be assumed that best practices for the information requirements related to making a transaction ‘known’ to the Member state will develop. However, digital markets can often be global or EU-wide, thus if merging parties are looking to eliminate all risk of referrals, they need to actively inform all Member States about transactions – a scenario that seems completely unrealistic.

To limit the risk of referral, the practical solution will most likely be that merging parties provide the EC with information about their intended transaction and the EC will indicate whether it considers the concentration to be a suitable Article 22 candidate, cf. para 24 of the Guidance. This is however not binding on Member States.

While it must be assumed that the EC will be reluctant to accept referrals after giving an indication that the transaction will not be an Article 22 candidate, the parties are still left to rely on the EC’s discretion. One could easily envision a situation, especially in dynamic, fast-moving digital markets that the prospected competitive dynamic described in a briefing paper, or an initial notification, differs from how the situation actually evolves, even in the short term. Also, a third party or a Member State could assess the competitive situation differently. In such cases we believe there is a real risk that the EC will indeed accept a referral even when it has indicated otherwise to the informing parties.

Undoubtedly, Article 22 offers a degree of legal certainty. In Illumina/Grail, the General Court held that it did not contravene the principle of legal certainty that Article 22 covered referrals of transaction falling below national thresholds (paras 173-178). Nevertheless, given the EC’s broad discretionary powers, as outlined in the Guidance, it is clear that the priority is placed on effective scrutiny rather than a heightened degree of legal certainty. EC is indicating that it will generally not consider a referral appropriate where more than six months has passed after closing, cf. the Guidance para 21, but this soft deadline does not apply if they have sufficient concerns related to the transaction.

This essentially means that the EC may, at its discretion, accept a referral without any effective time limit and regardless of whether it has been informed by the parties and the time elapsed since closing. Merging parties are therefore left with significant uncertainties and have no choice but to rely on the EC to follow its own guidance and signals, or accept the extreme administrative burden making sure all the deadline for referrals runs in all Member States.

It is not only the risk of actual intervention that may cause parties to think twice about a deal but also the risk of long-time delays and resource consuming processes with the authorities. It is therefore arguable that the EC’s change of policy is in risk of having a chilling effect on pro-competitive mergers, perhaps especially in the digital sphere.

Although the reference mechanism presents its challenges, undertakings will, in many cases, have a good indication on which transactions may have a negative effect on competition. However, occasionally, undertakings enter into well-intended transactions believing they are well within what is prudent. This issue especially arise in markets where the competitive analysis may be challenging, due to e.g. difficulties in identifying the relevant market definition. The

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competitive effects of a transaction may consequently end up being perceived differently by the undertakings involved and by the competition authorities.

A comparative look – the national competition authority’s (‘NCA’) jurisdiction below the filing thresholds.

By comparison, under the Norwegian Competition Act, the NCA has long had the ability to impose notification obligations for transaction below the turnover thresholds.

Pursuant to section 18(3) of the Norwegian Competition Act, the NCA may impose an obligation to notify transactions below the turnover thresholds provided that there are reasonable grounds to assume that competition will be affected by the concentration. Such an order may not be issued later than three months after the final agreement is entered or control is obtained, whichever comes first.

Contrary to Article 22, the time limit grants the parties predictability of when the NCA has jurisdiction to intervene in a closed transaction. The high degree of predictability, nonetheless, affects the ability of the NCA to intervene in all concentrations that threaten to significantly affect competition. The parties of a transaction can escape merger control simply by keeping the transaction a secret, shifting the responsibility to uncover transactions subject to merger control from the parties to the NCA. While on the outset this system may look clearly inadequate, and the three months from signing is arguable quite short, the NCA has imposed information requirements on players in a number of industries which requires them to disclose any transaction in which they are involved, and thereby not allowing them to keep transactions from the NCA. The information requirements do not necessitate a complete notification, but it allows the NCA to request a notification if deemed appropriate. Most mandated notifications pursuant to section 18(3) is based on information obtained from these information requirements. Of the mandated notifications, the NCA have made three decisions so far in 2023, of which two were dropped and one prohibited.

The one prohibited transaction this year concerned the ready-mix concrete company ØB Group’s acquisition of Betongvarer, which also operated in the market within ready-mixed concrete. Betongvarer was well below the turnover threshold and the geographic market was limited to just one small peninsula on the west coast of Norway. The transaction could have gone under the NCA’s radar if it were not for the information requirements placed on the owner of ØB Group.

Recently, the first merger case ever tried before the Norwegian Supreme Court overturned the NCA’s prohibition decision (the Schibsted/Nettbil case). This case was a below threshold concentration, and a good example of a wellintentioned transaction, where the parties seemingly failed to predict that the NCA would take a different (and now confirmed wrong) view of the transaction.

In 2020, the NCA imposed an obligation to notify media conglomerate Schibsted’s acquisition of the tech start-up Nettbil. Due to Nettbil’s low turnover, the concentration was not subject to any mandatory merger filing. Schibsted was, however, under the obligation to inform the NCA about prospected mergers, which resulted in the NCA calling the parties to submit a notification after closing. The NCA found that Schibsted’s online platform for car sales, Finn.no, and Nettbil had horizontal overlap in a market for online sales of cars and that the transaction gave incentives to raise prices and reduce innovation. The NCA especially feared that the transaction would constitute a “killer acquisition” in which Schibsted would remove the increasing competitive pressure Nettbil had exerted on Finn.no. On this basis, the NCA ordered Schibsted to divest Nettbil. After being processed in two appeal bodies, the Supreme Court overturned NCA’s decision in 2023. As the parties argued, the Supreme Court concluded that Finn.no and Nettbil did not operate in the same product market and the acquisition of Nettbil did not constitute a “killer acquisition”.

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New legislation with a middle ground procedure?

It is easy to understand the EC’s desire to have flexibility in a rigid system based principally on turnover thresholds. The repurposing of Article 22 does indeed provide undertakings with an incentive to actively inform competition authorities about transactions falling below national and EU thresholds. It also leaves significant uncertainties, perhaps especially in fast-moving markets, that may have an undesirable chilling effect.

While not easy to find some middle ground, certain principles should in our opinion be followed: • While useful to have a referral mechanism, the one-stop-shop system upon which the EU merger control regime is originally based upon should be persevered to the best extent possible. When a transaction is made known to the EC, it should not be able to intervene based on subsequent referrals.

• Also, the system of ex ante review should be preserved to the best extent possible. From a transaction and deal certainty perspective, this is absolute key. Again, this can be solved by giving the parties the possibility to get legal certainty by actively informing the EC about the transaction prior to closing.

• There should be an absolute deadline for intervention post-closing. As mentioned above, while three months after signing or closing in Norway may leave the NCA with too little leeway, adjustments may be done to find some middle ground.

• The deadline can be linked to closing only, reducing the possibility for the companies to keep the transaction from the public domain. This will allow third parties to become aware of the transaction before the deadline is expired.

• As in Norway, a requirement on specific companies to inform the EC of all transactions will allow it to request notification where appropriate. A somewhat similar concept is already implemented as the requires designated ‘gatekeepers’ to inform the EC of all contemplated acquisitions of ‘core platform services or any other services [which occur] in the digital sector or enable the collection of data’.

In conclusion, while the need for flexibility and alternatives to purely turn-over based thresholds is clear, we would call for an approach that better balances the need for effective enforcement and the legal certainty of merging parties.

Heidi Jorkjend is Partner in the law firm Thommessen and works with competition law, as well as the rules of ownership control under the Security Act and the EU regulations regarding foreign subsidies. She has extensive experience in both national and international cases where companies are under investigation for violations of competition laws, and she has been involved in several complex merger control cases. She has experience with various sectors and industries, including industry, shipping, telecom, food stuffs and financial markets.

Heidi is ranked as a leading competition law attorney in several rankings.

Eivind Vesterkjær is Partner in the law firm Thommessen and advises clients on competition law (including merger control), public procurement, state aid, regulatory issues, FDI, and general business law. He has broad experience from a variety of sectors and industries, including technology & telecom, financial services, shipping, energy, life sciences, and consumer retail. Eivind has for a number of years been ranked among Norway’s leading lawyers within competition law and public procurement.

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Digital mergers under review Isabel Álvarez and Pablo Velasco It is not breaking news that digital sectors are on the radar of competition authorities, both from the sanctioning and merger control perspective (as proved by the recent activity and pipeline of new cases that, for example, authorities in Europe have resolved or initiated). For example, only in terms of merger control, the Spanish National Markets and Competition Commission (“CNMC”) has analysed around 20 digital mergers in the last three years.

In this context, there are those who argue that merger control rules should be updated to take the specificities of digital mergers into account and others that consider that the current framework is able to capture them.

Indeed, digital mergers can pose a challenge for competition authorities. The specificities of digital markets (such as, for example, multi-sided platforms, digital ecosystems, the winner takes it all strategies, and zero-price) can have an influence on three main areas: market definition, notification of transactions, and substantive analysis.

Market definition In the CNMC’s experience, the digital market definition issues worth highlighting are: (i) online vs offline sales, (ii) multi-sided markets and (iii) zero-price markets.

As regards whether online and offline sales are part of the same product market, the CNMC has usually considered these as separate markets. In fact, this question has been analysed in online food delivery cases (such as C/0730/16 Just Eat/La Nevera Roja and C/1046/19 Just Eat/Canary); in cases involving urban mobility apps (such as C/0802/16 Daimler/Hailo/MyTaxi); and in insurance and financial comparison websites (for instance, in case C/1147/20 Bauer/ Acierto).

