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Mergers and acquisitions in Europe 1993: the new EC merger control regulation and its effects on national merger control in Germany.

I. Internal market 1993--the trigger for a wave of mergers and acquisitions

The prospect of radical changes in the economies of both West and East Europe has forced companies to consider how best to meet the new challenges posed by the rapidly approaching common market.(1) It is time for companies to expand to prepare for the single market. For some the choice is easy: either merge or be overrun!

So it is not surprising that the American wave of mergers and acquisitions, management buy-outs and buy-ins, hostile takeovers and "going public" transactions has swept Europe, too.(2) In comparison with those in the U.S.A., the number of mergers and acquisitions in the EC may still be small(3) but as the magic date draws closer, more enterprises are placing their trust in the concept of merging, ignoring often unfortunate past experience. According to research conducted by a German institute in the 1980's, nine out of ten mergers failed to provide the success envisaged by their initiators.(4)

Mergers and acquisitions have been one of the most hotly contested topics in the last few years in the Community.(5) It is evident that the single market cannot be created without generally applicable European competition law, for without this the fairly high legal standards of some of the member states will be sacrificed to a playground open to the sort of abuse the Germans called "Elephants' weddings."

After describing the efforts of the EC Commission and the European Court of Justice to develop such merger control within the provisions of the EEC Treaty, this article will give an overview of the content of the merger control regulation of December 21, 1989. Special attention will be directed to the relationship between national and European merger control as well as between the new regulation and the provisions of the EEC Treaty.

II. Mergers and acquisitions under EC law--historical development

A. The Treaty of Rome and the early EC competition policies

Unlike the ECSC Treaty, the EEC Treaty does not contain provisions explicitly dealing with merger control. The existing rule of an. 85 deals with the prevention, restriction and distortion of competition within the common market. Art. 86 deals with an abuse of a dominant position within the common market. This omission by the founding fathers of the Community must be viewed in its historical context. In 1957, concentration of business was viewed as a positive step. Enterprises were encouraged to build up their firms in order to expand beyond the small-scale post-war European economy.(6)

The Community's basic objectives, particularly "economic and social progress" and "steady expansion," presupposed a certain degree of concentration. In its memorandum On the Concentration of Enterprises in the Common Market, issued in 1966, the Commission espoused this view and stated that it was not possible to apply the existing antitrust rule in art. 85 of the EEC Treaty to agreements whose purpose was the acquisition of the total or partial ownership of enterprises or the reorganization of the ownership of enterprises.1 The Commission further stated that a market-monopolizing concentration would normally be treated as an improper exploitation of a dominant position within the terms of art. 86 of the EEC Treaty.

However, the EC soon realized the potential threat to competition posed by the concentration process. Greater significance was therefore assigned to another basic objective of the EEC Treaty--art. 3(f)--which envisages a "system ensuring that competition in the Common Market is not distorted."(8) The change in political climate in the member states may also have prompted this examination. The question arose whether competition law should only further its own goals or whether it should be used as an instrument to implement "industrial policies." In the 1960's and 1970's, the lines limiting state interventionism had not yet been drawn and, as far as competition law is concerned, these boundaries are still unclear.(9) Therefore, the EC looked at art. 85 and art. 86 of the EEC Treaty in a new light, seeking to apply them to mergers.

B. Commission practice in recent years

Examining the Commission's practice in making decisions, and its informal statements made at the request of parties contemplating a merger, a complex picture can be discerned.(10) For a long time the Commission intervened pursuant to art. 85 of the EEC Treaty only in cases relating to full-fledged joint ventures.(11)

But the Commission did not apply art. 85 of the EEC Treaty to mergers where previously independent companies became one. Neither, until 198% Md an. 85 of the EEC Treaty apply to so-called partial concentration, where two companies merge part of their respective activities into one unit without any anticompetitive "spill-over effect" on their remaining activities.(12)

The Commission later enlarged the scope of art. 85 of the EEC Treaty, prompted mainly by the continued reluctance of the Council of Ministers to act upon the draft merger control regulation, first proposed in 1973. Commissioner Peter Sutherland warned about this failure to act when in 1985 he stated:

The Commission's patience is not inexhaustible, and the moment will

soon arrive when the existing Treaty provisions will be used to assess

whether a given merger is acceptable or dangerous.(13)

Eventually, the Philip Morris/Rothmans judgment of the Court of Justice in 1987 cleared the way for a wider application of art. 85 of the EEC Treaty. It is not surprising that the Commission 0seized this opportunity. In 1988, citing the Philip Morris judgment, the Commission intervened in a merger in which the French metal can manufacturer, Carnaud SA, agreed with the Sacilar group to acquire its 66.6% shareholding in another French can maker, Sofreb. Without explicitly saying so, the Commission generalized so as to apply to all mergers those arguments it had previously advanced only in connection with joint ventures.14 The old doctrine that art. 85 of the EEC Treaty dealt only with the market-relevant conduct of competitors and not with changes of market structure had been eroded.

