Control of concentrations between companies
Regulation (EC) No 139/2004 — the control of concentrations between undertakings (the Merger Regulation)
It lays down EU rules with regard to concentrations where two or more firms combine by means of a merger or acquisition.
It means that one intra-EU merger need not be notified to several competition authorities in the EU; it is based on the principle of subsidiarity whereby a merger is examined by the judicial authority best placed to do so.
This regulation applies to all concentrations with an EU dimension*.
As a general rule, the party or parties who will acquire control following the concentration must notify the European Commission prior to its implementation.
The regulation also allows notification before the conclusion of a binding agreement which facilitates coordination with other jurisdictions in investigations of mergers. This procedure, known as pre-notification, allows the firms or persons concerned to inform the Commission, by means of a reasoned submission, before notifying a concentration.
In this way, parties may show the Commission that the proposed merger, while resulting in a concentration with a cross-border dimension, affects competition in the market of one EU country.
If the EU country in question does not disagree with the application to refer the case within 15 working days of receiving the submission, the Commission has 25 working days from receiving the submission to refer all or part of the case to that EU country’s competent authorities so that that country can apply its national competition law.
The same procedure applies where a person or a firm wishes to draw the Commission’s attention to the cross-border effects which a merger without an EU dimension could have at European level.
Initiation of proceedings: the Commission
Once it receives a notification, the Commission has to decide whether:
- to initiate proceedings;
- to carry out investigations; and
- to impose fines.
First, it determines by decision whether the concentration:
- comes under this regulation;
- is compatible with the common market;
- raises serious doubts as to its compatibility.
Concentrations with an EU dimension cannot, in theory, be implemented either before notification or for 3 weeks following notification. If, however, a concentration has already been implemented and declared incompatible with the common market, the Commission can order the companies concerned to dissolve the concentration or restore the situation as it was prior to the implementation of the concentration.
The Commission can also adopt interim measures if it finds that a notified concentration, although within the scope of this regulation, does not give rise to serious doubts as to its compatibility with the common market, or requires only a simple change to bring it into line with the common market.
To enforce compliance with this regulation, the Commission may impose:fines not exceeding 1% of the aggregate turnover of the firm where it supplies incorrect, incomplete or misleading information or does not supply information within the required time limit. It may also impose fines where seals affixed during an inspection have been broken.
It can impose
- fines of up to 10% of the aggregate turnover of the firm concerned where, either intentionally or negligently, it fails to notify a concentration prior to its implementation, implements a concentration in breach of the regulation or fails to comply with a Commission decision; or
- periodic penalty payments not exceeding 5% of the average daily aggregate turnover of the company for each working day of delay, calculated from the date set by the Commission in its decision requiring information, ordering inspections, etc.
The Commission must consult an Advisory Committee composed of representatives of the EU countries’ authorities before it takes any decision relating to compatibility, incompatibility or the imposition of fines or periodic penalty payments. The Court of Justice of the European Union can abolish, reduce or increase any fines or periodic penalty payments imposed.
Referral procedure: the Commission and the EU countries’ competent authorities
Whereas previously, the turnover and ‘3+’ criteria were applied by identifying concentrations with a cross-border effect (i.e. exclusive EU competence where at least 3 EU countries request a referral), Regulation (EC) No 139/2004 introduces a third criterion for referral to the competent authorities of the EU countries.
An EU country may, within 15 working days of the date of receiving a copy of the notification, acting on its own initiative or at the Commission’s request, declare that a concentration significantly affects competition in its domestic market. The product or service market must present all the characteristics of a distinct market without, however, constituting a substantial part of the common market.
The Commission has 65 working days following the notification of the concentration to decide whether to deal with the case itself under this regulation or to refer the whole or part of the case to the competent authorities of the EU country; if the Commission fails to adopt a decision, the case is considered to have been referred to the EU country in question.
EU countries can also request the Commission to investigate whether a concentration, although without an EU dimension, significantly hampers competition between EU countries and is liable to have a significant effect on competition on their territory/ies. The Commission must then inform the competent authorities of the EU countries and firms concerned, fixing a time limit of 15 working days within which any other EU country can join the initial request. If, within 10 working days, the Commission has not adopted a decision to refer or not to refer, it is deemed to have adopted a decision in accordance with the request.
Concentration: a ‘concentration’ arises where a change of control on a lasting basis results from:
the merger of 2 or more previously independent companies or parts of companies;
the acquisition by 1 or more persons (already controlling at least 1 company) or by 1 or more companies of direct or indirect control of 1 or more other companies.
Multiple transactions that are conditional on one another or are closely connected are regarded as a single concentration.
Concentration with an EU dimension: a concentration has an ‘EU dimension’ where:
the combined aggregate worldwide turnover of all the companies concerned is more than €5 billion; and
the aggregate turnover in the EU of each of at least 2 of the companies concerned is more than €250 million, unless each of the companies concerned generates more than 2/3 of its aggregate EU-wide turnover within one EU country.
Even if the above mentioned thresholds are not reached, a concentration may have an EU dimension if:
- the combined aggregate worldwide turnover of all the companies concerned is more than €2.5 billion;
in each of at least 3 EU countries, the combined aggregate turnover of all the companies concerned is more than €100 million;
- in each of at least 3 EU countries, the aggregate turnover of each of at least 2 of the companies concerned is more than €25 million;
- the aggregate EU-wide turnover of each of at least 2 of the companies concerned is more than €100 million, unless each of the companies concerned generates more than 2/3 of its aggregate EU-wide turnover within one EU country.
Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation) (OJ L 24, 29.1.2004, pp. 1-22)
Commission Notice on a simplified procedure for treatment of certain concentrations under Council Regulation (EC) No 139/2004 (OJ C 366, 14.12.2013, pp. 5-9)
Corrigendum to Commission notice on a simplified procedure for treatment of certain concentrations under Council Regulation (EC) No 139/2004 (OJ C 11, 15.1.2014, p. 6)