As regards multi-sided markets and the question on whether to integrate or separate both sides of the market, the CNMC carries out a case-by-case analysis. For instance, in a case involving online classified ads (C/0573/14: Schibsted/ Milanuncios) as well as a case involving mobility apps (C/0802/16 Daimler/Hailo/MyTaxi), the CNMC assessed the products offered by a platform as a whole. However, in an online food delivery case (C/0730/16 Just Eat/La Nevera Roja), CNMC considered separate markets for the products offered on each side of the platform, while in C/1046/19 Just Eat/Canary the product market definition was left open As regards zero-price markets, non-revenue markets shares using alternative metrics can be used to measure market power (such as quality, consumer experience, innovation or network extensions). For instance, in a cybersecurity sector case (C/1263/22 NORTON / AVAST), the CNMC considered that market shares by revenue overestimated the parties’ actual market power, since they did not include zero pricing products (which can be equally competitive and can be monetized through other means: bundled products, ecosystem solutions, data accumulation…). For this reason, it ended up using additional alternative metrics such as users or devices (units) that enabled to take into consideration the competitive pressure exerted by free products and by pre-installed solutions.

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Notification of transactions There has been a lot of discussion on whether merger thresholds should be modified, especially in order to capture acquisitions by strong incumbents of nascent, innovative start-ups (i.e. potential competitors in the future) (see here, paras. 1-8), the so-called “killer acquisitions”, especially in the pharma and digital sectors.

In this sense, some countries introduced new thresholds based in the value of the transaction (such as Germany and Austria). In its turn, regarding the EU merger control review that was initiated in 2016 (see here), the European Commission (“EC”) considered initially to review the merger thresholds, for example, by introducing a new value-based threshold. However, this change was eventually ruled out as the EC eventually announced that it would use instead the referral system foreseen in article 22 of Regulation 139/2004 (“EUMR”), which allows any Member state to request the EC, under certain conditions, to review a transaction even if the EU and/or national thresholds are not met (see Guidance on article 22 referrals).

The General Court judgement in case T‑227/21 – Illumina v Commission is very relevant in this regard, to the extent that it confirmed that referrals request from a competition authority not having jurisdiction under national law to examine a concentration are possible. For the time being, there have been three referrals under article 22 EUMR: (i) Illumina/ Grail; (ii) Qualcomm/Autotalks; and (iii) EEX/Nasdaq.

The CNMC was one of the national competition authorities (“NCAs”) requesting the EC to review the transaction Qualcomm/Autotalks under article 22 EUMR (see here) in a transaction that was not notifiable in Spain (nor in any other Member State). In any case, it is likely that the referral of a non-notifiable transaction will be rare in Spain due to the market share threshold (in addition to the extended turnover threshold) that has enabled the CNMC to: (i) review potentially problematic mergers that would have escaped scrutiny otherwise; and (ii) refer these mergers to the EC when they are broader than national in scope. In fact, thanks to this threshold, some digital mergers have been notified in Spain to be subsequently referred to the EC, such as Facebook/WhatsApp (under article 4.5 EUMR) and Apple/Shazam (under article 22 EUMR) (see here, page 3).

In fact, more than 70% of the digital mergers analysed in the last three years were notified due to the transaction meeting the relevant national market share thresholds. Thus, in principle, this threshold already enables the CNMC to capture potentially anticompetitive deals (see declarations from the CNMC’s president here).

In addition, article 14 of the new Digital Markets Act includes an obligation for gatekeepers to notify any transaction in the digital sector, irrespective of whether it is notifiable to the EC under or to a competent national competition authority under national merger rules. Although this does not involve any substantive change in practice, it is true that it may facilitate the detection of transactions that do not meet European or national thresholds and that are considered worthy of revision, as they could be requested to be referred under article 22 EUMR In this regard, there is a recent example of a case opened by the Belgium NCA that will be the first one in which this doctrine will be applied (see here).

Substantive analysis The special characteristics of digital markets have also sparked a debate about the current need of a review of the competition and merger policy framework in terms of substantive analysis, as many argue that traditional tools for assessing mergers may have become less informative.

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However, the existing merger control rules can adapt to some of the current challenges and competition authorities have gained a higher degree of knowledge of digital markets and of how entrenched positions could become.

It is important to point out, in the first place, that international coordination is very relevant in digital markets, especially at early stages (to gain knowledge) and along the process until the end (to maximize consistency).

In addition to this, the examination of internal documents, previously or in early stages, may be a relevant source to assess the transaction in these markets, as they may allow to check whether or not there are innovation theories of harm, together with other sources, such research and development (R&D) efforts in terms of budget or human resources, among others.

And these sources can be complemented with market tests when needed. It is important to recall that market tests usually target medium-big firms (competitors, customers, etc.) but many of these platforms operate in multi-sided markets which involve consumers or small business users operating in one of the sides, whose perspective may be important to assess competitive constraints and the counterbalancing power of demand but whose opinion may be difficult to obtain. In order to solve these difficulties, some innovative tools, like pools, could be used to obtain the opinion of these smaller users.

For instance, in the referred case C/1263/22 NORTON / AVAST, in order to assess the general impact of the transaction and especially competitive constraints and the effects on innovation, the CNMC relied on market tests with market players but also with consumer associations, as well as on a thorough analysis of internal documentation (requested by the CNMC) previous to the merger.

It is also relevant to bear in mind the importance of remedies in digital markets. The CNMC has tended to consider light-touch behavioural remedies. In C/0730/16 Just Eat/La Nevera Roja the commitments accepted by the CNMC included non-exclusivity clauses for the merged entity, which would be the leading platform in Spain. Such remedies have appeared to be the right ones, as four years later, the CNMC had the opportunity to analyse this sector ex-officio in an antitrust case analysing potential 101/102 issues in S/0026/20 – REDES PARALELAS EXCLUSIVIDADES PLATAFORMAS (“Platforms Exclusivities”), and observed that the combined market shares of the aforementioned merging parties, which were around 70% (based on revenues and deliveries – and even higher in terms of associated restaurants at the time of the authorization of the merger -), had been substantially reduced after the transaction due to the commitments, as other relevant players had the opportunity to enter the market.

Conclusion Digital mergers present specific characteristics that need to be taken into consideration when analysing a merger from an antitrust perspective. In most cases, it is possible to take these specificities into account with the current merger control rules. However, in other cases, it has been considered useful to update the merger control framework.

In this regard, for instance in the EU, an update of the market definition notice is taking place, among other reasons, in order to reflect some of the specificities of digital sectors.

In addition, new rules or approaches have been adopted regarding the notification of transactions (in most cases in order to solve the killer-acquisitions problem). In this regard, as explained above, the current merger control rules in Spain are a sound instrument to analyse and monitor the acquisition of potential competitors, even in cases related to killer acquisitions.

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Lastly, although it may not be necessary to introduce specific new rules in order to assess digital mergers from a substantive perspective, it is important to take into consideration the special features of these markets. In this regard, international coordination, internal documents examination, rigorous market tests or appropriate remedies could represent useful instruments in order to address the challenges posed by digital markets.

Isabel Álvarez Fernández Del Vallado Pablo Velasco Sanzo Case Handlers at the CNMC Personal views, which do not necessarily reflect CNMC’s official views

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EU merger control in the digital sector: an expanding toolkit, an evolving practice Sean Mernagh The views expressed are strictly personal and can under no circumstance be attributed to the European Commission.

In 1989, the first EU merger regulation came into force. In the 35 years since, it has been replaced in 2004 by Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (“EU Merger Regulation”), and supplemented, refined and interpreted by implementing regulations, case law, guidelines, and notices. As European Union (EU) consumers, we have all benefited directly or indirectly from EU merger control, as well as from the refinements and improvements over time of the EU merger control toolkit. Indeed, these refinements have enabled EU merger control to continue to be relevant, effective and fit for purpose as markets inevitably evolve and change over time.

Ten years after the first EU merger regulation, in 1998, the Google search engine was created. It too has been incrementally improved upon and changed over time, for example based on feedback and data collected from users.

As consumers, we have similarly benefited from such improvements, even if they may have also helped to maintain, or even expand, a gap with rivals.

In December 2022, I co-wrote a Digital Mergers Policy Brief highlighting the specific challenges raised by digital merger, and providing an overview of the Commission’s decisional and remedies practice to date. In that publication, we outlined that certain particular characteristics of digital markets tend to amplify the anticompetitive effects of mergers, even in the case of fringe acquisitions, for example stemming from strong network effects and advantages generated by data access, which are generally integral to digital services. Even acquisitions of nascent players of companies operating in neighbouring or tangentially-related markets can reinforce the market power of large digital platforms, who may be able to stifle competition by reinforcing an already dominant position, or pre-empting competitive disruptions by small or nascent innovative players.

In this op-ed, I will first say a few words on jurisdiction and detection focusing on the expanding toolkit in this regard, including and Digital Markets Act and amending Directives (EU) 2019/1937 and (EU) 2020/1828. Second, I will outline my views on how the Commission’s assessment of digital mergers has evolved and adapted with experience, focusing in particular in cases from the past twelve months. Remedies in digital mergers is a hotly debated topic, in particular on a perceived difference in approach between the Commission and other authorities around the world.