The second antitrust rule in the EEC Treaty, art. 86, was the subject of an earlier famous Court of Justice decision in the Continental Can case in 1973. That case is considered to be the only formal Commission decision prohibiting a merger under art. 86 of the EEC Treaty. In its subsequent informal interventions, the Commission has continued to apply the Continental Can doctrine so that it has become a part of competition law practice.(15)

If principles are to emerge, it is vital in addition to Commission's practice to consider the two leading cases of the Court of Justice just mentioned.

C. The leading cases of the Court of Justice

1. THE CONTINENTAL CAN JUDGMENT(16) In the first case the Court of Justice in Luxembourg took the opportunity to elaborate on the word "abuse" in an. 86 paragraph 1 of the EEC Treaty. This, it was stated, pertains not only to those practices by undertakings that may damage the consumer directly, but also to those that have detrimental effect on market structure.

The Court held that an abuse may occur,

if an undertaking in a dominant position strengthens such position in

such a way that the degree of dominance reached substantially fetters

competition i.e., that only undertakings remain in the market whose

behaviour depends on the dominant one.(17) In other words, a corporate acquisition by a dominant undertaking is unlawful under art. 86 of the EEC Treaty if it has a substantial limiting effect on competition.

A significant problem of the Continental Can doctrine was that art. 86 of the EEC Treaty does not provide any procedural rules because it was not drafted specifically for the purposes of regulating mergers. Another limitation of the doctrine is that it only applies where one firm is already dominant. Thus, it probably would not apply, for instance, to the joinder of two 40% firms.

The Commission reacted quickly to the Continental Can decision. Within a few months a proposal for a regulation on merger control had been submitted to the Council.(18) The Council members were unable to reach a consensus on this draft. An amended proposal was made in 1982, and then another one in 1984, this one having passed through the European Parliament and the Economic and Social Committee. A fourth attempt was made in 1986.(19) The proposed regulations continually met with strong resistance from the member states.

In 1988, the Commission, responding to, among other things, a decision of dc Court of Justice, submitted yet another proposal for merger control.

2. THE PHILIP MORRIS/ROTHMANS JUDGMENT(20) This time, a major case on an. 85 of the EEC Treaty spurred a further attempt by the Commission to initiate a merger control regulation.

The complicated scenario of the Philip Morris/Rothmans case is the subject of a considerable number of publications,(21) So that only a summary of the main statements of the Court of Justice is necessary for present purposes.

In the decision, the Court justified the application of art. 85 of the EEC Treaty notwithstanding the fact that following the acquisition of shares both the companies involved remained independent. The Court stated:

Although the acquisition by one company of an equity interest in a

competitor does not in itself constitute conduct restricting competition,

such an acquisition may nevertheless serve as an instrument for influencing

the commercial conduct of the companies in question so as to

restrict or distort competition on the market on which they carry on

business.(22) The Court of Justice then gave two examples:

That will be true, . . . where the investing company obtains legal

or de facto control of the commercial conduct of the other company

or where the agreement provides for commercial co-operation

between the companies or creates a structure likely to be used for such


That may also be the case where the agreement gives the investing

company the possibility of reinforcing its position at a later

stage. . . .(23)

At the same time the Court of Justice stated there were no general criteria for determining when a merger falls within art. 85 of the EEC Treaty and pointed out:

Every agreement must be assessed in its economic context and in particular

in the light of the situation on the relevant market. Moreover,

where the companies concerned are multinational corporations which

carry on business on the worldwide scale, their relationship outside the

Community cannot be ignored.(24)

The Philip Morris/Rothmans judgment is one of the most criticized judgments of the Court of Justice.(25) A major criticism is that the decision does not clearly delineate the scope of art. 85 of the EEC Treaty and therefore leaves open the possibility that it is applicable to all mergers.

