As we pointed out previously in our blog entry of 30 October 2013 with regard to Eurotunnel’s buyout of SeaFrance, EU cross-border merger control can sometimes lead to ludicrous situations such as the authorization of a merger in one Member State and refusal in another, thereby placing the undertaking concerned in an untenable position. Following a conflict in the decisions of the French Competition Authority, which had authorized the purchase of assets subject to commitments, and of the UK Competition Commission which had prohibited the transfer, the French Minister for the Economy and the President of the Competition Authority commissioned Fabien Zivy to produce a report on the current handling of “multi-jurisdictional” merger operations within the EU and to analyze all potential areas for improvement, and more generally to make recommendations for the rationalization of European merger control.

The Zivy Report firstly highlights the undeniable progress made due to the creation, 25 years ago, of the European “one-stop shop” system for the control of large cross-border mergers, but also recognizes its shortcomings in light of the duration – considered to be getting longer by businesses and their counsel – of the informal « pre-notification » phase, of  the volume of information demanded by the investigation departments responsible for reviewing operations, the relative complexity of referral  mechanisms, and the fact that efficiency gains are not sufficiently taken into account in the competitive assessment, which can sometimes be perplexing for undertakings. The report also focuses on the duplication of merger control at the national level – the national competition authorities in the EU having increased from 3 in 1989 to 30 currently for an overall total of around 125 – which although clearly paving the way to a European standard, is also the cause of unavoidable legal differences and practices despite coordination between the various competition authorities. As we have seen, the main drawback of the multi–jurisdictional system is the risk of conflicting decisions; this has occurred on three occasions in recent years (Pan Fish/Marine Harvest in 2007, Akzo Nobel/Metlac in 2012 and SeaFrance/Eurotunnel in 2013, which revealed difference in interpretation between national authorities even though they had cooperated and applied similar substantive rules to the same transnational concentration). Ultimately, the report criticizes the burden and costs inherent in multiple notifications for this type of operation, which are highly contestable in terms of economic logic.

A certain number of recommendations have been made for a “simpler, more consistent and more strategic regulatory framework”. Starting from the premise that the referral mechanisms provided for in Regulation No 139/2004 are inadequate to avoid the risk of conflicting decisions, the report suggests that undertakings should be able to request a referral to the Commission of cross-border merger files prior to notification where the merger is notifiable to more than one national authority, but not three – which is currently the case pursuant to Article 4(5). The report also recommends asking national authorities to apply EU merger control law to all mergers which are notifiable in two or more Member States in order to avoid differences in interpretation and application of national laws even when they are fairly similar in content. Further, it favors harmonizing the types of thresholds above which mergers are reviewable in the various Member States (but not their level), by retaining only thresholds expressed in terms of turnover and introducing a model notification form listing standard information to be provided by companies when they notify a cross-border operation. Finally, given that the interaction of national competition authorities only exists within the framework of informal initiatives, the report advocates extending to merger control with certain adjustments, the European Competition Network (ECN, which was set up for the purposes of antitrust enforcement.

The Zivy report’s contribution to the debate is to be commended for pointing out the inherent weaknesses in the multi-jurisdictional control of cross-border mergers, which can lead to conflicting and irreconcilable results, i.e. authorization in one Member State and refusal in another of the same operation – thus creating a high level of legal uncertainty for the parties to such operations. Innovative and effective solutions are offered to prevent and limit inconsistent decisions. In addition, it has the merit of addressing the problem of the divergent nature of national merger control systems, which currently burden companies engaged in multinational merger deals with excessive administrative costs.