The scope of the standstill obligation in the EU Merger Regulation
Name: Elise Louisa Vos
Master International and European Law: European Competition Law and Regulation Thesis supervisor: R.H. van Ooik
Abstract
In the recent case EY/KPMG the Court of Justice of the European Union delivered its first ruling on the scope of the standstill obligation, laid down in Article 7(1) of Regulation No 139/2004. The obligation must be interpreted as meaning that a concentration is implemented only by a transaction which, in whole or in part, in fact or in law, contributes to a lasting change in control of the target undertaking. In this thesis I attempt to research which transactions fall within this description of the Court, by analysing the approach of the Commission and the National Competition Authority and compare this with the view of the Court. This comparison shows that the broad interpretation of the standstill obligation from the Commission and the Danish Competition Authority in EY/KPMG is one bridge too far for the Court. However, the strict approach in other cases, like Altice and Canon, might pass the test. This knowledge will not only help the Commission in its search for future violations, but will also give guidance to companies on which measures can be implemented before or during notification to the Commission, without violating Article 7(1) of the EUMR.
Table of contents
Chapter 1: Introduction
1.1 Background and research question p. 4
1.2 Research design p. 4
Chapter 2: The Merger Regulation
2.1 History of the Regulation p. 5
2.2 The standstill obligation of Article 7 p. 6
2.2.1 Conditions p. 6-10
2.2.2 Limitations p. 11
2.3 Powers of the Commission p. 11-12
Chapter 3: The standstill obligation in practice
3.1 Case law of the Court on Article 7 p. 13
3.1.1 Facts of EY/KPMG p. 13-14
3.1.2 Opinion of the AG p. 14-16
3.1.3 Decision of the CJEU p. 16-17
3.2 The Commission’s approach compared to EY/KPMG p. 17-18
3.2.1 Previous cases of violation p. 18-19
3.2.2 Recent approach of the Commission p. 19-25
3.4 National Competition Authorities p. 25
3.4.1 Transfer of shares p. 25-27
3.4.2 Other considered implementations p. 27-29
Chapter 4: Conclusion
4.1 The scope of the standstill obligation p. 29-30
4.2 Recommendations p. 30
4.2.1 The Commission and NCA’s future focus p. 30-31
1. Introduction
1.1 Background and research question
On the 31st of May 2018 the Court of Justice of the European Union (‘CJEU’) delivered its first ruling on the standstill obligation, laid down in Article 7(1) of the EU Merger
Regulation.1 This decision was not unexpected, considering the increase of fines of the European Commission (‘Commission’) on violation of this obligation.2 Article 7(1) of the EUMR reads as follows: “A concentration with a Community dimension as defined in Article 1, or which is to be examined by the Commission pursuant to Article 4(5), shall not be
implemented either before its notification or until it has been declared compatible with the common market.” With its recent decision the CJEU ruled that a concentration is
implemented by a transaction which, in whole or in part, in fact or in law, contributes in a change in control of the target undertaking. Nevertheless, the grey area of which transactions specifically contribute in a change in control in light of Article 7(1) of the EUMR remains.3 In this research I attempt to determine the scope of the standstill obligation within the meaning of Article 7(1) of Regulation No 139/2004, which will help the Commission in its search for future violations,4 and also give guidance to companies on which measures can be
implemented before or during notification. 1.2 Research design
In order to determine the scope of the standstill obligation I will first discuss the basic concept as laid down in the EUMR. Furthermore the particular requirements for Article 7(1) of the EUMR will be highlighted. After this introductory chapter, the opinion of the Advocate General Wahl in the EY/KPMG case will be discussed and the case law of the CJEU and the General Court will be compared in order to determine the scope of Article 7(1) of the EURM. Furthermore the practice of the Commission and the National Competition Authorities will help narrow down the existing grey area on implementation of concentrations. In the conclusion I will compare the different views on the standstill obligation and give my recommendations on the scope of the standstill obligation.
1 Council Regulation (EC) 139/2004 on the control of concentrations between undertakings [2004] OJ L24/1, Article 7(1).
2 The standstill obligation is also known as gun-jumping, however in this thesis the term standstill obligation will be used.
3 Case C-633/16 Ernst & Young P/S v Konkurrenceradet [2018] ECLI:EU:C:2018:23, Opinion of AG Wahl, paras 39, 63.
2. The Merger Regulation
2.1 History of the Regulation
Although mergers can be beneficial for competition, there are various reasons why mergers should still be regulated. For example a national government can have objections to a merger when it disapproves that a foreign firm takes over a domestic firm or the firm itself will object to being targeted of a hostile bid. 5 Nevertheless it could be argued that, since competition law already forbids the abuse of a dominant position,6 there is no need for merger control to prevent the creation or strengthening of market power. Why must there specifically be ex ante control (before a merger) given that there is legal protection in de form of ex post control (after a merger)?7 One reason is that ex post investigations have the chance to be less
effective; the investigations of unilateral conduct of dominant firms are intensive and National Competition Authorities lack the resources to explore every alleged infringement.8 Therefore there must be a specific legal instrument to permit effective ex ante control over
concentrations in terms of their effect on the structure of competition in the EU and to be the only instrument applicable to such concentrations.9
Nowadays the rules on the control of mergers (or, in the words of the Regulation,
concentrations) are incorporated in the EU Merger Regulation 139/2004 (‘EUMR’), which replaced the Council Regulation (EEC) No 4064/89 of 21 December 1989.10 The EUMR reformed this regulation significantly, which included an amendment of Article 7 of the initial Regulation.11 The previous standstill obligation (also laid down in Article 7) only provided for a three-week waiting period before its notification.12 It read as follows: “For the purposes of paragraph 2 a concentration as defined in Article 1 shall not be put into effect either before its notification or within the first three weeks following its notification.”13 Article 7 (1) of the EUMR does not provide a concrete waiting period, but only indicates that a concentration
5 A. Jones and B. Sufrin, EU Competition Law (6th edition, OUP 2016), page 1085, 1087; R. Whish & D. Bailey, Competition Law (8th edition, OUP 2015), pages 853-854.
6 Consolidated version of the Treaty on the Functioning of the European Union [2012] OJ C 326/01, Article 102
7 R. Whish & D. Bailey, Competition Law (n.5), page 860.
8 Ibid.
9 Council Regulation (EC) 139/2004 (n.1), recital 5 and 6.
10 Council Regulation (EEC) 4064/89 on the control of concentrations between undertakings [1989] OJ L 257/90.
11 European Commission Press Release, ‘Commission adopts comprehensive reform of EU merger control’ [2002] IP/02/1856.
12 Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), Opinion of AG Wahl, para 34.
shall not be implemented either before its notification or until it has been declared compatible with the common market.