Apart from the lack in both art. 85 and art. 86 of the EEC Treaty of appropriate substantive criteria to determine to which mergers these articles should apply, both also fail to provide any procedural rules through which control can be effected.(26) Article 85, it is submitted, is applicable only in respect of the relatively minor anticompetitive effect of a merger. The crux of this transaction, the structural change of the market, ought not to be brought within the ambit of art. 85.

These problems could be resolved by a new regulation aimed specifically at merger control. The Philip Morris/Rothmans judgment was, it is submitted, a political push for just such a new regulation.

III. The new EC merger control regulation

The Commission had had to modify its proposals for the new merger control regulation(27) several times due to the intense critical discussion on the subject, particularly from Germany. Finally, a compromise was found, and on December 21, 1989 the EC Council of Ministers passed the regulation to take effect as of September 21, 1990.

A. The scope

According to art. I the regulation applies to "all concentrations with a Community dimension."

1. CONCENTRATIONS The transactions to be considered as concentrations(28) are described in art. 3. Concentrations include mergers of two independent companies and acquisitions by a company or a person already controlling at least one company of "direct or indirect control of the whole or parts of one or more company" by contract or any other means. The regulation itself defines, in art. 3(3), control as "the possibility of exercising decisive influence on an undertaking." It can be constituted by all contracts or actions such as the interlocking of executive bodies, contracts conferring the right to use the assets of a company, etc. Under the regulation, a minority participation generally does not meet this requirement unless such a participation permits control of the decisions of the shareholder's meeting, for example, where a certain number of shareholders is habitually absent.

2. JOINT VENTURES The regulation is not applicable to the formation of joint ventures that give rise to or aim at the coordination of the competitive behavior of the parties or between them and the joint venture. These formations are not deemed to have a concentrative character and are therefore subject to examination only under art. 85 of the EEC Treaty. Distinguishing joint ventures with a concentrative and those with a cooperative character will certainly raise problems in practice. According to the legal rule of art. 3(2) of the regulation

. . .the creation of a joint venture performing on a lasting basis all

the functions of an autonomous economic entity which does not give

rise to coordination of the competitive behaviour of the parties

amongst themselves or between them and the joint venture, shall constitute

a concentration within the meaning of Art. 3 paragraph 1(b).

In order to clarify this rule the Commission has issued joint venture guidelines(29) that are not binding on the European Court of Justice but give a hint at the practice of the Commission, although the Commission announced it would change the complicated set of criteria in the near future.

As to the first condition, the guidelines set out a number of criteria that indicate the joint venture's ability to act as an autonomous economic entity such as the human and material resources or the company's competence to exercise its own commercial policy. The joint venture's economic independence will not be contested merely because the parent companies reserve to themselves the right to decide, e.g., concerning changes in company purpose, increases of capital and similar questions. Economic independence will be assumed if the joint venture operates in a market different from that of the parent companies and that is not adjacent to or upstream or downstream of those markets.

In this case the Commission considers the second negative condition, the absence of coordination of competitive behavior, in principle, to be met. A joint venture is operating on a market other than that of the parent companies if it undertakes new activities on behalf of the parent companies or has taken over preexisting activities of the parent companies. Their withdrawal may take up to 1 year from the establishment of the joint venture. A coordination of competitive behavior between the parent companies or between them and the joint venture will be presumed where one or more of the parent companies remain active in the joint venture's market or remain potential competitors of the joint venture. The Commission takes the same view for those cases where "the joint venture is operating in a market that is upstream or downstream of that of the parent companies."

3. COMMUNITY DIMENSION OF A CONCENTRATION The regulation only applies to mergers with a Community dimension. This requirement is defined by quantitative thresholds in worldwide and Community-wide turnover. The aggregate worldwide turnover for all companies involved in a merger must exceed 5 billion ECU and the Community-wide turnover of each of at least two companies concerned has to exceed 250 million ECU. Additionally, at least one of the companies involved must not generate more than two-thirds of its EC turnover in only one member state or, positively expressed, an EEC-wide dimension of a concentration is excluded if each of the companies achieves more than two-thirds of its Community-wide turnover within one and the same member state.

The aggregate turnover of one company that is part of a group is calculated as the consolidated turnover of the company itself in dependent as well as controlling companies.