The Commission’s approach to remedies in digital mergers is covered in some detail in the Digital Mergers Policy Brief. I do not propose to revisit that here or add further observations, other than to reiterate a couple of high-level points. First, while divestiture remedies are the Commission’s benchmark, case law of the EU courts requires the Commission to at least consider if a non-divestiture remedy proposal would be effective in removing competition concerns if proposed by the parties. So the Commission does not, and indeed cannot, reject a particular type of remedy out of principle. In practice, while they have been accepted in some instances, e.g. Meta/Kustomer (M.10262) and Broadcom/VMWare (M.10806), they remain exceptional. These mergers tended to involve particularly circumscribed and narrowly-defined anti-competitive concerns, a small set of readily-identifiable remedy beneficiaries and a largely self-policing solution. In

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other recent digital and tech mergers, a divestiture remedy that would preserve the deal rationale was not available, and similarly the proposed non-divestiture remedies were found to be insufficient to remove the concerns identified, leaving the Commission with no option but to prohibit the merger, such as in Illumina/Grail (M.10188), and more recently in Booking Holdings/eTraveli Group (“Booking/eTraveli”, M.10615).

Expanded detection and jurisdictional tools As a result of several developments in the last couple of years, the Commission is now well-placed to detect and take jurisdiction over digital mergers that may warrant review, even when they may not be notifiable at EU or even at national level. At the same time, the Commission’s expanded jurisdictional tools allow for targeting those small number of potentially problematic cases that may otherwise escape review entirely. It was not intended to result in a marked increase in the number of transactions reviewed, nor materially increase the administrative burden on competition authorities or merging parties, and indeed the Commission’s case practice to date confirms this, as shown below.

First, a potential enforcement gap was closed with the Commission’s recalibrated approach to Article 22 of the EU Merger Regulation, and the legality of this approach was confirmed by the EU General Court in Illumina v Commission (T-227/21). Since the announcement of the new approach on 11 September 2020, three cases were referred to the Commission under Article 22 by Member States without original jurisdiction (M.10188 – Illumina/Grail – Article 22 referral decision of 19 April 2023, M.11212 – Qualcomm/Autotalks – Article 22 referral decision of 17 August 2023, and M.11241 – EEX/Nasdaq Power – Article 22 referral decision of 18 August 2023), an average of around one per year. The relatively small number of cases shows that the recalibrated approach to Article 22 remains, as envisaged, a safety net and not a catch-all. It is therefore normal that there has not been a flood of cases.

Of course, for each below-threshold case that is referred, are many other cases that are briefly assessed by the Commission before concluding that they would not be good candidates for referral. These have been detected through a combination of ex officio monitoring, complaints from competitors or customers, and consultations with merging parties. Such monitoring is certain to continue and, in the digital sectors specifically, it will be boosted by the recent designation of six digital firms as gatekeepers under the DMA. Under Article 14 of the DMA, gatekeepers are required to inform the Commission about every concentration they are involved in, regardless of the purchase price, sector or turnover of the target, allowing the Commission to assess whether the concentration would be a good candidate for an Article 22 referral.

Indeed, the Commission has already begun to receive such submissions.

As was indicated in the Q&A document with practical information on Article 22, merging parties have the option to voluntarily come forward with information about their intended transactions and request an early indication from the Commission on whether or not it considers their transaction to be a good candidate for an Article 22 referral. Indeed, early indication letters have already been issued in a number of cases.

Perhaps as a result of the increased focus on Article 22, there has also been an uptick in ‘traditional’ Article 22 referrals by Member States that had original jurisdiction to review the case as their national notification threshold were met. These include, for example, Meta/Kustomer (M.10262), Viasat/Inmarsat (M.10807) and Adobe/Figma (M.11033). With certain Member States, including Italy and Ireland, introducing call-in provisions for below-threshold transaction, it is possible that there could be a sustained increase in below-threshold mergers being reviewed at EU and indeed at national level.

Overall, there is a consensus that mergers, particularly in digital markets, can have far-reaching negative effects on competition in a market even if the target has little to no turnover at the time it is acquired. While these changes may

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result in a slight increase in complexity for lawyers advising on competition approvals, the Commission stands ready to provide an early indication where requested and overall these new detection and call-in measures represent a targeted and proportionate response to a perceived enforcement gap, ensuring that resources are focused on the small number of potentially problematic mergers, notably in the digital sector, that actually merit a careful review.

An increasingly sophisticated and bold assessment of digital mergers Despite calls from some quarters to reduce the standard of review or reverse the burden of proof in digital mergers, due to the perception that they may be particularly harmful to competition, the Commission has consistently held the line that there should be no double standards in merger control, with the same rules, presumption and burdens of proof applying to all mergers regardless of the sector.

At the same time, it is true that mergers in digital markets can raise particular challenges for enforcers such as the Commission seeking to carry out a future-looking assessment of the likely impact of the deal. This is particularly the case where the target may be a nascent player or where they market itself is nascent, going through a technological transition, or susceptible to tipping. The Court of Justice in its recent judgment in CK Telecoms (C-376/20 P, para 86) made clear however that since the assessment is necessarily prospective, this “precludes a requirement for [the Commission] to meet a particularly high standard of proof in order to demonstrate that a concentration would or would not significantly impede effective competition” (para. 86). Rather, the Commission is only required to show “by means of a sufficiently cogent and consistent body of evidence, that it is more likely than not that the concentration concerned would or would not significantly impede effective” (para. 87). In other words, the same standard of proof applies to all mergers, one of balance of probabilities, and this is irrespective of the complexity of the theory of harm put forward. This seminal judgment from the EU’s highest court, which also confirmed that the Commission may depart from its merger guidelines provided it justifies such an approach (para. 123), strengthens the Commission’s ability to formulate new theories of harm when necessary, notably in the face of new market realities brought up by digital mergers.

As outlined in the Digital Mergers Policy Brief, the Commission has developed, and continues to develop, a merger case practice in relation to the digital sector based on sophisticated and dynamic competition theories of harm. That paper identified four broad, non-exhaustive, categories of digital theories of harm, namely (i) interoperability degradation based on conglomerate relationships, (ii) access degradation based on vertical relationships, (iii) data-related effects such as strengthening of a dominant position by combing datasets (in line with para. 36 of and followed in Google/ Fitbit (M. 9660) and Meta/Kustomer (M.10262)) or foreclosing access by others to such data, and (iv) ecosystemrelated effects such as leveraging market power in one market to expand one’s ecosystem of products, or sophisticated forms of bundling or tying or strengthening of a company’s dominant position in one “core” market in order to further lock customers in or incentivise them to remain within the acquirers “walled garden” of services.

Of these categories, which are not necessarily mutually-exclusive, the most frequently-discussed, and nebulous, is ecosystem-related effects. A number of recent Commission decisions involved an assessment of such ecosystem-related effects, and I will briefly focus on three of these and outline why, in my view, the outcomes differed.

The most recent case involving ecosystem-related effects, and the first prohibition of 2023, is the Commission’s decision of 25 September 2023, to block the proposed acquisition by Booking, with operates the Booking.com hotel booking website, of eTraveli. With a market share of more than 60%, Booking was the dominant hotel online travel agency (‘OTA’) in the European Economic Area (EEA) pre-transaction. With only one sizeable competitor, which focused mainly on the United States market, Booking had the ability to act independently on the EEA market, and was seen as

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an indispensable partner. The acquisition of eTraveli, a flight OTA, would have allowed Booking to develop an ecosystem of services with eTraveli’s flight capabilities, which would leverage existing brand strength and customer inertia. The transaction would have allowed Booking to attract hundreds of million additional visits and would have allowed it to reach travellers earlier in their trip planning process, making it even more difficult for competitors to challenge Booking’s dominant position in the hotel OTA market and reinforcing Booking’s bargaining position towards hotels. This would ultimately have increased hotels’ costs, and in turn may have resulted in higher prices for end customers.

In other words, the Commission concluded that Booking would strengthen its dominant position in hotel OTA market through the acquisition of a leading player in the neighbouring flight OTA market, resulting in a structural change in the market that would have decreased the ability of competitors to enter or expand in the hotel OTA market and to compete generally. While this was the first time that the Commission blocks a merger on this basis, it is not the first time that the Commission assessed ecosystem related effects in its merger decisions.

In Amazon/MGM (M.10349), Amazon, which is active in the retail supply of audio-visual (on-demand streaming) services through Prime Video, would acquire MGM’s audio-visual content (most notably the popular James Bond franchise of films), thereby making its Prime Video offering more attractive to consumers. the Commission investigated whether Amazon could leverage a strengthened position in the market for audio-visual content as a result of the addition of MGM’s content into Amazon’s core market for the provision of marketplace services, where it may have already held a dominant position (footnote 250) – note also that on 6 September 2023, Amazon was also designated as a gatekeeper under the DMA and the Amazon Marketplace was designated as a core platform service within the meaning of the DMA. The Commission ultimately cleared this conglomerate theory of harm on the basis that acquiring MGM’s audio-visual content and film library was “unlikely to [increase demand, barriers to entry or expansion, or otherwise] fundamentally change the competitive landscape in the market for marketplace services”.