2.2 The standstill obligation of Article 7
In the EUMR there are, among other things, two important considerations: first,
concentrations that have a Union dimension must be pre-notified to the Commission and, second, before completing the concentration, the Commission must give its permission.14 Both of these considerations come back in Article 7(1) of the EUMR. This Article lays down the standstill obligation, which is one of the founding principles of the Merger Regulation.15 The obligation prevents the potentially detrimental impact of transactions on the competitive structure of the market, pending the outcome of the Commission’s investigation.16
Article 7(1) of the EUMR does not clarify the exact scope of the prohibition which it lays down: it provides no indication as to the circumstances in which a concentration is deemed to be implemented and does also not specify whether the implementation of a concentration may take place after a transaction which does not contribute to the change in control of the target.17 For that reason, to determine when an implementation of a concentration is too early and therefore in violation of Article 7(1) of the EUMR, it must be interpreted by reference to its purpose and general scheme.18
2.2.1 Conditions
In order to fall within the scope of the Merger Regulation, to ensure the effectiveness of Article 7(1) EUMR and to prevent reorganisation of an undertaking does not result in lasting damage to competition, there must be effective control of concentrations that have a Union
14 R. Whish & D. Bailey, Competition Law (n.5) page 872.
15 Ibid, pages 899-900; A. Jones and B. Sufrin, EU Competition Law (n.5), page 1126; Case T-411/07 Aer
Lingus Group v Commission [2010] ECR II-3691, para 80; Case C-633/16 Ernst & Young P/S v
Konkurrenceradet (n.3), Opinion of AG Wahl, paras 9, 61; European Commission Press release, Mergers:
Commission alleges Merck and Sigma-Aldrich, General Electric and Canon breached EU merger procedural rules, IP/17/1924 [2017]; Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), para 37; J. Modrall, ‘The EU gets tough on gun-jumping’ (n.4), page 13.
16 ‘Altice fined EUR 125 million for gun-jumping’ (Mlex Market Insight) 24 April 2018
<http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=983809&siteid=190&rdir=1 > accessed 13 June 2018; European Commission Press release, Mergers: Commission alleges Merck and Sigma-Aldrich, General Electric and Canon breached EU merger procedural rules (n.15); Case C-633/16 Ernst & Young P/S v
Konkurrenceradet (n.3), paras 41; Council Regulation (EC) 139/2004 (n.1), recital 5. 17 Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), paras 38, 39.
18 Ibid, para 40; Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), Opinion of AG Wahl, paras 61-62; Case C-248/16 Austria Asphalt Austria Asphalt GmbH & Co OG v Bundeskartellanwalt, [2017],
dimension.19 If these conditions are fulfilled, then the European Commission has exclusive jurisdiction over concentrations, otherwise the National Competition Authorities (‘NCAs’) will generally investigate the concentrations in accordance with their domestic merger control rules.
The concept of ‘concentration’
Article 7(1) of the EUMR is limited to concentrations, but it does not define what is considered as a concentration.20 Elsewhere in the EUMR, in Article 3 of the EUMR, a concentration is described in such a way that it will cover all operations bringing about a lasting change in the control of the undertakings concerned and therefore in the structure of the market.21 It includes all mergers of two or more previously independent undertakings,22 acquisitions of direct and indirect control of the whole or parts of one or more
undertaking(s)23 and the creation of full-function Joint Ventures.24 Moreover, transactions that are closely linked or take the form of a series of transactions in a short period of time are considered as a single concentration.25 In certain circumstances even a group of interrelated transactions may be considered as one single concentration, where the transactions at issue are interdependent in such a way that none of them would be carried out without the others and that the result consists in conferring on one or more undertakings direct or indirect economic control over the activities of a company.26 Lastly the Merger Regulation covers direct
acceptance of restrictions, which is related to and necessary for the implementation of concentrations, by the undertakings concerned.27
19 Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), para 41; Case C-248/16 Austria Asphalt
Austria Asphalt GmbH & Co OG v Bundeskartellanwalt, (n.18) para 21; Council Regulation (EC) 139/2004
(n.1), recital 34; European Commission Notice, ‘Commission Consolidated Jurisdictional Notice under Council Regulation (EC) 139/2004 on the control of concentrations between undertakings’ [2008] OJ C95/01, p. 5.
20 Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), para 43.
21 Council Regulation (EC) 139/2004 (n.1), recital 20, 21; A. Jones and B. Sufrin, EU Competition Law (n.5), page 1095.
22 See, for example, Veba/VIAG (COMP/M.1673) [2000] OJ L 188; AstraZeneca/Novartis (COMP/M.1806) [2000] OJ C 143/07.
23 European Commission Notice (EC) 139/2004 (n.19), recital 11; Case C-633/16 Ernst & Young P/S v
Konkurrenceradet (n.3), para 45.
24 Council Regulation (EC) 139/2004 (n.1), recital 20-21; European Commission Notice (EC) 139/2004 (n.19), recital 7.
25 Ibid.
26 Case T-282/02 Cementbouw Handel & Industrie v Commission [2006] ECLI:EU:T:2006:64 II-00319, para 109; Case C-202/06 P, EU:C:2007:814 Cementbouw Handel & Industrie v Commission [2007],
ECLI:EU:C:2007:814, I-12129, para 44; Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), Opinion of AG Wahl, para 64; European Commission Notice (EC) 139/2004 (n.19), recital 36.
Article 3(2) of the EUMR lays down the conditions to determine if there is a change in control and clarifies that the Regulation is intended to catch transactions which lead to an undertaking or undertakings acquiring the ability to exercise decisive influence over another undertaking.28 The most common way to change control is by the acquisition of shares.29 However the concept of control is broad, it may be direct or indirect and can be obtained on a legal or a factual basis. The acquisition of control must be on a lasting basis, which follows from a change in the structure of the market.30 Nevertheless, a change in control on a temporary basis does not need to be excluded from the Regulation per se, when the underlying agreements have a fixed time limit, if it is provided that these agreements are renewable or the period envisaged is sufficiently long.31
There are two different types of control. The first is sole control: one undertaking alone can exercise decisive influence on an undertaking.32 Sole control may be enjoyed on a legal or a factual basis. On a legal basis sole control can be acquired when an undertaking obtains a majority of the voting rights of a company or where a minority shareholder owns shares that confer special rights to determine the strategic commercial behaviour of the company.33 Sole control can occur on a factual basis, where a minority shareholder is able to veto the strategic decisions of an undertaking; the fact that it can block decisions means that it has the
possibility of exercising decisive influence in the sense of article 3(2) of the EUMR. It can also exist where a minority shareholder is likely to be able achieve a majority at shareholders meetings.34 The second type of control is joint control, which arises where two or more undertakings have the possibility of exercising decisive influence over another undertaking.35 Commonly, joint control occurs when the undertakings in question enjoy the power to turn down strategic decisions, also known as negative control.36
Union dimension
28 Ibid, recital 16; A. Jones and B. Sufrin, EU Competition Law (n.5), page 1096.
29 Council Regulation (EC) 139/2004 (n.1), recital 17.
30 Microsoft/Yahoo! Search Business (COMP/M.5727) [2010] OJ C 020/08; Case C-633/16 Ernst & Young P/S
v Konkurrenceradet (n.3), Opinion of AG Wahl, para 60.
31 Council Regulation (EC) 139/2004 (n.1), recital 28; DaimlerChrysler/Deutsche Telekom/JV (COMP/M.2903) [2003] OJ C 288/02.
32 A. Jones and B. Sufrin, EU Competition Law (n.5), page 1096.
33 Ibid; R. Whish & D. Bailey, Competition Law (n.5), page 878.
34 Electrabel/Compagnie Nationale du Rhone (COMP/M.4994) [2009] OJ C 279/9.
35 Case T-282/02 Cementbouw Handel & Industrie v Commission (n.26); R. Whish & D. Bailey, Competition
Law (n.5), page 878-883; A. Jones and B. Sufrin, EU Competition Law (n.5), page 1098.
36 R. Whish & D. Bailey, Competition Law (n.5), page 878-883; A. Jones and B. Sufrin, EU Competition Law (n.5), page 1098.