The turnover requirements for a EC-wide dimension have been intensively discussed. The Commission hoped for lower thresholds to broaden the scope of the merger regulation.(30) In a for-the-record statement, it has expressed its opinion that "the threshold for the world-wide turnover will be reduced to 2 billion ECU" at the end of the fourth year following the adoption of the regulation. Before that moment the turnover thresholds have to be reviewed according to art. 1(3).

B. The procedure

The merger control procedure begins when the Commission is notified of a concentration. Notification has to be made by the parties to a merger or by the person or company acquiring control of another company or part of it, within 1 week of "the conclusion of the agreement, or the announcement of the public bid, or the acquisition of a controlling interest." This short period means that a merger will be notified before it is realized, either legally or factually. Accordingly, art. 7(1) determines that a transaction "shall not be put into effect either before its notification or within the first three weeks following its notification." The Commission may decide to continue this suspension of concentration until its final decision or to take "other interim measures," which are not defined in the pertinent art. 7(2), in order to "ensure the full effectiveness of any decision" to be taken. However, according to art. 7(3) the suspension of a transaction does not "impede the implementation of a public bid" provided that the acquirer does not exercise the voting rights of the acquired shares without the approval of the Commission.

Only concentrations with a Community dimension have to be notified. In cases of doubt, a notification to the Commission is to be recommended. In this case an additional notification to the national cartel office is not necessary because the Commission has to transmit copies of all notifications and the most important documents to the competent authorities of the member states within three working days after their receipt.

Notification must be made in conformity with form CO, which has been issued as annex I to Commission Regulation No. 236790 of 25 July 1990.(31) This regulation sets out provisions on the pre-merger notification procedure, the time limits for initiating proceedings and for decisions and rules on the hearing of the parties involved and third parties under the merger control regulation. Form CO itself is a lengthy document requiring detailed information on the parties to the merger, the affected markets, ownership and control of and by the parties to the merger, personal and financial relations to other companies active on the affected market the impact of the envisaged merger on consumers and technical development. The Commission may, however, according to art. 4(3) of Commission Regulation No. 2367/90, "dispense with the obligation to provide any particular information requested by form CO." It therefore recommends informal talks on the merger before notification in order to determine the information not required for a special transaction. To be aware of the information required is of particular importance with regard to art. 4(2) of Commission Regulation No. 2367/90; according to this provision, notification only "shall become effective on the date on which the complete information is received by the Commission," so that the time limits for decisions as described below do not begin until that date.

The Commission first must examine the question of the Community dimension of the concentration. If it decides there is no such dimension it "shall record this finding by means of a decision" (art 6(1a)). This decision has to be taken within I month at most, generally running from the day following receipt of the notification.

As a rule the preliminary examination has to be completed within this period. The Commission may also decide within this term that "the concentration notified, although faring within the scope of this Regulation, does not raise serious doubts as to its compatibility with the common market"; in this case it will approve the concentration formally by determining that it is compatible with the common market.

If the Commission finds that a concentration falling within the scope of the regulation raises serious doubts as to its compatibility with the common market it must initiate the "main examination" that shall be completed within 4 months after the initiation of the preliminary examination.

The main examination may culminate in the formal approval of a concentration which may be granted subject to conditions and obligations intended to insure any modification requested by the Commission. Alternatively, the concentration

will be prohibited if the Commission finds it not compatible with the common market.

If the concentration has already been implemented, the Commission may order the divestiture of the concentration. If the Commission does not decide promptly, a concentration "shall be deemed declared compatible with the common market" (art. 10(6)). This rule provides for the observance of the above mentioned strict time limits imposed by the regulation.

C. The relationship between national and European merger control

1. THE PRINCIPLE As indicated above, merger control is not only exercised on an EC level but also in several member states including Great Britain, France and Germany. The relationship between national and European merger control must therefore be determined, and whether mergers in Germany, Great Britain or France will be examined by both the Commission and the national authorities has to be established.

Generally, all concentrations lacking Community dimension will be examined only by the national cartel office. The decision of the Commission that a concentration does not fall within the scope of the regulation-because it has no Community dimension-consequently opens the way for national merger control.


a) The rule of art. 22(3) of the regulation A member state may request that a concentration lacking a Community dimension be examined by the Commission under the merger control regulation. In this case the Commission may approve a concentration subject to certain conditions or prohibit it provided that the concentration affects trade between member states. Article 22(3) thus offers the possibility for member states without national merger control regulations to provide for enforcement of the European standard in their own country.

b) The referral of a transaction to the competent national authorities pursuant to art. 9 of the regulation In addition to this, concentrations with a Community dimension within the meaning of art. 1(2) are not subject to European merger control if the Commission takes advantage of art. 9 to refer a notified concentration with a Community dimension to the competent authorities of a member state upon its request. This provision has been included as a "last-minute compromise" answering particularly Germany's strong request to keep a hook on those transactions where it believes national merger control is necessary.

