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Mind the Gap? An Analysis from a German Competition Law Perspective of the European Commission’s Proposal to Review Non-Controlling Minority Shareholdings Under European Merger Control Law

Abstract

The following article analyses the European Commission’s proposal to bring acquisitions of non-controlling minority shareholdings under its jurisdiction. As a consequence, the European Commission would have the power to decide types of cases and to block mergers, which are generally not subject to merger control law in the majority of the Member States of the European Union. Additionally, this could lead to tension with regulatory systems in EU Member States, which review non-controlling minority shareholdings already, and to additional burden for companies. In contrast to many other articles about this topic, it examines in detail the opinions submitted in response to the European Commission’s public consultation with regard to the proposed requirement for notification (“competitively significant link”), the form of the notification and the timing for such notifications. Many stakeholders have criticised the European Commission’s proposal, inter alia by stating that these acquisitions could be caught by the prohibition of anti-competitive agreements under Art. 101 Treaty on the Functioning of the European Union. The authors use German merger control law as a proxy to prove the existence and the extent of the enforcement gap referred to by the European Commission. The German Federal Cartel Office and the German courts have considered acquisitions of non-controlling minority shareholdings, in which the acquirer gained a “competitively significant influence” over the target, to have anti-competitive effects. However, the importance of the enforcement gap seems to be limited in practice.

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Notes

  1. 1.

    Such acquisitions are also subject to review under the merger control regimes of a number of jurisdictions outside the European Union, including Australia, Brazil, Canada, Japan, New Zealand, Norway and the United States.

  2. 2.

    http://ec.europa.eu/competition/consultations/2014_merger_control/index_en.html (as of 22 June 2016).

  3. 3.

    Ibid.

  4. 4.

    This article considers the replies from the public authorities and registered organisations. Account has not been taken of the replies received from the non-registered organisations and the response from the Polish Office for Competition and Consumer Protection (in the Polish language).

  5. 5.

    White Paper, para. 39 et seq.

  6. 6.

    Council Regulation (EC) 139/2004 (OJ 2004 L24 1, 29.1.2004).

  7. 7.

    White Paper, para. 26 et seq.

  8. 8.

    White Paper, para. 29 et seq.

  9. 9.

    The majority of the registered organisations who submitted comments on the 2014 public consultation favour a voluntary self-assessment system. However, the Austrian Federal Chamber of Labour and the Austrian Federal Competition Authority, the German Federal Cartel Office and the German Federal Ministry for Economic Affairs and Energy prefer the introduction of a mandatory notification system. This desire reflects their domestic notification systems in the case of non-controlling minority shareholdings. According to Montag and Wilks, a clear cut procedure is preferable and to that end, notification should be mandatory or voluntary (Montag and Wilks 2015, p. 90).

  10. 10.

    White Paper, para. 46.

  11. 11.

    White Paper, para. 47.

  12. 12.

    Not all of the respondents to the most recent public consultation commented on every aspect of the Commission’s proposal. This article analyses the responses of those that made explicit reference to and expressed a clear opinion on the relevant issues. References to the comments should not be considered to be an exhaustive enumeration.

  13. 13.

    Summary of replies of 16 March 2015, para. 13 et seqq.

  14. 14.

    See for example American Chamber of Commerce to the European Union (AmCham EU), Association Française d’Etude de la Concurrence, BUSINESSEUROPE, French Association of Large Companies (AFEP), and MEDEF (Business Confederation); see also Opinion of the European Economic Social Committee (“EESC”) on the White Paper – Towards more effective EU merger control (OJ 2015 C230, 14.7.2015) under 1.5 and 5.2: clarification is needed concerning the concept of a competitor, the parameters for the concept of a vertically-related company, the definition of a significant link and whether the SIEC test should be considered for the overall activities of the corporate group operating in different economic sectors.

  15. 15.

    Independent Music Companies Association (IMPALA).

  16. 16.

    See for example American Chamber of Commerce to the European Union (AmCham EU), Association Française d’Etude de la Concurrence, CCI Paris Ile-de-France, The Law Society of England and Wales and Siemens.

  17. 17.

    Summary of replies of 16 March 2015, para. 21.

  18. 18.