The other requirement that has to be fulfilled in order for a transaction to fall within the scope of the Merger Regulation is that the concentrations must have Union dimension. Since the Regulation focuses on significant structural changes, the impact of these changes should go beyond the national boarders.37 A concentration with a Union dimension should be deemed to exist where the turnover of the undertaking concerned exceeds the thresholds laid down in Article 1 of the EUMR.38 Turnover is used as a proxy for the economic resources that would be combined as a result of a concentration.39 There are two alternative sets of thresholds.40 The first one contains the original thresholds, which includes a worldwide turnover test and an EU-wide turnover test. Both of these tests must comply with the so-called two-thirds rule, which means that there is no Union dimension if each of the undertakings concerned achieved more than two-thirds of its EU-wide turnover in one Member State. The lower turnover tests can be found in the second (alternative) thresholds.41
Generally, concentrations that do not have Union dimension are subject to the merger laws of the Member States.42Article 1(2) of the EUMR is intended to secure that there is a minimum level of activities within the European Union and to exclude purely domestic transactions.43 However, even when a concentration does not have a Union dimension, the Commission may still have jurisdiction when the concentration possibly has substantial impact in at least three Member States.44 The opposite is also true: in principle, when a concentration has Union dimension, the Commission has sole jurisdiction, but there are circumstances in which the Commission makes an exception and allows jurisdiction to be referred to the NCAs, for example when it would be simpler or more preferable if the transaction is reviewed at the Member State level rather than by the Commission under the Merger Regulation.45
37 Council Regulation (EC) 139/2004 (n.1), recital 8, 10 and 18.
38 Ibid.
39 R. Whish & D. Bailey, Competition Law (n.5), page 883-885; A. Jones and B. Sufrin, EU Competition Law (n.5), page 1103-1104.
40 Council Regulation (EC) 139/2004 (n.1), Article 1 (2).
41 R. Whish & D. Bailey, Competition Law (n.5), page 883-885; A. Jones and B. Sufrin, EU Competition Law (n.5), pages 1103-1104.
42 R. Whish & D. Bailey, Competition Law (n.5), page 883; A. Jones and B. Sufrin, EU Competition Law (n.5), pages 1123-1124.
43 R. Whish & D. Bailey, Competition Law (n.5), pages 883-885; A. Jones and B. Sufrin, EU Competition Law (n.5), pages 1103-1104.
44 Council Regulation (EC) 139/2004 (n.1), Article 1(3); R. Whish & D. Bailey, Competition Law (n.5), pages 883-885.
45 R. Whish & D. Bailey, Competition Law (n.5), page 872; A. Jones and B. Sufrin, EU Competition Law (n.5), pages 1123-1124.
Notification
EU merger rules require that companies notify planned concentrations with a Union
dimension for review by the Commission: the notification requirement.46 Article 4(1) of the EUMR safeguards the Commissions ability to detect and investigate concentrations and lays down the rules on prior notification of concentrations and pre-notifications.47 The notification should be made following the conclusion of the agreement, the announcement of the public bid, or the acquisition of controlling interest. The notification must also include supporting documentation, such as copies of the agreement bringing about the concentration. The Commission publishes the notices of concentrations in the Official Journal.48
Once the concentration has been notified, it is necessary, within the fixed time limits, to determine whether a concentration could significantly impede effective competition in the internal market (Phase I).49 For this assessment the strengthening of a dominant position and the possible effects on the market must be taken into account.50 During the investigation, the Commission works closely with the NCAs of the Member States and with competition authorities in other jurisdictions.
Phase I of the investigation must be completed within 25 working days of the notification. Following Article 11 of the EUMR, this time period can be suspended if the Commission adopts a formal decision asking for more information. At the end of the first Phase the Commission will reach a decision, which can be: clearance, clearance subject to commitments, no jurisdiction, relocation to a NCA51 or further investigation. When the Commission has serious doubts as to the compatibility of the concentration with the internal market after the first phase, it will continue to Phase II. This Phase includes an in depth investigation, which may take an additional 90 working days, with extended provisions up to 35 working days.52
The Commission has a wide variety of powers under the EUMR, which includes the power to: approve a merger, approve a merger subject to commitments (the parties must divest certain 46 Council Regulation (EC) 139/2004 (n.1), Article 4.
47 European Commission Press release, Mergers: Commission alleges Merck and Sigma-Aldrich, General Electric and Canon breached EU merger procedural rules (n.15); Case C-633/16 Ernst & Young P/S v
Konkurrenceradet (n.3), Opinion of AG Wahl, para 8, 70. 48 R. Whish & D. Bailey, Competition Law (n.5), page 899-900.
49 Ibid, pages 872 and 873.
50 Ibid, pages 854, 872 and 873.
51 Council Regulation (EC) 139/2004 (n.1), Article 9.
businesses within a certain period following completion or must give commitments regarding their future behaviour), prohibit a merger in its entirety or give fines for a breach of the EUMR. The Commission can impose fines for providing incorrect information relating to the notification or for already implementing the concentration without approval: violation of the standstill obligation.
2.2.2 Limitations
A concentration that has to be notified cannot be implemented, unless and until the
Commission declares it compatible with the internal market: the standstill obligation.53 There are exceptions to this obligation, for example in case of a public bid. In this situation, the bid may already be implemented, provided that the interested parties notify the Commission of the concentration without delay and that the parties do not exercise the voting rights attached to those securities.54 It may also occur, that the Commission grants derogation from the provisions of suspensions.55 These decorations are however rare and depend on the Commission’s view, which will take into account the effects of the suspension on the undertakings concerned by a concentration or on a third party and the threat to competition that the concentration poses.56
2.3 Powers of the Commission
The Merger Regulation gives the Commission powers to investigate and the ability to impose fines for breaches of this Regulation.57 When the Commission suspects a possible violation of Article 7(1) of the EUMR, it will first give a Statement of Objections, in which it informs the companies involved of the objections raised against them.58 This Statement is the first formal step in an investigation. The concerned companies can examine the documents in the
Commission’s file and can give a written reply and request an oral hearing. The duration of
53 Council Regulation (EC) 139/2004 (n.1), Article 7.
54 Schneider/Legrand (COMP/M.2283) [2004] OJ L 101/1; Tetra Laval/sidel (COMP/M.2416) [2004] OJ L 43/13; R. Whish & D. Bailey, Competition Law (n.5), page 902; Case T-411/07 Aer Lingus Group v
Commission (n.15), para 82.
55 Council Regulation (EC) 139/2004 (n.1), Article 7(3); A. Jones and B. Sufrin, EU Competition Law (n.5), page 1126.
56 R. Whish & D. Bailey, Competition Law (n.5), page 902.
57 Ibid, pages 936-937.
58 European Commission Press release, Mergers: Commission alleges Merck and Sigma-Aldrich, General Electric and Canon breached EU merger procedural rules (n.15).
the investigation depends on various factors; there is no legal deadline for completion of the investigation.59
In accordance with Article 8(3) and (4) of the EUMR, the Commission may declare that a concentration is incompatible with the common market. If, in this situation, a concentration has already been implemented, the Commission may require the undertakings concerned to dissolve this concentration, in particular through the disposal of all the shares or assets acquired, so as to restore the situation prevailing prior to the implementation of the
concentration.60 In other words, the validity of transactions concluded in violation with the standstill obligation depends on the subsequent approval decision of the Commission.61
When dissolution is no longer possible, the Commission may take other appropriate measures to restore the situation, for example request corrective measures to substantially change the design of the concentration.62 Nevertheless, even in the situation that the Commission did already approve the merger, the Commission has the possibility to withdraw a merger
clearance.63 Although this measure is considered extreme and the Commission has never used this option before, the Commissioner Margret Vestager noted that it may happen in the future: “It is an extreme step to undo a merger approval but I don’t think that one can completely say that it will never happen.”64
The penalties for implementing a concentration in breach of Article 7(1) of the EUMR are laid down in Article 14 of the EUMR.65 Fines can go as high as 10 per cent of the worldwide turnover of the undertakings concerned, but the Commission has to bear in mind the nature, gravity and duration of the infringement.66 Next to this, the Commission takes into account any mitigating and aggravating circumstances.67
The above-described conditions of the standstill obligation give guidance as to when a
concentration was implemented too early and is therefore wrongful. Nonetheless, the scope of 59 Ibid.
