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Control your merges

09 Aug 2023 / eu Print

Control your merges

The prohibition of abuse of dominance under the EU treaties allows ex post control (at the national level) of an acquisition that is not notifiable under EU merger control, says Alan McCarthy.

In a 16 March 2023 judgment of the CJEU, following a request for a preliminary ruling from the Cour d’Appel de Paris in Case C449/21 Towercast SASU v Autorité de la Concurrence, the court considered an issue of the application of EU competition law and merger control under the Treaty on the Functioning of the European Union.

A digital terrestrial television (DTT) platform had been in use in France since 2005. The main DTT network operator is TDF, which had enjoyed a state monopoly on the French terrestrial television broadcasting market. The liberalisation of the French audiovisual area enabled undertakings such as Towercast (a competitor of TDF) to enter the broadcasting market.

In 2016, TDF acquired sole control of Itas (also a competitor of TDF), which was not notifiable to the European Commission under the EU Merger Regulation (EUMR) or to the French competition authority under French merger-control rules. As a result, the acquisition was not reviewed under merger-control rules (and there was no article 22 EUMR reference to the commission for any ‘sub-threshold’ EUMR review).

Towercast argued that the TDF acquisition of Itas breached the prohibition of an abuse of a dominant position under article 102 TFEU (for example, by TDF hindering competition on the upstream and downstream wholesale markets for DTT broadcasting services in France).

The French authority brought an appeal before the Cour d’Appel de Paris.

That court asked the CJEU if a national competition authority can carry out, in view of the prohibition of abuse of a dominant position under article 102 TFEU, an ex post article 102 review of an acquisition by an undertaking in a dominant position, where that deal was under the EUMR and French merger-control notification thresholds, and thus not subject to ex ante merger control.

Notification thresholds

The CJEU found that an acquisition under EUMR notification thresholds may still be subject to control by member state national competition authorities and courts, on the basis of the direct effect of article 102 TFEU.

The CJEU said that, notwithstanding the principle that the EUMR is the only regulation applicable to acquisitions meeting the EUMR thresholds, the procedural law of member states is still applicable to such acquisitions, which are not notifiable to the commission under the EUMR (or which have not been reviewed under national merger-control rules).

The EU legislature did not intend to render the control carried out at national level on an acquisition, in the light of the article 102 TFEU prohibition laid down by primary law, to be devoid of purpose. Consequently, the EUMR does not preclude control of acquisitions that do not meet the EUMR thresholds: while certain acquisitions may escape prior merger control (for example, by the commission under the EUMR or by local merger-control authorities), they may still be subject to a subsequent article 102 TFEU assessment.

When carrying out such a subsequent article 102 TFEU review of an acquisition, the authority in question must verify if a purchaser who is in a dominant position on a given market, and who has acquired control of another undertaking on that market, has by that conduct substantially impeded competition on that market.

Post-completion reviews

While this CJEU judgment is probably to be expected, it means that acquisitions that can’t be notified to the commission under the EUMR and that aren’t assessed by local merger-control authorities (such as the Competition and Consumer Protection Commission), may still be reviewed after they have been completed (for example, because they didn’t require merger-control review) to determine if they are prohibited (or otherwise vulnerable) under article 102.

Such added ‘deal uncertainty’ may not happen very frequently in practice, but it means that any deal completed because it was not notifiable under the EUMR or to the local merger-control authority must also factor in whether their deal involves a dominant player in a market.

In all of this (including the new ‘call-in’ powers for the Competition and Consumer Protection Commission under the Competition (Amendment) Act 2022 and the increasing tech/pharma scrutiny of the commission on the article 22 EUMR power of referral by national competition authorities) is the added uncertainty about any post-completion article 101 TFEU application (that is, whether the completed deal constitutes an anti-competitive agreement).

Alan McCarthy is a partner in A&L Goodbody LLP and a member of the EU and International Affairs Committee.

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Alan McCarthy
Alan McCarthy is a partner in A&L Goodbody LLP and a member of the Law Society’s EU and International Affairs Committee.