In a similar non-horizontal merger, Google/Photomath (M.10796), the Commission investigated whether the acquisition would have strengthened Google’s already dominant position in the provision of general search services. Photomath did not operate a general search service, but it had capabilities to solve maths questions that could improve Google Search and thus potentially impact competition between Google Search and other general search services, for example by raising barriers to entry and expansion for Google’s rivals in that market. Ultimately, the Commission concluded that the potential harm was unlikely to materialize in particular because the relevance of maths search queries for the market for general search services was low and thus cleared the transaction unconditionally.

These decisions are good examples of how merger reviews have become increasingly sophisticated. Fewer transactions in today’s economy are purely horizontal or vertical, particularly in the digital sector or in the case of undertakings that operate ecosystems of products or services. Indeed, the EU General Court echoed this in its Google Android (T‑604/18) judgment when it observed that an undertaking may be active in “distinct but interconnected relevant markets” (para. 129) that form part of an overall ecosystem, while for example having market power or a dominant position in some of these markets.

In the three mergers mentioned, each involving ecosystem-related effects, a common thread is that the theories of harm all related to strengthening of an existing dominant position in a core market, which may have formed part of a broader ecosystem.

It is not necessarily the case that all ecosystem-related mergers will be assessed in the same manner. The Commission carefully assesses which effects are plausible for a given merger, as this will depend on the individual circumstances of the case. Vertical, conglomerate and horizontal effects can in fact reinforce each other – for example, in Meta/Kustomer

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(M.10262), the Commission, as part of its assessment of Meta’s incentive to engage in input foreclosure, took into considerations gains that may have resulted in adjacent or neighbouring markets, such as additional data for online ads purposes and longer-term benefits from steering businesses into the Meta ecosystem of products (paras. 309 -310).

Also, many recent digital mergers reviewed by the Commission have included components of both horizontal and nonhorizontal relationships or involve adjacent or complementary markets – for example, in cases M.8124 – Microsoft/ LinkedIn (2016), M.9660 – Google/Fitbit (2020), M.10262 – Meta/Kustomer (2022), and M.10646 – Microsoft/ Activision Blizzard (2023). This has also been the case in non-digital mergers, such as in Cases M.8674 – BASF/Solvay (2019) and M.8900 – Wieland/Aurubis (2019), the Commission identified both horizontal and vertical concerns.

To properly capture the anti-competitive effects of such complex mergers, the Commission relies on its Guidelines, but it may also directly apply the provisions of the EU Merger Regulation directly or even depart from the Guidelines if this is properly justified, as indeed was recently confirmed by the Court of Justice in CK Telecoms (376/20 P).

Even if there is no dedicated section in the Commission’s Guidelines for mergers in the digital sector—unlike for example in the that will soon enter into effect—the Commission has not been constrained from investigating dynamic competition theories of harm or from intervening in digital and tech mergers where warranted (see, for example, Cases M.8314 – Broadcom/Brocade – 2016, M.8124 – Microsoft/LinkedIn – 2016, M.9660 – Google/Fitbit – 2020, M.10262 – Meta/Kustomer – 2022, M.9987 – Nvidia/ARM – 2022, M.10646 – Microsoft/Activision Blizzard – 2023, M.10806 – Broadcom/VMware – 2023).

Concluding remarks When it comes to mergers in the digital sector, merging parties and their advisers can expect the Commission to focus its resources on the potentially problematic mergers that warrant careful review. Some of these may be below-threshold transactions, but it has never been the Commission’s intention to take jurisdiction over a flood of additional cases, as indeed shown by the September 2023 simplification package aimed at further simplifying the Commission’s procedures for the handling of non-problematic cases, and freeing up more resources for the complex cases.

It can also be expected that the Commission will continue to focus on sophisticated and dynamic theories of harm adapted to the types of competitive harm that can occur, and indeed may have occurred, in digital markets. The Commission’s assessment may be new and may therefore not always fall neatly within its established . It will however always follow a sound, evidence-based approach, with the same presumptions and standard of proof for all mergers, all sectors and all merging parties.

Sean Mernagh is a case handler at the European Commission, working in the unit handling mergers in the digital and technology sectors. Prior to joining the Commission, Sean worked in private practice in international law firms in Brussels and Dublin focusing on competition law. Sean also holds an LLM from the College of Europe.

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Two-Speed Merger Control Regime and the Digital Markets Act: Article 14 of the DMA in Catching Them All Alba Ribera Martínez The EU merger control regime is expanding by the minute. Its contours are being currently reworked by the European Commission (EC or Commission) and through the jurisprudence of the European Court of Justice (ECJ). One of the most salient developments is that of the EC’s re-purposing of its merger policy by transforming those acquisitions that fall outside of their scope via thresholds into a safe net where enforcement is prevalent. That idea has crystallised into two main work streams bearing an impact in relation to the actions of national competition authorities (NCAs).

By this means, the referral mechanism under Article 22 of Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (EUMR) has been re-vamped by the EC. Formerly discouraged, the EC’s policy is moving towards capturing those acquisitions that would fall outside of the Member States’ jurisdiction. The renowned Illumina/Grail case has been recently followed by the latest accepted requests in the Autotalks/Qualcomm and EEX/Nasdaq Power cases.

Even in those transactions falling below the EU and national merger control thresholds, and when the referral mechanism under Article 22 EUMR has not been triggered, the European Court of Justice has recently confirmed in Towercast (C-449/21) that their analysis may be subject to Article 102 TFEU (paras 52 and 53 of the ruling). Alongside the development surrounding Article 22 EUMR, Towercast gives way to the EC’s open-door policy where NCAs may apply the prohibition of an abuse to measure the impact of mergers. Away from the idea that the Continental Can (Case 6-72) case law is obsolete, one could say that this is more of a step back than forward.

The Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on contestable and fair markets in the digital sector (Digital Markets Act or DMA) complements this endeavour. Since its proposal in 2020, the legislator introduced the obligation upon the gatekeepers to inform the Commission of any “intended concentration within the meaning of Article 3 EUMR where the merging entities provide core platform services or any other services in the digital sector or enabling the collection of data”, irrespective of whether it is notifiable either at the EC or national level (then, Article 12 of the proposed draft of the DMA). At that time, Article 12 of the Draft DMA was introduced as a response to the French competition authority’s call to introduce a mandatory information requirement for every merger carried out by a ‘structuring platform’.

It was not until the legislative process was more advanced before the European Parliament, that the obligation was expanded to include the possibility that the competition authorities of the Member States could be notified of this same information to request a referral under Article 22 EUMR (Article 14(5) of the DMA). Once again, the NCAs pushed for the introduction of this last clause of the provision, especially the German, Dutch and French competition authorities termed the former Article 12 of the Draft DMA as lacking ambition and called for further initiative to indirectly enhance the merger control system via the DMA, without the risk of altering the legislative procedure and voting rules for its adoption.

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Shortly after the designation of six economic operators, and with all eyes placed upon March 2024 as the time limit where compliance is expected from designated gatekeepers, Article 14 of the DMA may apply at a different speed and time than the rest of the DMA obligations.

Speedy implementing act, speedy implementation The DMA is particularly characterised by the timeframes that it applies to economic operators. Although it entered into force on the 1st of November 2022, its obligations did not start to apply until the 2nd of May 2023, irrespective of those provisions that started to apply later than that, on the 25th of June 2023, as set out by Article 54 of the DMA (only two provisions fall under the scope of this ‘delayed’ application – Article 42 on representative actions and Article 43 on the reporting of breaches –).

May was, then, the month that saw the wheels turning in the Commission. The gatekeepers were provided with a two-month period until July to notify the Commission that they met the thresholds set out in Article 3 of the DMA. Designation on the side of the EC materialised on the 5th of September, and crystallised into six economic operators being captured by the regulation on account of 22 core platform services (even though more core platform services of these gatekeepers could arguably be included into the list and will likely be added in the future pursuant to the market investigations that are currently being pursued by the Commission via Articles 17(1) and 17(3) DMA).

From that moment on, the clock starts to tick against the gatekeepers. The gatekeepers are compelled to comply with the substantive obligations set out in the regulatory framework (i.e., Articles 5, 6 and 7 of the DMA) within 6 months after the core platform services under the designation decisions have been listed (Article 3(10) of the DMA). The same timeframe applies to the gatekeepers’ reporting regarding compliance of these obligations (Article 11(1) of the DMA) as well as to the submission of an independently audited description of any techniques that the gatekeepers apply for the profiling of their consumers (Article 15(1) of the DMA). March is approaching, but it is not near enough.

That is the reason why the EC is progressively exercising its capacity to issue implementing acts under Article 46 of the DMA. Aside from the procedural one from adopted last April and the template for concentrations itself, it has issued a pair of drafts for public consultation, regarding Article 11 of the DMA (the gatekeepers’ issuing of compliance reports) and Article 15 of the DMA (the gatekeepers’ obligation to audit their profiling techniques). The EC is still reviewing those drafts in light of the public’s comments and has not yet issued final versions to them.

However, the situation regarding the obligation under Article 14 DMA seems to be quite different for two main reasons.

First, the moment when its implementation and application are expected is not explicitly provided for. Unlike the provisions under Articles 5, 6, 7, 11 and 15 of the DMA, the 6-month period is not set out to apply, so there seems to be no expected delay regarding its application deriving from the letter of the law – meaning: it already is applicable now. Second, the EC has issued the final (and only) version of the implementing act fleshing out the expected conduct imposed on the gatekeeper under Article 14 of the DMA (for an extensive review of the implementing act, see my own comment here). The absence of a public consultation points toward a need to speed imminent enforcement. One can conclude that the EC is readily prepared to enforce the gatekeepers’ obligation to inform about all of their concentrations in the digital/data landscape immediately after their designation decisions, as also remarked by Commissioner Breton in his short address issued shortly after the designation decisions were made public.

