In June 2013, the European Commission launched a consultation on its proposed reform of the EU Merger Regulation (EUMR), which included a proposal to extend the scope of the EUMR to cover acquisitions of non-controlling shareholdings between undertakings. The consultation closed in September 2013. This article provides an overview of the Commission’s proposal and the issues raised by the consultation, and sets out next steps in the legislative process.
The Commission’s Proposal
The EUMR entitles the Commission to review, prior to completion, transactions that confer control by one undertaking over another, provided that the parties to the transaction meet certain turnover thresholds. As part of a wider revision of the EUMR, the Commission proposes extending its jurisdiction to cover acquisitions of shareholdings that fall short of conferring “control” over the target, but which give the minority shareholder the ability to exercise sufficient influence over the target to reduce the intensity with which it competes, for example, by influencing pricing decisions.
In its proposal, the Commission refers to such transactions as the acquisition of “structural links,” reasoning that some problematic structural links may not be detected and sanctioned under Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU)—which prohibit, respectively, anticompetitive agreements between undertakings and the abuse of a dominant position. In its discussion of the effects of such structural links, the Commission refers at length to Ryanair/Aer Lingus, where the Commission’s repeated prohibitions against Ryanair’s acquisition of full control of Aer Lingus did not prevent Ryanair from holding a 29.8 percent “non-controlling” stake in Aer Lingus, Ryanair’s only competitor on certain routes. The rights attached to Ryanair’s stake, although falling short of conferring “control,” allowed Ryanair to block certain strategic decisions in the shareholders meeting of Aer Lingus, which allegedly weakened Aer Lingus’s ability to compete with Ryanair. Read More