On March 16, 2023, the Court of Justice of the European Union (CJEU) confirmed that national competition authorities (NCAs) in EU Member States can assess concentrations that are not subject to national or EU level merger control under the general rules regarding abuses of dominant positions (the EU’s equivalent of Sherman Act, Section 2, in the United States). The judgment is another indicator that the European Commission (Commission) and EU Member State competition authorities will continue to review below-threshold (i.e., nonreportable) M&A deals.
Background and judgment
Télédiffusion de France (TDF) acquired sole control of Itas in 2016. Both companies were active in providing broadcasting services in France. The acquisition was not notified to, or examined by, the French competition authority (FCA) or the Commission as it did not meet the applicable revenue-based thresholds. Towercast — another broadcasting company in France — lodged a complaint with the FCA arguing that TDF’s acquisition of Itas constituted an abuse of a dominant position, contrary to Article 102 of the Treaty on the Functioning of the European Union (TFEU). According to Towercast, the transaction significantly strengthened TDF’s preexisting dominant positions in both upstream and downstream wholesale markets for television broadcasting. In January 2020, the FCA rejected Towercast’s complaint, reasoning, in essence, that Article 102 TFEU did not apply to M&A deals. Towercast appealed the FCA’s decision to the Paris Court of Appeal, which referred the relevant question of EU law to the CJEU.
In its ruling, the CJEU held that NCAs in EU Member States can assess under Article 102 TFEU an M&A transaction that does not meet the national or EU-level thresholds for notification and has not otherwise been referred by an NCA for review by the Commission under the EU Merger Regulation. The CJEU explained that ensuring that NCAs could conduct ex-post reviews under Article 102 TFEU of below-threshold M&A deals was an important tool in ensuring that competition in the EU was not restricted or distorted.
The CJEU’s ruling in Towercast is notable for companies doing M&A with a nexus to Europe for a number of reasons:
- It makes clear to NCAs in EU Member States that they can conduct ex-post reviews of below-threshold M&A deals. This will leave companies with one or more dominant positions in the EU exposed to the possibility of certain completed M&A deals’ being unwound several years after closing. The absolute number of M&A deals reviewed in this way is likely to remain low, but the mere possibility of ex-post reviews will encourage complaints from aggrieved third parties, and the legal certainty achieved at closing will be compromised on some deals.
- The CJEU’s confirmation that Article 102 TFEU can be used for ex-post reviews of below-threshold deals marks the latest development in the increasing scrutiny of M&A deals in Europe. In the past few years, the following have occurred.
- The Commission has sought to encourage antitrust reviews of below-threshold deals by making clear that it is open to receiving referrals of cases (under Article 22 of the EU Merger Regulation) from NCAs that do not themselves have jurisdiction to conduct a review under their national merger control rules.
- A number of European countries (including the UK, Austria, Germany, Ireland, and Italy) have expanded (or are expanding) the scope of their merger control rules to capture otherwise below-threshold deals.
- The EU has adopted a regulation on coordinating investment screening reviews being conducted at Member State level and has encouraged Member States to adopt their own investment screening tools.
- The EU has adopted its Foreign Subsidies Regulation, which (among other things) gives the Commission powers to review large M&A deals, and call in other deals, where the parties have received financial contributions from non-EU countries.
The ruling may also be interpreted as suggesting that the Commission’s policy shift under Article 22 of the EU Merger Regulation — whereby the Commission made clear that it was open to receiving referrals of cases from NCAs that did not themselves have jurisdiction to conduct a review under their national merger control rules — was not necessary as such cases could have been examined under Article 102 TFEU.
It remains to be seen to what extent NCAs in EU Member States avail of the ability to review M&A deals ex-post using Article 102 TFEU. The possibility of an Article 102 TFEU investigation at some point will be of concern to a significant number of companies involved in M&A with a European nexus. There are some obvious ways in which legal departments can seek to mitigate the risks relating to ex-post reviews, including, notably:
- being alert to postdeal conduct that might exclude rivals or exploit customers/consumers (and therefore risk triggering a complaint under Article 102 TFEU about the deal itself)
- looking out for any suggestion in internal (or external) documents — whether pre- or postdeal — that the merged entity might be dominant, or have market power, or be able to exclude rivals or exploit customers/consumers
- monitoring trends among NCAs availing of the ability to review M&A deals ex-post under Article 102 TFEU, including the sectors most likely to be implicated, and the particular NCAs most likely to initiate an investigation
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