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Nailing down the interaction between Article 22 EUMR and Article 14 DMA Once those concentrations are brought under the EC’s limelight, then the Commission is unconstrained (and even authorised via the DMA) to redress those acquisitions to competition policy, be that at the Union level (if the concentration does meet the thresholds of the EUMR, as indicated in Article 14(3) DMA) or at the national level (given that NCAs are provided with the information by the Commission on those concentrations pursuant to Article 14(4) and may exercise their requests under Article 22 EUMR thereof).

Notwithstanding, Article 14 DMA does not open the door only to merger control regime, but also to the application of Article 102 TFEU at the national level if any one of them were to unearth the implications of the Court of Justice’s Towercast ruling. According to this, the mere acquisition by a gatekeeper would not justify NCA scrutiny, but the degree of dominance reached through the acquisition would have to substantially impede competition (para 52 of Towercast).

That is to say, the acquisition of the target must make a material difference in the competitive landscape, in the fashion of a near-total elimination of competition (see a previous comment on the ruling here).

A related (and perhaps more conflictive) possibility stemming from the ECJ’s ruling would indicate that the gatekeeper’s previous acquisitions falling under the radar prior to their designation under the DMA could also be captured under the indirect means of the DMA-Article 22 EUMR pathway. The ECJ confirmed that the temporal effect of the ruling is not limited retrospectively (paras 54-61), so NCAs could test their luck in addressing the long-way-gone killer acquisitions that escaped merger control (a re-vamped Facebook/WhatsApp saga would be interesting to watch, if the Court’s exceptional requirements set out in Towercast were met, i.e., the good (?) faith in which both undertakings relied on when being subject to EU merger proceedings and the lack of presence of a risk of serious difficulty brought as a consequence of its analysis anew) subject to time limitation.

The sandbox to the DMA’s future implementation The direct application of Article 14 DMA immediately after designation is not trivial. The acquisitions of the gatekeepers within the digital sector have been anything but scarce. Some commentators have even framed the discussion in terms of the footballisation of antitrust by remarking that current merger control stays 1 to 1,000 before Big Tech’s plans of expansion and internal growth via M&A (the only one counting in the competition authority’s marker being the CMA’s prohibition decision of Meta’s acquisition over Giphy).

The Commission seeks to re-balance the institutional asymmetry that it has suffered over the past years by expanding the notification obligations under the EUMR and bringing them to the next level: the catch-them-all strategy. However, the empirical economic research supporting this move is, at its best, skewed. If one traces back the legislator’s initial intentions as drawn in the Impact Assessment Report issued by the Commission in December 2020, the immediate precedent to the introduction of Article 14 DMA may be found regarding the digital platforms’ investments in research and development (R&D) being diverted to mergers and acquisitions (M&A) (para. 322).

In the EC’s own words, this motion leads to higher market concentration instead of an increase in the quality and quantity of consumer products and services (equating to a decrease in market contestability). The EC estimated that the application of the obligation to notify all concentrations would entail an estimated EUR 221 billion in innovation and EUR 332 billion over 10 years due to its multiplicative effect increasing the size of the European single market and online crossborder trade. As per the Impact Assessment Report, the trail of these estimates follows, in turn, to the empirical research

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performed via the Impact Assessment support study published in 2020. Notwithstanding, the latter’s findings do not support by any means these same conclusions. Instead, the impact assessment support study recognises that there is limited empirical evidence in the field of digital platforms to support the direct and simplistic correlation between R&D divestment to M&A, despite that it lists empirical contributions supporting the findings with reference to the formerly monopolised industries and to data deriving from the information and technology market of the 1990s ranging to the early 2000s.

Moreover, the scope of Article 14 of the DMA does not only comprise those mergers and acquisitions lying at the outskirts of the gatekeepers’ operations but instead is aimed at capturing information on all of the acquisitions that a gatekeeper could possibly perform. The clause ‘or any other services in the digital sector or enable the collection of data‘ contained under Article 14(1) DMA goes well beyond the scope of the core platform services that the regulatory instrument (cautiously?) wishes to rein in into contestable and fair parameters.

The clause is a euphemism to bring every intended concentration under the Commission’s scrutiny. One can hardly think about a transaction that would not involve a digital component or data-reliant technique of some sort.

From a procedural perspective, the information barrier effect between the newly created Directorate for the DMA and the rest of DG Comp’s units enforcing EU competition law seems to be, in light of the regulatory instrument’s content, at least discouraged and, at its best, artificial. The EC is attributed the character of the sole authority enforcing the DMA (Recital 91), not DG Comp or DG Connect. Apparently, the device under Article 14 DMA does not provide for a cooperation mechanism to exchange information between the EC’s units. In fact, the information obtained via the application of Article 14 DMA may only be redirected to the Commission for performing market investigations for the purposes of the regulatory instrument or to the NCAs (Recital 71).

However, the same effect may crystallise through an indirect mechanism: the cooperation rules set out in Article 38 DMA. The provision establishes that the Commission and NCAs shall cooperate and inform each other about their respective enforcement actions through the European Competition Network (ECN). The exchange of information is not without its limits. It shall only be exchanged and used for the purpose of coordination of the DMA’s enforcement and the rules referred to in Article 1(6). Cooperation is set as the way to enforce the rules referred to in Article 1(6) DMA (the enforcement of the EUMR and national rules concerning merger control are included under the provision’s clause (c)).

Then, at least an ECN member is also present in advising the EC through the High-Level Group (Article 40(2)(c) DMA). Therefore, it is clear that although the units will not communicate and exchange information directly, they may do exactly that through the indirect means of the ECN. There is nothing in the regulatory instrument forbidding them to, irrespective of the fact that the legal basis sustaining the communication to the EC of transactions via Article 14 DMA falling under the radar of the EUMR is the need to monitor contestability trends, and not a significant impediment of effective competition.

Against this background, Article 14 DMA brings more to the table than it simplifies the already existing general repurposing of merger policy endeavoured by the European Commission. The question of whether contestability trends might be identical to the EUMR-relevant thresholds remains unanswered, and brings forward, again, quo vadis, DMA?

Alba Ribera Martínez is a PhD Student at University Carlos III of Madrid.

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Damned if you do and damned if you don’t: how gun-jumping is growing teeth Inês Neves As a new era of hefty gun-jumping fines seems to unfold, it is important that companies do not neglect the binding European Union (‘EU’) merger control framework as interpreted by EU case law. While both the obligations to notify and not to implement a concentration, and the European Commission’s power to impose fines can be considered ‘crystal clear’, a certain degree of uncertainty cannot be completely excluded from the reality of mergers and acquisitions (‘M&A’), which involves the subsumption of facts into the concepts of (single) concentration, (partial) implementation and acquisition of control. It is important that the general legal principles ensure a fair balance between the effectiveness of the EU merger control system and the discretion of the European Commission on the one hand, and the needs of the business world on the other.

Gun-jumping in the context of the EU merger control system Under the EU system of merger control, of which the Merger Regulation 139/2004 (‘EUMR’) is the cornerstone, concentrations that have a Union dimension must be notified to the Commission prior to their implementation (Article 4(1) of the EUMR). In addition, unless an exemption under Article 7(2) of the EUMR applies or the European Commission (‘EC’ or ‘Commission’) grants a derogation under Article 7(3), merging companies may not implement a proposed concentration until the Commission has issued a clearance decision (Article 7(1) of the EUMR).

Gun-jumping is the common denominator of non-compliance with the notification and/or the standstill obligations under the EUMR. In July 2023, the EC fined Illumina approximately EUR 432 million for intentionally breaching the ‘standstill obligation’ under Article 7(1) of the EUMR, in a first case investigated under its new policy initiative to welcome ‘Member State referrals of mergers that are below the EU’s revenue thresholds with significant anti-competitive potential in the context of Article 22 of the Merger Regulation’ (Buettner et al., 2022). This is not an isolated case, though. National competition authorities around the world are increasingly imposing record fines (see, for example, the developments in India, Israel, Mexico, Portugal, Turkey and Slovakia). In a context where gun-jumping is growing teeth, there are a number of reasons why companies should be aware of their obligations under EU and national merger control regimes.

First, negligence will be deemed to have occurred irrespective of whether the company was i) aware that it was in breach of EU rules, ii) mistaken as to the legal character of its conduct or iii) even if it erred as to the lawfulness of its conduct on the basis of legal advice given by a lawyer. Overall, it is sufficient for a fine to be imposed that the undertaking concerned cannot be unaware of the nature of its conduct – see Opinion of Advocate General Collins of 27 April 2023 in Altice Europe v Commission (C-746/21 P, para. 71) and Marine Harvest v Commission (T‑704/14, paras. 237-238).

Second, the absence of relevant precedents in the Commission’s fining decisions or in judgments of the EU Courts on specific conduct ‘does not preclude, as such, the possibility that an undertaking may have to expect its conduct to be declared incompatible with the EU competition rules’ – see Altice Europe v Commission (T‑425/18, para. 347) and Marine

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Harvest v Commission (T‑704/14, para. 389). In other words, a reorientation of previous decision-making practice is legitimate if it is based on a correct interpretation of the full scope of the relevant legal provision – see Altice Europe v Commission (T‑425/18, para. 141).

