Select Committee on European Union Thirty-Second Report


Who should examine which mergers?

24. In this section, we examine the scope of application of the ECMR. The question of jurisdiction is the major issue that triggered the Commission's current review. It has always been one of the more politically sensitive issues at the heart of the EU Merger regime. Indeed, when the Regulation was initially negotiated, the hardest issue to resolve was how to decide which cases should be dealt with exclusively by the Commission and which cases should be dealt with at Member State level.

25. In attempting to answer the question of which mergers should be assigned to Community control and which should remain within the remit of the national competition authorities (NCAs), the ECMR reflects the principle of subsidiarity i.e., that action should be taken at the most appropriate level in view of the objectives to be obtained and the means available to the Community and to the Member States. One of the aims of the ECMR was to ensure that large mergers having trans-national effects were examined by the most appropriate authority. The principle of the ECMR is that the Commission is generally better placed to deal with a merger that has international impact, while NCAs are better placed for examining mergers having effects on competition that are limited to a national market.[12]

26. Drawing up legal rules (including sanctions for failure to pre-notify) to achieve such a distribution of competencies has been challenging. To determine this, one would ideally examine where the merger would have most significant impact. But such an exercise may be complex and contentious. Consequently, the ECMR adopted a straightforward 'bright line' test comprising a set of thresholds based on the turnover of the companies involved, both at a global and Community level, in the merger (Article 1(2)). Mergers involving companies whose turnovers exceed these thresholds are deemed to have a 'Community dimension', and so are examined and controlled exclusively by the Commission. Thus such mergers no longer have to be cleared by NCAs; the Commission works as a 'one-stop shop'. Vice versa, mergers involving companies whose turnovers fall below the required threshold are left for examination by NCAs.

27. By way of exception, to deal with cases which may give rise to particular competition problems in a Member State, the ECMR enables cases to be referred back from the Commission to the competition authorities of specific Member States at their request (Article 9). That referral may be limited to a particular product market. There is also a procedure for Member States to refer cases falling outside the thresholds of the ECMR to the Commission (Article 22).

28. The Commission's 1996 review of the Regulation concluded that the thresholds set in 1989 were not catching all the cases that potentially had significant cross-border effects. Since it is inefficient and expensive to have parallel treatment of the same case in a number of Member States, the ECMR was amended in an attempt to resolve the so-called 'multiple filings' problem, which has been exacerbated following the growth of national merger regimes. This was, and remains, a particular concern for businesses because of the additional cost burden of having to notify the merger (possibly in different languages) to a number of NCAs who operate with different jurisdictional and procedural rules.[13]

29. Following the 1996 review, the initial thresholds were supplemented in 1997 with a rather more complicated set of thresholds based not just on the parties' operations world-wide and in the EU, but also on the turnover generated in three or more Member States. It was hoped that this would deliver a better ex ante distribution of cases between the Commission and Member States. However, these secondary thresholds (contained in Article 1(3)) have fallen short of achieving their underlying objective of conferring competence on the Commission for cases affecting three or more Member States. There have been a limited and decreasing number of notifications under this Article, whereas there has been an increase in the number of multiple filing notifications in three or more Member States.[14] This problem will inevitably be compounded with the forthcoming enlargement of the EU.[15]

30. The Commission considers that the jurisdictional criteria should be amended to provide a more direct case-related test for establishing the cross-border nature of a merger. It has been suggested that there may also be a need for greater alignment of national merger control rules.

Are the right mergers being judged to have a Community dimension?

