4.1 Public Policy Defences in Member States
Up to this point, this Thesis has discussed how fit competition authorities and more
specifically how fit the European Commission’s Merger Regime is to support the EU wide push to realize its goals in the European Green Deal through the ‘Theory of Harm’ and the
‘Merger Efficiencies Defence’. This Thesis will now seek to determine how fit a final
element of the EU’s Merger Regime is in assisting it reach its climate commitments, that is a
‘Public Policy Defence’ element. Therefore, to gain context and to properly carry out a comparative analysis in the area, we must first look to how this element has been approached by Member States and competition regimes outside the EU.
An increasing number of national competition authorities (NCAs) across the globe have incorporated a ground-breaking policy initiative into their merger enforcement regimes.
Certain NCAs have put a system in place which allows for mergers to be cleared that contribute to achieving environmentally sustainable objectives on grounds of public policy.
The Author of this Thesis recognizes that this may seem similar to passing mergers under Recital 29 EUMR for efficiency reasons. However, this method should be seen as an alternative means which would effectively allow mergers, which pursue environmental objectives, to be passed while avoiding the complexities involved in merger efficiencies as per the Merger Guidelines. This ‘Public Policy Defence’, as will be demonstrated, offers a more broad and thus less difficult threshold to be crossed. The EU should take inspiration from other jurisdictions that are proactive in this matter, to be able to take the next step in making the EU’s Merger Regime fit for achieving its climate commitments.
One of the most ground-breaking merger regimes of the European Member States, which allows for public policy clearance, is that of Germany, which contains a feature known as
‘Ministererlaubnis’. Under the Act against Restraints of Competition74, the Ministry of Economic Affairs (Bundesministerium für Wirtschaft und Klimaschutz) is granted the competence to overturn decisions by the German Competition Authority (Bundeskartellamt).
The overturning of these decisions occurs to concentrations which produce overriding public
74 §42, Gesetz gegen Wettbewerbsbeschränkungen (BGBl. I S. 1750, 3245) 2013.
interest effects, such as significant environmental benefits, to the extent that it is within the public interest to bear the burden of the anti-competitive effects from the concentration.
In a case of paramount importance, Miba/ Zollern75, the Ministry of Economic Affairs used its Ministererlaubnis power to overturn a decision of the Bundeskartellamt due to
environmental efficiencies, citing public policy reasons. In this case the Bundeskartellamt was concerned that competition would be significantly reduced in the market of large-bore engines and therefore, after carrying out a SEIC test, the NCA refused to pass the
concentration.76 However, after subsequent and successful argumentation by the parties that the concentration would contribute significantly to the innovation for wind energy
technology, the Bundesministerium für Wirtschaft und Klimaschutz overruled.77
This case of Miba/Zollern is significant as it may be used as an effective platform and model to launch an EU wide public interest option, similar to the Ministererlaubnis system, for firms under the scope of the EUMR who wish to participate in green initiatives. A similar
possibility for a Minster to overturn a decision by the Member State’s national competition authority for public policy interest exists in the Spanish competition framework and
specifically mentions in the Spanish Competition Act that environmental externalities constitute a sufficient reason to act on grounds of public policy.78 Thus the Spanish Model provides further support that a ‘Public Policy Defence’ element could and therefore should be incorporated within the EUMR.
75 Miba/ Zollern (Case I B 20302/ 14-02), overturning decision of Der Bundesministerium für Wirtschaft und Klimaschutz, 19th August 2019,
<https://www.bmwk.de/Redaktion/DE/Downloads/V/verfuegung-verwaltungsverfahren-miba-zollern.pdf?__blob=publicationFile&v=4> accessed on 22nd April 2022.
76 Miba/ Zollern, Bundeskartellamt Press Release, 17th January 2019,
<https://www.bundeskartellamt.de/SharedDocs/Publikation/DE/Pressemitteilungen/2019/17_01_2019_Miba_Zo llern.pdf;jsessionid=D85181AE4ED528D5C4C84D292C16606D.1_cid371?__blob=publicationFile&v=2>
accessed on 6th February 2022.
77 Miba/ Zollern (Case I B 20302/ 14-02), overturning decision of Der Bundesministerium für Wirtschaft und Klimaschutz, 19th August 2019,
<https://www.bmwk.de/Redaktion/DE/Downloads/V/verfuegung-verwaltungsverfahren-miba-zollern.pdf?__blob=publicationFile&v=4> accessed on 22nd April 2022.
78 Article 10(4)(d), Spanish Competition Act 15/ 2007, Published in (Official State Gazette No. 159, of 4July 2007.
4.2 The Oceanic Way
With respect to merger regimes which consider environmental externalities as constituting a legitimate interest under public policy, significant headway has been made by the national competition authorities of New Zealand and Australia.
These NCAs have held that the threshold that exists for availing of a ‘Public Policy Defence’
is that, “the likely public benefit resulting from the conduct outweighs the likely public detriment”.79 To further understand this, we turn to the Australian Competition Tribunal, which roughly defined the public benefit as anything of value to the community generally, or any contribution to the aims pursued by the society.80 This ‘Public Policy Defence’ element of the NCAs merger enforcement is reminiscent of the ‘Merger Efficiencies Defence’, but as is evident from its broad scope, its public benefit element allows for a less stringent
examination as to whether the relevant market is compensated.
Through precedents set by both the Australian and New Zealand competition authorities one can see that ‘public benefit’ and ‘anything of value to the community’ is in fact considered to include environmental efficiencies. The New Zealand Competition Authority in its decision of the Refrigerant License Trust Board81 held that an agreement between 100% of the island’s refrigerant wholesalers to only supply to licensed or certified customers produced anti-competitive effects. Nonetheless, the agreement would result in increased compliance and reduce the release of hazardous substances in the atmosphere, therefore the NCA permitted the agreement. Moreover, the Australian Competition Authority in Tyre
Stewardship Australia82 passed a recycling scheme for tires on the grounds for public benefit.