Third, particular diligence is expected from large multinational companies with significant legal resources and that have already been involved or fined in merger control proceedings before the Commission or before national competition authorities – see Canon v Commission (T-609/19, paras. 372-373), Marine Harvest v Commission (T‑704/14, paras. 258, 537, 538 and 541) and Opinion of Advocate General Collins of 27 April 2023 in Altice Europe v Commission (C-746/21 P, para. 81). More than a meaningful ‘cost’, competition law awareness is something that EU case law expects of a diligent operator – to focus ‘on the implications of the transaction from a competition law point of view at a much earlier stage’ – see Marine Harvest v Commission (T‑704/14, paras. 269 and 288).

Recent developments Recently, there has been a renewed interest in gun-jumping, with the General Court and the Court of Justice providing ‘guidance on the concepts of partial implementation; single concentration; and fines for gun-jumping’ (Bailly and Malamataris, 2020).

In European Union jurisdiction, three main developments contribute to this recent focus.

First, Altice’s appeal before the Court of Justice in Altice Group Lux v Commission (C-746/21 P) against the Judgment of the General Court of 22 September 2021 in Altice Europe v Commission (T-425/18), in which the company sought the annulment of the Commission Decision C(2018) 2418 final of 24 April 2018 (Case M.7993 – Altice/PT Portugal) fining Altice both for failing to notify its acquisition of PT Portugal (EUR 62.25 million) and for breaching the EU standstill obligation (EUR 62.25 million). While the General Court reduced the fine for the latter, it dismissed the remainder of the action. On 27 April 2023, Advocate General Collins proposed that the Court of Justice should dismiss Altice’s appeal in its entirety – see Opinion of Advocate General Collins of 27 April 2023 in Altice Europe v Commission (C-746/21 P).

Second, the Judgment of the General Court of 18 May 2022 in Canon v Commission (T-609/19), following the Commission Decision C(2019) 4559 final of 27 June 2019 (Case M.8179 – Canon/Toshiba Medical Systems Corporation), which imposed fines of EUR 28 million on Canon, again for failing to notify a concentration and for implementing a concentration in breach of Articles 4(1) (EUR 14 million) and 7(1) (EUR 14 million) of the EUMR. Among other things, the General Court clarified the concepts of partial implementation in the context of a single concentration involving a parking structure.

Finally, the ongoing battle between Illumina and GRAIL and the European Commission, with its latest development in July 2023, with the EC’s fining decision based on Article 14 of the EUMR. In a parallel litigation, it is important to mention the Judgment of the General Court of 13 July 2022 in Illumina, Inc. v European Commission (T-227/21), where the Court was asked to clarify the scope of the first subparagraph of Article 22(1) of the EUMR, in the light of the EC’s previous practice of discouraging Member States not having jurisdiction from making a request for referral – see Illumina v Commission (T-227/21, para. 31). In particular, the Court ruled out that, provided the four cumulative conditions of Article 22 of the EUMR are met, the Commission is competent to examine a concentration which is the subject of a referral request made either by a Member State which i) does not have a merger control system (currently, only Luxembourg), or ii) notwithstanding the existence of a national merger control regime, the concentration does not fall within the scope of that national legislation. This judgment was appealed to the Court of Justice (C-611/22 P).

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None of these developments diminishes the importance of the earlier judgments. First, the Judgment of the Court of Justice of 31 May 2018, in Ernst & Young (C‑633/16), in which the Court clarified that the standstill obligation of Article 7(1) of EUMR can be triggered by measures that merely contribute to a change of control, without bringing about a change of control. Second, the judgments in the Marine Harvest case, following the Commission Decision C(2014) 5089 final of 23 June 2014 (COMP/M.7184 – Marine Harvest/Morpol). Although subject to some dogmatic doubt, this case has made it relatively settled that Articles 4(1) and 7(1) of the EUMR entail separate, autonomous (and cumulative) fines that can be imposed by the European Commission in one and the same decision – see Marine Harvest v Commission (T‑704/14, para. 343) and (C-10/18 P, para. 111). Whereas Article 4(1) of the EUMR imposes a procedural, positive and instantaneous obligation to act or ‘facere’ – to notify a concentration -, Article 7(1) of the EUMR provides for a substantive, negative and continuous obligation of ‘non facere’ – not to implement a concentration or to take any steps or transactions entailing its partial implementation, either i) before notification (in which case, both Articles 4(1) and 7(1) are infringed) or ii) until it has been declared compatible with the internal market – see Opinion of Advocate General Collins of 27 April 2023 in Altice Europe v Commission (C-746/21 P, para. 18).

Higher fines with no room for ‘legitimate expectations’ ‘Gun-jumping’ is, by its very nature, classified as a ‘serious infringement’, both in the decision-making practice of the EC and in the case law of the EU Courts – see Marine Harvest v Commission (T‑704/14, para. 480) and Advocate General Collins of 27 April 2023 in Altice Europe v Commission (C-746/21 P, para. 81). As a result, significant fines can be imposed even where the concentration in question does not give rise to competition concerns – see Marine Harvest v Commission (T‑704/14, para. 491). This also explains why it is considered ‘inappropriate to calculate the amount of the fine on the basis of the value of sales in the sector affected by possible competition concerns’. Otherwise, ‘the fine would, in principle, have to be set at EUR 0 in the case of a concentration raising no competition concerns’ (ibid., para. 629).

Of course, gun-jumping in the context of a concentration that raises serious doubts as to its compatibility with the internal market (and unless harmful effects can be ruled out in a particular case), is not equivalent to the early implementation of a concentration that does not raise competition concerns – see Altice Europe v Commission (T‑425/18, para. 301), Marine Harvest v Commission (T‑704/14, para. 500) and Electrabel v European Commission (T‑332/09, para. 247).

In any case, one thing is clear: the stakes are now higher than ever.

While the Commission’s decision-making practice prior to Altice and Illumina/Grail already allowed it to penalise undertakings for implementing a concentration before it had been notified and cleared (see decisions in Case COMP/M.7184 – Marine Harvest/Morpol, Case COMP/M.4994 Electrabel/Compagnie National du Rhône, Case IV/M.969, A.P. Møller and Case IV/M.920, Samsung/AST), recent developments show that gun-jumping fines are gaining teeth and that neither the principle of legal certainty, nor the principle of protection of legitimate expectations seem to protect undertakings from higher fines.

Faced with the defence of ‘the Commission’s practice and worldwide established practice in mergers and acquisitions’ (see Altice Europe v Commission (T‑425/18, para. 134(f)), the EU Courts have clarified that the Commission’s practice in previous decisions does not in itself constitute a legal framework for the fines imposed in competition cases – see Canon v Commission (T-609/19, para. 423) and Altice Europe v Commission (T‑425/18, para. 336). While the Commission may decide to impose a ‘small fine when applying for the first time(s) a provision under which it is entitled to impose a fine’, it is not obliged to take into account (in particular as a mitigating circumstance) the fact that conduct with exactly the same characteristics has not yet given rise to the imposition of a fine’ – ibid. (T-609/19, para. 426) and (T‑425/18, para. 348), as well as Marine Harvest v Commission (T‑704/14, paras. 546 and 640).

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Uncertainties, time and the subsidiary protection of principles The reasonableness of the period of time taken by the institution to adopt a measure in the context of merger control proceedings must be assessed in the light of all the circumstances specific to each case. However, the time-limits must be compatible ‘with both the requirements of good administration and the requirements of the business world’, and must ensure ‘maximum legal certainty as well as sound and efficient administrative activity within brief periods’ – see Illumina v Commission (T-227/21, para. 226).

As regards legal certainty in particular, it is true that neither Articles 4(2), 7(1) nor 14(2) of the EUMR contain broad concepts or vague criteria (see Canon v Commission (T-609/19, para. 387) and Marine Harvest v Commission (T‑704/14, para. 379). However, while these provisions are clear as to the obligations and fines to which companies are subject, problem or uncertainty in the EU merger control system lies in the moment or particular circumstances that trigger such obligations and responsibilities.

For example, it is clear that, ‘in order to be effective, the Commission’s investigation must be carried out not only before the acquisition of control, but also before the implementation, even partial, of the concentration’ (see Canon v Commission (T-609/19, para. 77(f)) and Ernst & Young (C-633/16, para. 47). As a result, there may be uncertainty as to whether a transaction which is not sufficient to transfer control contributes, in whole or in part, in fact or in law, to the change of control of the undertaking and thus triggers the obligations set out in Articles 4(1) and 7(1) – see Canon v Commission (T-609/19, para. 73). Moreover, while the Commission ‘is required to reveal clearly and unequivocally in the contested decision the elements which it took into account in setting the amount of the fine’ (see Altice Europe v Commission (T‑425/18, para. 318) and Marine Harvest v Commission (T‑704/14, para. 450(f)), in his most recent Opinion of 27 April 2023 in Altice Europe v Commission (C-746/21 P, para. 81), Advocate General Collins seems to suggest that ‘a degree of unforeseeability as to the level of fines the Commission might impose in an individual case’ shall be kept, in order to ensure greater deterrence and avoid that ‘undertakings might include the risk associated with non-compliance in the cost-benefit analysis of a merger.’

