Merger Control Regulation | Bedeutung & Erklärung

Concept and Purpose of the Merger Control Regulation

The Merger Control Regulation is a central legal provision for controlling corporate mergers within the European Union. Its aim is to protect competition in European markets and to ensure that mergers do not lead to a significant impediment to competition. Through the instrument of merger control, it prevents the creation or strengthening of dominant market positions.

Legal Basis

European Merger Control Regulation

The legal basis for merger control at the European level is formed by Regulation (EC) No 139/2004 of the Council of 20 January 2004 on the control of concentrations between undertakings (short: European Merger Control Regulation, also “EMCR” or “EU Merger Control Regulation”). It replaces the former Regulation (EEC) No 4064/89 and governs the control of concentrations of Union-wide significance (“Community dimension”).

National Provisions

In addition to the European Merger Control Regulation, the Member States have supplementary national provisions. In Germany, this is in particular Section 35 et seq. of the Act against Restraints of Competition (GWB).

Scope of Application

The Merger Control Regulation applies to concentrations that reach a Union-wide significance. A concentration within the meaning of the Regulation occurs in the case of:

Merger of two or more previously independent undertakings,
Acquisition of control of one or more undertakings by one or more other undertakings,
Creation of joint ventures that on a lasting basis perform all the functions of an autonomous economic entity.

The criterion of ‘Community dimension’ is determined based on certain turnover thresholds defined in Article 1 of the Merger Control Regulation.

Merger Control Procedure

Notification Requirement and Preliminary Investigation Procedure

Mergers subject to the Regulation must be notified to the European Commission. A prohibition on implementationapplies, meaning the concentration may only be completed after it has been cleared by the Commission.

After notification of the transaction, a two-stage examination procedure follows:

Phase I: Preliminary Review

Within 25 working days, the Commission examines whether the concentration raises serious competition concerns. If it does not, it clears the concentration.

Phase II: In-depth Investigation

If there are serious competition concerns, the Commission opens an in-depth review (Phase II), which lasts 90 working days and can be extended in exceptional cases. Here, the effects are examined in detail.

Decision-making Powers of the Commission

The Commission may:

clear the concentration unconditionally,
clear the concentration subject to conditions and obligations (e.g., divestment of certain business units),
prohibit the concentration if it is incompatible with the internal market.

Exceptions and Referral Procedures

Under certain circumstances, national competition authorities or the Commission itself may request the transfer of jurisdiction. This is governed by the so-called referral procedure pursuant to Art. 9 and Art. 22 EMCR.

Substantive Assessment Criteria

Significant Impediment to Effective Competition (SIEC Test)

The core of the substantive assessment is the so-called SIEC test (Significant Impediment to Effective Competition). A concentration will be prohibited if it is expected to result in a significant impediment to effective competition in the internal market or a substantial part of it, in particular through the creation or strengthening of a dominant position.

Additional Assessment Criteria

The Commission particularly considers:

Market structure and market shares,
Position of competitors,
Access to supply and sales markets,
Barriers to market entry,
Innovation and efficiency potential.

Legal Protection and Remedies

Parties to the proceedings, as well as third parties involved, have the right to bring an action before the General Court of the European Union against decisions of the Commission. The higher instance is the Court of Justice of the European Union. Legal protection is governed by the general provisions of the European Treaties.

Relationship to Other Legal Instruments

The Merger Control Regulation is lex specialis with respect to national merger control rules, provided the turnover thresholds for the Union-wide significance are met. Parallel review by national authorities is excluded (one-stop-shop principle). Concentrations not falling under the Regulation are subject exclusively to national merger control provisions.

Significance and Impact

The Merger Control Regulation is a significant element of European competition policy. It ensures that competition in European markets is maintained even in the case of large-scale, cross-border mergers. Its practical application is regularly adapted to current market developments and economic conditions.

Literature and Links

Note: This article provides a comprehensive overview of the legal basis, procedures and main aspects of the Merger Control Regulation within the European Union, referencing exclusively publicly available sources.

Frequently Asked Questions

What conditions must be met for a transaction to fall under the Merger Control Regulation?

