COMPETITION • EUROPEAN LAW • MERGERS
The acquisition of a minority interest only falls within the scope of merger control if it confers on the purchaser sole control of the target, due in particular to a dispersion of capital, or joint control, where the unequal interest of the two shareholders is compensated for by mechanisms such as preferential subscription rights in the event of a capital increase or the appointment of members of the board of directors of the joint undertaking. Where it does not allow the acquisition of control, the acquisition of a minority shareholding is not subject to review by the Commission.
As a result of the public consultations in 2009 and 2013 which led to the conclusion that a recast of Regulation No 139/2004 was not necessary, on 9 July 2014 the European Commission adopted the White Paper “Towards more effective EU merger control” on possible improvements to the EU merger control rules and has launched a public consultation on its proposals for the simplifying of procedure and greater flexibility. In particular, it proposes to change the terms of control of minority shareholdings that do not confer control but have an influence on competition, as is the case in certain EU Member States (Austria, Germany) and outside the EU (Canada, the United States, Japan and the United Kingdom). According to the Commission, the acquisition of a minority stake in the capital of a competitor may produce non-coordinated anticompetitive effects by strengthening the purchaser’s motivation and ability to unilaterally increase its prices or limit its output. This is the case when an undertaking has a financial interest in its competitor’s profits increasing: it may then decide to “internalize” the increase in these profits, caused by a decrease in its own production or an increase in its own prices. Similarly, the acquisition of a minority interest may allow the acquirer to take advantage of its position to limit the competitive strategies available to the target undertaking and thereby weaken its competitive strength. Furthermore, the Commission considers that the holding of minority interests between competitors may produce coordinated anticompetitive effects by affecting the ability and motivation of market players to tacitly or explicitly agree to achieve supra-competitive profits. Finally, non-horizontal acquisitions of minority interests that also confer significant influence could raise competition concerns related to input foreclosure.
As a means of handling such transactions, the Commission has proposed the establishment of a targeted transparency system, which would require the parties to submit an information notice to the Commission on acquisitions of non-controlling minority interests where there is a competitively significant link between the activity of the acquirer and that of its target, either because these undertakings operate on the same markets or in the same sectors, or because they operate on vertically related markets. The competitive link would be considered significant when the minority interest is approximately 20% or between 5% and approximately 20% but with additional factors such as rights which give the acquirer a de facto blocking minority, a seat on the Board of Directors or access to commercially sensitive information of the target. The information notice would allow the Commission to decide whether or not to carry out a more in-depth investigation of the transaction as well as give Member States an opportunity to consider whether to request a referral and allow potential complainants to come forward. However, these proposals were not followed up, as no changes to the Merger Regulation have been made since then.