60 Case T-411/07 Aer Lingus Group v Commission (n.15), para 25.
61 S. de Jong, ‘De retoriek van gun-jumping’, M&M (2018) issue 2, page 50; E.J. Poelman, ‘Gun-jumping: averij in het zicht van de haven’, M&M (2007) issue 3, p. 72; Case C-633/16 Ernst & Young P/S v
Konkurrenceradet (n.3), Opinion of AG Wahl, para 10-11.
62 Haniel/Cementbouw/JV(CVK) (COMP/M.2650) [2002] OJ C 33/11.
63 Council Regulation (EC) 139/2004 (n.1), Article 8 (4) and (5).
64 S. de Jong, ‘De retoriek van gun-jumping’ (n.61) page 50.
65 European Commission Press release, Mergers: Commission alleges Merck and Sigma-Aldrich, General Electric and Canon breached EU merger procedural rules (n.15)
66 Council Regulation (EC) 139/2004 (n.1), Article 14(3).
the obligation remains discussable.68 In the next chapter the different views on how the exact scope of the standstill obligation is to be determined will be considered.
3. The standstill obligation in the EU in practice
Implementing a concentration that fulfils the requirements of Article 7(1) of the EUMR without approval from the Commission is a violation of the standstill obligation, however practice shows the difficulty to determine if such a concentration has been implemented. In this chapter the different views on the scope of Article 7(1) of the EUMR will be discussed. 3.1 Case law of the Court on Article 7
Before EY/KPMG the Court had not specifically ruled on the scope of the standstill obligation of Article 7(1) of the EUMR nor on the Commission’s relating supervisory powers.69 This is interesting, as noted in the Opinion of the Advocate General Wahl in EY/KPMG, since the recently imposed fines by the Commission have been significant.70 All the same, on 31 May 2018 the Court laid down its first decision on the scope of the standstill obligation.
3.1.1 Facts of EY/KPMG
The case concerned two Danish accountant companies: KPMG DK companies (‘KPMG DK’) and Ernst & Young P/S (‘EY’) that entered into a merger agreement on 18 November 2013. At the time of conclusion of the merger agreement, KPMG DK was still a member of an international network of KPMG International Cooperative (‘KPMG International’), trough a cooperation agreement, which was concluded on 15 February 2010 between KPMG DK and KPMG International.71 Because of the merger agreement, KPMG DK was obligated to withdraw from KPMG International. Right after signing this agreement, on 18 November 2013, KPMG announced to terminate the cooperation agreement as of 30 September 2014.72 Since the merger did not have Union dimension within the meaning of Regulation No 139/2004, notification to the Commission was not necessary. Nevertheless the merger agreement had to be notified to the Danish authorities, which happened officially on 13 December 2013 and was approved by decision of the Competition Council of 28 May 2014.73 68 Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), Opinion of AG Wahl, para 43.
69 Ibid; for example, European Commission Press release, Mergers: Commission fines Altice €125 million for breaching EU rules and controlling PT Portugal before obtaining merger approval, IP/18/3522 [2018].
70 Ibid.
71 Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), paras 10, 12
72 Ibid, paras 14, 15
However, on 17 December 2014 the Competition Council declared that KPMG DK had disregarded the standstill obligation, by giving notice to terminate the cooperation agreement on 18 November 2013. The termination of the cooperation agreement was, according to the Competition Council, merger-specific, irreversible and likely to have market effects.74 EY disagreed and saw to annul the decision before the Danish Court. Since the Danish standstill obligation is based on Article 7 of the EUMR, the Danish Court referred several questions to the CJEU, concerning the interpretation of Article 7(1) of the EUMR. 75 Specifically, must Article 7(1) of the EUMR be interpreted as meaning that a concentration is implemented only by a transaction which, in whole or in part, in fact or in law, contributes to the change in control of the target undertaking? Furthermore, can termination of a cooperation agreement be regarded as bringing about the implementation of a concentration and whether the produce of market effects is therefore relevant?76
3.1.2 Opinion of the AG
The Advocate General Wahl delivered his opinion on the standstill obligation on 18 January 2018. In agreement with the Commission, the Advocate General is of the opinion that the scope of the standstill obligation must be clearly demarcated by a negative definition: what lies outside the scope of Article 7(1) of the EUMR?77 A positive definition, which would include an exhaustive list of criteria, has the risk of excluding certain measures.78
Nevertheless, when considering the negative scope of the standstill obligation, certain discretion must be taken into account. The Advocate General raises awareness to the lack of judicial review on the subject, which allows the Commission’s use of the standstill obligation to be unrestricted and unchecked.79 The function of the obligation is to prevent undertakings from implementing concentrations prematurely and to reduce the risk that this implementation will have to be undone, in case there is no approval of the Commission. This must be kept in mind while exploring the limits of the standstill obligation under the Merger Regulation.80
74 Ibid, paras 22, 24.
75 Ibid, paras 26.
76 Ibid, paras 30.
77 Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), Opinion of AG Wahl, para 5.
78 Ibid, paras 44-45,57.
79 Ibid, para 43.
In order to define the negative scope, the Advocate General constitutes that the three referred criteria (merger specific, irreversible and potentially creates market effect) are irrelevant.81 Instead the focus should be on the concept of a concentration, more specific, the meaning of a change in control on a lasting basis.82 Can the determination of a contract be considered as acquisition of the possibility of exercising influence on a target undertaking?83
Since Article 7 of the EUMR does not give a definition of the concept of concentration nor change in control, the equality between Article 3 and Article 7 of the EUMR must be considered. The concept of a concentration is one of the cornerstones of the EUMR and it would be illogical if this concept were more restricted when considering Article 3 of the EUMR or the standstill obligation of Article 7 of the EUMR.84 Furthermore, like Article 3 of the EUMR, the standstill obligation should cover all operations, partial as well as full
implementation of a concentration, that will bring about a lasting change in the control of the undertakings concerned and, consequently, change the structure of the market.85 The
obligation should however exclude merely internal preparatory measures preceding a
concentration.86 Hence, the difficulty lies within the grey area between preparatory measures and partial implementation. To which can determination of a contract be considered?87 Following the requirements laid down in Article 3 of the EUMR, the Advocate General observes that although the determination is interrelated to the merger agreement, it is
separable from transfer of control. It is not self-standing, not inextricably linked to the transfer of control and did not give the possibility of exercising decisive influence as defined in Article 3(2) of the EUMR. The effect of termination was simply that KPMG DK was no longer part of the network and became independent on the trader market. This also follows from the fact that the two undertakings stayed competitors to each other after determination of the contract with KPMG International. Thus, the Advocate General considers that the
determination of the contract did not contribute to a shift in control.88 Additionally, if determination would be seen as exercising control, then it would have the consequence that
81 Ibid, paras 44-45, 57, 91.
82 Ibid, para 62; See also to that effect, Case T-704/14 Marine Harvest ASA v European Commission [2017] ECLI:EU:T:2017:753, para 58.