While this state of affairs may be justified by the legitimate goal of ensure the effectiveness of the EU merger control system, any measures adopted by the EC must also be proportionate, and, in order to ensure respect for the fundamental rights of companies, rule of law requires that the Commission’s discretion be limited at least by general principles of EU law, some of which are capable of a process of subjectivisation into real subjective positions that companies can invoke.

It is fair to say that, while in areas of greater complexity the EC may be given greater discretion, there are insurmountable limits to the interpretation and application of legal rules by the EC. As Advocate General Collins recalls in his Opinion of 27 April 2023 in Altice Europe v Commission (C-746/21 P, para. 81), the Commission’s decision-making process must respect general principles of EU law, notably equal treatment, proportionality and the duty to state reasons, and its results must be subject to effective judicial review.

There are two or three fundamental principles that must be considered as escape valves.

The first is the principle and right to good administration (Article 41 of the Charter of Fundamental Rights of the European Union or ‘CFREU’), which is particularly relevant because, according to EU case law, the appropriate course of action for a company in doubt is to contact the Commission, either by entering into the consultation procedure on the application of Article 7(2) or by asking for a derogation from the standstill obligation under Article 7(3) of the EUMR – see Canon v Commission (T-609/19, para. 374), Marine Harvest v Commission (T‑704/14, para. 256) and Electrabel v European Commission (T‑332/09, para. 255). While full cooperation with the Commission (by responding to requests

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for information, submitting documents and replying to the statement of objections) will not in itself be considered as a mitigating circumstance (see Canon v Commission (T-609/19, para. 440) and Marine Harvest v Commission (T‑704/14, paras. 634-638), informing the Commission before signing may justify a reduction of the fine – see Altice Europe v Commission (T‑425/18, in particular para. 365f).

Second, the principle of proportionality applies as a guiding principle for limiting the exercise of the rights and freedoms provided for in the CFREU. While the imposition of separate fines for breaching the obligations to notify and to stand still may be justified in view of their differences, and while this is not per se considered to be contrary to the principle of proportionality, the EC has so far adopted the practice of imposing the same fines for each of the infringements, as if it had decided on one level of fines that is proportionate and then simply divided it into two tranches. This approach may indeed eliminate the practical effect of the question of whether two fines can be imposed for the same conduct.

Finally, the principle of equal treatment, not only before the law (Article 20 of the CFREU) but also before its enforcers, may prevent comparable situations in terms of markets, products, countries, undertakings and periods concerned from being treated differently as regards the calculation of fines, where there is no objective justification for different treatment – see Canon v Commission (T-609/19, paras. 422-423) and Altice Europe v Commission (T‑425/18, paras. 335-336).

Damned if you do and damned if you don’t… with limits It is understandable that gun-jumping should be considered a serious infringement and that significant fines should be imposed on companies that breach their obligations under the EUMR, especially when the infringement is intentional in the context of a cost-benefit analysis of a merger. However, it is also important that merger control, while legitimate in theory, does not end up as an excessive barrier to entry and the exercise of an economic activity in a given market. This is all the more important in view of the growing investigative and sanctioning powers of the Commission and national competition authorities, which are no longer limited to the strict context of the EUMR but are now extending into new areas. In addition to the potential of the referral mechanism under Article 22 of the EUMR, both Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the union and Regulation (EU) 2022/2560 of the European Parliament and of the Council of 14 December 2022 on foreign subsidies distorting the internal market are examples of how growing teeth also means growing jurisdiction and how the broadening of notification and standstill obligations in the EU can also mean to increasing or at least cumulative fines. As these obligations and sanctions go to the heart of the freedom to conduct a business as a fundamental right (Article 16 of the CFREU), any limitation on its exercise must be in line with the general principles of EU law.

Inês Neves is a Guest Lecturer at the Faculty of Law, University of Porto (Portugal), a Researcher at the Centre for Legal Research (CIJ) and a lawyer with expertise in European and competition law. She is also a member of the Jean Monnet Module ‘A Digital Europe for Citizens. Constitutional and Policymaking Challenges’.

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Gun-jumping – Substantive integration before merger clearance Renella Reumerman The European Commission’s decision to fine has once again thrown up some interesting questions in relation to ‘gunjumping’ in EU merger control: the implementation of mergers before they have been notified and cleared by the European Commission, both scenarios being prohibited pursuant to Articles 4 and 7 of the of the Merger Regulation (Regulation 139/2004) .

This article focuses on the issue of pre-completion substantive integration, noting that the economic rationale for applying either Article 101 of the Treaty on the Functioning of the European Union (TFEU), or Articles 4 or 7 of the Merger Regulation, to such conduct lacks clarity, and querying whether the Court’s approach to the concept of implementation is sufficiently expansive to comprise such steps.

Merger control serves the public interest by preventing changes to the structure of the market that would significantly impede effective competition to the detriment of consumers. Rather than opting for a system of self-assessment and voluntary notification, the European Union (EU) legislator has established a system of mandatory prior notification and clearance for qualifying mergers. It is for the Commission to determine which mergers are problematic and which are not. Its ability to impose fines for gun-jumping is a cornerstone of that system, motivated by the consideration that completed mergers are difficult to undo (‘unscrambling’) and may have significant negative consequences for consumers, if they lessen competition. That consideration is all the more acute in the EU context because EU merger control is in principle concerned only with very large mergers.

The mandatory regime in the EU can be contrasted with voluntary merger control regimes, for example in the United Kingdom. Under that regime, there is no requirement to notify, but if the Competition and Markets Authority (CMA) decides to investigate a merger it can, and regularly does, impose obligations on merging parties that require them to hold their businesses separate. The merging parties undertake not to engage in any (further) steps to integrate the two businesses until the CMA has cleared the merger and, if relevant, implemented remedies. A monitoring trustee is appointed to ensure compliance. So-called ‘hold separate undertakings’ may be imposed in the context of both completed and uncompleted mergers, as the CMA can even unwind consummated concentrations.

It is clear that there are two aspects to a merger raising issues when it comes to gun-jumping: (i) completing the transaction in the procedural or corporate law sense (‘legal completion’); and (ii) integrating the two businesses in the substantive sense, so that they operate as one entity on the market (‘substantive integration’). It is generally not difficult to distinguish between the processes that bring about the legal completion of the transaction and the steps taken to integrate two businesses at an operational level. It is, moreover, usually possibly to determine with some certainty the point in time when a merger completes in the procedural sense. In the EU law context there appears to be an expectation that substantive integration will not start until that has happened.

Those in charge may consider that merger clearance is ‘red tape’, that the commercial success of the merger depends on ‘getting on with things’, or that not becoming involved in strategic decisions or running of the target’s business will undermine its value. It is also clear that, in the ordinary course, undertakings do not give a competitor access

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to commercially sensitive information or allow them to be involved in operational or strategic decision-making. Any alignment of merging parties’ interests comes about only as a result of the anticipated merger.

In the EU context, customary and prudent advice is that under the Merger Regulation legal completion is permitted only after a qualifying merger has been notified and cleared. At the same time, an acquirer cannot get involved in operational and strategic matters related to the target without running the risk of infringing Article 101 TFEU. That legal position is reflected, inter alia, in paragraphs 46 to 49 and 57 of the judgment in Case C-633/16, Ernst & Young, which set the bar at a ‘contribution to a change of control’, albeit that that case concerned very specific facts The acquirer’s rights being limited to the protection of financial interests as opposed to the possibility of exerting decisive influence could provide a benchmark for this.

Having said that, the application of Article 101 TFEU to substantive implementation in the period between notification and legal completion is not without complications. Horizontal agreements that infringe Article 101 TFEU due to their anticompetitive effects usually involve the majority of undertakings active in the relevant market and the cumulative market share of cartel members is very high. Otherwise, horizontal agreements are likely to be ineffective and inherently unstable because customers will switch to those who are not involved. The 2023 Commission Horizontal Guidelines state that ‘only if the parties to the agreement have market power will they be able to profitably maintain prices above the competitive level, or profitably maintain output, product quality or variety below competitive levels’ (paragraph 228).

Although it is a cliché that price fixing agreements are ‘by object’ infringements, how difficult would it be to show that, with low combined market shares, supra-competitive price increases are simply not possible? It is for the same reason that the vast majority of mergers are cleared: they are not expected to give rise to market power that results in higher prices compared to the counterfactual. Agreements between only two competitors with low combined market shares that generate anticompetitive effects are uncommon (leaving aside oligopolistic markets and cartel agreements). Moreover, arrangements usually considered under Article 101 TFEU relate to price-fixing, market sharing and bid-rigging, whereas an acquirer in a merger may initially be more concerned with the target’s decisions regarding staff, marketing and advertising, key purchasing and investment decisions, and information relating to, for example, spare capacity and production costs. Nevertheless, under Article 101 TFEU, a self-assessment is required. Whether or not arrangements between two undertakings that are in the process of completing a merger have the object or effect of restricting competition depends on the nature of the arrangements, whether the undertakings are competitors, the undertakings’ combined share of the relevant market and the characteristics of that market. If the assessment leads to concluding that the arrangements do not have the object or effect of restricting competition, then Article 101 TFEU is not infringed, and that provision is ineffective in ensuring that substantive integration does not occur before the merger is cleared.