    See for example Austrian Federal Competition Authority, Bulgarian Commission on Protection of Competition, Bundesverband der Deutschen Industrie (BDI), BUSINESSEUROPE, Danish Competition and Consumer Authority, Japan Business Council in Europe (JBCE), Siemens and UniCredit.

  19. 19.

    White Paper, para. 42.

  20. 20.

    White Paper, para. 49; Montag and Wilks (2015), p. 90, question the benefit of the information notice, as the requested information would not differ significantly from the Short Form CO. However, based on the Commission’s proposals, it is possible that the information notice will be substantially less burdensome if a pre-notification phase is not envisaged. Moreover, several aspects which constitute part of the Short Form CO have not been included in the proposal, for example, the value of the transaction, market shares and contact details of the three largest competitors, research and development activities, main innovations in the last three years, cooperative effects of a joint venture (if applicable) and supporting documentation. The submission of presentations, which analyse the transaction or the affected markets, can be especially burdensome and time-consuming for the parties (see Sec. 5.3 of the Short Form CO and Sec. 5.4 of the Form CO).

  21. 21.

    White Paper, para. 49.

  22. 22.

    Interestingly, the EESC also emphasises in its opinion that the broad scope of amendments in the White Paper should not conflict with its aim of maintaining the right balance between the public interest in closing a loophole and the corporate interest in keeping administrative costs low (Opinion of EESC under 1.2 and 3.4; OJ 2015 C230, 14.7.2015). In addition, the EESC suggests considering social repercussions, for example, employment issues and the benefits arising from any new merger control provisions (Opinion of EESC under 1.4, 3.4 and 3.7; OJ 2015 C230, 14.7.2015).

  23. 23.

    White Paper, para. 49.

  24. 24.

    This is only implicitly indicated in the summary of replies of 16 March 2015 by the Commission (para. 29).

  25. 25.

    Belgian Competition Authority.

  26. 26.

    French Competition Authority.

  27. 27.

    UK Competition & Markets Authority.

  28. 28.

    Independent Music Companies Association (IMPALA), MEDEF (Business Confederation) and UniCredit.

  29. 29.

    Competition Law Committee of the City of London Law Society (CLLS).

  30. 30.

    White Paper, para. 50.

  31. 31.

    Ibid.

  32. 32.

    It is interesting to note that the Commission has not stressed this point in its summary of replies of 16 March 2015, para. 32 et seq.

  33. 33.

    The Department for Business Innovation & Skills of the UK Government and UK Competition & Markets Authority.

  34. 34.

    Association of the Italian Joint Stock Companies, Independent Music Companies Association (IMPALA) and MEDEF (Business Confederation).

  35. 35.

    White Paper, para. 51.

  36. 36.

    OJ C 326 (26.10.2012).

  37. 37.

    White Paper, para. 24.

  38. 38.

    See for example, Commission, 13 July 2005, Case No. M.3653 – Siemens/VA Tech concerning unilateral effects and Commission, 13 March 2009, Case No. M.5406 – IPIC/MAN Ferrostaal considering foreclosure effects.

  39. 39.

    White Paper, para. 25.

  40. 40.

    For a critical view on the existence of a sufficient enforcement gap see Levy (2013).

  41. 41.

    Finnish Competition and Consumer Authority, Independent Music Companies Association (IMPALA) and UK Competition & Markets Authority; see also Montag and Wilks (2015), p. 82 et seq.

  42. 42.

    Joined Cases C-142/84 and C-156/84 British American Tobacco Company Ltd v. Commission, EU:C:1987, 490, para. 37.

  43. 43.

    Green Paper on the Review of Council Regulation (EEC) No 4064/89, COM(2001) 745 final (not published in the Official Journal).

  44. 44.

    Levy (2013), p. 726 (the author concludes that this is contrary to the Commission’s desire for reform).

  45. 45.

    White Paper, para. 39.

  46. 46.

    It is noted for the sake of completeness that the applicability of Art. 102 TFEU is limited in these circumstances as the Commission would need to prove that the acquirer of a non-controlling minority stake in another company holds a dominant position and that the acquisition of such a stake would result in an abuse of its dominance (White Paper, para. 40).

  47. 47.

    Case T-41/96 Bayer AG v. Commission, EU:T:2000, 242, para. 69.

