Annexes to COM(2000)399 - Application of the Merger Regulation thresholds - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2000)399 - Application of the Merger Regulation thresholds. |
|---|---|
| document | COM(2000)399  |
| date | June 28, 2000 |
Referral provisions
68. As has already been indicated above, a number of respondents are sceptical to an increased use of Article 9 (referral from the Commission to a Member State). These respondents are of the opinion that referrals may create additional costs and increase the legal uncertainty. Reasons for additional costs may be that it is necessary to consult with legal experts in the Member State in question, translations and possibly longer waiting periods. The increased uncertainty has been indicated as being caused by the fact that merger control in a number of Member States, in addition to competition criteria, rely on various expressions of "public interest". Some respondents have also mentioned the fact that several national merger control systems, at various stages, call for the possible intervention on a political level.
69. As regards Article 22 (referral from one or more Member States to the Commission), some respondents have stated that measures should be adopted to allow effective use of this provision in multiple filing cases. Although the 1998 amendments to the Merger Regulation introduced such a possibility, there have still not been any joint referrals by two or more Member States to the Commission under Article 22(3). The information available at this stage does not allow any conclusions as to the reasons why joint referrals have not been made in the cases where a transaction has undergone multiple national notifications.
IV. Preliminary analysis and impact on resources
70. As described above, the Commission's experience shows that concentrations, which meet the turnover thresholds in Article 1(2) and/or Article 1(3), generally have a significant cross-border impact. This finding is confirmed by the views expressed by the European business community (which, in addition, would largely favour an increase in the number of cases handled by the Commission). In contrast, a number of Member States have expressed some doubts as to the need to change the current jurisdictional division between the Commission and the Member States. Nevertheless, most Member States agree that there is a need for a more in-depth analysis of these issues, and such an analysis should be based not only on a statistical approach, but also on an assessment of the effects of multiple filings [14]. The Member States have also expressed their continued willingness to provide the Commission with further empirical data.
[14] Member States have also raised a number of issues that they consider relevant for a more in-depth review. These are set out in the annex to this Report.
71. There are, however, in the Commission's view several indications that the current thresholds have as an effect that an important number of cases that have a significant cross-border impact fall outside the Community rules. The figures received from the NCA's strongly suggest that a lowering of the overall world-wide turnover requirement is not the key to this problem. In fact, already at the current levels, 25% of all notifications to the NCA's met the EUR 5 billion threshold in Article 1(2) [15]. All these cases either failed to meet to EUR 250 million threshold or were caught by the 2/3 rule. At the same time 36% of the notifications to the NCA's exceeded the EUR 2.5 billion threshold in Article 1(3). Here, the available information suggests that about 10% (or approximately 400 cases) of these cases also exceeded the EUR 100 million threshold in 1(3) (d). Consequently, these cases failed either one of the three Member State requirements or the 2/3 rule. The available statistics are not sufficiently detailed to allow a more detailed conclusion as to the most prevalent "stumbling block".
[15] The percentage figures indicated here are based on the turnover figures that the NCA's have provided to the Commission, i.e. in relation to multiple filing cases. Further data collection would be needed for an assessment of the profile of the remaining cases dealt with by the NCA's.
72. Despite the above reservations, the available information indicates that the two main reasons why these cases fail to meet the existing thresholds are, first, the requirement in Article 1(3) of a minimum amounts of turnover in three Member States, and, second, the 2/3-rule. (A third reason could be that, inter alia, certain "new technology" industries generally do not generate turnover at the levels required by the Merger Regulation.)
73. The available data allows some cautious quantification of the effects of the current criteria of Article 1(3). What appears to be clear from the statistics provided by the NCA's is that the level of turnover required is less important in excluding Community jurisdiction that the number of Member States, where such turnover in required. This means that even if the level of required turnover would have been lower, it is still likely that "only" the 70 cases that where notified to three or more Member States would have been candidates for Article 1(3). The fact that this figure of 70 cases is significantly higher than that notified according to Article 1(3) (45 cases), provides a strong indication that the current criteria should be reviewed. It should also be noted that the available information does not allow conclusions as to by how much the Article 1(3) thresholds would need to be reduced to bring the 70 cases within the scope of the Merger Regulation.
74. On the other hand, a reduction of the number of "affected" Member States, from three to two, would have a higher potential to make some or all of the 364 cases that were notified to more than one NCA eligible for treatment under the Community rules.
75. As indicated in the introduction, the Merger Regulation was originally intended to provide a level regulatory playing field for all mergers that could be presumed to have significant cross-border effects. The available information provides strong indications that the current thresholds of Article 1 are less than optimal for this purpose and do not, for many transactions with significant cross-border effects, provide a one-stop shop merger control. In fact, certain transactions have even after the introduction of Article 1(3) had to be notified to seven or more Member States (as well as to several NCA's in applicant countries) [16].
[16] For example, CSM/Leaf, notified in nine Member States (B, D, DK, Ir, I, NL, S, SF & UK), United Technologies Corp/Electrolux Commercial Refrigeration, notified in eight Member States (A, D, DK, H, NL, I, S & SF), as well as in Croatia, Estonia, Poland and Romania.
