EU Law and Practice Contributed by: Porter Elliott, Catherine Gordley and Niharika Parshurampuria, Van Bael & Bellis
Referral to the Member States By the parties (Article 4 (4) EUMR)
the Commission prohibited on 6 September 2022 – was annulled by the Court of Justice on 3 September 2024. The Court of Justice judgment ruled that the Commission is not empowered to accept jurisdiction to review a concentration where the transaction does not meet EU notification thresholds and in respect of which the referring member state(s) does not have jurisdiction – ie, the national merger control thresholds are not met. Since the Court of Justice judgment, many EU mem - ber states have adopted “call-in” powers that allow them to assume jurisdiction over transactions that fall below the national filing thresholds. In some cases, national competition authorities have called in below- threshold transactions and subsequently referred them to the Commission under Article 22. This prac - tice effectively closes a perceived enforcement gap by allowing the Commission to review concentrations involving companies with limited (or even no) turnover that nonetheless play a significant competitive role on the market, such as so-called “killer acquisitions”, whereby larger companies seek to eliminate small but promising companies as a source of actual or potential competition or “reverse killer acquisitions”, where the acquiring company plans to keep the tar - get’s business and eliminate its own, again reducing competition. Such killer and reverse killer acquisitions are often identified in the digital and pharmaceutical sectors, where valuable targets can have little, if any, turnover, although they can occur in any industry. Although this new approach of NCAs calling in deals and then referring them to the Commission under Arti - cle 22 ensures that anti-competitive transactions can no longer escape Commission review, this comes at the expense of legal certainty, which has historically been one of the key attributes of the EU merger con - trol regime. No longer is it possible to rule out reviews of deals that do not meet the filing thresholds of either the EUMR or any member state’s merger control law. As such, companies increasingly face the dilemma of not being able to file a deal even if they wanted to (because it does not meet the thresholds anywhere in Europe) but also not being able to close the deal with - out the risk that the deal may nevertheless be subject to European merger control scrutiny.
Before notifying a transaction with an EU dimension to the Commission, the parties may make a “reasoned submission” to the Commission requesting a full or partial referral of the transaction to a member state NCA. The parties’ submission must demonstrate that the concentration may significantly affect competi - tion in a market within a member state that presents all the characteristics of a distinct market and should therefore be examined by that member state’s NCA. Only one Article 4 (4) request has ever been rejected. By the member states (Article 9 EUMR) A member state may request a full or partial referral from the Commission. To do so, the member state must inform the Commission within 15 days of receipt of a copy of the EU notification that the transaction threatens to significantly affect competition in a mar - ket within that member state that has all the character - istics of a distinct market (in which case, the Commis - sion will decide whether to refer the case) or that the transaction affects competition in a market within that member state which moreover does not constitute a substantial part of the internal market (in which case, the Commission must refer the case). Historically, the Commission has rejected just under 12% of Article 9 requests. 2.2 Failure to Notify The EUMR imposes both a notification and a standstill obligation: • notification obligation – Article 4 (1) of the EUMR requires parties to notify any concentration with an “EU dimension” (defined as meeting the EUMR turnover thresholds) before implementation; and • standstill obligation – Article 7 of the EUMR requires parties to wait to implement any concen - tration with an EU dimension until the transaction is notified to and cleared by the Commission (see 2.12 Requirement for Clearance Before Imple- mentation ). Fines for Failure to Notify or Suspend Under Article 14 (2) of the EUMR, the Commission may fine parties up to 10% of their aggregate world - wide turnover for “gun-jumping” if they fail to notify a
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