The European Commission has launched a public consultation to evaluate several aspects of EU merger control for possible revision. Stakeholders are invited to provide feedback until 13 January 2017. A link to the questionnaire can be found here.
The current consultation partly builds on previous efforts to improve and simplify the EU merger control regime, including the so-called “Simplification Package”, which has been in force since January 2014.
A novel aspect of this consultation is the Commission’s announcement that it is considering additional jurisdictional thresholds to overcome possible “shortcomings” of the current turnover-based system. Today, the scope of the EU rules is defined by the size of the merging parties in terms of their worldwide and EU-wide sales. Generally, transactions are not subject to EU merger control if the parties have combined worldwide sales of less than EUR 2.5 billion worldwide or if there are no two parties with EU-wide sales of more than EUR 100 million each. (Exceptions exist. For instance, the Commission may obtain jurisdiction over a transaction if it is being referred to it from the EU Member States.) The Commission’s concern is that the current thresholds do not adequately capture all transactions that may have a significant impact on competition in the EU. In particular, the Commission believes that this may be the case in the digital economy and the pharmaceutical industry. Regarding the digital economy, the Commission mentions the 2014 acquisition of WhatsApp by Facebook, which was originally outside the thresholds of EU system but was ultimately referred to the Commission. Regarding the pharmaceutical industry, the Commission sees the 2015 acquisition of Pharmacyclics by AbbVie as a transaction that it should have reviewed but that escaped the system.
The Commission raises the question whether the introduction of a complementary threshold based on the value of the transaction (“deal size threshold”) could improve the current system. With its consultation, the Commission seeks to explore the level at which it should set such a deal size threshold and whether additional criteria are required to ensure that only transactions with a sufficient link to the EU are captured. Among other things, the Commission also presents the idea that the ratio between the value of the transaction and the worldwide turnover of the target should exceed a certain multiple. (Example: transaction value = EUR 1 billion, worldwide turnover of the target = EUR 100 million, ratio/ multiple = 10.) The Commission explains that such a requirement could help to identify targets with high market potential if the valuation of the target exceeds its annual revenues by several multiples.
Unlike the other topics of the consultation, a deal size threshold is viewed by many as controversial and should be addressed with additional care: instead of making the EU merger control regime leaner and more efficient, it would expand its scope to additional transactions, which would otherwise have been reviewed by the national competition authorities. This is true all the more since Germany is about to introduce a new deal size threshold into its national merger control regime.