If the Commission decides that a transaction threatens significantly to impede competition in a market within a member state bearing all the characteristics of a distinct market, it may refer the case to the national authorities, which will treat the transaction in accordance with the national law. A market within a member state is deemed to be a distinct market if it is homogenous regarding the conditions of competition and if these differ appreciably from those in neighboring areas, for instance where the companies involved in the transaction account for especially large market shares.

The Commission may also deal itself with the case "in order to maintain or restore effective competition on the market concerned" (art 9(3a)). It may, therefore, only decide to prohibit the concentration or to approve it with such modifications that are necessary to make the transaction compatible with the common market, for only by these means may the Commission achieve the aim set in art. 9(3a)).

The Commission may take these decisions where a concentration threatens to impede effective competition in the common market or in a substantial part of it.(32) If, therefore, the distinct national market does not form "a substantial part" of the common market the Commission has to refer the transaction to the competent national authorities upon their request. The question as to whether this condition is fulfilled will be answered on the grounds of the criteria expressed by the European Court of Justice in its jurisdiction regarding art. 86 of the EEC Treaty.(33) Only in a few cases will a relevant national market, measured by these criteria, not form a substantial part of the common market and so oblige the Commission to refer the case if asked to do so. Thus, it is very likely that the Commission and the EC Council of Ministers will realize their intention to refer a transaction to national authorities only in exceptional cases.(34)

3. SUMMARY This review indicates that the general rule governing the relationship between national and European merger control is as follows: National merger control is excluded for transactions with a Community dimension that are examined pursuant to the new EC merger control regulation unless the Commission refers the case pursuant to art. 9. Conversely, those transactions that do not meet the criteria for a Community dimension are subject only to national merger control unless a member state requests a control by the Commission pursuant to art. 22(3). Thus the goal of so-called one-stop shopping has basically been realized. But this principle would be undermined if articles 85 and 86 of the EEC Treaty could still be directly applied as merger control rules.

D. The relationship between the merger control regulation and articles 85 and 86 of the EEC Treaty

1. THE PROBLEM It is the Commission itself which, in its record statement to art. 22, prompts discussion of this question. It has declared its intention to examine transactions lacking a Community dimension, but with a worldwide turnover of 2 billion ECU and more.

If the Commission acts on this intention, this would cause uncertainty. Unlike the merger control regulation, articles 85 and 86 of the EEC Treaty do not provide for turnover thresholds limiting their scope. The closest we have to such thresholds is the Commission statement in its Notice Concerning Agreements of Minor Importance(35) that it will not apply articles 85 and 86 if be market shares of the companies participating in a transaction to be examined do not exceed five percent.

Furthermore, if these provisions were generally applicable, pursuant to art. 3 of Regulation No. 17, the Commission would be obliged to apply articles 85 and 86 of the EEC Treaty to concentrative transactions upon request of any natural or legal person who claims a legitimate interest, such as a competitor.

Whether or not these provisions are applicable apart from the merger control regulation is therefore a question of very significant practical importance. It has to be answered separately for each of the provisions.

2. RELATIONSHIP BETWEEN ART. 85 OF THE EEC TREATY AND THE REGULATION Art. 85 of the EEC Treaty has to be considered in the light of the Philip Morris judgment. As was discussed above,(36) the European Court of Justice has confirmed the application of art. 85 of the EEC Treaty to mergers, but only where the acquisition serves as an instrument for influencing the commercial conduct of the companies participating in the transaction. In contrast to commercial conduct control, merger control as it is established by the merger control regulation serves to control the structure of a relevant market and to prevent the establishing or enforcing of dominant market positions that restrain competition. A company may, by an acquisition that does not permit a control of another company, obtain an influence on its competition conduct; in such a case the merger control regulation is not applicable and the acquisition is examined on the grounds of art. 85 of the EEC Treaty. If a company obtains control of another, e.g., by acquiring the majority of its shares, and the agreements between the two companies show that the acquisition creates a situation in which commercial conduct of the dependent company may be influenced, this transaction may be considered on the basis of the merger control regulation as well as art. 85 of the EEC Treaty. But these examinations will focus on two different aspects, the restraint of commercial conduct of a legally independent company on the one hand and the establishment or enforcement of a dominant position on the other. They might, of course, reach different decisions. In practice, the merger control of transactions with a Community dimension on the basis of the merger control regulation will take precedence, whereas commercial conduct control will only take effect once the merger has been approved.

