Landmark Judgment on European Commission Merger Control Powers – Legal Certainty Restored?

An important judgment by the Court of Justice of the European Union (CJEU) has put an end to controversial efforts by the European Commission (EC) to extend its merger control jurisdiction. Since 2021, the EC has claimed a right to review deals that meet no filing thresholds anywhere in the EU. This has made it challenging for deal parties to know if their deals might be reviewed by the EC. The CJEU has definitively rejected the EC’s expansionary tendency. 

On September 3, 2024, the CJEU delivered a landmark judgment in Joined Cases C-611/22 P and C-625/22 P, rejecting the EC’s policy regarding Article 22 of the EU Merger Regulation (EUMR). Article 22 EUMR allows one or more EU Member States to request that the EC examine a transaction that does not meet the EU’s turnover-based thresholds. While this provision has existed for some time, it had rarely been used. In 2021, the EC issued guidance encouraging national competition authorities (NCAs) to refer transactions, even if they lacked jurisdiction under their own national rules, in an attempt to capture below threshold deals. 

The EC tried out its newly claimed jurisdiction when it reviewed an acquisition by Illumina, a U.S.-based company specializing in genetic sequencing, of GRAIL, a U.S. firm developing cancer detection technologies. NCAs in several Member States referred the transaction to the EC under Article 22 without having jurisdiction under their own national merger control rules because GRAIL reportedly did not meet the relevant national thresholds. Illumina challenged the EC’s jurisdiction, but the EU General Court (GC) ruled in favour of the EC. This judgment was subsequently appealed to the CJEU.

The CJEU’s Findings in a Nutshell

The CJEU held that the EC never had jurisdiction to review Illumina’s acquisition of GRAIL, because Article 22 EUMR cannot be used where the referring Member State lacks jurisdiction under its own national rules. The CJEU rejected the EC’s argument that Article 22 could be used as a “corrective mechanism” to fill-in gaps in EU merger control law to address mergers that fall below EU and national thresholds. 

The judgment emphasized that the EUMR’s turnover thresholds are of “cardinal importance” for determining whether the EC has jurisdiction to review a transaction and should not be bypassed without clear legislative intent. The CJEU emphasised the “effectiveness, predictability and legal certainty that must be guaranteed to the parties to a concentration,” emphasising that businesses must be able to identify “easily and quickly” to which authority they must turn, within what time limit and in what form, all of which depends on pre-defined merger control thresholds.

Following the CJEU’s ruling, the EC has withdrawn several decisions related to the case, including the decisions to open an in-depth investigation, the prohibition decision, decisions relating to interim and restorative measures, as well as the gun-jumping fine, as they no longer have a legal basis following the judgment.

Key Takeaways and What’s Next?

The CJEU judgment provides several key takeaways for businesses:

• Increased legal certainty: The judgment reinforces the importance of the EUMR’s turnover thresholds in determining whether a transaction should be reviewed by the EC. This clarity allows companies to better predict the regulatory requirements for their transactions and reduces the risk of unexpected interventions under Article 22 EUMR. Mergers that do not meet the EU thresholds can no longer be referred to the EC for review unless the referring NCA itself has jurisdiction. 

• Limited use of Article 22: NCAs that have jurisdiction over a transaction may – as they always have been able to do – refer it to the EC under Article 22 if they believe it raises wider EU competition concerns. In other words, in the future, Article 22 can be used to determine which authority will review a notifiable transaction, but not as a mechanism to determine if a transaction gets reviewed at all. Commissioner Vestager also mentioned in a speech given on September 6, 2024 that Article 22 could be revisited to “allow for the referral of sub-threshold mergers by member states without jurisdiction in defined circumstances.”

• Focus on “call-in” powers: Businesses engaging in cross-border transactions should be aware that several Member States, including Denmark, Hungary, Ireland, Italy, Latvia, Lithuania, Slovenia and Sweden, have recently expanded their national merger control rules to allow them to, in some circumstances, “call-in” transactions (even where traditional revenue-based thresholds are not met). A transaction could therefore still be “called in” by one of these few jurisdictions, and potentially be referred to the EC. This would be controversial in light of the CJEU’s ruling but cannot be excluded. Commissioner Vestager has also alluded to the possibility for the EC to introduce its own “call-in” power to review below-threshold transactions.

• Other available channels for review remain: a recent CJEU judgment confirmed that NCAs can review acquisitions under the EU’s abuse of dominance rules, even when the transactions fall below EU and national merger control thresholds. However, this type of review can only occur after-the-fact, and so the need to make a filing or seek prior approval does not arise.  

• Future legislative reform: The EC may now seek legislative reforms to adjust merger control thresholds (e.g., to adopt HSR-style value of transaction thresholds) to try to capture transactions believed to be strategically significant or to have adverse potential competition effects. However, this is a politically challenging route which could result in attempts by Member States to pursue a broader reform, so is unlikely to happen quickly. For the moment at least, the judgment offers businesses greater certainty regarding when and where it may need to make filings.