Moving With The Times: EU Merger Rules Review Process To Start In The Fall
August 10, 2016
By FTI Consulting
As mergers involving big data hit the headlines, the European Commission (EC) has decided to take action by initiating the process to review its merger review rules. A 12 week consultation is to be opened in September to seek views on whether the EC’s current EU merger rules need to be revised.
This follows concerns that the current rules are outdated in today’s growing digital world. The issue is not new (see our previous blog here) and recent digital mergers have revived the issue. Of note the $19 billion Facebook / WhatsApp deal which almost escaped the Commission’s net even though a substantial proportion of WhatsApp’s users were in Europe. The case was finally filed with the EC only because the relevant national competition authorities accepted to refer the case back to Brussels. The case prompted Commissioner Vestager to consider stepping up the game by recognising in March of this year that EU merger rules could potentially use a freshening up.
In her speech Refining the EU merger control system, Vestager acknowledged that by “looking only at turnover, we might be missing some important deals that we ought to review.” She explained that “the issue seems to be that it’s not always turnover that makes a company an attractive merger partner. Sometimes, what matters are its assets. That could be a customer base or even a set of data.” The Commissioner also clarified that this does not only involve big digital deals but other sectors as well such as pharmaceuticals transactions involving new drugs that are being developed but not yet approved for sale. A company might be valuable simply because of its ability to innovate.
By opening a consultation, the Commissioner opens the review process by seeking clarification on the debate before deciding whether merger rules will require any updating. The timing could not be “timelier” as two further “big data mergers”, Microsoft/LinkedIn and Verizon/Yahoo, respectively $26 billion and $4.8 billion deals, are putting the EU merger rules once again under the spotlight.
The simplified treatment of certain categories of typically unproblematic case, i.e. that generally do not raise competition concerns
Whether the “purely turnover-based” jurisdictional thresholds should be extended to be made more effective – other criteria could include transaction value to take into account the market potential which might not be (yet) visible in the turnover
Whether it can streamline the referral system used to transfer deal reviews between the national authorities and Brussels to cut red-tape where possible
Improving technical elements of the merger review such as fostering coherence / convergence between Member States to avoid divergent decisions in parallel merger reviews by several national competition authorities
The issue of minority shareholding seems however to have been cast aside for the time being. No surprises there as Commissioner Vestager already stated earlier this year that she was not convinced of the necessity of reviewing whether an acquisition of non-controlling minority shareholding currently not covered by EU merger rules should also fall under the Commission’s control.
It now remains to be seen whether the results of the consultation (to be published in the first quarter of 2017) and the internal policy paper that will follow (in the second half of 2017) will this time actually lead to any modification of the merger rules.
To be continued…
The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting LLP, its management, its subsidiaries, its affiliates, or its other professionals, members or employees.