3. RELATIONSHIP BETWEEN ART. 86 OF THE EEC TREATY AND THE REGULATION Unlike art. 85, art. 86 of the EEC Treaty has been interpreted as a rule that serves to control market structure. This is the core of the Continental Can doctrine cited above.(37) Certainly art. 86 of the EEC Treaty is only applicable if a company strengthens an already existing dominant market position, whereas the merger control regulation, in addition to this, also covers the establishment of such a position. On the other hand, the scope of the merger control regulation is restricted by the turnover thresholds of art. 1. Hence the scope of art. 86 of the EEC Treaty and the merger control regulation is not identical, but both rules could be applied to concentrations.

According to art. 22(1) the regulation "alone shall apply to concentrations defined in Article 3." Thus all concentrations independent of their Community dimension shall be considered on the basis of the new regulation and not on the grounds of the EEC Treaty itself.

A mere regulation cannot abrogate the rules of the EEC Treaty which is, after all, the "constitution" of the EC, so that art. 22(1) of the regulation could be ineffective if it does not truly reflect the legal situation. It is submitted that it does so if the merger regulation is viewed as an interpretation of art. 86 of the EEC Treaty with respect to concentrative transactions. The EEC Treaty authorizes the Council of Ministers to enact regulations that serve to realize the principles laid down in articles 85 and 86 of the EEC Treaty.(38) The merger control regulation has expressly been enacted with regard to art. 87 of the EEC Treaty. The regulation therefore details the application of articles 85 and 86 of the EEC Treaty to concentrative transactions. This purpose is binding for the Commission, which may therefore only examine mergers on the basis of the regulation.(39)

Only future decisions of the Commission and of the European Court of Justice will show whether this legal opinion will be generally accepted.

The decisions rendered by the Commission in the first few months since the enactment of the merger control regulation have not dealt with this question.(40)

E. Governing standard

These decisions did not confirm the concerns that the Commission might adopt an industrial policy view on the concentrations.(41) Such a practice would contradict the intention of the EC Council, which, after intense discussion on whether industrial policy or competition policy should form the basis of the governing standard, has adopted a straightforward competition policy standard.

The Commission has, according to art. 2, to decide whether a transaction "creates or strengthens a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial pan of it." The preamble to the merger regulation states that, "where the market share of the undertakings concerned does not exceed 25% either in the common market or in a substantial part of it," a transaction is "not liable to impede effective competition."

This rule characterizes the EC merger control regulation as a pure market structure control that relates to the relevant product and geographic markets to be defined in all cases. The definition of the relevant markets will thus crucially affect the final decision.

In considering whether a concentration may be declared compatible with the common market or not, the Commission has to take into account the following criteria listed in art. 2:

The need to preserve and develop effective competition within the

common market in view of, among other things, the structure of all the

markets concerned and the actual or potential competition from undertakings

located either within or without the Community and, furthermore,

the market position of the undertakings concerned and their economic

and financial power, the opportunities available to suppliers and users,

their access to supplies or markets, any legal or other barriers to entry,

supply and demand trends for the relevant goods and services, the

interests of the intermediate and ultimate consumers, and the development

of technical and economic progress provided that it is to consumers'

advantage and does not form an obstacle to competition.

Some of the above cited factors, such as the "opportunities available to suppliers and users," the "access to supplies or markets" and the "economic and financial power" of a company concerned, are not strictly related to the effects on competition on a horizontal level but to vertical concentrations and their effects on smaller distributors or suppliers.

Only at the end of the list of these factors does the regulation refer to an industrial policy standard. The reference to "the development of technical and economic progress" seems to pick up the statement in the regulation's preamble that "the dismantling of internal frontiers is resulting and will continue to result in major corporate reorganizations in the Community, particularly in the form of concentrations" and that "such a development must be welcomed as being in line with the requirement of dynamic competition and capable of increasing the competitiveness of European industry. . . ." The great number of competition factors included, the formulation of the general rule for decision making and especially the restriction of industrial policy to a factor that is only considered provided competition is not impeded, all show the absolute priority of the competition policy standard.