83 Ibid.
84 Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), Opinion of AG Wahl para 39.
85 Council Regulation (EC) 139/2004 (n.1), recital 20, 21.
86 Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), Opinion of AG Wahl, paras 62, 63.
87 Ibid, paras 39, 63.
any measure implemented between signing the merger agreement and the competition authority approval potentially could have been caught by the standstill obligation.89
On the basis of the above the Advocate General concludes that the Court should answer the question referred to the effect that the standstill obligation from Article 7(1) of the EUMR has a negative scope: it does not affect measures which, although taken in connection with the process leading to a concentration precede and are severable from the measures actually leading to the acquisition of the possibility of exercising decisive influence on a target undertaking.90
Overall the opinion of the Advocate General, apart from a view paragraphs, is noticeable missing in the decision of the CJEU on 31 May 2018. The CJEU’s decision, which will be discussed next, does not agree, nor disagree with the negative scope set by the Advocate General.
3.1.3 Decision of the CJEU
In order to determine the scope of the standstill obligation and answer the specific questions of the referring court, the CJEU first notes that Article 7(1) of the EUMR is limited to
concentrations as defined in Article 3 of the EUMR.91 This clarification was needed, since the General Court considers in Aer Lingus Group v Commission that the acquisition of a minority shareholding can be considered to fall within the scope of Article 7(2) of the EUMR, but a minority shareholding is not considered a concentration within the meaning of Article 3 of the EUMR. Hence, the decision of the General Court may suggest that the standstill obligation has a broader scope than Article 3 of the EUMR.92 As expressed by the Advocate General in EY/KMPG, as discussed above, detaching the standstill obligation of Article 7 from Article 3 of the EUMR will create a grey area, where certain measures which, fall outside the scope of Article 3 of the EUMR or even Article 1 of the EUMR, will be caught under the brought perception of the General Court. Such a broad interpretation would go beyond what is necessary in order to maintain effective merger control.93
89 Ibid.
90 Ibid, para 98.
91 Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), para 43; Case C-248/16 Austria Asphalt
Austria Asphalt GmbH & Co OG v Bundeskartellanwalt, (n.18), paras 20-21.
92 Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), Opinion of AG Wahl, para 66; Case T-411/07
Aer Lingus Group v Commission (n.15), para 83.
Second, the CJEU considers that a concentration within the meaning of Article 7(1) of the EUMR arises as soon as the merging parties implement operations contributing to a lasting change in control and consequently has the chance of exercising any influence over the target undertaking.94
The words ‘as soon as’ seem to be in line with the decision of the General Court to upheld the fine given to Marine Harvest in Marine Harvest v Commission.95 Even though Marine
Harvest’s takeover of Morpol took place in several stages and involved various sellers, the General Court sided with the Commission, saying that the single transaction of acquisition in December 2012 already gave Marine Harvest sole control of Morpol and that that was the moment that it had to ask for the Commission’s approval.96
Furthermore the CJEU considers that partial implementation, single transactions that are closely connected and a group of interrelated co-dependent transactions, that results in direct or indirect economic control over the activities of one or more other undertakings may also be considered as operations contributing to a lasting change in control.97 Otherwise the efficiency of the prohibition in Article 7(1) of the EUMR would be threatened.98 However, excluded are transactions that, despite having been carried out in the context of a concentration, are not necessary to achieve a change in control. Those transactions, although they may be
preparatory to the concentration, do not fall within the scope of Article 7(1) of the EUMR. They do not present a direct functional link with the implementation, so that their
implementation is not, in principle, likely to undermine the efficiency of the control in concentrations.99 That these transactions may produce market effects does not change this.100 All of the above considered, according to the CJEU, Article 7(1) of the EUMR must be interpreted as meaning that a concentration is implemented only by a transaction which, in whole or in part, in fact or in law, contributes to a lasting change in control of the target undertaking.101 The Court concluded that the termination of a contract, such as in KPMG/EY, 94 Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), paras 46, 52.
95 Case T-704/14, Marine Harvest ASA v European Commission (n.82).
96 Natalie McNelis ‘Marine harvest fine for gun-jumping in Morpol buyout upheld by EU court’ (Mlex Market Insight) 26 October 2017 <http://www.mlex.com/GlobalAntitrust/DetailView.aspx?
cid=931438&siteid=190&rdir=1 > accessed 13 June 2018.
97 Case T-282/02 Cementbouw Handel & Industrie v Commission (n.26), para 109; Case C-633/16 Ernst &
Young P/S v Konkurrenceradet (n.3), Opinion of AG Wahl, paras 64, 65.
98 Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), paras 47, 48; Council Regulation (EC) 139/2004 (n.1), recital 20; Case T-704/14, Marine Harvest ASA v European Commission (n.82), para 126.
99 Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), para 49.
100 Ibid, para 50.
between KPMG Denmark and KPMG International, has only an ancillary and preparatory nature and therefore does not contribute to a lasting change in control of KPMG Denmark, irrespective of whether that termination has produced market effects.102 EY has not acquired the possibility of exercising any influence on KPMG DK because of the termination; the two companies stayed independent both before and after termination.103
This decision of the CJEU gives guidance on the scope of the standstill obligation, which will be useful for future cases.104
3.2 The Commission’s approach compared to EY/KPMG
In this chapter first the Commission’s previous approach on the standstill obligation will be discussed and compared with the scope set by the CJEU in EY/KPMG. Second the more recent cases and the stricter approach of the Commission will be analysed. Furthermore predictions will be made if the two most recent cases, Altice and Canon will be considered as violations of the standstill obligation according to the CJEU.
3.2.1 Previous cases of violation
In 1998 the Commission gave the first fine, of €33.000, for failure to notify and carrying out an operation without prior approval.105 Samsung had acquired control over AST; at the time of notification Samsung had already acquired a 45.4% share in AST’s fragmented capital and had a majority of directors on the board of AST.106 A year later, during an investigation of a notified concentration of AP Moller, the Commission discovered several un-notified
implementations of concentrations from AP Moller.107 Since AP Moller was a large undertaking that could be expected to know that the concentrations had to be notified and since there was considerable time before they were brought to the Commission’s attention, a larger fine was imposed, of €219,000. However this fine could have been higher; the
Commission took into account that the implementation seems to have no negative effects on competition, which was considered a mitigating factor.108
102 Ibid, para 60.
103 Ibid, para 61.
104 European Commission Press release, Mergers: Commission fines Altice €125 million for breaching EU rules and controlling PT Portugal before obtaining merger approval, (n.69).
105 Samsung (COMP/M.920) [1999] OJ L 225/12; R. Whish & D. Bailey, Competition Law (n.5), pages 936, 937.
106 Ibid, para 6.
107 A.P. Møller (COMP/M.969) [1999] OJ L 183/29.
In light of the judgement of the CJEU in EY/KPMG and specifically acquiring control of a target undertaking, it seems most likely that these decisions of the Commission fall within the scope set by the CJEU; even though Samsung had not acquired a majority of shares in AST’s, it did have a majority of the directors on the board of AST, which can be considered as acquiring control, since it implies possible decisive influence on AST’s, and thus
implementation of a concentration.109 However it is possible that, considering that the CJEU did not change its opinion because of possible market effects in EY/KPMG,110 the
Commission should no longer consider negative (or positive effects) on the market as a mitigating factor.
