OVERVIEW

• On 6 May 2022, the European Commission (Commission) published the draft revised Implementing Regulation (Draft Implementing Regulation) and the Notice on Simplified Procedure (Draft Notice) for the EU Merger Regulation (EUMR), and launched a second public consultation to gather feedback from interested parties on these draft documents (Second Consultation).

• The Second Consultation aimed at gathering feedback on the Draft Implementing Regulation and Draft Notice, with a view to amending these two documents. Ultimately, the objective of this process is to amend the EU merger control regime so that it would: (i) additional transactions could benefit from the simplified procedure; (ii) streamline the review of transactions that meet the conditions for a simplified procedure; and (iii) allow the Commission to focus on the most complex and relevant cases.

BACKGROUND

In 2000, the Commission introduced a simplified procedure for straightforward transactions that are unlikely to give rise to competition concerns, which it amended in 2013 through a first simplification package.

In August 2016, the Commission launched a thorough review process of its merger procedural and jurisdictional rules, and in March 2021, it published a Staff Working Document (SWD) with the preliminary results of its internal review. The SWD found that while the simplified procedure had generated significant cost savings for the merging parties and the Commission, there were still many unproblematic cases that were not captured by the simplified procedure, and that the information requirements may remain too burdensome even for simplified cases. The SWD also found that clarity was needed for situations where the Commission will use the full review even if the transaction technically qualifies as a simplified case.

Based on the SWD, the Commission prepared an inception impact assessment laying out specific options for further review of the Draft Implementing Regulation and Draft Notice, and launched a first public consultation and discussions with National Competition Authorities and stakeholders on these specific options. Based on this feedback, the Commission produced the Draft Implementing Regulation and the Draft Notice for which it launched a second consultation on 6 May 2022. The Second Consultation sought to:

• Identify additional cases that could benefit from the simplified procedure, while adding safeguards to recognize cases meriting more detailed review.

• Achieve a better allocation of the Commission’s resources on cases that deserve a closer scrutiny. 

• Streamline the Commission’s notification forms.

NEW CATEGORIES OF TRANSACTIONS BENEFITTING FROM THE SIMPLIFIED PROCEDURE AND “FLEXIBILITY CLAUSES”

The Draft Notice expands the scope of the simplified procedure by introducing several new categories and giving more flexibility to the Commission to grant simplified treatment.

First, the Draft Notice introduces two new categories of simplified cases for vertical transactions:

• Vertical transactions where the merging parties’ combined market share is below 30% in any plausible upstream market and their combined share is also below 30% in any plausible downstream purchasing market. 

• Vertical transactions where the merging parties’ combined market shares in the upstream and downstream markets is below 50%, the Herfindahl-Hirschman Index delta is below 150, and the smaller party is the same in the upstream and downstream market.

Second, the Draft Notice proposes “flexibility clauses” that allow the Commission – at the request of the notifying parties – to grant the simplified procedure to transactions that do not fall under the simplified categories. These flexibility clauses include the following scenarios:

• Transactions where the horizontal overlaps result in combined market shares of less than 25% and the individual or combined market shares in vertically related markets are less than 35% or the individual or combined market shares are below 50% in one market and below 10% in all other vertically related markets.

• Joint ventures whose turnover and the total value of the assets transferred in the EEA is less than EUR150 million.

EXCLUSION FOR TRANSACTIONS REQUIRING A MORE DETAILED REVIEW

The Draft Notice also provides guidance on the circumstances in which the Commission may refuse to apply the simplified procedure, even if the conditions for simplified treatment are technically met. These exclusion categories appear voluminous but in reality they largely reflect the Commission’s decisional practice:

• Joint ventures with negligible EEA activities, where there are significant horizontal overlaps or vertical relationships between the parties.

• Transactions where it is difficult to define relevant markets or determine market shares, or mergers involving novel issues of general interest.

• Transactions where one party has significant non-controlling shareholdings in companies active in the markets where another party is active.

• Transactions that do not involve horizontal overlaps, but which may increase the market power of the merging parties through the combination of competitively valuable assets, including technological, financial, or other resources, or competitively valuable assets, such as raw materials, IP rights, infrastructure, or user base of commercially valuable data.

