Tag: Regulation 139/2004

Robert Miklós Babirad

J.D. Masters Diploma candidate in EU Law, King’s College London; Post Graduate Diploma in EU Law (Merit); Member of the New York Bar

I           Introduction

On March 27, 2013, the Commission invited public comments regarding a proposal to simplify procedures under the EU Merger Regulation.[1]  Changes would include altering market share thresholds relating to which mergers would qualify for access to the simplified merger notification procedure.[2]  Additionally, Commission Regulation (EC) No 802/2004 implementing Council Regulation (EC) No 139/2004[3] (`the Implementing Regulation’) would be amended with regard to the forms for merger notification.[4]

Mergers unable to qualify for notification under the simplified procedure would also benefit from the proposed changes.[5]  Only information relating to markets in which the market shares of those firms merging, which is in excess of the established thresholds for notification under the simplified procedure, would be required for submission in a notification to the Commission.[6]  An important aspect of the proposed changes would be that seventy percent of all mergers notified to the Commission would now qualify for notification under the simplified procedure.[7]

The issue is whether these proposed changes under the EU Merger Regulation will be helpful to fostering European competitiveness and economic development.  This article will begin by briefly discussing the process of notifying a merger to the Commission with a focus on the simplified merger notification procedure; the changes to both the Notice detailing the simplified notification procedure as well as to the forms for notification under the Implementing Regulation will then be discussed; and finally, the article will assess the overall helpfulness of the proposal.

II         The Simplified Merger Notification Procedure

Under the EU Merger Regulation[8]it is mandatory for the Commission to be notified of those mergers encompassing a “Community dimension” in order to obtain approval prior to effecting the merger with limited exceptions.[9]  The EU Merger Regulation provides for this notification to the Commission before a merger may be implemented.[10] A determination as to whether a merger contains a “Community dimension” is governed by the turnover threshold of the merging undertakings under the EU Merger Regulation.[11]

The Commission Notice on a simplified procedure for treatment of certain concentrations under Council Regulation (EC) No 139/2004[12] (“the Notice”) provides for notification to the Commission using a form that is shorter and not as extensive with regard to its informational requirements for qualifying mergers that have not traditionally presented prima facie difficulties with regard to competition.[13]

Mergers qualifying under the simplified procedure may also obtain authorisation after a “lighter procedure” and without the need for the Commission to engage in an extensive investigation of the market relating to the merger being notified.[14]  A “short-form clearance decision” for the merger is typically adopted within a period of 25 working days from the notification date to the Commission.[15] A more comprehensive Phase II Commission investigation will occur if the merger presents “serious doubts”[16] as to whether it will be compatible with regard to competition and the EU’s single market.[17]  The objective of the simplified merger notification procedure is to increase the focus and effectiveness of controlling mergers under the EU Merger Regulation.[18]

A key benefit available to those merging undertakings with access to the simplified short form notification merger procedure is that of a reduction in the amount of detailed information and associated expenses, which would otherwise be expended in completing a non-simplified merger notification to the Commission.[19] The information that must be provided for a regular Form CO notification as well as for a notification under the simplified procedure is provided in Annexes I and II respectively of the Implementing Regulation.[20]  It is a benefit to both the merging entities as well as to the Commission to encourage use of the simplified procedure, because of the reduction in resources under this form of merger notification.

III        Proposed Changes

Expansion of access to the simplified merger notification procedure includes a proposal to increase the qualifying market share threshold under the Notice from 15% to 20% for those competing firms in the same market merging.[21]  A merger concerning undertakings participating in markets that are upstream and downstream from one another would be able to take advantage of an increased 25% to 30% qualifying threshold for access to the procedure under the proposal.[22]  Additionally, access to the simplified merger notification procedure under the proposal would be available where two undertakings are participants in the same market and their joint share of the market exceeds the threshold of 20%, but as a result of their merger, the resultant market share increase from the merger is insubstantial.[23]

The Implementing Regulation[24] will also be revised under the proposal with regard to the notification forms for mergers.[25]  An important aspect of the proposed changes relates to those cases, which would be unable to qualify for access to the simplified merger notification procedure.[26]  The firms engaged in a merger would be required to submit comprehensive information in a notification to the Commission solely for the markets in which their market share is found to be in excess of the thresholds established for qualification under the simplified merger notification procedure.[27]  This is a positive change, which will enable the Commission to focus exclusively on information with the potential to pose a threat to competition within the single market upon implementation of the merger.

The primary objective underlying the short form simplified merger notification procedure is that of facilitating the process of notification and reducing burdens of an administrative nature for those mergers, which the Commission has traditionally found unlikely to present concerns relating to competition within the EU’s single market.[28]  The proposed changes will act as a positive expansion toward the attainment of these goals.