An agreement that provides for an undertaking’s extensive involvement in the running of another undertaking may constitute a change of control. That was effectively the position the Commission took in Altice. But what about scenarios in which merging parties agree to take steps to integrate the target business before completion (and before clearance) that do not amount to a change of control? In some ways, those scenarios are indistinguishable from collusive agreements: two undertakings agree to cooperate rather than compete. Only the context – i.e. the anticipated merger – is different. But arguably, it would be inefficient and cumbersome for the Commission to carry out an ex post Article 101 TFEU assessment in those circumstances. In fact, this is not something that the Commission does on a regular basis. The deterrent effect of the threat of fines under Article 101 TFEU in this context is therefore somewhat dubious.

Another option for the Commission would be to put in place interim measures under Article 8(5)(a) of the Merger Regulation. That, however, is not ideal. The regular imposition of interim measures risks undermining the effectiveness of the standstill obligation per se. Moreover, that provision of the Merger Regulation refers back to implementation within

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the meaning of Article 7 thereof. If a particular step or series of steps would not amount to implementation within the meaning of Article 7, query whether it could form the subject of interim measures pursuant to Article 8(5)(a) of the Merger Regulation.

In an appropriate case, where a qualifying merger has been notified to the Commission but not yet declared compatible, it might therefore be expedient to interpret ‘implementation’ as encompassing forms of pre-completion substantive integration. Indeed, this may well be covered by the test in . Alternatively, there may be a degree of substantive integration, going beyond the benchmark of protecting the target’s value, that is permitted under the Merger Regulation, and not prohibited under Article 101, TFEU. The argument that an approach whereby the Merger Regulation prohibits all pre-clearance substantive integration might unduly fetter business is less persuasive in the context of the progressive simplification of EU merger control procedures. Neither is there is much merit in the argument that strict separation must be maintained between the application of Article 101 TFEU to collusive conduct (and, by extension – to pre-clearance substantive integration that does not ‘contribute to a change of control’) and the application of the Merger Regulation to ‘lasting’ changes of control.

As to the temporal aspect, cartels typically operate for ten years and they may last considerably longer; moreover the context of the merger means that pre-completion substantive integration is also ‘lasting’ (unless, of course, the merger is prohibited). On the other hand, an acquirer may sell on the target soon after having acquired it. Given the range of transactions that qualify as mergers, it could be unduly formalistic to distinguish between ‘structural’ and nonestructural/behavioural arrangements.

In the interests of the integrity and effectiveness of the mandatory merger control regime it would be useful to have greater clarity on the matter of substantive integration in advance of merger clearance, rather than relying on cumbersome methods and unclear reasoning to deter it.

Renella Reumerman is a référendaire, currently at the General Court of the European Union, previously at the Court of Justice. Any views expressed are personal.

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Not the right mix: the European Commission, Art. 3(4) EUMR and Austria Asphalt Daniel von Brevern and Maximilian-Philipp Schöps We have a question: The Court of Justice explicitly held in Austria Asphalt (C-248/16) that the acquisition of joint control only constitutes a “concentration” within the meaning of Art. 3(1), (4) EUMR if the resulting joint venture qualifies as a “full-function joint venture”. This was in September 2017. Since then, the European Commission has on various occasions (e.g. here, here, here and here) stated the exact opposite, namely that “full-functionality” is not a required condition in cases involving the acquisition of joint control. How is that possible?

We actually know the answer. It is possible because the European Commission, instead of applying the Austria Asphaltjudgement, relies, when applying Art. 3(4) EUMR, on its own Consolidated Jurisdictional Notice – adopted some 10 years prior to the Austria Asphalt-judgment. Paragraph 91 of the Consolidated Jurisdictional Notice states that fullfunctionality is not required if joint control is acquired from “third parties”.

One might assume that the Austria Asphalt-judgement has some language that would allow and explain the European Commission’s ongoing reliance on paragraph 91. Well, it does not.

In the Austria Asphalt-case, Austria Asphalt, a subsidiary of the Strabag group, and Teerag Asdag, part of the Porr group, wanted to establish a joint venture. Austria Asphalt would acquire 50% of the shares in the asphalt mixing plant “AMP Mürzzuschlag”. Prior to the transaction, AMP Mürzzuschlag was solely owned by Teerag Asdag. AMP Mürzzuschlag did not meet the requirements of a full-function joint venture. Following proceedings at the Austrian Federal Competition Authority and the Higher Regional Court of Vienna, the case ended up at the Austrian Supreme Court. The Austrian Supreme Court referred the question whether Art. 3(4) EUMR applies to a change from sole to joint control over an existing company according to Article 267 TFEU to the CJEU. In response to the Austrian Supreme Court’s question, both the Court of Justice in its judgment, and Advocate General Kokott in her opinion, were very clear: the European Commission’s practice with respect to the acquisition of joint control and the interpretation of Art. 3(4) EUMR, as laid down in the Consolidated Jurisdictional Notice, is not compatible with the EUMR. The Advocate General even noted and deplored the European Commission’s lack of a clear, uniform, and consistent approach when applying Art. 3(4) EUMR. One might take the position that the Austria Asphalt-judgment only dealt with the scenario where sole control by an existing shareholder changes into joint control by the pre-existing shareholder and a new shareholder. The judgement does not apply, the argument goes, to transactions where two or more shareholders acquire joint control over a company previously controlled by a third party.

A closer look shows: this line of argument has no merits. Neither the Austria Asphalt judgment nor the Advocate General’s opinion discuss or even mention at any point the two scenarios, and nothing indicates that either the court or the Advocate General considered that they should be treated differently. Also, the Court of Justice’s ruling could not be clearer or less ambivalent: “Art. 3(4) EUMR must be interpreted as meaning that a concentration is deemed to arise upon a change in the form of control of an existing undertaking which, previous exclusive, becomes joint, only if the joint venture created by such a transaction performs on a lasting basis all the functions of an autonomous economic entity”.

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Even more importantly, there is no reason or justification for treating the two scenarios differently. A different treatment might be justifiable if the acquisition of joint control from a third party necessarily had a greater impact on the market structure, and therefore required increased ex-ante scrutiny by the European Commission. But the impact on market structure very much depends on the specific transaction. The acquisition by two investment companies of a real estate asset from a third party will usually have a very limited impact on the market structure. The divestment of a 50% stake in a self-owned production company to a competitor can have a major impact. Yet, following the European Commission’s approach, the former transaction (no impact on market structure) is subject to merger control review, while the latter one (potentially significant impact on market structure) is not.

Not reviewing the third-party transactions would also not lead to an “enforcement gap”. A review of the cases decided since the European Court of Justice handed down its Austria Asphalt-judgment in 2017 shows that the European Commission’s approach results in numerous additional Simplified Procedure cases. Simplified Procedure cases are cases that, from the outset, do not raise any structural or other concerns. The respective cases usually involve the acquisition of joint control over real estate, for example a logistics facility in western Netherlands, a car park in the West-Midlands or a warehouse near Barcelona. None of these cases raise, under any conceivable angle, structural concerns, and nothing would be different had the European Commission not reviewed these cases.

Does it matter? It does. One might argue that having to notify a non-notifiable transaction is not the end of the world.

It is not, but even the most straightforward notification under the EUMR takes time and effort, prevents a swift closing of the transaction, and makes use of resources that could well be used elsewhere – including those of the European Commission. As pointed out by Advocate General Kokott in her Austria Asphalt opinion, the European Commission’s approach has the effect of “diverting the Commission’s attention from the transactions that are truly relevant from the point of view of the structure of market”.

On a more general level, the number and depth of regulatory instruments potentially applicable to mergers and acquisitions (M&A) transactions has recently skyrocketed. A very significant percentage of cross-border transactions are now subject to some form of foreign investment screening mechanism, often in a number of jurisdictions in parallel, and often involving notification and prior clearance-requirements. The Foreign Subsidies Regulation entered into force in January 2023. It introduced an additional merger control review mechanism, which will regularly apply in addition to the traditional merger control review (see EULL Symposium March 2023 “State Aid in Times of Crisis”).

The European Commission broadened in the Illumina/Grail-saga its own merger control jurisdiction by creatively interpreting of Article 22 EUMR, subsequently blessed by the General Court and currently applied in further cases.

Finally, the European Court of Justice’s surprising Towercast-judgment increased the risk for transaction parties that a transaction project which is not subject to ex-ante merger control might be picked up by national regulators at a later stage (see T. Kuhn, EULL 2023, “Is Planet Merger Control becoming uninhabitable? – Observations on the increasingly shaky statics of international merger control”).

We do not doubt that there are a number of good reasons for increased foreign investment control, for the Foreign Subsidies Regulation and, perhaps, even for a broad understanding of Article 22 EUMR. But, as always, with regulation comes over-regulation. The European institutions, including the European Commission, are aiming for “Better Regulation”, which includes the goal to make EU laws simpler and better, and to avoid “unnecessary burdens”. The European Commission’s interpretation of Art. 3(4) EUMR is a prime example of an unnecessary burden. But here is the good news: it is an unnecessary burden the European Commission can easily, quickly and without any negative impact get rid of. It only has to apply the Austria Asphalt-judgment, and apply Art. 3(4) EUMR to all instances involving the acquisition of joint control. Compliance with the European Court of Justice, leading to useful de-regulation and enabling all stakeholders to focus on the important issues in life and competition law. What else can you wish for?

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Daniel von Brevern is a Partner, Maximilian-Philipp Schöps an Associate in the Düsseldorf office of Eversheds Sutherland. The article reflects their own opinion. The authors were not involved in any of the cases discussed.

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