31. Witnesses did not think that current thresholds resulted in significant misallocation of cases between the Commission's Merger Task Force and the NCAs. The Joint Working Party of the Bars and Law Societies of the UK (JWP) said that there were "not that many cases" where the Commission might usefully have analysed the substance of the transaction rather than individual Member States (Q 83). The Confederation of British Industry (CBI) considered that the data collected by the Commission in its 2000 report[16] indicated that, despite the introduction of the secondary thresholds in Article 1(3), there had not been a significant increase in the number of notifications made to the Commission under this Article. Furthermore, a large and increasing number of cross-border transactions involving several different Member States had fallen outside the scope of the Regulation (Q 2).[17] The JWP was concerned for the burden and cost that multiple filings placed on industry. The CBI stressed that the need to file in three or more countries was "a huge inefficiency for business" (Q 12), while the Union of Industrial and Employers' Confederation of Europe (UNICE) argued that multiple filings could hinder the competitiveness of European businesses in global markets (p 105).

32. Many witnesses (including the American Chamber of Commerce, UNICE, the CBI, and the United Kingdom Government) saw the 'one-stop-shop' approach adopted in the ECMR as one of the Regulation's "key strengths". The Government therefore appreciated the Commission's concern that an increasing number of merger cases continued to require multiple filings with a number of national authorities. The Government agreed that the Commission would be better placed to deal with some mergers with significant cross-border effects which were falling to the national regimes (p 150; Q 412). For a number of witnesses, the priority was to strengthen the 'one-stop shop' principle and increase consistency and predictability.

33. The key jurisdictional issue, as we see it, is how best to amend the ECMR to minimise the problems associated with multiple filings while ensuring that those mergers that significantly affect competition in a distinct market within a Member State are examined at national level. It is a question of striking the right balance between the need for simplicity, predictability, consistency and rapidity (all of which are particularly important for business) and the need to have a flexible system that will ensure that a merger is examined by the regulatory body that is best placed to ensure the maintenance of effective competition.

34. We agree with those witnesses who suggested that no single amendment would achieve this. The question of how to amend Article 1(3) is not separable from consideration of Article 9 and Article 22. The different elements must work together in a coherent way. We endorse the response of John Vickers, the Director General of the Office of Fair Trading, who emphasised that the difficult but important objective is to design a workable "package" of measures that will meet the aims (QQ 202, 207, 209).

35. We recognise that the speed of the referral procedure is important. It should not, however, be the paramount requirement of the jurisdictional rules in the Merger Regulation. It is more important to ensure that, where possible, mergers are examined by the best-placed competition authority. The public interest is better served by a system whereby mergers are examined by the authority which can most effectively analyse the specifics of the case and, in the interests of competition in the Union and in Member States, impose any necessary sanctions and remedies.

Article 1(2)

36. Among our witnesses, the American Chamber of Commerce (ACC) was alone in advocating an extension of the Commission's jurisdiction through a reduction of the quantitative thresholds contained in Article 1(2)[18] (p 127). Whilst recognising that such an amendment was "not very realistic", it supported the reduction "as a principle" (Q 359). All of our other witnesses were agreed that the thresholds in Article 1(2) should not be amended.[19] Whilst some witnesses would have liked the thresholds to be lowered, they recognised that this was impracticable given the consequent increase of the MTF's resources that would be required. On balance, they supported no change to Article 1(2) (pp 5, 48). Other witnesses, including the Government, the Office of Fair Trading (OFT) and the Competition Commission, simply saw "no need" to change the thresholds contained in Article 1(2).[20]

37. Witnesses pointed out that the thresholds in Article 1(2) had not been increased in line with inflation since they were introduced in 1989; de facto they had been gradually lowered over time (Q 252; p 5). The OFT concluded that the thresholds had "actually fallen […] effectively by 23 per cent." Ms Bloom, Director of Competition Enforcement in the OFT, added that, if you calculated the change "in terms of nominal GDP, it would be something nearer to a 33 per cent decline" (Q 203). The scale of business had also increased as business turnover and market capitalisations of firms had increased (QQ 203-04).

