Illumina’s acquisition of Grail was the first concentration that the Commission accepted to review under its extended jurisdiction under its new policy for the use of the referral mechanism under Article 22 of the EU Merger Regulation (EUMR).
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The Commission’s new policy for the referral mechanism
On 31 March 2021, the Commission published its new guidance paper on the application of this mechanism, in which it actively encourages Member States to make Article 22 referral requests where a concentration is likely to affect EU competition, even if the turnover thresholds are not met. Moreover, the Commission opened the door to ex post review by considering “the fact that a transaction has already been closed does not preclude a Member State from requesting a referral”. This could serve to fill the enforcement gap identified by the Commission Evaluation to certain procedural and jurisdictional aspects of EU merger control that was published around the same time.
This approach is a clear deviation from the Commission’s preceding interpretation of the Article 22 referral mechanism. Although the Commission acknowledges that its new policy extends its own jurisdiction, it also considers that Article 22 always had the potential for such extension. According to the Commission, the wording of Article 22 "clearly implies (or does not explicitly exclude)" a mechanism whereby the Commission has jurisdiction following a referral by a National Competition Authority (NCA) where a national merger control system already exists, but the concentration does not meet the thresholds.
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The appeal
Both Illumina and Grail argued that the referral violated EU law and fell outside the scope of Article 22. They therefore sought the annulment of the relevant referral decisions under Article 263 TFEU. In its landmark decision of 13 July 2022, the General Court (GC) confirmed, against all odds, the Commission’s interpretation of Article 22. Based on a literal, historical, contextual and teleological interpretation, the GC upheld the Commission’s extended jurisdiction. Illumina and Grail – of course – appealed to the CJEU.
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The Advocate General's opinion
On 21 March 2024, Advocate General (AG) Emiliou published his opinion, which leaves no doubt: the GC judgment should be set aside. Early on in his opinion the AG sets the tone: "the Commission’s contention that, where the wording of a provision appears clear enough, the Court should not make use of any other means of interpretation is perplexing." What follows is an analysis that can be seen as an exemplary discourse on the different ways of interpreting the rule of law. Although it is up to the CJEU whether or not to follow the AG's opinion, we would argue that it will be difficult to adequately and convincingly argue otherwise. In this article, we reflect on two particular considerations in the AG’s opinion, namely the preservation of legal certainty and the potential for ex post enforcement as an alternative.
Closing one door…
Firstly, the AG rightly attaches great importance to the preservation of legal certainty. According to the AG, the ‘gap-filling purpose’ advocated by the Commission cannot be assessed in isolation. It should be considered in the light of all the objectives of (EU) merger control. One of these objectives is to establish a "predictable system capable of offering legal certainty" for the companies concerned. The scope of the EUMR should therefore be interpreted without upsetting the carefully devised balance "between effective scrutiny of competition and avoidance of unnecessary costs and delays for both the merging parties and the public administration itself." As the AG rightly points out: "the importance of predictability and legal certainty, in particular for merging parties, cannot be overemphasised.”An interpretation of the EUMR that allows the Commission to assess concentrations that do not meet any thresholds may be very risky. Undertakings may likely feel obliged to file informal notifications to all NCAs to obtain legal certainty that no referral will be made. Such a practice can hardly be said to preserve the beforementioned balance.
…but leaving all the windows open?
Secondly, after reaffirming the importance of legal certainty, the AG questions the Commission's claim regarding the actual need to fill an enforcement gap. Interestingly, in doing so, the AG at the same time seems to (implicitly) encourage the Commission to be creative outside the merger control framework. The AG sees potential in ex post enforcement under Articles 101 and 102 TFEU, particularly in the wake of the Towercast judgment, which allows NCAs to intervene ex post in mergers on the basis of Article 102 TFEU. The AG is not convinced that such enforcement would be ineffective and time-consuming. This contrasts to a recent statement by DG Competition Director General Olivier Guersent, who described the Towercast judgment as “the mother of all uncertainties, because you have no time limit, you can re-open [the investigation] at any time. And if you conclude that this merger was bad, you can unmerge several years after, which I think is really not good.” -
Consequences of room for creativity – NCAs providing a glimpse of the future?
It may be wishful thinking, but our bets are on the CJEU (at least) limiting the extended scope of the Commission's jurisdiction under Article 22 following the Commission's and GC's interpretation. But at the risk of sounding too negative, we cannot help wondering about the consequences of the CJEU validating the AG's apparent endorsement of creative merger control enforcement. A look at recent decision practice at the national level may already illustrate the wide variety of scenarios undertakings will have to consider.
- The Belgian Competition Authority (BMA) was the first NCA to apply the Towercast judgment and assess a merger ex post under Article 102 TFEU. In March 2023, the BMA opened an ex officio investigation into the takeover of EDPnet's assets by Proximus, as ordered by the Ghent Enterprise Court in the context of a judicial reorganisation procedure. Three months later, the BMA found a prima facie case of abuse of a dominant position and imposed interim measures to ensure the viability and value of EDPnet. In November 2023, Proximus divested EDPnet to Citymesh, a new telecoms entrant, which had appealed against the decision of the Enterprise Court.
- In May 2024, the French Competition Authority (AdlC) published its decision extending the scope of the Towercast judgment to Article 101 TFEU. The decision concerned the exchange of business assets between three rendering companies, which qualified as merger transactions. The AdlC found the necessary basis in the Towercast judgment for the assessment of merger transactions under Article 101 TFEU, provided that they do not exceed any merger control threshold and do not give rise to a referral under Article 22. The AdlC did not find an infringement by effect (which was not possible on the basis of the lack of information in the file), and thus did not provide any guidance for future assessments under Article 101 TFEU. However, we hope that the AdlC's finding that the merger transactions did not constitute an infringement by object will also be the rule for future assessments.
- The Dutch Competition Authority (ACM) takes a more 'structural' approach. It considers an extension of its merger review powers necessary, in particular to capture two type of small acquisitions which according to the ACM may lead to competition concerns: the killer acquisitions and the so-called 'bead stringing' acquisitions, i.e. where a major player acquires smaller competitors one by one (see, for example, a blog by ACM Chairman Martijn Snoep and the recent preliminary application of the ‘bead stringing’ theory of harm in a concentration referred to Phase II). The ACM has put forward several options for extending its jurisdiction to review concentrations, ranging from lowering the turnover thresholds to establishing a so-called 'call-in power', whereby the ACM can 'call-in' a small acquisition within a certain period of time by indicating that it wishes to assess that acquisition under the regular procedure. The ACM is currently discussing potential solutions with the Ministry of Economic Affairs and practitioners. There are rumours that a potential amendment to the competition law is being drawn up which would give the ACM this 'call-in' power.
We cannot wait to see how the CJEU will decide and will certainly be following developments closely.
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How we can help
At NautaDutilh, we understand the importance of navigating the complex landscape of competition law when it comes to joint ventures, mergers, acquisitions and other cooperations. Our team is well versed in EU and national competition law across a wide range of sectors, allowing us to provide comprehensive and practical advice to our clients.