For a transaction to fall under the Merger Control Regulation (in particular pursuant to the EU Merger Control Regulation, Regulation (EC) No 139/2004), several cumulative requirements must be met. Firstly, it must qualify as a “concentration” within the meaning of Art. 3 of the Regulation. This includes cases of a full merger, the acquisition of control over an undertaking (either by acquisition of shares or by contractual agreements), as well as the establishment of a joint venture. In addition, certain turnover thresholds defined in Art. 1 of the Regulation must be exceeded. In particular, a concentration is examined by the Commission when the parties’ combined worldwide turnover exceeds €5 billion and at least two of the undertakings concerned each achieve more than €250 million in the EU, provided that not more than two-thirds of their EU turnover is achieved in one Member State. Exemptions, such as those in Art. 4(4) (referral to national authorities), must also not apply. The fulfilment of the thresholds and definition as a concentration must always be assessed case-by-case, based on legal and factual criteria.

How does the European Commission’s review procedure work for notified concentrations?

The review procedure follows a two-stage system: Following notification, the Commission first conducts a preliminary investigation (Phase I) within 25 working days to check whether the concentration raises competition law concerns. If the Commission finds no serious concerns, clearance is granted. If competition law concerns do arise in the preliminary investigation, the Commission opens an in-depth review (Phase II), which lasts a further 90 working days (extendable up to 105 days). In this phase, in-depth market investigations, hearings with the parties and third parties, and possibly the offering and evaluation of commitments (remedies) take place. The statutory deadlines ensure a swift and predictable review process. The Commission’s decision is legally binding and may take various forms: clearance, prohibition, or conditional clearance.

What are the consequences of implementing a notifiable concentration without clearance from the Commission?

Implementing a notifiable concentration without prior clearance (‘gun jumping’) constitutes a serious infringement of the merger control provisions and is subject to significant sanctions under Article 14(2) of the Regulation. In particular, the Commission may impose fines of up to 10% of the worldwide annual turnover of the undertaking concerned. In addition, the measure is deemed provisionally invalid under civil law until clearance is obtained. In severe cases, the Commission may also order that already completed concentrations be unwound. Further, there is a risk of reputational damage and increased scrutiny in future proceedings. Therefore, timely and complete notification prior to implementation is mandatory.

To what extent are the rights of third parties safeguarded in proceedings under the Merger Control Regulation?

Third parties, in particular competitors, customers or suppliers of the undertakings involved, may play a significant role in proceedings under the Merger Control Regulation. The Commission is obliged to give them the opportunity to comment if they are individually affected or can provide specific information. Especially during Phase II, market participants are routinely involved in the investigations through questionnaires, hearings or public consultations. However, third parties do not have a right of action against a clearance decision itself, but may only seek legal remedies via national courts or file a complaint due to procedural errors. It is important to note that the protection of trade secrets and confidential information must be comprehensively respected, which is why third parties are often granted only limited access to the case file.

What role do commitments (remedies) play in the proceedings and how are they structured?

Commitments, also referred to as ‘remedies,’ are an important tool to address the Commission’s competition concerns and avoid prohibition of the concentration. Remedies can be offered in both Phase I (usually structural, such as divestiture of business units) and Phase II (also including behavioral commitments). The commitments must be suitable to effectively and permanently eliminate the identified competition concerns. The Commission reviews the practicality, feasibility, and independence of the proposed measures and may oversee their implementation via a trustee. Typical remedies include divestitures, access obligations to infrastructure or licenses, as well as obligations to conclude certain agreements. The acceptance and effectiveness of remedies is established via corresponding binding provisions in the clearance decision.

How is coordination between the European Commission and national competition authorities carried out?

Coordination takes place via a sophisticated referral and consultation system. Generally, the Commission has exclusive jurisdiction to review concentrations that exceed the EU turnover thresholds (the so-called ‘one-stop-shop’ principle). However, referral is possible under Article 4(4) and Article 9 (transfer to national authorities at the request of a Member State or the notifying party, provided the effects are expected primarily in one country) or Article 22 (case taken up by the Commission at the request of national authorities). The Commission and the Member States are in close information and consultation throughout the review procedure, and may share data and assessments. This ensures coherent application of merger control provisions and prevents conflicting decisions.

What legal remedies are available to companies against Commission decisions in connection with the Merger Control Regulation?

Companies may bring an action for annulment before the General Court of the European Union (GC) against decisions of the Commission, in particular prohibition or conditional clearance decisions (Article 263 TFEU). The Court reviews formal and substantive errors in the Commission’s decision, and the review in complex economic matters is generally limited to checks for manifest error. The Court’s judgment can itself be appealed to the Court of Justice of the European Union (CJEU). Generally, bringing an action does not have suspensive effect, although an interim measure may be applied for in individual cases. Companies should note that the period for bringing an action is only two months from notification of the Commission’s decision.