European Commission to Continue Discourse on the Enforcement Gap Related to Minority Shareholdings

The European Union’s Commissioner for Competition, Margrethe Vestager, who began her five-year mandate on Nov. 1, 2014, has indicated that there is more work to be done on the Commission’s initiative to close an enforcement gap related to minority shareholdings. The proposal—which would reform the EU Merger Regulation in order to give the Commission the power to scrutinise the acquisition of non-controlling minority interests—was one of the issues put out for consultation in the Commission’s White Paper, published July 2014. In a speech delivered Mar. 12, 2015, Vestager stated that the replies to the consultation had indicated that the proposal had not struck the right balance between the issues raised and the proposal’s procedural burden. The modalities of the system would now be discussed again within the Commission as well as Member States and other stakeholders. The White Paper had proposed a targeted transparency system that would enable parties to self-assess whether a transaction creates a competitively significant link and, if so, submit an information notice to the Commission. In the event that an information notice is submitted, the Commission would then decide whether to investigate the transaction.

The EU Merger Regulation currently applies only to transactions that concern the acquisition of control. The Commission has exclusive jurisdiction to review such deals, provided that they meet certain turnover thresholds. The Commission’s gap-closing initiative responds to concerns that, in some instances, the acquisition of minority shareholdings can also impede competition. For example, the UK’s competition authority found that Ryanair’s minority shareholding (29.82%) in Aer Lingus gave it the ability to exercise material influence over the policy of Aer Lingus and ordered a reduction of Ryanair’s holding to 5%. Despite the Commission’s prohibiting—owing to serious competition concerns—takeover bids launched by Ryanair for Aer Lingus, the Commission had no jurisdiction to review Ryanair’s minority stake in Aer Lingus.

Commissioner Vestager’s speech is available here.