European Union: Merger Control - A New Policy enables post-closing reviews of deals even where no national filing thresholds are met

In brief

The European Commission ("Commission") has issued new guidance on the application of Article 22 EUMR referrals ("Article 22 Guidance").1 The Article 22 Guidance will complement the Commission's existing Notice on Case Referral. The Article 22 Guidance is technically not a change in law, but it is a significant change of policy by the Commission as it will now actively encourage a Member State to refer transactions which may adversely affect competition even if they fall below the merger filing thresholds of that Member State.2 The new Article 22 Guidance anticipates referrals of closed deals. Prior to this change in policy, the Commission discouraged such Article 22 referrals.


Contents

Executive Summary

  • The European Commission (Commission) has issued new guidance on when it will accept referrals of merger control reviews from EU national competition authorities. The new guidance was published on 26 March 2021 with immediate effect.
  • In a change of policy, the Commission will accept merger control referrals from a Member State even if the transaction falls below that Member State's filing thresholds. 
  • Member States can refer transactions to the Commission even if they have already closed.
  • For a transaction to be referred it must: (i) affect trade between Member States; and (ii) threaten to significantly affect competition within the Member State or States making the request.
  • The Commission says that this is more likely to be the case if the turnover of the target does not reflect its actual or future competitive potential.
  • The Commission anticipates that this change in policy will mostly affect transactions in the pharmaceutical, biotech and technology sectors where acquisitions of start-ups and small companies with low-to-no revenue regularly occur, but the new guidance applies to all sectors and all transactions.
  • Parties to transactions falling below the European and national merger control filing thresholds which are economically significant (e.g. on the basis of deal value) should now manage the risk of such referrals in their transaction documentation.

In brief

The European Commission ("Commission") has issued new guidance on the application of Article 22 EUMR referrals ("Article 22 Guidance").1 The Article 22 Guidance will complement the Commission's existing Notice on Case Referral. The Article 22 Guidance is technically not a change in law, but it is a significant change of policy by the Commission as it will now actively encourage a Member State to refer transactions which may adversely affect competition even if they fall below the merger filing thresholds of that Member State.2 The new Article 22 Guidance anticipates referrals of closed deals. Prior to this change in policy, the Commission discouraged such Article 22 referrals.

The Commission anticipates that this change in policy will mostly affect transactions in the pharmaceutical, biotech and technology sectors, such as acquisitions of start-ups and small companies with low-to-no revenues, but that could adversely affect competition. These types of transactions typically fall below the EU and Member State merger control filing thresholds. However, the Commission’s revised policy is not limited to just these sectors.

In practice, Parties to transactions falling below the European and national merger control law thresholds which are economically significant (e.g. on the basis of deal value) should now manage the Article 22 risk in their transaction documentation.

The Commission has also announced a new impact assessment to assess policy options to further simplify the Merger Implementing Regulation and the Notice on Simplified Procedure. The aim of this consultation is to identify additional cases that are highly unlikely to raise competition concerns and could therefore be assessed under the simplified procedure. As a first step in this process, the Commission has launched a public consultation with a deadline for submitting a response of 18 June 2021.

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1 See https://ec.europa.eu/competition/consultations/2021_merger_control/guidance_article_22_referrals.pdf

2 Article 22 of the Merger Regulation states that, in order for a referral to be made by one or more Member States to the Commission, two legal requirements must be fulfilled. The concentration must: (i) affect trade between Member States; and (ii) threatens to significantly affect competition within the territory of the Member State or States making the request.


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