• Transactions that do not trigger horizontal overlaps or vertical relationships, but which involve parties that are active in closely neighboring markets where one or more of the parties has a market share of 30% or more.

• Transactions that trigger certain special circumstances already identified in the horizontal and non-horizontal merger guidelines, such as high degree of market concentration, elimination of a maverick, merger involving particularly close competitors or an important competitive force, elimination of potential competition, or increase in barriers to entry.

• For joint ventures, change from joint to sole control when the joint control situation acted as a competitive constraint to the parties to the joint venture.

• Transactions where one or more National Competition Authority raises concerns or requests a national referral.

STREAMLINING THE INFORMATION REQUIREMENTS FOR TRANSACTIONS BENEFITTING FROM THE SIMPLIFIED PROCEDURE 

The Draft Implementing Regulation and the Draft Notice propose a new filing form in a “tick-the-box” format for simplified cases, with multiple choice questions and tables.

Moreover, the Draft Notice introduces the so-called “super simplified procedure”, i.e., a procedure where the parties are invited to formally notify without any pre-notification contact. Such procedure is available for:

• Mergers without any horizontal overlap or any non-horizontal relationship. 

• Joint ventures inactive in the EEA.

“HYBRID” FILINGS

If a transaction, which has to be filed under the standard procedure, in some markets fulfils the requirements for the simplified procedure, namely it results in horizontal overlaps or vertical relationships that meet the conditions for the simplified procedure, the Commission will issue a so-called “hybrid decision”. This means that the Commission will not conduct a detailed assessment of the horizontal overlaps or vertical relationships, but it will merely state that certain horizontal overlaps or vertical relationships fall within one or more of the categories eligible for the simplified procedure.

ELECTRONIC NOTIFICATIONS

Under the current system, notifications generally shall be made by filing four hard copies (one original and three copies) and two CD or DVD-ROM copies. During the COVID-19 pandemic, the Commission has accepted notifications in digital format. This experience has shown that electronic means could efficiently be used in the merger procedure. As a result, the Commission proposes to adopt the electronic notification, provided that the notification and other relevant documents are signed by Qualified Electronic Signature according to the eIDAS Regulation.

INFORMATION REQUIRED

The Draft Implementing Regulation requires the merging parties to provide more information on the source and usage of data provided. More specifically, the Draft Implementing Regulation requires the parties to specify the source of the data contained in the notification (e.g., CRM software or data sets purchased from external providers), as well as an indication whether the data are used in the ordinary course of business. This additional information regarding the source and usage of the data is an essential element to consider the notification as complete.

PROCEDURAL RIGHTS

The Commission wishes to extend the rights of third parties to receive non-confidential versions of the Statement of Objections (SO), the charge sheet through which the Commission informs the merging parties of its preliminary objections, theories of harm, and evidences against the transaction. The Draft Implementing Regulation provides that where a SO is issued by the Commission, it may send to third parties a non-confidential version of the SO or inform them of the nature and subject matter of the proceedings. This would enhance transparency but could also improve the ability of third parties to challenge transactions that go to Phase 2, i.e. when the Commission opens an in-depth review of transactions that pose competition concerns that cannot be resolved in Phase 1.

NEXT STEPS AND PRACTICAL IMPLICATIONS FOR BUSINESSES

The deadline for submitting contributions expired on 3 June 2022.

The Commission will use the information gathered to prepare the Draft Implementing Regulation and Draft Notice, which are expected to enter into force in the second quarter of 2023.

These two instruments are a welcome development for businesses and are expected to lead to a more efficient merger review process by the Commission. They will potentially reduce burden on businesses and further streamline the merger review process, particularly for transactions that are unlikely to raise competition concerns. Having said that, the Commission retains a significant amount of discretion to revert to the full merger review procedure, given the long list of potential exclusions. Accordingly, the full ramifications and practical implications of this new simplification package remains to be seen.

Dr. Jens Steger and Philip Torbøl also contributed to this article.