  48. 48.

    Case T-325/01 DaimlerChrysler AG v. Commission, EU:T:2005, 322, para. 84.

  49. 49.

    Case C-49/92 P Commission v. Anic Partecipazioni SpA, EU:C:1999, 356, para. 103.

  50. 50.

    Case C-48/69 ICI v. Commission, EU:C:1972, 70, para. 64.

  51. 51.

    Case C-49/92 P Commission v. Anic Partecipazioni SpA, EU:C:1999, 356, para. 131.

  52. 52.

    White Paper, para. 40.

  53. 53.

    Ibid.

  54. 54.

    Joined cases C-501/06 P, C-513/06 P, C-515/06 P and C-519/06 P GlaxoSmithKline Services Unlimited v. Commission, EU:C:2009, 610.

  55. 55.

    Ibid., para. 58.

  56. 56.

    Case C-8/08 T-Mobile, EU:C:2009, 343, para. 31.

  57. 57.

    Joined cases T-374/94, T-375/94, T-384/94 and T-388/94 European Night Services, EU:T:1998, 198, para. 136.

  58. 58.

    The article has a focus on the concentration under Sec. 37(1)(4) GWB, as the “additional factors” proposed by the Commission seem to be inspired by this provision. Even if this is not the case, decisional practice under Sec. 37(1)(4) GWB could potentially be used by the Commission in order to clarify or apply the requirement of a “competitively significant link”.

  59. 59.

    Bach (2015), Sec. 37, para. 103; Riesenkampff and Lehr (2009), Sec. 37, para. 26.

  60. 60.

    Rittner et al. (2014), para. 1471.

  61. 61.

    Bach (2015), Sec. 37, paras. 104 and 105; Kuhn (2011), p. 278; Schwarz (2005), p. 2125; Thomas (2014), Sec. 37, para. 302; for an opposing view see Zigelski (2009), p. 1263, who argues that decisional practice provides relatively clear guidance and that the provision is not onerous for companies.

  62. 62.

    See for example, Bechtold and Bosch (2015), Sec. 37, para. 36.

  63. 63.

    It is not surprising that the notification requirement proposed in the White Paper, i.e. the competitively significant link, resembles some factors which play a role in the German case-law concerning Sec. 37(1)(4) GWB.

  64. 64.

    Emmerich (2014), p. 415; Kuhn (2011), p. 264.

  65. 65.

    See for example Federal Supreme Court, 21 November 2000, Case No. KVR 16/99, 2001 NJW-RR 762; Federal Cartel Office, 27 Febraury 2008, B5-198/07, para. 45 – A-TEC Industries/Norddeutsche Affinerie; see Bechtold and Bosch, Sec. 37, para. 43 and Schütz (2014), Sec. 37, para. 79 for the importance of a horizontal overlap or vertical relationship; conglomerate transactions should not fall under the provision: Bechtold and Bosch, Sec. 37, para. 43 (based on wording and legislator’s motives); Thomas (2014), Sec. 37, para. 345; for an opposing view, but also only in exceptional circumstances see Monopolkommission (1991/1992), p. 253, para. 536; Kallfaß (2014), Sec. 37, para. 57; Kuhn (2011), p. 264 et seq.

  66. 66.

    See for example, Federal Supreme Court, 21 December 2004, Case No. KVR 26/03, 2005 WM 664, p. 665 – Post/trans-o-flex.

  67. 67.

    Ibid.

  68. 68.

    Federal Cartel Office, 27 February 2008, Case No. B5-198/07, para. 27 et seq. – A-TEC Industries/Norddeutsche Affinerie; the Federal Supreme Court has upheld a prohibition decision of the Federal Cartel Office (Federal Supreme Court, 21 December 2004, Case No. KVR 26/03, 2005 WM 664, p. 666 – Post/trans-o-flex).

  69. 69.

    Federal Cartel Office, 3 January 1997, Case No. B6-108/96, 1997 NJWE-WettbR, 67–72 – ASV/Stilke.

  70. 70.

    Federal Supreme Court, 21 November 2000, Case No. KVR 16/99, 2001 NJW-RR, 762–765 – ASV/Stilke.

  71. 71.

    Ibid., p. 762.