Apart from the above-described fines, the Commission was not so strict on other
undertakings; in Kirch/Bertelsmann the agreement was concluded before notification and common activities had already started. The Commission did not penalize them, but only requested the parties to ensure that this illegal behaviour, that can be sanctioned with fines, be stopped immediately.111 In Haniel/Cementbouw /JV(CVK) the concentration that was reported in 2002 had already been established in 1999. However, after the undertakings had offered corrective measures to substantially change the design of the concentration, the Commission imposed no fine.112 Also the investigation on Ineos/Kerling was closed, after their purchase was cleared in 2008. Even though the Commission was suspicious that UK Chemicals Company had violated the standstill obligation by its acquisition of Norsk Hydro's Kerling polymers business, the Commission ceased the investigation, after the clearance of the transaction was announced.113 However, this more ‘forgiving’ nature of the Commission seemed to change over the years.114
3.2.2 Recent approach of the Commission
109 Ibid, page 878; Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), Opinion of AG Wahl, paras 6, 7.
110 Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), para 50.
111 European Commission Press release, Commission warns Bertelsmann and Kirch against infringement of European merger control, IP/ 97/1062 [1997].
112 Haniel/Cementbouw/JV(CVK) (COMP/M.2650) (n.62).
113 D. Lumsden ‘EC closes early implementation probe as Ineos Kerling purchase cleared’ (Mlex Market Insight) 30 January 2008 <http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=34994> accessed 13 June 2018.
The Commission already became stricter in the investigation on Electrabel/Compagnie National du Rhone.115 In 2009 the Commission imposed a fine of 20 million for violation of
the standstill obligation. Electrabel had acquired sole control of CNR in 2003, through a transaction of shares from 17,68% to 49,95% (47,92% voting rights), without receiving approval from the Commission. When Electrabel informally asked the Commission in 2007 if they had de facto acquired control of CNR, the Commission answered in the affirmative. Electrabel had, factually, always been able to push through its will at the shareholders meeting given the low historical presence of the other minority shareholders. Another
important factor was that since 2003 Electrabel was the only industrial shareholder to manage the power stations of CNR.116
The change in the Commission approach became even clearer in Marine Harvest. The Commission imposed a fine of 10 million on Marine Harvest, because they also acquired de facto control before approval of the Commission.117 With the December 2012 acquisition (48,5% of shareholding) of Marine Harvest they were highly likely to achieve a majority of the shareholders meetings, especially considering the size of its shareholding and the level of attendance of other shareholders at shareholders meetings in previous years.118 The
Commission took into account that Marine Harvest had acquired the shares not through several partial transactions of assets ultimately forming a single economic entity, but with one transaction in December. Furthermore the Commission pointed out that the duration of the infringement (a period of 9 months and 12 days) was considered long,119 that the
concentration at issue raised serious doubts as to its compatibility with the internal market and the fact that there were previous procedural infringement cases concerning the applicant and other companies.120 All things considered, the Commission concluded that Marine Harvest committed the infringement as a result of negligence.121 The eventually given fine for 10 million for the infringement of the standstill obligation was in addition to a fine of 10 million for violating of Article 4(1) of the EUMR.122 In 2017 the General Court sided with the
115 Electrabel/Compagnie Nationale du Rhone (n.34); upheald on appeal, Case T-332/09 Electrabel v
Commission [2012] ECLI:EU:T:2012:672.
116 Case C-84/13 P Electrabel v Commission [2014], ECLI:EU:C:2014:2040; J. Modrall, ‘The EU gets tough on gun-jumping’ (n.4), page, 14-15; S. de Jong, ‘De retoriek van gun-jumping’ (n.61) page 55.
117 Marine Harvest/Morpol (COMP/M.7184) [2014] OJ C 455/04; R. Whish & D. Bailey, Competition Law (n.5), page 936-937; J. Modrall, ‘The EU gets tough on gun-jumping’ (n.4), pages 14, 15.
118 Case T-704/14 Marine Harvest ASA v European Commission (n.82), para 19, 25; J. Modrall, ‘The EU gets tough on gun-jumping’ (n.4), pages 14, 15.
119 Ibid.
120 Ibid.
121 Ibid.
Commission in Marine Harvest, which the Commission took as encouragement: “Today's judgement is a reminder of companies duty not to implement concentrations of an EU
dimension before notifying and receiving the Commission's approval. Failure to comply with this requirement carries the risk of significant penalties.”123
Both decisions of the Commission in Electrabel/Compagnie National du Rhone and Marine Harvest seem to be in line with the CJEU’s judgement in EY/KPMG, since both transactions of shares contribute to a change in control of the target undertakings.124
More recent decisions show the real change in the Commission’s policy; investigations for alleged partial implementation of notified transactions lead (or will most likely lead) to infringement decisions and fines. Recent cases involve a much greyer area of law in the EU, since previously the Commission has detected and prohibited a pre-approval partial
implementation of a notified transaction in only one case, Bertelsmann/Krich/Premiere, and even in that case no fine was imposed.125
Altice and Canon
The first decision, in which the Commission imposed a fine for an alleged partial
implementation, concerns the Netherlands-based cable and communication company: Altice. This company is fined with (almost) €125 million for implementing its acquisition of
Portuguese telecom operator PT Portugal before receiving formal antitrust approval from the Commission. The implementation, according to the Commission, consisted as follows: in February 2015, Altice notified the Commission of its plans to acquire PT Portugal. The Commission on 20 April 2015 conditionally cleared the concentration. In may 2017, the Commission addressed a Statement of Objections to Altice detailing its concerns that Altice implemented its acquisition of PT Portugal before obtaining the Commission’s clearance and in some instances even before its notification of the merger. In particular the Commission concluded that certain provisions of the purchase agreement resulted in Altice acquiring the legal right to exercise deceive influence over PT Portugal, for example: by granting Altice veto rights over decisions concerning PT Portugal’s ordinary business (like contracts that the company signed and the staff it employed), by giving PT Portugal instructions on how to carry out a marketing campaign and by seeking and receiving detailed commercially and 123 Ibid; Marine Harvest file for appeal, the Case is now pending before the CJEU: Case C-10/18 Marine
Harvest.
124 Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), paras 59, 62.
financially sensitive information about PT Portugal outside the framework of any
confidentially agreement.126 Since Altice was aware of the merger rules and their behaviour was therefore considered negligent.127
According to Altice, which will file appeal at the General Court to annul the decision, the transaction agreement governing the management of the target during the pre-closing period provided Altice with a consultation right on certain exceptional matters relating to PT Portugal, which was in accordance with well-established merger agreement market practice. Furthermore Altice considers that the elements in the Commission’s file do not establish the exercise of influence, by Altice over PT Portugal’s business conduct.128
The Commission considers that a business needs reassurance that the property they get will be the one they agreed to pay for, that is why merger agreements include terms to preserve the value of the company and the standstill obligation will not be violated just because the company can stop decisions that would affect the value of its purchase. However there is a difference between the day-to-day decisions a company makes and the decisions that really change the whole nature of the business. If a company wants to be certain they do not violate the standstill obligation in a merger, they should not have the control over decisions in the ordinary course of business. In addition, it is considered normal practice in merger deals that buyers cannot control these ordinary decisions until after the merger is approved. If the companies however have control – as Altice in PT Portugal- then the companies will meet the discontentment of antitrust authorities and potentially lead to a substantial fine, in order to protect the ability to defend competition.129 All the facts considered, the Commission found that Altice had infringed the prior notification obligation of a concentration under Article 4(1) of the EU Merger Regulation and the standstill obligation under Article 7(1) of the EU Merger Regulation.130
126 M. Newman & L. Crofts ‘Altice’s EU gun-jumping fine could come next week’ (Mlex Market Insight) 20 April 2018 <http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=982583&siteid=190&rdir=1 > accessed 13 June 2018; ‘Shazam deal may allow Apple to “tempt” customers away from rivals, EU’s Vestager says’ (Mlex Market Insight) 26 April 2018 <http://www.mlex.com/GlobalAntitrust/DetailView.aspx?
cid=984807&siteid=190&rdir=1 > accessed 13 June 2018.
