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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