38. The Committee recommends that the thresholds in Article 1(2) should not be amended.

Article 1(3)

39. Having concluded that the secondary thresholds introduced in 1996 are not doing the job they were intended to do, the Commission has looked in detail at the possibility of changing the figures involved in Article 1(3).[21] However, it has concluded that no combination of changes to those thresholds could avoid the problem of multiple filings and deliver the desired outcome of catching all mergers having significant cross-border effects (paragraphs 34-51). Our witnesses agreed.[22]

40. The Commission is now proposing that Article 1 be amended to provide that mergers which do not meet the thresholds in Article 1(2) would be deemed to have a Community dimension when they fall within the jurisdiction of three or more Member States (the '3 plus' rule).[23] Under this proposal, the turnover thresholds in Article 1(3) would be removed. The Commission's proposal takes account of the findings of its research that, in the majority of recent cases where notification was necessary in three or more Member States, some or all of the Member States involved defined the relevant geographic market as wider than national.[24] A '3 plus' rule would be simpler and easier to understand than the complicated set of rules currently in Article 1(3) but it would also remain quite a crude way of establishing jurisdiction. The JWP was not convinced that such a rule "would capture those cross-border cases that would be more appropriately allocated to the Commission" (p 31). It would not necessarily identify mergers which it was important for the Commission to review (Q 85).

41. The Government saw "real advantages" in replacing the complex thresholds laid out in Article 1(3) with a simpler system; they gave "a qualified welcome" to the '3 plus' rule as it would lift more cases of 'multiple filings' out of national jurisdictions. However, there remained "a number of concerns" about the Commission's proposal. Simply because a transaction required notification in a number of Member States did not by itself render it apt for review by the Merger Task Force. It was possible for international transactions to affect purely national markets; in those circumstances, such transactions were often better dealt with by the relevant NCA, which would be closer to the markets involved and closer to the consumers and would often have a better knowledge of how a market worked in a particular country (p 150). Nonetheless, the International Chamber of Commerce (ICC) thought that it was "a reasonable assumption" that a merger that would be subject to three or more national filings had "a dimension and a significance which transcends the national level" (p 188). The Competition Commission and the National Consumer Council (NCC) agreed that, in a merger "where cross-border activity is involved, it should be dealt with by a cross-border authority" (Q 254; p 194).

42. The Committee agrees with the Government that the Commission's proposal to replace the Article 1(3) thresholds with a '3 plus' rule could provide the basis of a solution to the jurisdictional question and the problem of multiple filings (Q 412). We support such a change. However, for the same reasons as given in paragraphs 33 and 34 above, such an amendment would need to be accompanied by changes to Articles 9 and 22.


43. The CBI favoured abolishing the secondary thresholds in Article 1(3) provided they were "replaced with a system whereby companies have the option of notifying under the ECMR if filings could otherwise be made in three or more Member States" (p 2). It argued that, as the merger rules are not harmonised across the EU, "any other approach would increase legal uncertainty" (p 2).[25] Where the new '3 plus' test was satisfied, the CBI wanted companies to have "the option either to notify nationally or to notify Brussels" (Q 6). The ACC "strongly" supported making notification optional as notifying with the Commission could impose "a significantly higher burden" on the parties than national filings (Q 360). The Competition Law Association (CLA) and the ICC also supported optional notification (pp 48; 190). UNICE went further and suggested that parties should have the option to request the Commission to take jurisdiction "as soon as the relevant national jurisdiction criteria of two or more Member States" were met (p 105; Q 297).[26] UNICE said:

"parties should not be prevented from notifying their transaction to several national competition authorities, and not to the Commission, if they wish to do so, for instance because it would be more efficient for reasons related to information or linguistic requirements, or because the authorities concerned have particular knowledge about the markets concerned" (p 106).

44. Any move to a system of optional notification would fundamentally change the ECMR, where the principle is that notification to the Commission is mandatory once the appropriate thresholds have been met. For the European Parliament's Economic and Monetary Affairs Committee, a system where responsibility was "assigned automatically" would not only clarify and simplify the system but also "make for more uniform assessment criteria".[27]

45. The Commission stressed that its proposal had been to retain mandatory notification—one of the basic features of the ECMR at present. Introducing an optional element could lead to multinational companies 'forum shopping', enabling them to operate in countries where they would like to submit to national scrutiny and thus avoid EU scrutiny. The Commission said it "would naturally weigh that into [its] consideration when deciding what proposal to go forward with" (Q 390).

