European Commission wants European merger control review for the acquisition of minority shareholdings

On 9 July 2014, the European Commission (Commission) launched a public consultation on possible amendments to the European Merger Control Regulation. In its White Paper “Towards More Effective EU Merger Control”, the Commission outlines the proposed amendments. The White Paper relies on the results of a first public consultation conducted by the Commission in June 2013.

The Commission’s proposals aim at more effective merger control provisions. The most important amendment proposed relates to the merger control review of acquisitions of minority shareholdings. At present, at EU level a notification obligation applies only to mergers in which an undertaking – either alone or together with another undertaking – acquires control over the target company. The acquisition of a mere minority shareholding without control rights does, however, not fall under the jurisdiction of the Commission, even if the transaction might have negative effects for competition within the EU. Such transactions can so far be reviewed at most by national competition authorities if the national law – for example as in Germany and Austria – subjects the acquisition of minority shareholdings to national merger control. One well-known example for a critical minority shareholding in a competitor was the acquisition by Ryanair of a minority shareholding in its competitor Aer Lingus in 2007/2008. In August 2013, Ryanair was obliged by the British Competition Commission to reduce its interest in Aer Lingus to 5%.

In its White Paper the Commission proposes to introduce a “targeted transparency system”, according to which companies must inform the Commission of the transaction if certain conditions are met. The Commission shall have the possibility to review the acquisition of non-controlling minority shareholdings if the transaction leads to a "competitively significant link" between the companies. The existence of a competitively significant link requires that the purchaser and the target company are either competitors or are active in vertically related markets. In addition, the subject matter of the acquisition must either be a minority shareholding of at least 20% (or more) or an acquisition of shares of between 5% and 20 % in connection with further rights (e.g. a seat on the supervisory board, access to competitively sensitive information or “de facto”-veto rights). If these conditions are met, the Commission may open a merger control procedure at its sole discretion. For this purpose, the Commission has six months from receipt of the respective information from the parties to decide whether the transaction needs to be filed.

Apart from the proposal to include the acquisition of minority shareholdings into European merger control review, the Commission also makes proposals in its White Paper, inter alia, how the reference system between the Commission and the Member States in merger cases could be simplified.

The White Paper can be found here. Companies, associations of companies and other interest groups can comment on the Commission’s proposals until 3 October 2014.