The changes proposed are with the intent of streamlining and reducing resources otherwise unnecessarily expended on merger cases.[29]  The Commission will instead be able to use its resources more efficiently on those mergers which necessitate a more comprehensive assessment and may actually result in a harmful impact upon both consumers and competition within the single market.[30]  Additionally, burdens of an administrative nature for both undertakings notifying a merger and with regard to burdens imposed upon the resources of DG Competition will continue to be reduced by this procedure and its expansion.[31]

The Commission’s primary objective in amending the Notice as well as the notification forms under the Implementing Regulation is to reduce procedural administrative burdens in an effort to increase European competitiveness and to stimulate continued economic growth.[32]  These changes to the Notice and Implementing Regulation will be helpful for the attainment of these objectives by encouraging a more efficient use of resources for both DG Competition and the merging parties.

IV        Helpfulness of Proposed Changes

The primary concern regarding mergers under the EU competition law system is that a particular merger when effected will have the result of reducing post-merger competitiveness within the common market.[33]  The proposed changes to the simplified merger notification procedure will not have the result of decreasing competitiveness or hindering the necessary scrutiny and control of mergers, which remain a primary and essential concern regarding any merger that is to be implemented within the single market.  Expanding access to the simplified procedure as well as reducing burdens of both a financial and administrative nature for both the merging parties and DG Competition will foster greater growth within Europe; facilitate the notification of mergers, which are not detrimental to the single market; and stimulate greater European competitiveness.

It may be argued that expanding access to use of the simplified notification procedure will act as a detriment to competition and to the necessary oversight of proposed mergers within the single market.  An increase in the qualifying market share for access to the simplified notification procedure may enable too many potential mergers to employ this procedure without sufficient safeguards.  An increasing number of merging firms will be able to notify under the simplified and shortened notification procedure because of the increased qualifying percentages, thereby resulting in an increase in the number of mergers that the Commission will potentially approve without a comprehensive relevant market investigation.[34]  A less comprehensive investigation of the market with regard to a greater number of qualifying mergers may hinder the Commission’s ability to engage in fully informed decision making and may result in greater threats to competition within the EU’s single market.

Additionally, amending the Implementing Regulation with regard to the merger notification forms would enable merging firms that are unable to qualify under the simplified procedure to only be required to provide information to the Commission with regard to markets in which the market share of the merging firms is in excess of the access threshold mandated under the simplified merger notification procedure.[35]  It may be argued that a reduction in the amount of information being provided in a notification under this proposed change will have a negative impact on the Commission’s ability to make an informed assessment as to whether a merger should be approved and its assessment of potential anti-competitive effects.

However, the possible negative implications of the proposed changes appear to be outweighed by existing precautions taken by the Commission.  The proposed increased qualifying percentages under the simplified notification procedure continue to be within “safe harbours” previously established by the Commission.[36]  Additionally, mergers qualifying under the simplified procedure will continue to be subject to the EU Merger Regulation’s “ex-ante merger control” system.[37]  The proposed changes will only benefit those mergers, which in the Commission’s experience have not posed a threat to competition rather than lowering existing safeguards, which would increase the probability of anti-competitive activity.[38]  It is also important to note that the Commission will continue to require critical information in any notification, which potentially reflects a threat to competition, regardless of whether the notification occurs under the standard or simplified notification procedure.[39]  A comprehensive investigation by the Commission of the relevant market where there is a potential threat to competition due to a proposed merger will also continue to take place.[40]

The changes being considered by the Commission do not reduce the oversight or scrutiny provided for under the EU Merger Regulation.[41]  An example of oversight, which will be unaffected by the proposed changes is that of Article 16 providing for the Court of Justice to review Commission decisions regarding the imposition of fines or penalty payments.[42]  Additionally, the Commission has the power under Article 8 to dissolve mergers where an incompatible concentration was effected without Commission approval or without adhering to a mandated condition for implementation.[43]  Fines may also be imposed by the Commission if the information in a notification is false or misleading by the merging parties.[44]  It is important that these safeguards remain unaffected by any proposed changes to the notification procedure.

Expanding access to the simplified merger notification procedure and updating the notification forms under the Implementing Regulation will not have a detrimental impact on the need to protect the EU single market from anti-competitive conduct regarding proposed mergers. Facilitating EU economic development in the field of mergers, which are subject to Commission notification, will have a positive effect on economic growth within the EU.  Establishing greater access to the simplified merger notification procedure and updating the notification forms will facilitate the notification process and positively stimulate EU economic growth in the field of mergers.

V         Conclusion

A proposal to expand access to the simplified notification procedure under the EU Merger regulation will have a positive impact on reducing administrative burdens and expanding European economic growth.  Both the Commission as well as the merging parties will benefit from the proposed changes.  Safeguards for the protection of the single market from anti-competitive conduct in the field of mergers will also remain in place and are unaffected by the proposed changes.  Additionally, amending the notification forms under the Implementation Regulation will enable the Commission to focus its resources more efficiently and effectively on potentially problematic areas with regard to a proposed merger rather than on issues that do not raise any competitive concerns.[45]