76. As far as the impact of the 2/3-rule is concerned, it is the Commission's experience that certain transactions with clear cross-border effects are excluded from the scope of the Merger Regulation by this criterion. It may also be noted that a significant proportion (35%) of the European business community representatives has indicated that this rule does not distinguish "national transactions" in a satisfactory manner. Still, it has to be concluded that the available information is insufficient to allow any firm conclusions.
77. Consequently, further data collection and analysis would be required prior to making any concrete conclusion or proposing specific amendments. Nevertheless, even the available figures indicate that the introduction of a consistent approach, where all transactions with a significant cross-border effect were to be treated under the Community rules would have a significant impact on the Commission's resources [17].
[17] In principle, an alternative possibility would be to further harmonise the national rules, possibly in combination with a more flexible referral system. However, on the basis of the comments received so far from the business community, this does not appear to be favoured by them, as any deviation from the one-stop shop principle is perceived to decrease predictability and increasing the regulatory costs. However, the justification for such claims should be further analysed in the course of the wider review.
78. The above-mentioned impact on resources can be demonstrated by reference to the number of cross-border transactions handled by the NCA's in the reporting period. As indicated before, this was at least 364 cases. Compared to the total number of cases notified to the Commission during the same period (494 cases), this clearly is a significant number of cases. There are also reasons to assume that the actual number of cases notified to the NCA's with significant cross-border effects is even higher. This is due, partly, to the fact that the national systems for merger control are not yet harmonised, for example, some Member States have no merger control, and others are based on voluntary notification [18]. This most likely has the effect that a certain number of cases with significant cross-border impact do not enter the statistics of cases notified to more than one NCA. In addition, if cross-border impact were to be measured on the merits, e.g. by whether the relevant markets are wider than national (or whether more than one national market is affected), it is likely that an additional number of cases would fall to be assessed under the Community rules. Moreover, the proportion of such cases will increase with the completion of the internal market. [19]
[18] Of the Member States with voluntary notifications systems, Spain introduced a mandatory regime in 1999, and proposals for such a change is pending in France and in Denmark. Also the UK is considering certain changes to its merger control rules. The introduction of additional national control is widely expected to further increase the number of multiple notifications.
[19] An additional increase in the number of notifications under the Merger Regulation will result if the proposal in the white paper on Modernisation - to treat additional joint ventures under the Merger Regulation - is adopted.
79. These potential effects on the Commission's resources are widely recognised by the business community. Many respondents have observed that there has been a large increase in the number of transactions being notified under the Merger Regulation over the last years. These respondents generally expect this trend to further accentuate in the years to come. In addition, as has been explained above, the respondents are generally in favour of substantially lowering the thresholds in Article 1. Unless the necessary resources for handling a significantly increased number of merger cases can be found by other means, it has been suggested that the Commission could introduce a filing fee for merger notifications [20].
[20] Filing fees are currently applied in some jurisdictions, including the US, the UK, Germany, Austria and Spain. At the European level, a figure of EUR 30.000 has been mentioned as not being unreasonable. On the basis of, say, 400 notifications annually, such a system would generate EUR 12 million, which would allow a non-insignificant addition of human resources.
V. Conclusion
80. In conclusion, at this stage it appears that the criteria in Article 1(3) and perhaps even those in Article 1(2) have as a result that an important number of transactions with significant cross-border effects, and therefore a Community interest, remain outside the Community rules on merger control. There are also indications from the European business community that this is considered as problematic, and that it acts as a constraint on the investment decisions of European firms.
81. On that basis the Commission believes that a more in-depth analysis of the appropriate mechanism for establishing Community jurisdiction in merger cases is necessary. At this stage it would also appear that any change to the Merger Regulation that would remove this unbalance is likely to require:
* To significantly change the existing system of case allocation (work distribution) between the Commission and the NCA's.
* The attribution of significant additional Commission resources dedicated to treating all mergers with significant European cross-border effects.
* A more thorough review, not only of the existing turnover thresholds, but also of other substantive and procedural rules relating to the control of concentrations.
82. The Commission therefore invites the Council to take note of the information set out in this Report and to endorse the further investigation, in conjunction with the Member States and other interested parties, into the appropriate mechanism for establishing Community jurisdiction in merger cases as well as other matters related thereto.
83. The Commission will also submit this report for information to the European Parliament and the Economic and Social Committee.
ANNEX TO THE COMMISSION'S REPORT TO THE COUNCIL ON THE APPLICATION OF THE MERGER REGULATION THRESHOLDS
1. The Commission has received comments from Member States as well as from the business community about the desirability to include issues outside the scope of Article 1 in the review of the Merger Regulation. These proposals have been summarised in this annex, which, however, does not constitute an exhaustive list of all proposals received.
2. In addition, it is possible that this list of non-threshold issues may be expanded, in particular since the more in-depth analysis is likely to involve contacts with interested parties who have not yet made their views known. Furthermore, the Commission will necessarily have to pay particular attention to the need to maintain and develop the consistency of the European merger control system as a whole. It cannot be excluded that this will have to involve proposals, including certain "housekeeping amendments", and that this may go beyond the matters mentioned in this Report.
