EU MERGER LAW: EU MERGER LAW: fundamentalsfundamentals

Eleanor M. FoxEleanor M. FoxProfessor, New York University Professor, New York University

School of LawSchool of Law

ABA Antitrust Section Spring Meeting 2005 ABA Antitrust Section Spring Meeting 2005

BackgroundBackground

The EC Treaty contains no merger controlThe EC Treaty contains no merger controlMerger law adopted 1989, effective 1990:Merger law adopted 1989, effective 1990:

Conferred authority to challenge mergersConferred authority to challenge mergersCentralized control in Brussels; a one-stop shop Centralized control in Brussels; a one-stop shop Standard before 2004 amendment- mergers illegal Standard before 2004 amendment- mergers illegal if they:if they:

“ “create or strengthen a dominant position as a result of create or strengthen a dominant position as a result of which effective competition would be significantly which effective competition would be significantly impeded”impeded”

SEE SLIDE 5 FOR AMENDED TESTSEE SLIDE 5 FOR AMENDED TEST

Notification and waiting, with deadlinesNotification and waiting, with deadlines

Enforcement: 1990s Enforcement: 1990s

Active enforcement against horizontal, vertical, Active enforcement against horizontal, vertical, conglomerate mergersconglomerate mergers– Concern with price-raising, leveraging, portfolio Concern with price-raising, leveraging, portfolio

effectseffects

Active against multinational mergersActive against multinational mergers

Was the “dominance” standard limited to Was the “dominance” standard limited to dominance?dominance?– Court of Justice held that dominance standard met by Court of Justice held that dominance standard met by

proof of “collective dominance” proof of “collective dominance” Kali & Salz 1998Kali & Salz 1998

REFORM: 2004REFORM: 2004

2002 - Court suggests Merger Regulation might 2002 - Court suggests Merger Regulation might not reach unilateral effectsnot reach unilateral effects

Amendment adopted to Amendment adopted to – close this possible gap, simplify referrals between close this possible gap, simplify referrals between

Commission and member states, provide more Commission and member states, provide more flexible deadlines, and give guidance on analysisflexible deadlines, and give guidance on analysis

2004 - Council amends Merger Regulation2004 - Council amends Merger Regulation– Commission adopts Horizontal Merger GuidelinesCommission adopts Horizontal Merger Guidelines

Similar to US horizontal merger guidelinesSimilar to US horizontal merger guidelines

COUNCIL REG. 139/2004COUNCIL REG. 139/2004

New standard - includes unilateral effectsNew standard - includes unilateral effects

– ““A concentration which would A concentration which would SIGNIFICANTLY IMPEDE EFFECTIVE SIGNIFICANTLY IMPEDE EFFECTIVE COMPETITION …, in particular as a COMPETITION …, in particular as a result of the creation or strengthening of result of the creation or strengthening of a dominant position, shall be declared a dominant position, shall be declared incompatible with the common market.”incompatible with the common market.”

What is caught?What is caught?(When is a merger of community dimension?)(When is a merger of community dimension?)

Combined aggregate world turnover (“TO”) is Combined aggregate world turnover (“TO”) is > 5 billion EUR> 5 billion EUR

Aggregate Community TO of each of at least two of the Aggregate Community TO of each of at least two of the firms is > 250 million EURfirms is > 250 million EUR

Unless each firm has > 2/3 of its Community TO in one and the Unless each firm has > 2/3 of its Community TO in one and the same member statesame member state

OR: combined worldwide TO is > 2.5 billion EUROR: combined worldwide TO is > 2.5 billion EUR– In each of at least 3 member states combined aggregate TO is > In each of at least 3 member states combined aggregate TO is >

100 million100 millionIn each of at least 3 of these member states, aggregate TO of each In each of at least 3 of these member states, aggregate TO of each of at least 2 firms is > 25 millionof at least 2 firms is > 25 million

– Aggregate Community TO of each of at least 2 firms is > 100 Aggregate Community TO of each of at least 2 firms is > 100 million EURmillion EUR

– Unless each firm concerned has > 2/3 of its aggregate Unless each firm concerned has > 2/3 of its aggregate Community TO within one and the same member state Community TO within one and the same member state

MANY MORE RULES!MANY MORE RULES!

Conforming with ICN recommendations, the Conforming with ICN recommendations, the Merger Regulation was amended toMerger Regulation was amended to– give parties more freedom to decide time to notifygive parties more freedom to decide time to notify

– Requires notification prior to implementation and following Requires notification prior to implementation and following conclusion of agreement, announcement of public bid, or conclusion of agreement, announcement of public bid, or acquisition of controlling interest; also allows notification where acquisition of controlling interest; also allows notification where firms demonstrate good faith intention to conclude agreement firms demonstrate good faith intention to conclude agreement or make a bidor make a bid

How long can Commission take to decide?How long can Commission take to decide?w/i 25 working days, must decide if merger raises serious w/i 25 working days, must decide if merger raises serious questionsquestionsExtended to 35 if Commission identifies concernsExtended to 35 if Commission identifies concernsMust decide w/i 90 days of opening second phaseMust decide w/i 90 days of opening second phase

– Extensions allowed up to 20 more daysExtensions allowed up to 20 more days

THE DRAMA OF SUBSTANCETHE DRAMA OF SUBSTANCE

Boeing/McDonnell Douglas (Comm. 1997)Boeing/McDonnell Douglas (Comm. 1997)

GE/Honeywell (Comm. 2001)GE/Honeywell (Comm. 2001)

Airtours/First Choice (CFI 2002)Airtours/First Choice (CFI 2002)

Tetra Laval/Sidel (ECJ 2005)Tetra Laval/Sidel (ECJ 2005)Conglomerate mergers may be caught but their harms are Conglomerate mergers may be caught but their harms are “uncertain, and difficult to establish”“uncertain, and difficult to establish”

Standard of review-close scrutiny: Standard of review-close scrutiny: The Court must decide whether the evidence is “accurate, The Court must decide whether the evidence is “accurate, reliable and consistent” and contains all the information reliable and consistent” and contains all the information necessary “to assess a complex situation and whether it is necessary “to assess a complex situation and whether it is capable of substantiating the conclusions drawn from it.” capable of substantiating the conclusions drawn from it.”

A new era of building bridges?A new era of building bridges?