46. The Government saw "merit" in a system of optional notification under a new '3 plus' rule. However, they also recognised that this "could be said to amount to a formalisation of forum shopping […] there would clearly be a risk that parties might use their discretion to select the regulatory regime under which they expect to get the easiest ride" (p 151; Q 413).

47. The CBI dismissed talk of forum shopping by arguing that "all of the Member States' authorities are relatively sophisticated and professional" and so loopholes did not exist (Q 6). The ACC used the same argument (Q 360). The CBI conceded, however, that a standard of regulation did not necessarily exist in all of the applicant countries. Some had "a long way to come in understanding a competition-driven market economy", though they were being "very thorough and very particular about finding out everything about mergers" (Q 12).

48. Whilst recognising the "danger" of forum shopping, the Competition Commission was "supportive" of the principle of companies being allowed to notify to the Commission voluntarily. Dr Derek Morris, the Chairman of the Competition Commission, considered that this "clearly" made sense. He suggested that "an effective solution" to the problem of forum shopping could be found by amending Articles 9 and 22 (QQ 253, 261).

49. The OFT also thought that it was possible to "guard against that risk" (Q 205). Like the CBI, Ms Bloom of the OFT suggested that forum shopping was really only a problem

"if there is a difference in quality between the authorities as to how well they will handle the case. Given the professional approach of all the national competition authorities, and also obviously of Brussels, I think that is not the same worry that it might have been some years back when the other authorities were much newer to handling mergers. They now have a fair amount of experience and we exchange among ourselves learning and staff, so I think it is much less of a concern now." (Q 205)

50. For the OFT, a well-functioning Article 22 could provide a safeguard: "in the event that the parties to a merger were trying to engage in forum shopping to get an easy ride, there would be a natural corrective on the part of the authorities" (Q 205). UNICE also saw Article 22(3) as "a fall-back mechanism" and a "safeguard against forum shopping" (Q 302).

51. Were the '3 plus' rule adopted in Article 1(3), the question arises of how to deal with the case where the notification is voluntary in one or more of the jurisdictions (e.g. the United Kingdom). The NCC called for clarification of this point (p 193). The CBI did not consider that requiring notification in three or more mandatory regimes would solve the multiple filings problem. It cited the potential scenario where "filings might end up being made in two mandatory jurisdictions and two voluntary ones, with the transaction still falling outside the ECMR" (p 5). The CBI held that this "would be a serious lacuna and could adversely affect United Kingdom businesses" for whom the multiple-filings problem would not be completely resolved. It called such a move "an 'own goal' against British business" (Q 14). In contrast, it supported a self-certification procedure whereby companies would be entitled to notify the merger to the Commission if the transaction fell within the jurisdiction of three or more Member States. This position was also supported by the American Chamber of Commerce and the International Chamber of Commerce (pp 126, 188).

52. The Committee does not support the proposal that notification be optional under the revised Article 1(3). Greater certainty and clarity would be achieved by maintaining a mandatory system of notification. In order to assist those companies who wish to notify under the ECMR, however, the Commission might give further consideration to the proposal that parties should be able to request the Commission to take jurisdiction over a case as soon as the relevant national jurisdictional criteria of two or more Member States are met (including cases where filing is optional in one or more Member State). The Commission would have the discretion whether or not to take over the case.


53. The thresholds, as they are set out in Article 1(3) in terms of the turnover of companies at global or Community level, are only an approximate way of deciding which is the best placed authority to deal with the case but they have been shown to be workable in practice.

54. Reducing the number of instances where companies are required to file for clearance with a multiplicity of NCAs is an important objective. Consequently, we support the Commission's proposal to move to a simpler system whereby it would have jurisdiction over all mergers that are subject to three or more national filings, including cases where filing is optional in one or more Member State. Such a change would mean that more mergers having effects on competition in more than one Member State would be dealt with by the Commission. It would give greater certainty for business.

