On 9 July 2014, the EU Commission (Commission) published a White Paper (White Paper) entitled Towards more effective EU merger control. The White Paper sets out the Commission’s current thinking on the application of merger control rules to the acquisition of non-controlling minority shareholdings. The Commission’s proposals concerning the application of merger controls to the acquisition of non-controlling minority shareholdings are, however, problematic and may lead to a dampening of investments in Europe. Interested parties, which include companies, industry associations and national competition authorities, have until 3 October 2014 to comment on the White Paper.
Under the current Council Regulation (EC) No 139/2004 (the Merger Regulation), the Commission is only able to review transactions that lead to a change of control. The Commission also has the power to review existing minority shareholdings held by the parties to a notifiable transaction, i.e., one resulting in a change of control. Acquisitions of non-controlling minority shareholdings (also referred to as structural links) by themselves, however, can only be carried out retrospectively under Articles 101 or 102 of the Treaty on the Functioning of the European Union (TFEU). In other words, under the Merger Regulation, acquisitions of non-controlling minority shareholdings are not subject to prior review by the Commission unless they result in a change of control, and are only subject to after-the-fact enforcement under Articles 101 and/or 102 TFEU. This leads to what the Commission perceives as an “enforcement gap” at EU level, which results in the Merger Regulation not being applied to non-controlling minority shareholdings that have the potential to harm competition, as exemplified by the recent Ryanair/Aer Lingus case.
In contrast, some EU Member States, such as Germany, and some major non-European jurisdictions (including the United States and Japan) are empowered to review some non-controlling minority shareholdings under their national merger control rules. In these jurisdictions, the Commission would contend that no enforcement gap exists, since non-controlling minority shareholdings can be subjected to prior review.
In view of concerns about the enforcement gap, in 2011, the Commission organised studies on the importance of minority shareholdings in the European Union. Subsequently, in June 2013, the Commission launched a public consultation (the consultation paper) on possible modifications to the Merger Regulation, including the expansion of merger controls to capture certain non-controlling minority shareholdings. The consultation paper also considered different models for reviewing non-controlling minority shareholdings. The responses to the consultation paper generally revealed a lack of consensus about the existence and extent of an enforcement gap. Equally, the responses demonstrated that the need to change the Merger Regulation to address a perceived enforcement gap remained a hotly disputed topic.
The 9 July White Paper contains the Commission’s proposed actions in response to the consultation paper. It covers the issue of minority shareholdings and also looks at other areas where the Commission sees the need for a revision of merger control rules, including mechanisms for referring cases between the Commission and the EU Member States. The White Paper was published together with the Commission [...]