Nevertheless the first decision of the Commission under art. 8Q) (be decision declaring that concentration was incompatible with the common market in the Aerospatiale-Alenia/de Havilland case(42) had to be defended against serious political pressure exerted on the Commission's merger control task force. This pressure in favor of the mentioned asset deal originating from other member states such as France or the Commissioner for Industrial Policy, Bangemann, showed that an independent European cartel authority would have been a more appropriate solution than the internal task force construction. (42) Decision of October 2, 1991-IV/N 0 53, Wettbewerb und Wirtschaft (WuW) 1992, at 163.

IV. Conclusion

After about 2 years of experience, it is to be expected in the long term that the priority of competition policy will be reflected in the practice of the Commission. Furthermore, it can be said that the standards of merger control throughout the EC will be largely harmonized even though the national authorities remain free to control mergers with only a national dimension. In the long run, national standards for mergers of minor importance are unlikely to be more rigorous than for those with a European dimension. This prediction will be even stronger if the scope of the merger control regulation is broadened by a reduction of the turnover thresholds of art. 1 in accordance with the wishes expressed by the Commission.

Whether the Commission will be able to use art. 86 of the EEC Treaty to control mergers that do not reach the turnover thresholds in the regulation will be another question of large practical importance that will presumably have to be decided by the European Court of Justice. As shown above, the answer to this question should be in the negative so that the Continental Can doctrine be relegated to historical significance only, as one of the milestones on the way to statutory EC merger control. (1)See Art. 8A of the EEC Treaty, introduced by art. 13 of the Single European Act signed at Luxembourg on February 17, 1986 and at The Hague on February 28, 1986: "The Community shall adopt measures with the aim of progressively establishing the internal market over a period expiring on 31 December 1992. . . ." (2) Karl-Heinz Fanselow, Aufbruch, Frankfurter Allgemeine Zeitung, Unternehmensbeteiligungen, Management Buy-Out, May 23, 1989, at B1, and Peter E. Horn, M + A Teams "maschieren" in Europa auf, id. at 27. (3) According to Wolfgang Kartte, President of the German Cartel Office, Doping far Giganten, Frankfurter Allgemeine Zeitung, April 22, 1989, at 15, in 1984 only 575 mergers took place in the Community, while the number in 1988 increased to 1,159. (4) Karl Ohem, Neun von zehn Unternehmensfusionen bleiben erfolglos, Frankfurter Allgemeine Zeitung, June 9, 1989, at 21. See also Wolfgang Kuhn, Mergers and Acquisitions, Handelsblatt, April 14, 1989, at B I 1, to the particular legal problems in connection with the seller's position. (5) See Carsten-Thomas Ebenroth & Christoph E. Hauschka, Zusammenschlu[beta]kontolle nach der geplanten EG-Fusionskontollverordnung, Zeitschrift fur Rechtspolitik 1989, at 62-68; John E. Ferry, The Future of Merger Control in the EEC, ABA Antitrust (Summer 1988), at 12-16. (6) Merger Control in the EEC, A survey of European Competition Laws (Deventer/Netherlands, Kluwer Law and Taxation Publishers), at 222 & 223. (7) Study No. 3 (Brussels 1966). (8) Rainer Bechtold & Werner Kleinmann, Kommentar zur Fusions-Kontrolle (2d ed. Heidelberg 1989), at Introduction, pp. 105 & 106. (9) Compare Manfred Caspari, former Director General of DG IV (Competition), Die Entwicklung des europaischen Wettbewerbsrechts (Speech held in the office of Heuking, Kuhn, Herold, Kunz and Partners in Dusseldorf, April 22, 1988), Anwaltsblatt No. 10/1988, at 1. (10) See Ivo van Bael & Jean-Francois Bellis, Competition Law of the EEC (Bicester, Oxfordshire, CCH Editions Limited), at 214 & 215. (11) Decision of November 23, 1977, OJ L 327/26 (GEC-Weir