  72. 72.

    Ibid., p. 765.

  73. 73.

    The acquirer published and sold newspapers and magazines and the target was active in the press retail business.

  74. 74.

    Ibid., p.762.

  75. 75.

    Ibid., p.764.

  76. 76.

    Federal Supreme Court, 21 December 2004 Case No. KVR 26/03, 2005 WM, 664 – Post/trans-o-flex.

  77. 77.

    Overall, the supervisory board consisted of 12 members.

  78. 78.

    Federal Supreme Court, 21 December 2004, Case No. KVR 26/03, 2005 WM 664, p. 665 – Post/trans-o-flex.

  79. 79.

    Federal Cartel Office, 22 July 2004, Case No. B8-27/04, para. 20 – Mainova/Aschaffenburger.

  80. 80.

    Ibid., para. 21.

  81. 81.

    Düsseldorf Court of Appeal, 23 November 2005, Case No. VI-2 Kart 14/04 (V), paras. 16 – Mainova/Aschaffenburger.

  82. 82.

    Federal Cartel Office, 8 September 2004, Case No. B6-27/04, p. 23 – Bonner Zeitungsdruckerei.

  83. 83.

    Ibid., p. 19.

  84. 84.

    Ibid., p. 24.

  85. 85.

    Ibid., p. 25 et seq.

  86. 86.

    Ibid., p. 26.

  87. 87.

    Ibid., p. 28.

  88. 88.

    Düsseldorf Court of Appeal, 6 July 2005, Case No. VI-Kart 26/04 (V), para. 21 – Bonner Zeitungsdruckerei.

  89. 89.

    Ibid., paras. 24.

  90. 90.

    Ibid., para. 30.

  91. 91.

    Ibid., para. 32.

  92. 92.

    Federal Cartel Office, 27 February 2008, Case No. B5-198/07, para. 27 et seq. – A-TEC Industries/Norddeutsche Affinerie.

  93. 93.

    Federal Supreme Court, 21 December 2004, Case No. KVR 26/03, 2005 WM 664, p. 666 – Post/trans-o-flex.

  94. 94.

    Federal Cartel Office, 12 March 2013, Case No. B3-132/12, para. 49 – Asklepios Kliniken/Rhön-Klinikum.

  95. 95.

    For completeness, the same would apply if the requirements of Art. 102 TFEU were not fulfilled.

  96. 96.

    The ECJ has held in its judgment in case C-12/03 Commission v. Tetra Laval BV, EU:C:2005, 87 at para. 42: “A prospective analysis of the kind necessary in merger control must be carried out with great care since it does not entail the examination of past events – for which often many items of evidence are available which make it possible to understand the causes – or of current events, but rather a prediction of events which are more or less likely to occur in future if a decision prohibiting the planned concentration or laying down the conditions for it is not adopted”.

  97. 97.

    Joined Cases C-142/84 and C-156/84 British American Tobacco Company Ltd v. Commission, EU:C:1987, 133, para. 38.

  98. 98.

    See for example, Goyder et al. (2009), p. 389; Löffler (2001), Vorbemerkungen, para. 10.

  99. 99.

    Activity Report 2013/2014, p. 16.

  100. 100.

    In 2013: 31 cases and in 2014: 30 cases (Activity Report 2013/2014, p. 135).

  101. 101.

    In 2013: 23 cases and in 2014: 23 cases; none of these cases has been reviewed in Phase II (Activity Report 2013/2014, p. 20 and p. 135).

  102. 102.

    Federal Cartel Office, 12 March 2013, Case No. B3-132/12, para. 49 – Asklepios Kliniken/Rhön-Klinikum.

  103. 103.

    http://ec.europa.eu/commission/2014-2019/vestager/announcements/thoughts-merger-reform-and-market-definition_en (as of 22 June 2016).

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Balitzki, A., Pugh, R. Mind the Gap? An Analysis from a German Competition Law Perspective of the European Commission’s Proposal to Review Non-Controlling Minority Shareholdings Under European Merger Control Law. IIC 47, 595–616 (2016). https://doi.org/10.1007/s40319-016-0490-9

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Keywords

  • Minority shareholdings
  • Enforcement gap
  • White Paper
  • European and German merger control