Select Committee on European Scrutiny Third Report


COM(00) 399

Commission Report on the application of the Merger Regulation thresholds.

Legal Base:
Department: Trade and Industry
Basis of consideration: Minister's letter of 19 December 2000
Previous Committee Report: HC 23-xxviii (1999-2000), paragraph 26 (1 November 2000)
To be discussed in Council: No date known
Committee's assessment: Politically important
Committee's decision: Cleared (decision reported on 1 November 2000)


  9.1  On 1 November 2000, we reported on a Commission report on the application of the European Community Merger Regulation (ECMR) thresholds. These thresholds have been in force since 1989 and were last amended in 1998. Their broad aim is to require Commission agreement to mergers which have a significant Community dimension. Such mergers would otherwise be subject to the jurisdiction of the national competition authorities of Member States. There has been a steep increase in the number of cases caught by the thresholds in recent years, rising from 12 in 1991 to 292 in 1999.

  9.2  The Commission's report reviewed experience since the 1998 changes. Whilst it considered that more work is needed before definitive proposals could be brought forward, it also considered that there was a prima facie case for some lowering or other revision of the thresholds to ensure that they covered all mergers with a Community dimension.

  9.3  The Government said that it welcomed the report as a starting point for a broader review of the operation of the ECMR but it was not convinced that the Commission had established the case for lowering the thresholds. We cleared the document but invited the Minister to provide a summary of the Government's consultation so far with business and consumer interests in the UK, and to say what further consultations it may have in mind in the light of the Commission's report.

The Minister's response

  9.4  In his letter of 19 December 2000, the Parliamentary Under-Secretary of State for Competition and Consumer Affairs at the Department of Trade and Industry (Dr Kim Howells) responds to our requests. He says:

    "As noted in the Explanatory Memorandum, the Commission sought information from Member States as they began work on their report on the operation of the ECMR thresholds. As part of their study the Commission also wrote directly to various firms and their representatives (business associations and law firms) including a number from the UK enclosing a questionnaire which was also posted on their website. In order to inform UK Government input to the Commission, DTI officials wrote to a number of key UK stakeholders (see attached list) on 6 December 1999 drawing attention to the Commission's forthcoming report and seeking suggestions of other aspects of the ECMR which might usefully be reviewed. Copies of the letter were placed in the libraries of the House. In the event, responses were received only from the CBI and the Law Society of Scotland.

    The Law Society of Scotland (LSS) forwarded comments from two of its members, Shepherd & Wedderburn WS and Dundas & Wilson CS. Both expressed general satisfaction with the current ECMR thresholds. Shepherd & Wedderburn acknowledged that multiple filing could cause problems and increase costs, but thought that difficulties caused by the high level of the thresholds in Article 1(2) had been corrected by the introduction of Article 1(3). They also supported the retention of turnover-based thresholds (as opposed to a market share approach) though they suggested that a better definition of items to be included in the calculation of a financial institution's turnover would be helpful. Dundas & Wilson made no comments beyond an expression of satisfaction with the current thresholds and the current operation of the Merger Regulation.

    "The CBI stated that the 'one stop shop' framework of the ECMR was strongly favoured by business, due to its speed and certainty and because it enabled the proper assessment of competition issues in transactions of a European or global nature. They stated that they were satisfied with the present thresholds set out in Article 1(2). However, whilst they felt that the introduction of further thresholds under Article 1(3) was a positive step, they suggested a reduction in their value in order to catch a higher number of transactions. Specifically, they suggested a reduction in the threshold in Article 1(3)(c) from 25 million euro to 15 million euro, and lowering that in Article 1(3)(d) from 100 million euro to 50 million euro. They also argued for an increase in the resources of the Merger Task Force together with greater continuity of staffing and for amendments to the requirements in the form CO so as to reduce the burden its completion placed on businesses.

    "Responses regarding the thresholds set out in the ECMR were therefore split, with the LSS members appearing generally satisfied with the current levels and the CBI proposing changes to those in Article 1(3). We considered the CBI's proposals carefully, but decided that further evidence was needed regarding the scale of the problems posed by multiple filing and the merits of various possible amendments to the ECMR before firm conclusions could be drawn. In particular, as noted in our Explanatory Memorandum (paragraph 13), discussion of this issue needs to take into account not only the advantages to business of the ECMR one-stop shop but also the need to ensure that national competition authorities remain responsible for the analysis of cases which, for regulatory reasons, it is more appropriate that they should consider. As was also noted in our Explanatory Memorandum (paragraph 5), the Commission agree that even following their report further work is needed, in particular the gathering of additional evidence regarding the impact of multiple filing, before decisions can be made. The CBI's proposals, which were also submitted to the Commission, will be considered in this context.

    "We have no plans at present to initiate another consultation at this stage as the Commission is, as noted above, still developing its thinking. I understand that the Commission envisages a Green Paper some time next year, which would, of course, provide an opportunity for further consultation".


  9.5  We thank the Minister for his response. We note that comments in the UK were received from the Confederation of British Industries and the Law Society of Scotland only and that the Confederation of British Industries favours some lowering of the thresholds in Article 1(3) of the Regulation. We see that the Government intends further consultations once the Commission's Green Paper is published later this year. We shall report on that document in due course.

List of Consultees

Representatives of lawyers and barristers
1. The General Counsel for the Bar
2. Bar/Law Society Working Group on Competition Law
3. The City of London Law Society
4. Competition Law Association
5. The Law Society
6. Law Society of Northern Ireland
7. International Law Society of Scotland
8. Joint Working Party on Competition Law
9. Solicitors European Group

Representatives of business
1. Association of British Chambers of Commerce
2. Confederation of British Industry
3. International Chamber of Commerce
4. Institute of Directors
5. Federation of Small Businesses
6. European Small Business Alliance
7. British Chamber of Commerce in Brussels

Representatives of Consumers
1. Consumers' Association
2. National Consumer Council
3. Scottish Consumer Council
4. Consumers in European Community Group

Representatives of Trade Unions
1. Trade Union Congress

Economic consulting firms
2. Lexicon

Academics and other individuals
1. Martin Howe
2. John Cook, MacFarlanes
3. Professor John Vickers, All Souls College
4. Valentine Korah
5. Richard Wish, King's College London School of Law
6. Judge Bellamy QC
7. Chris Kerse, Legal Adviser, European Communities Committee

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