Natrium-Umwalzpumpen), Decision of December 31, 1983, OJ L 376/17 (Carbon Glas Technologie), Decision of July 13, 1983, OJ L 244/13 (Rockwell/Iveco), Decision of February 26, 1988, OJ L 52/51 (Olivetti/Canon). See Bechtold & Kleinmann, supra note 8, at 106 & 107. (12) Commission Decision of February 12, 1975, OJ L 338/95 (SHV/ Chevron); Seventeenth Report on Competition Policy, 1988, No. 69 (Montedison/Hercules). See also, Merger Control in the EEC, supra note 6, at 225-31. (13) The Fourth International Antitrust Law Conference, New Hall, Cambridge, September 16-20, 1985, Vol. II (HB 45/ U 21, U 26). (14) Seventeenth Report on Competition Policy (1988), No. 70. (15) See Bechtold & Kleinmann, supra note 8, at 108-10. (16) Europemballage Corporation and Continental Can Co. Inc. v. Commission (Case 6/72) (1973), ECR 215. (17) Paragraph 26. (18) Proposal for a Regulation (EEC) of the Council on the control of concentrations between undertakings, submitted to the Council by the Commission on July 20, 1973, OJ C 92/1 of October 31, 1973. (19) Amended proposal for a Council Regulation on the control of concentration between undertakings (Merger Control Regulation), OJ C 36 of February 12, 1982, further amended in 1984, OJ C 51 of February 23, 1984, and 1986, OJ C 324 of December 17, 1986. (20) British American Tobacco Comp. Ltd., R. J. Reynolds Industries Inc. v. Commission (Case 142 and 156/84) (1987), ECR 4487. (21) See authors in note 25, infra. (22) Paragraph 32. (23) Paragraphs 38 & 39. (24) Paragraph 40. (25) See Frank H. Fine, The Philip Morris Judgment: Does Article 85 Now Extend to Mergers?, ECLR 1987, at 333-43; Martin Schodermeier, Auf dem Weg zur europaischen Fusionskontolle, Wirtschaft und Wettbewerb 3/1988, at 185-94; Achim von Winterfeld, EG-Fusionskontrolle durch Richterrecht?, Recht der Internationalen Wirtschaft 12/1988, at 958-62; Ulrich Immenga & Andreas Fuchs, Art. 85 EWG-Vertrag als Grenze fur Unternehmensbeteiligungen?, Neue Juristische Wochenschrift 1988, at 3052-59. See also the interpretation in: Merger Control in the EEC, supra note 6, at 263-79. (26) See Frank H. Fine, supra note 25, at 342 & 343 and Merger Control in the EEC, supra note 6, at 278. (27) See OJ L 395/1-12 of December 30, 1989. (28) The English text of the regulation speaks of concentrations instead of mergers. In this article both terms will be used. (29) See OJ C 203/90, p. 10.(28) The English text of the regulation speaks of concentrations instead of mergers. In this article both terms will be used. (30) See the report on the proposals made by the Commissioner Leon Brittan, Wirtschaft und Wettbewerb 1989, at 488 & 489. (31) See OJ L 219/90, p. 5. (32) As to the governing standard for the decisions of the Commission see III. E. in this text. (33) As to these criteria see Alfred Gleiss & Martin Hirsch, Kommentar zum EWG-Kartellrecht (Commentary on the EEC Antitrust Law) (Stuttgart 1978), at art. 86 n.26. (34) See the critical view of art. 9 expressed by Karsten Schmidt, Forschungsinstitut fur Wirtschaftsverfassung und Wettbewerb (Publisher), Wettbewerbspolitik an der Schwelle zum europaischen Binnenmarkt (Koln 1989), at 72. (35) Notice of December 3, 1986, OJ No. C 231, p. 2. (36) II.C.2. (37) II.C.1. (38) See Eberhard Grabitz & Norbert Koch, Kommentar zum EWG-Vertrag (Commentary on the EEC Treaty) (Munchen 1989), at art. 87 n.11 (39) See Karsten Schmidt, supra note 34, at 69. (40) See Wirtschaft und Wettbewerb (WuW) 1991, at 294 & 338. (41) See Ehlermann, Director General for Competition in the EC Commission, in: Handelsblatt of April 18, 1991, at B21. (42) Decision of October 2, 1991-IV/N 0 53, Wettbewerb und Wirtschaft (WuW) 1992, at 163.

MICHAEL SCHMITTMANN, Heuking, Kuhn, Herold, Kunz & Partners, Dusseldorf.

WOLFGANG VONNEMANN, Treuhandanstalt, Berlin.
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Author:Schmittmann, Michael; Vonnemann, Wolfgang
Publication:Antitrust Bulletin
Date:Dec 22, 1992
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