Stricter enforcement of European merger control

Concentrations in new markets and digital ecosystems are the key drivers for significant changes in the European Commission’s enforcement practice which are accompanied by a landmark judgment on review criteria and the applicable standard of proof handed down by the European Court of Justice.

Inherent uncertainty in merger control without original jurisdiction

Parties to a concentration, especially in the pharma and digital economy sectors, are facing a risk that the European Commission will review their proposed transaction despite it not being originally subject to merger control either under European law or national law.

The General Court had already confirmed in 2022 that the European Commission may also review transactions which national competition authorities refer to Brussels without themselves having jurisdiction (T-227/21 – Illumina v Commission). The European Commission is already reviewing two other concentrations: Qualcomm/Autotalks and EEX/Nasdaq Power. The European Court of Justice is expected to decide on the lawfulness of this procedure this year. In addition, by its judgment of 16 March 2023 (C‑449/21 – Towercast), the European Court of Justice enabled national competition authorities to review concentrations based on abuse of dominance control pursuant to Article 102 TFEU even where the concentrations do not exceed national thresholds and are not referred to the European Commission.

Less strict requirements of proof can make prohibitions easier

In its landmark decision of 13 July 2023 (C-376/20 P – Commission v CK Telecoms UK Investments), the European Court of Justice settled two fundamental questions:

To prohibit a merger, the European Commission only needs to demonstrate that the existence of a significant impediment to effective competition “is more likely than not”. Contrary to the General Court’s view, it is not necessary for the European Commission to demonstrate with a “strong probability” that such impediment exists.

Several criteria are relevant for the legal appraisal, none of which should be interpreted in an overly formalistic manner: for example, there is no general rule as to how close competitors need to be for a merger to lead to a significant impediment to effective competition; in any event, it is not only mergers between “particularly close” competitors that may lead to such impediment. The European Commission also does not need to demonstrate in this respect that an undertaking competes particularly aggressively – and especially not only based on competition in terms of price – to be classified as an important competitive force (for further details, please see our Noerr News article).

New theory of harm regarding digital ecosystems results in first prohibition

By its decision of 25 September 2023, the European Commission prohibited Booking’s acquisition of eTraveli (M.10615 – Booking/eTraveli) based on a new theory of harm for digital ecosystems, irrespective of its own guidelines. Booking would have expanded its ecosystem for travel services by taking over the online flight booking portal as an important customer acquisition channel. Without examining potential foreclosure effects as is the traditional procedure, the European Commission established that the dominant position of Booking on the market for hotel online travel agencies in the EEA would be strengthened. The European Commission considers the new approach for digital ecosystems to be necessary and possible within the existing “flexible” framework of competition law.

 

This article is part of the Competition Outlook 2024. You can find all Competition Outlook articles here.