In-depth merger control continues

This blog addresses the developments in 2020 in the assessment of mergers and acquisitions by competition authorities such as the European Commission (the “Commission”) and the Netherlands Authority for Consumers and Markets (“ACM”). It also looks ahead to what’s in the pipeline in the coming months.

Merger control: the Commission

The concentration notifications that are currently being assessed by the Commission can be found here. With eight phase II investigations pending, the Commission has its work cut out for it these next few months. It is obvious that the Commission will continue its in-depth investigation of concentrations also in 2020, despite the COVID-19 crisis. The following proposed concentrations are in any event already among the high-profile cases of 2020:

  • The proposed acquisition of GrandVision by EssilorLuxottica will create the largest worldwide eyewear producer and retailer. That is reason for the Commission to critically assess the concentration. The phase II investigation has already lasted more than seven months. It now remains to be seen whether the deal will go ahead, since EssilorLuxottica and GrandVision are now seriously divided about the conditions of the deal.
  • The conditional approval of the merger of Bombardier and Alstom. Also in 2020, the Commission appears to be equally critical of mergers of large industrial companies. In 2019, for instance, the proposed merger of Siemens and Alstom (the creation of a “European Champion”) failed to pass the merger test, despite the political support for European Champions; see here and here. Alstom and Bombardier took a different approach, by offering during phase I already to remove the problematic overlap by inter alia divesting production facilities in France and Germany. That approach has proven effective, in light of the press release.
  • The conditional approval of the acquisition of payment service provider Nets by Mastercard. Nets is an up-and-coming European company in the field of FinTech. The Commission approved its acquisition by MasterCard, provided that a licence of Nets for an innovative payment service was sold to a competitor. The Commission therefore does not shy away from strictly assessing alleged “killer acquisitions” and making its approval subject to conditions with a view to innovation. The Commission previously intended to do the same in the pharma sector; see here, for instance.

Mergers and acquisitions in the digital economy are a topical issue at the Commission (and at national competition authorities, including ACM). They often relate to the role of data as a competition parameter. The accumulation of data within one merged entity or the access to essential data for current and prospective competitors after a merger are then assessed. The Commission is under increased pressure (also from Member States) to take the above into account in its merger assessment, particularly in the case of dominant tech companies. The proposed acquisition of Fitbit by Google is currently subject to a phase II investigation of the Commission in which the role of data is being addressed. The Commission fears that, on taking over Fitbit, Google will further strengthen its dominant position on the online advertising market by using Fitbit’s user data. This phase II investigation should be completed by the end of 2020.

Merger control: ACM

Fewer concentrations have been notified in the Netherlands by mid-2020 than was the case by mid‑2019, namely 46 compared to 75. Although that comes as no surprise, in light of the impact of COVID-19, it is remarkable that ACM is increasingly assessing mergers in phase II. This may be due to ACM’s wish to handle cases faster and more efficiently. A longer investigation in phase I would then be counterproductive if it is immediately obvious that an in-depth investigation is required. This may result in ACM deciding sooner that a merger must be assessed in phase II rather than in phase I.

A number of Dutch concentration cases stood out to us in 2020:

  • The acquisition of Sandd by PostNL. After ACM had prohibited the acquisition by Sandd, the State Secretary for Economic Affairs granted PostNL a permit after all, on the grounds of the public interest. Until that time that power had not yet been exercised in the Netherlands. The use of that power has not proven successful: the administrative court annulled the permit on the grounds of negligence in arriving at the decision. The State has appealed the judgment. To be continued!
  • The merger between Corendon and Sunweb. The merger was initially notified to the Commission and was later partly referred back to both ACM and the Belgian competition authority. In phase II, ACM is now investigating whether after the merger there will still be sufficient competition from other package tour operators. It will be interesting to see whether (and how) the impact of the COVID-19 pandemic on the travel sector will play a large role in ACM’s assessment. ACM’s decision is expected by late 2020/early 2021.
  • The acquisition of Dutch educational institution LOI by rival institution NCOI. ACM unconditionally approved the concentration after a phase II investigation. In ACM’s opinion, sufficient competition will remain in the field of part-time education from regular professional and vocational training institutions. Earlier in 2020, ACM had already cleared the acquisition of Hogeschool TIO by NCOI.

It should also be noted that ACM approved concentrations subject to behavioural remedies several times in 2020, for instance concentrations regarding platforms. The concentration between Sanoma and Iddink, for instance, was approved on the condition that competitors continue to have access to the Magister learning management system (LMS). ACM also stipulated behavioural conditions when it allowed public transportation companies NS, GVB, RET and HTM to create a joint mobility platform. One of those conditions is that competing mobility platforms retain access to transport data of the transportation companies in question also after the creation of the joint mobility platform. Unlike structural remedies (such as divestments), behavioural remedies must be monitored continuously. The non-structural nature of behavioural remedies in combination with the necessary monitoring has been reason for ACM in the past not to accept behavioural remedies. It has yet to be seen whether ACM will rely on behavioural remedies also in 2021 to safeguard competition (for instance in the field of platforms).

Merger assessment: gun jumping, procedural developments and thresholds

We previously noted that gun jumping remained on the competition authorities’ radars. That is still the case in 2020, as apparent from the fines imposed past year (see here, here and here). Also in 2021, merging entities and their advisors should therefore bear in mind the standstill obligation in mergers and acquisitions and exchange confidential business data only when strictly necessary.

The Commission is meanwhile evaluating by means of a public consultation whether its Notice on the definition of the relevant market is still fit for purpose. And for good reason, since that current policy rule of the Commission dates from as far back as 1997. The way in which competition authorities are defining markets in both product and geographic dimensions plays an important role in merger control. The outcome of the public consultation will determine not only the Commission’s own merger control; competition authorities elsewhere in Europe (including ACM) follow the Commission’s policy rules in applying national competition law. Market parties have until October 2020 to respond to the public consultation. The Commission is expected to announce the outcome in the course of 2021.

The notification thresholds are also changing in various Member State; see here and here, for instance. The Dutch government meanwhile still appears to be advocating that the transaction value should also be considered in determining whether a merger or acquisition must be notified to ACM, thereby following the example set in Germany. Its objective is also to submit the acquisition of small (but innovative) competitors by established (often pharmaceutical or technological) companies to a competition law assessment. The further details of this policy proposal is awaited with a great deal of interest. Perhaps a new government will lead the way in 2021.

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