While the two preceding decisions concern agreements rather than concentrations per se, the approach taken by the two competition authorities could easily be adopted to merger control and more specifically generate an approach that could be used by the Commission to allow mergers circumvent the complexities found in the Merger Guidelines relating to merger
79 OECD, ‘Environmental Considerations in Competition Enforcement’, 1st December 2021, paragraph 201,
<https://one.oecd.org/document/DAF/COMP(2021)4/en/pdf> accessed on 6th March 2022.
80 Re 7-Eleven, (1994), ATPR 41-357 at [42,677].
81 Refrigerant License Trust Board, (Decision 735), Commerce Commission New Zealand Decision, 25 November 2011.
82 Tyre Stewardship Scheme, (Press Release 93/18), ACCC re-authorization, 24th May 2018,
<https://www.accc.gov.au/media-release/accc-re-authorises-tyre-stewardship-scheme> accessed on 2nd May 2022.
efficiencies.83 To expand on this point, the oceanic approach does not require a merger efficiency to directly compensate the market84 which is subject to anti-competitive effects, but rather adopts a community wide approach, as was stated above. This broad ‘Public Policy Defence’ would further the EU Merger Regime’s capability to assist the EU keep on track with climate commitments.
4.3 Article 21(4) EUMR
From the precedents above one can see that Member States across the European Union and regimes outside it have considered environmental externalities as capable of constituting such an externality that is sufficient to ignore anti-competitive effects. Something vaguely similar to a ‘Public Policy Defence’, is found within the EUMR. the Commission under Article 21(4) EUMR, allows for Member States to protect legitimate interest that are not mentioned in the EUMR, however, it does not mention that environmental externalities resulting from mergers are in fact considered as a legitimate interest. Moreover, the actions taken by a Member State to protect a legitimate interest cannot go as far as approving a concentration that was
previously blocked by the Commission.
Article 21 EUMR distinguishes between “recognised interests” and “other public interests”, which require an ex-ante review by the European Commission. Under Article 21(4) solely public security, plurality of the media and prudential rules are considered the prima facie legitimate interests capable of the defence subject to rules of proportionality and objective necessity. All others must be looked at by the Commission, where the Commission will assess whether the objective does in fact contain overriding public policy reasons and respects the principles of proportionality and non-discrimination.
The situation, as it currently stands, with Member States such as Germany and Spain allowing for environmental efficiencies to be permitted for public policy reasons combined with a lack of clarification on the Commission’s behalf has created a legal environment with a major lack of legal certainty. It is therefore paramount that the Commission specifically recognizes that green initiatives constitute a ‘recognised interest’, through amendment of the
83 Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertaking, OJ C 31, 5.2.2004, p. 5–18, paragraphs 78 – 88.
84 OECD, ‘Competition and Sustainability – Note by Australia and New Zealand’, 6th November 2020,
<https://one.oecd.org/document/DAF/COMP/WD(2020)62/en/pdf> accessed on 5th May 2022.
EUMR alongside the three aforementioned legitimate interests, in order to take the next step in making the EUMR ‘fit for purpose’.
However, if the Commission refuses to amend the EUMR, there is an alternative route to have these externalities incorporated under Article 21(4) of the EUMR. As mentioned before, the Commission must take into account any application made by a Member State to have a legitimate interest recognized. Thus, it was rightly pointed out by Simon Holmes85, following a potential application by a Member State to have environmental externalities recognized under Article 21(4), the Commission under the third paragraph of said Article is under an obligation to carry out an, “assessment of its compatibility with the general principles and other provisions of community law”. Other provisions of community law include
constitutional provisions, more specifically, Article 11 TFEU and Article 37 CFR, which require the Union to incorporate environmental protection into all of its policies. Therefore, Article 21(4), read together with the aforementioned primary law articles, suggests that the Commission has an onus to declare environmental objectives as legitimate, once it is referred to it by a Member State.
However, a clarification by the European Commission permitting Member States to protect environmental interest outside of those covered under the EUMR still does not sufficiently address the issue of a lack of legal certainty surrounding the area. Article 21(4) relies on the initiative of the Member States to protect the environmental interest that are not represented in the EUMR. Therefore, the Author of this Thesis suggests that the EU incorporates a public interest clause which mirrors the relevant element of the regimes of New Zealand or
Germany into its own merger analysis under the EUMR. This proposal would allow the Commission to permit a concentration which would reduce competition, if it met the
threshold used by the Oceanic Competition Authorities, allowing the Commission to bypass the legal minefield of the ‘Merger Efficiencies Defence’ and thus allow for an easier process of passing mergers, which produce positive environmental effects.
85 Simon Holmes, ‘Climate Change, Sustainability and Competition Law’, (2020), Volume 8 Issue 2, Journal of Antitrust Enforcement, <https://academic.oup.com/antitrust/article/8/2/354/5819564#205178732>, accessed on 15th March 2022.
4.4 Summary
From the above consideration we can conclude that the ‘Public Policy Defence’ element under Article 21 EUMR is not ‘fit for purpose’. The EU, as stated above, must clarify that the environmentally sustainably grounded public interest concerns can be availed of under
Article 21 EUMR and therefore recognise environmental interests as a prima facie legitimate interest. However, in order to make the EUMR properly ‘fit for purpose’, the EU should look to pursue a policy similar to that of the ‘Ministererlaubnis’ within the German Merger
Regime or the public interest clause in the Oceanic competition regimes. By doing this would drastically assist the EU in reaching its goals under the European Green Deal.