A. "Non-threshold issues" raised by the Member States in relation to the possible review of the functioning of the Merger Regulation
3. A large number of Member States have proposed that the review should cover, in addition to the thresholds, the existing rules for referrals (Articles 9 and 22). Member States regard these provisions as important mechanisms for fine-tuning the effects of the turnover-based thresholds in Article 1. In general terms it has been proposed that the aim of the review should be to improve the efficiency and transparency of Articles 9 and 22. Moreover, several Member States have referred to the involved companies' need for legal certainty in relation to referrals, as well as to the usefulness of collecting objective information concerning the impact, if any, on the costs that involved firms will have to bear in referral cases.
4. Member States have also indicated the need to review the procedural rules relating to their role (through the Advisory Committee on concentrations) in merger cases where commitments are offered to remedy competition concerns. The Member States are concerned that the current system does not always allow for an effective and transparent discussion, due to the various time constraints in the procedure.
5. Finally, Member State representatives have proposed a number of other issues for the review. These include the possibility of introducing a system of streamlined treatment of "routine cases" into the Merger Regulation. Moreover, it has been suggested that effectiveness of the rules relating to fines and periodic penalty payments in Article 14 and 15 should be reviewed.
6. Several Member States have indicated that the review should consider the impact of enlargement of the European Union.
A. "Non-threshold issues" raised by the business community in relation to the possible review of the functioning of the Merger Regulation
7. The obligation to notify concentrations with a Community dimension is triggered by the conclusion of the agreement, or the announcement of the public bid, or the acquisition of a controlling interest (see Article 4(1)). These concepts have been further explained in the Commission's Notice on the concept of a concentration. Still, respondents have suggested that the concepts of "announcement", "agreement", "acquisition of control" should be further clarified. Some respondents have suggested that notification should be possible even prior to the conclusion of a legally binding agreement.
8. Other respondents have suggested that the rules in Article 5 relating to the definition of the turnover calculation should be revised and simplified, in particular as regards financial institutions.
Procedural and institutional issues
Resources
9. As indicated in the Report, many respondents from the business community would be in favour of substantially lowering the thresholds in Article 1. As a means of financing the increased number of notifications, the business community appears willing to accept the introduction of a filing fee for merger notifications.
10. In this context there is widespread concern that the Commission must allocate appropriate resources in order to cope properly with the expected workload of merger cases, so as to maintain the current level of openness and quality. Practical examples have been given of the negative consequences flowing from an insufficient level of appropriate resources, including the reduced time that Commission officials can devote to any particular case. Another example that has been mentioned relates to the inconvenience and loss of momentum that can be experienced should it for resource problems be necessary to change the members in the case team appointed to investigate a notification [21].
[21] Relatively simple measures of a technical nature, such as the introduction of a voice mail system, where a message could be left in case of absence of case handlers, have also been suggested as necessary priorities.
Prioritisation
11. Furthermore, it has been suggested that measures should be adopted that would better allow the Commission to focus its resources on notified transaction that will have a significant impact on competition. For these cases, some respondents have indicated that the one-month period of the phase 1 investigation can be too short to allow effective treatment of the case and to be transparent. Therefore, the possibility of having a slightly longer first phase investigation, for example six weeks, has been mentioned, in particular when complaints have to be treated. Also for other, simpler cases, it has been suggested that additional measures should be adopted to decrease the burden imposed on notifying parties (e.g. simplification of the Form CO, used for notifying concentrations to the Commission).
Procedural issues
12. Some respondents have proposed that there should be a legal deadline for the Commission's possibility to declare a submitted notification to be incomplete (such a declaration re-starts the one-month period, see Article 4(2) of the Commission's Implementing Regulation, EC No 447/98). Various proposals have been made as to the appropriate length of such a deadline (within 1-3 weeks after notification).
13. Some respondents have suggested that the existing rules on treatment of business secrets and other confidential information should be reviewed. Suggestions have been made in both directions. Some have suggested that a higher degree of protection should be imposed, for example in that the Commission should take further measures to make sure that sensitive information is not divulged in its publications, e.g. in press releases. Other respondents have suggested that the current degree of protection should be lowered, for example by allowing notifying parties access to complaints submitted by third parties at an earlier stage in the procedure than is currently foreseen by Article 18. (The notifying parties have access to the Commission's file after receiving a "Statement of Objections").
Procedure at Member State level
14. Some respondents have suggested that the merger control procedure at the national level should be further harmonised in order to reduce the costs and uncertainties associated with multiple filings. The proposed harmonisation measures include that the national systems should align their notification thresholds up to the level where cases have to be notified to the Commission. Other suggestions are that multiple notifications (to several NCA's) should be allowed to be made in one Community language and that the national statutory waiting periods should be harmonised.
Procedure at the level of the Court
15. The current system for appeal of Commission decisions under the Merger Regulation is regarded by some as unsatisfactory. It has therefore been suggested that a fast-track procedure at the EU courts should be established concerning the appeal of merger decisions.