On April 20, 2023, the European Commission (EC) adopted a package of measures designed to simplify and streamline review procedures under the EU Merger Regulation (EUMR). The changes aim to minimize the burdens associated with the EC’s review of deals that do not raise substantive antitrust issues. The updated rules will be applicable as of September 1, 2023.
The 2023 EU Merger Simplification package includes (i) a revised Merger Implementing Regulation (Implementing Regulation), which includes updated notification forms, (ii) a Notice on Simplified Procedure (Notice), and (iii) a communication on the transmission of documents (Communication).
The measures (i) expand and/or clarify which deals qualify for the EC’s simplified procedure, (ii) streamline the review of cases under the simplified procedure, (iii) streamline the review of cases under the normal procedure, and (iv) introduce an electronic system for notifications.
Expansion and/or clarification of deals that qualify for simplified review
The Notice keeps the preexisting four main categories of transactions that may qualify for simplified review but for some categories broadens their scope significantly.
1. Extra-EEA Joint Ventures.
Simplified review will be available for the acquisition of joint control of a joint venture in the following two situations:
a) joint ventures with no current (at the time of notification) or expected (in the three years following the acquisition) European Economic Area (EEA) turnover and where the parties do not plan to transfer any EEA assets to the joint venture
b) joint ventures with current (at the time of notification), and expected (in the three years following the acquisition), EEA turnover, and value of transferred assets, all below €100 million
The first subcategory is new, while the second is amended. The changes to the second category are to two aspects: First, eligibility rests on the joint venture’s EEA turnover staying below €100 million for the next three years (as opposed to the current requirement based on turnover in the last financial year), and second, the total value of assets must also be below €100 million.
2. No horizontal or vertical relationship between the parties.
This category remains unchanged and applies to situations where the parties to the transactions have no overlapping activities and are not active in markets that are upstream and downstream to each other in the EEA.
3. Insignificant horizontal or vertical overlaps between the parties.
This category has been expanded considerably. The current rules provide that deals can benefit from simplified review if in the case of horizontal overlaps the combined market share of the parties post-transaction on all relevant markets on which they are both present is below 20%, and in the case of vertical relationships the individual or combined market share in any of the upstream or downstream markets is below 30%. These thresholds continue to apply, but the simplified procedure will also be available in the following situations:
- For horizontal overlaps: The combined share is above 20% but below 50% and the market share increment is small (the delta of the Herfindahl-Hirschman Index (HHI, a measure of concentration on a market) must be below 150).
- For vertical relationships (introduction of two new subcategories):
a. The individual or combined upstream market share of the parties is below 30% and the party (or parties) active in the downstream market holds a purchasing share of less than 30%. The EC explains that an undertaking’s purchasing share is calculated by dividing (i) the volume or value of the undertaking’s purchases of products in the upstream market by (ii) the total size of the upstream market (in terms of volume or value).
b. The individual or combined upstream and downstream market shares of the parties are below 50%, the market concentration index (HHI delta) is below 150, and the party with the smallest market share is the same in the upstream and downstream markets.
4. Change from joint control to sole control.
This category remains unchanged and applies if a party acquires sole control of an undertaking over which it already has joint control.
Flexibility to change from normal to simplified procedure
The Notice introduces a flexibility clause to allow the EC discretion to treat deals under the simplified procedure even if they do not fall under any of the above-mentioned default categories. This flexibility is available if the category thresholds are exceeded, but only modestly.
- For horizontal overlaps: The 20% threshold is exceeded, but the combined market share of the parties is 20% to 25%.
- For vertical relationships:
a. The 30% threshold is exceeded but the individual or combined upstream and downstream market shares of the parties are 30% to 35%.
b. The individual or combined market shares of the parties do not exceed 50% in one market and 10% in the other vertically integrated market.
- For joint ventures: joint ventures with turnover or assets exceeding the €100 million threshold but remaining between €100 million and €150 million in the EEA.
Safeguards and exclusions
The Notice also introduces a nonexhaustive list of examples of types of transactions that may be excluded from the simplified procedure (despite apparently meeting the criteria for simplified treatment), for example:
- transactions in which one undertaking may have significant noncontrolling shareholdings in companies active in the markets where another party to the transaction is active
- certain types of transactions that may increase the market power of the parties even if the parties do not operate in the same market, for example, combining technological, financial, or other resources or competitively valuable assets, such as raw materials, intellectual property rights (patents, know-how, designs, and brands), infrastructure, a significant user base, or commercially valuable data inventories
Streamlining the review of cases
The current notification form (Form CO) consists of questions to which the parties draft narrative responses. The Implementing Regulation introduces a new “tick-the-box” Short Form CO for simplified cases. This form includes mainly multiple-choice questions and tables.
In addition, joint ventures with no turnover or assets in the EEA, and concentrations with no horizontal or vertical relationships, may be reviewed under a further streamlined “super-simplified” procedure. Parties are encouraged to notify such transactions directly without any prenotification contacts with the EC’s case teams, which will reduce the review time and burden for notifying parties.
As for the review of nonsimplified cases, the Implementing Regulation also clarifies the information requirements in the Form CO. The main points:
- Waivers: clearer information about the possibilities for the parties to request a waiver from the obligation to provide certain information. The EC sets out two noncumulative conditions to obtain a waiver: The information is either not reasonably available and/or not necessary for the assessment.
- Introduction of tables to be completed with information on affected markets.
- Information about pipeline products or services (products or services likely to be brought to the market in the short or medium term): Both the Short Form CO and the Form CO request information about (i) horizontal overlaps between pipeline products and marketed products, or pipeline to pipeline overlaps, and (ii) vertical relationships involving pipeline products and marketed products, or pipeline to pipeline vertical relations. The requested information includes the parties’ activities in the market, their competitors’ pipeline products, the stage of development, and expected market shares.
- Noncontrolling shareholdings: tick-the-box questions about whether any of the parties has significant noncontrolling shareholdings (i.e., above 10%).
- Removal of parts of questions about cooperative agreements, trade associations, trade agreements, and imports from outside the EEA.
Introduction of an electronic merger filing system
During Covid-19, the EC started accepting notifications in digital format and the obligation to submit hard copy documents was temporarily suspended. This change will now become permanent, and digital transmission of documents will be the default.
In the past few years, the EC has engaged in an ambitious antitrust reform program. It has encouraged reviews of below-threshold deals under Article 22 of the EUMR by clarifying that National Competition Authorities (NCAs) can refer deals to the EC even if the NCAs themselves do not have jurisdiction to review a deal under their national merger control rules. In its recent Towercast judgment, the Court of Justice of the European Union confirmed that NCAs in EU Member States can assess transactions that are not subject to national and EU-level merger control under the general rules regarding abuses of dominant position. In addition, the EU’s Digital Markets Act established an obligation on gatekeepers to notify transactions “where the merging entities or the target of concentration provide core platform services or any other services in the digital sector or enable the collection of data.”
The simplification package appears to be part of the EC’s wider agenda of focusing its resources on cases that raise genuine substantive antitrust issues and is a welcome development for parties engaging in unproblematic transactions, as some (though not all) of the unnecessary burdens of notification are alleviated.
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