MERGER REGULATION
(21558)
10935/00
COM(00) 399
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Commission Report on the application of the Merger Regulation
thresholds.
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| Legal base:
| — |
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| Document originated:
| 28 June 2000 |
| Forwarded to the Council:
| 18 August 2000 |
| Deposited in Parliament:
| 12 September 2000 |
| Department: |
Trade and Industry |
| Basis of consideration:
| EM of 4 October 2000 |
| Previous Committee Report:
| None |
| To be discussed in Council:
| No date known |
| Committee's assessment:
| Politically important |
| Committee's decision:
| Cleared, but further information requested
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Background
26.1 The EC Merger Regulation (ECMR — Council
Regulation 4064/89/EEC as amended) provides that 'concentrations'
(mergers and joint ventures) with a 'Community dimension' are
subject to the jurisdiction of the Commission rather than that
of Member States' national competition authorities. For a concentration
to have a 'Community dimension' for the purposes of the ECMR,
it must meet the thresholds relating to the merging companies'
turnover laid down in Article 1 of the Regulation.
26.2 When the Regulation was revised in 1998,
the original, relatively high thresholds set out in Article 1(2)
of the Regulation were supplemented by a second set (Article 1(3))
with the aim of ensuring that a number of mergers which had genuine
cross-border effects but did not meet the Article 1(2) test would
fall to the jurisdiction of the Commission rather than require
separate notification in a number of Member States.
26.3 The number of mergers subject to the ECMR
has risen considerably over the years, and dramatically in the
last few years (1990 — 12, 1993 — 58, 1996 —
131, 1999 — 292). Some of this increase reflects the falling
real value of the monetary thresholds and the 1998 amendments
but the vast bulk appears to be due to the strong increase in
merger activity in the EU, resulting from the single market and
other factors.
The document
26.4 This report meets the requirement on the
Commission to report on the operation of the threshold before
July 2000.
26.5 In his Explanatory Memorandum of 4 October
2000, the Minister for Competition and Consumer Affairs, Department
of Trade and Industry (Dr Howells) summarises the document as
follows:
"The Commission's preliminary
conclusions from this analysis are that those cases currently
falling to the ECMR under Articles 1(2) and 1(3) certainly do
have a 'Community dimension' and that there may be a case for
another extension of Commission jurisdiction via a further lowering
of the thresholds. They assess that an 'important number' of cases
that have a 'significant cross-border effect' seem to be failing
to fall to the ECMR and argue that there is support in the business
community for a lowering of the thresholds due to the advantages
of the 'one-stop shop' provided by the ECMR process. They suggest
that the most effective ways of extending Commission jurisdiction
might be to amend either the 'two-thirds rule' (which prevents
a merger from falling to the ECMR even if it meets the basic criteria
of its turnover in one and the same Member State) or the 'three-country
rule' (the requirement in Article 1(3) for minimum levels of turnover
to be generated in at least three Member States).
"However, the Commission takes care to make
clear on a number of occasions that more work is needed before
any firm conclusions on possible amendment to the ECMR can be
drawn. In particular, they mention that additional collection
and analysis of data on cases that have recently been the subject
of multiple filings is required. They also point out that any
extension to the Commission's jurisdiction would have a significant
impact on the already stretched resources of the Merger Task Force.
"Finally, the report's conclusion makes clear
that further analysis of the question of the best means of establishing
Community jurisdiction in merger cases will lead the Commission
to undertake a more thorough review of the ECMR, addressing not
only the question of the Article 1 thresholds but also other substantive
and procedural issues."
The Government's view
26.6 The Minister says:
"The Government welcomes
the report and the Commission's intention to use it as the starting
point for a broader review of the operation of the ECMR. The Government
considers that such a review will be particularly useful in the
light of the ongoing boom in international mergers.
"The Government has not, however, been persuaded
by the analysis in the report to reach the same preliminary conclusion
as the Commission, namely that there is a prima facie case
for lowering the ECMR thresholds. The Government considers that
a careful balance must be struck between the advantages the ECMR
one-stop shop provides for business and the need to ensure that
national competition authorities remain responsible for the analysis
of cases which it is more appropriate that they should consider.
The Government does not think that the fact that some merger cases
are continuing to require filing with more than one national competition
authority necessarily means that this balance is not being achieved
by the current thresholds. The Government considers in particular
that it is often more appropriate that cases which require notification
to just two national authorities should be considered by those
authorities, who may have a better understanding of the national
markets involved and can liaise with one another relatively easily
(hence the requirement for minimum levels of turnover to be generated
in at least three countries in Article 1(3) of the Regulation).
The Government views the 'two-thirds' rule as a useful means of
deciding whether mergers which would otherwise fall to the ECMR
are actually more 'national' in character. The Government also
notes that the value of the existing thresholds has actually fallen
by around 50% in real terms since 1989.
"However, the Government agrees with the Commission
that more data collection and analysis is needed before final
conclusions can be drawn. The Government agrees that more statistical
information is required, in particular as regards the handling
of cases which have recently been the subject of filings in more
than one Member State. It is important that this should be accompanied
by further analysis of the practical impact of such multiple filings
and the costs they impose on the businesses involved.
"The Government considers that any review of
the ECMR could usefully also look at a number of other issues,
in particular Articles 9 and 22 of the Regulation which are concerned
with the referral of cases from the Commission to Member States'
competition authorities and vice versa. The Government believes
it would be helpful to examine the possibilities for increasing
the flexibility and workability of these provisions. The Government
would also support consideration during any review of the rôle
of the Advisory Committee of Member States and its possible expansion
to provide greater opportunities for peer review of merger cases
and discussion of horizontal developments in competition analysis.
"The Commission's plans for taking forward their
review are not yet clear. We would not expect any proposals for
legislation to emerge before the second half of 2001 at the very
earliest."
Conclusion
26.7 Merger regulation is a complex and increasingly
important subject. The Commission's report is a helpful beginning
to a review of the present arrangements. We note that the Government
is not disposed to accept that there is a prima facie case
for lowering the ECMR thresholds. However it does seem to be a
strong conclusion emerging from the Commission's review that,
despite the large rise in the number of cases referred to it,
there are significant numbers of mergers with a Community dimension
which are not "caught" by the present rules. We note
that the Government consulted a number of key stakeholders (business,
competition lawyers, consumers' organisations) in the preparation
of its responses to the Commission during its review. We ask the
Minister to let us have a summary of their responses, in particular
as regards their views on possible changes to the present thresholds.
We also ask him to tell us whether further consultations are planned
at this stage, on the basis of the Commission's report, or whether
the Government now intends to wait until there are proposals for
legislation. Meanwhile we clear this document.
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