127 ‘Altice fined EUR 125 million for gun-jumping’ (n.16).
128 Ibid.
129 ‘Shazam deal may allow Apple to “tempt” customers away from rivals, EU’s Vestager says’ (n.126); European Commission Press release, Mergers: Commission alleges Merck and Sigma-Aldrich, General Electric and Canon breached EU merger procedural rules (n.15). European Commission Speech, Competition and the rule of law Romanian Competition Council Anniversary Event, Bucharest, 18 May 2017.
130 ‘Altice to appeal EU ‘gun-jumping’ fine on PT Portugal deal’ (Mlex Market Insight) 24 April 2018 <http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=984197&siteid=190&rdir=1> accessed 13 June 2018.
The fine imposed by the Commission on Altice reflects the seriousness of the infringement of the standstill obligation and should, according to the Commission, prevent firms from
breaking EU merger control rules. After the fine was imposed on Altice, the Commissioner Margret Vestager (in charge of competition policy) reminded the competition community that the Commission has rules that help decide if a merger will harm consumers and rules that make the investigations work, by putting mergers on hold until the Commission has made a decision. Although companies might believe that their merger will not harm competition, that decision is not theirs to make.131 When companies start to act like a single business even before the Commission gives their approval, it can mean they get to know each other too well to ever really go back to competing independently, which undermines the Commission’s ability to protect consumers and the effectiveness of the merger control system.132
The unbending new policy of the Commission can be expected to show most with the fine that most likely will be imposed on the Japanese company, Canon Inc. (‘Canon’) in 2018.133 In July 2017 the Commission opened proceedings against Canon in connection with its acquisition of Toshiba Medical systems (‘Toshiba’) in which Canon paid the full price for non-voting shares in Toshiba and options for voting shares that were held by an interim buyer, a structure also known as “warehousing”.134 Although Canon only exercised these options after clearance was obtained, the Commission considers that the combination of Canon's ownership of 100% of Toshiba’s non-voting shares and options to acquire the voting shares allowed Canon to effectively acquire Toshiba, before the transaction was even notified. Considering the maximum of a 10% fine, Canon can face a fine for almost €3 billion for using warehousing to acquire Toshiba corporation before both notifying to, and obtaining approval by, the European Commission.135
The Commission’s new policy compared to EY/KPMG
131 J. Modrall, ‘The EU gets tough on gun-jumping’ (n.4), page 13.
132 ‘Altice fined EUR 125 million for gun-jumping’ (n.16); ‘Shazam deal may allow Apple to “tempt” customers away from rivals, EU’s Vestager says’ (n.126).
133 European Commission Press release, Mergers: Commission fines Altice €125 million for breaching EU rules and controlling PT Portugal before obtaining merger approval (n.69); J. Modrall, ‘The EU gets tough on gun-jumping’ (n.4), pages 12-17; European Commission Press release, Mergers: Commission alleges Merck and Sigma-Aldrich, General Electric and Canon breached EU merger procedural rules (n.15).
134 J. Modrall, ‘The EU gets tough on gun-jumping’ (n.4), pages 15, 16
135 D. Robinson and N. Romero-Passerin d’Entrèves ‘Canon faces EU fine of up to $3 billion after “jumping the gun” on merger’ 6 July 2017 https://www.neweurope.eu/article/canon-faces-eu-fine-3-billion-jumping-gun-merger/ accessed 13 June 2018; J. Modrall, ‘The EU gets tough on gun-jumping’ (n.4), page 16.
Can this new policy be considered in line with the decision of the CJEU in EY/KPMG? Although it was the Danish Competition authority that imposed the infringement, the Commission did support it. The Commission argued, referring to recital 34 of the Merger Regulation which states: “Undertakings should be obliged to give prior notification of concentrations with a Community dimension following the conclusion of the agreement, the announcement of the public bid or the acquisition of a controlling interest. Notification should also be possible where the undertakings concerned satisfy the Commission of their intention to enter into an agreement for a proposed concentration and demonstrate to the Commission that their plan for that proposed concentration is sufficiently concrete”, that it is not a prerequisite of a measure being held to constitute implementation of a concentration under Article 7(1) of the EUMR that a measure forms, in whole or in part, in law or in fact, part of the process leading to the actual change in control. The Commission considers that a partial implementation of a merger may, inter alia, arise in respect of measures which (i) consists of preparatory steps in the course of a procedure leading to a change in control; or (ii) allow the party obtaining control to gain influence over the structure of market behaviour of the target undertaking; or (iii) otherwise pre-empt the effect of the merger or significantly affect prevailing competitive situation.136 It should however be noted that this statement is conflicting, specifically the considerations of the Commission under (i) and (iii), with the recent decision of the CJEU in this case. The Commission should therefore take the view of the CJEU into account, when considering fining (partial) implementations.
Can fines in Altice and Canon considered in line with the scope of the standstill obligation set by the CJEU? According to the CJEU the focus should be on change in control and if there is the possibility to exercise decisive influence on the target undertaking. Considering the facts in Altice, circumstances, like acquisition of veto rights over decisions concerning ordinary business, giving instructions on marketing campaigns and receiving sensitive information, can arguably be considered as preparatory measures or as an acquisition of control. It will
determine on the influence Altice could exercise on PT Portugal’s business conduct, but it seems plausible that these circumstances lie closer to the definition the CJEU gives of a concentration, then the determination of a contract. It will therefore, possibly, be more difficult for Altice to argue that their measures did not have influence on the PT Portugal’s conduct and therefore there was no change in control, than it was for EY.
It is more difficult to predict the validity on the expected fine in Canon, considering that this will be the first time the Commission will impose a fine on the warehouse construction. That Canon secured their transaction through the warehouse construction is clear, however if this technique also means a change in control of Toshiba, remains up for discussion. The fact that Canon did not use their voting shares is, also considering views of NCA’s137 and the decision of the General Court in Marine Harvest,138 of no real importance, more interesting is the fact
that the Commission considers the combination between the acquisition of non-voting shares and options to acquire voting shares enough for Canon to effectively acquire Toshiba. It is arguable that options to acquire voting rights might not have to imply contribution of a change of control in fact or in law per se, however the warehouse construction could fall within the description of a group of interrelated transactions where the transactions are interdepend in such a way that none of them would be carried out without the others and that the result consists in conferring on one or more undertakings economic control over the undertaking. Consequently, these transactions could be considered as one transaction and should therefore not be implemented without permission, in accordance with Article 3 and Article 7 of the EUMR.
Although it remains questionable, as considered above, if the fierce new approach of the Commission will fall within the description of the standstill obligation as given by the CJEU in EY/KPMG every time, it is arguable that both situations in Altice and Canon can be considered as a change in control within the means of Article 7(1) of the EUMR. 3.4 National Competition Authorities
Although not every jurisdiction in the EU has a national standstill obligation, for example Italy, Lativa and the Untied Kingdom,139 the Commission’s strict approach towards violations inspired NCA’s to do the same.140 The NCA’s will keep track of certain transactions through 137 M.W.J. Jongman, ‘Airfield Holding B.V., Chellomedia Programming B.V./Raad van Bestuur Nma. Rechtbank Rotterdam’ (2008) M&M issue 3, p. 93, 94; Decision Raad van Bestuur van de NMa 19 July 2006, Case 5461, Airfield- Chellomedia.
138 Case T-704/14 Marine Harvest ASA v European Commission (n.82), paras 33-37.
139 Case C-633/16 Ernst & Young P/S v Konkurrenceradet (n.3), Opinion of AG Wahl, para 33.
140 A. Boyce and Lewis Crofts ‘Europe gets serious about ‘fast and loose’ mergers’ (Mlex Market Insight) 19 May 2017 <http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=889083&siteid=190&rdir=1 > accessed 13 June 2018; A. Boyce and Lewis Crofts ‘Slovak competition authority: fines imposed on Marti Tunnelbau, Danubai Ivest for gun-jumping merger decision’ (Mlex Market Insight) 3 June 2009
<http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=51961&siteid=190&rdir=1 > accessed 13 June 2018; ‘Westgate Romania faces probe into early merger implementation’ (Mlex Market Insight) 7 May 2018 <http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=987093&siteid=190&rdir=1 > accessed 13 June 2018; ‘Comparex fined in Austria for premature merger implementation ‘ (Mlex Market Insight) 25 April 18
media, if for example when public statements are made.141 If so, the authorities will look if, in practice, the concentration is implemented. In this chapter several of these national cases will briefly be discussed in order to give guidance when the (national) standstill obligation is violated and if this view is in line with the CJEU’s decision in EY/KPMG.
3.4.1 Transfer of shares
The Dutch national standstill obligation is laid down in Article 34 of the National
Competition law rules. According to this article it is prohibited to implement a concentration within four weeks of notification to NCA’s.142 Over the years the Dutch national Competition Authority, the ACM, has given several fines for early implementation.143 In most cases the undertakings concerned realized the obligation to notify the ACM too late, however there are situations where the parties deliberately notified the ACM of the concentration after
implementation.144
The first fine for violating the national standstill obligation was given in Verkerk-Horn by the ACM.145 The transfer of the majority of shares was considered an early implementation. The financial organizational reasons raised by the defence were not considered a reasonable excuse for the early implementation.146 Approximately the same is ruled in Nationale
Nederlanden-ASR; the acquisition of shares implies a transfer of control and can therefore be considered as an implementation.147 Even only obtaining veto rights, but not using them, is
<http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=984200&siteid=190&rdir=1 > accessed 13 June 2018; K. Soldon ‘Europapier cases gun-jumping charges over PaperNet deal after court setback’ (Mlex Market Insight) 1 August 2016 <http://www.mlex.com/GlobalAntitrust/DetailView.aspx?
cid=817306&siteid=190&rdir=1> accessed 13 June 2018; ‘Altice, SFR Group face French fines over access to fiber-optic broadband network’ (Mlex Market Insight) 9 March 2017
<http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=841587&siteid=190&rdir=1> accessed 13 June 2018; ‘Altice, SFR Group lose appeal against French fines over accesss to fiber-optic broadband network’ (Mlex Market Insight) 28 September 2017 <http://www.mlex.com/GlobalAntitrust/DetailView.aspx?
cid=923722&siteid=190&rdir=1> accessed 13 June 2018.
141 B. Breaken, M. van de Hel, D. Schrijvershof ‘Pre-pack’ faillissement en doorstart: hoe om te gaan met ACM en de NZa?’ 9 April 2015 < https://www.maverick-law.com/nl/blogs/pre-pack-faillissement-en-doorstart-hoe-om-te-gaan-met-acm-en-de-nza.html?q=pre-pack > accessed 13 June 2018.
142 M.W.J. Jongman, ‘Airfield Holding B.V., Chellomedia Programming B.V./Raad van Bestuur Nma. Rechtbank Rotterdam’ (n.137), pages 93, 94.
143 M.W.J. Jongman, ‘Airfield Holding B.V., Chellomedia Programming B.V./Raad van Bestuur Nma. Rechtbank Rotterdam’ (n.137), pages 93, 94; E.J. Poelman, ‘Gun-jumping: averij in het zicht van de haven, (n.61) pages 68-76; S. Vinken, M. Van Joolingen en M. Jongmans, ‘Kroniek concentratiecontrole 2013’ (2014) M&M issue 2, p. 40-41.
144 Decision dg-NMa 28 June 2000, case 1774, Verkerk-Horn; Decision Raad van Bestuur van de NMa 29 June 2007.
145 J. Poelman, ‘Gun-jumping: averij in het zicht van de haven’ (n.61), pages 73, 74; Decision dg-NMa van 28 juni 2000, case 1774, Verkerk-Horn.
146 Ibid.
147 E.J. Poelman, ‘Gun-jumping: averij in het zicht van de haven’ (n.61), pages 73, 74; Decision d-g NMA 13 December 2001, case 2727, NN-ASR-ArboDuo; however, see on the contrary: Decision d-g NMa van 25 februari
considered acquisition of control. The possibility of exercising power through the acquisition of a majority of shares was enough for the ACM (and the Dutch Court) to consider the transaction a concentration and should therefore be notified.148 It is not considered important, according to the ACM, whether or not it was the intention of the undertaking to avoid the competition law rules,149 nevertheless, the ACM does expect substantial undertakings that have experience with mergers to be cautious of early implementation.
The Norwegian Competition Authority has also given a company, Norgesgruppen, a fine for acting too fast in its acquisition, through stakes, of large parts of Ica Maxi grocery stores. The Norwegian Competition Authority concluded that Norgesgruppen broke merger rules by proceeding to the transaction before the regulator could finish reviewing the deal.150
The Austrian Competition Authority seems to be more considered with violations through stock exchanges, by taking into account that a misjudgement can happen to companies properly observing merger rules.151 However the authority did impose a fine for acquiring sole control of Agile software and Infracontrol in 2014. Therefore it is safe to say that national companies have to consider the (national) merger control rules, before acquiring a majority of the shares in the target undertaking, regardless of a merger agreement or the use of the voting shares.
The above described approach of the NCA’s on the transfer of shares seems to be in line with the decision in EY/KPMG, since the CJEU considered that a transaction can be implemented in whole or in part, in fact or in law, as long as it contributes to a change in control of the target undertaking.152 Hence, it is arguable that the actual use of shares is not per se needed, since the acquisition of the majority of the shares already shows a change in control. 3.4.2 Other considered implementations
Next to acquisition of shares, there have been other national cases that give more insight in what is considered an implementation in the eyes of NCA’s. In Norway for example, a fine to
2000, case 1712, Aegon-Jast-Kamerbeek.
148 M.W.J. Jongman, ‘Airfield Holding B.V., Chellomedia Programming B.V./Raad van Bestuur Nma. Rechtbank Rotterdam’ (n.137), pages 93, 94; Decision Raad van Bestuur van de NMa 19 July 2006, Case 5461,
Airfield- Chellomedia;
149 E.J. Poelman, ‘Gun-jumping: averij in het zicht van de haven’ (n.61), pages 73, 74; Decision d-g NMa van 25 februari 2000, case 1712, Aegon-Jast-Kamerbeek.
150 ‘Norgesgruppen accepts financial penalty for jumping the gun on Ica Maxi deal’ (Mlex Market Insight) 10 July 2014 <http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=559168&siteid=190&rdir=1> accessed 13 June 2018.
151 ‘Comparex fined in Austria for premature merger implementation ‘ (Mlex Market Insight) 25 April 18 <http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=984200&siteid=190&rdir=1 > accessed 13 June 2018.