55. The possibility would remain that there would be cases caught by the '3 plus' test that would still significantly affect markets with which national authorities were better placed to deal. In the Committee's view, the adoption of the '3 plus' test should therefore be accompanied by an efficient 'corrective' mechanism which should ensure that mergers that significantly affect competition on a national market can be dealt with by the relevant national authority.

Referrals to Member States—Article 9

56. As mentioned above, because the main test for determining whether a merger has a Community dimension is set out in terms of the turnover of the undertakings concerned at global or Community level, it is a crude way of determining who is the best-placed authority to deal with the case. Article 9 provides a corrective mechanism and allows a Member State to request that the Commission refer back a case that might have a particular competition problem in a distinct market within that Member State and which might not be remedied by the MTF applying the ECMR. In the Green Paper, the Commission suggests that the referral back system laid out in Article 9 should be amended. It suggests that it should be easier for the Commission to pass cases back to the Member States. The proposal to amend and simplify the criteria the Member States must meet to request a referral back (which are contained in Article 9(2)) is aimed at ensuring that mergers are dealt with by the best-placed authority.

57. Clarification of the operation of the referral back mechanism was widely welcomed by witnesses. They believed that the criteria for referring a case back to a Member State needed to be simple and predictable so that its function was, in the Government's words, "as close as possible to automatic" (p 151). The parties to a merger (and the Member States) needed to understand the types of cases that the Commission considered apt for Article 9 referral. Yet the Competition Commission saw reform of Article 9 as "very critical" for establishing the flexibility necessary to make sure that mergers end up being examined by the most appropriate regulatory body (Q 259). A number of witnesses from industry, however, were against any amendment that would increase the number of referrals back to Member States (see below paragraphs 59-67).

58. The Government agreed with the Commission that Article 9 had the potential to provide a corrective mechanism to the proposed amendments to Article 1(3). However, the Government considered that Article 9 would not be able to perform this role "if the Commission's current broad discretion over Article 9 referrals were retained" (p 150). The decision not to refer a case should be possible only "on certain clearly defined grounds" (p 151). The Government argue that "a more predictable system would bring more certainty about the regulatory path a particular deal is likely to take" (p 151). The Union of Industrial and Employers' Confederation of Europe (UNICE) backed this call for more transparency in how Article 9 referrals would work (Q 299).


59. The Green Paper proposes that, when making an Article 9 request, the National Competition Authority (NCA) should no longer be obliged to show that a merger would lead to a threat that a dominant position in a distinct market in the Member State will be created or strengthened. Dominance is too complex and too difficult a concept for Member States to prove at this stage in the merger review process. Instead, it would be sufficient for Member States to provide "a substantiated claim of effect on competition" in such a market. That is, Article 9(2)(a) would be removed; Article 9(2)(b) would be maintained, but the Commission would facilitate its use by establishing simpler geographic criteria.[28]

60. This amendment was supported by the Government, who saw it as limiting the Commission's current broad discretion to refuse an Article 9 request. The Government considered that the Commission's proposal to simplify Article 9 by removing the need to demonstrate dominance, thereby making its operation more predictable, had "potential" (p 151). The Office of Fair Trading (OFT) agreed that this amendment would make the test simpler with the consequence of making the application procedure more predictable (Q 204). These witnesses argued that simplification of the requirements for submission of a referral request was in the interests of procedural efficiency.

61. The Competition Commission considered the new form of words proposed by the Commission to be "the right wording". It saw the amendment as "a sound step" that could deliver "an element of automaticity" (Q 259). The National Consumer Council (NCC) also saw the Commission's proposal for simpler criteria as providing "a less cumbersome and swifter means of ensuring that the best placed authority has jurisdiction over the merger" (p 193).[29]

62. Other witnesses, however, opposed the changes proposed to Article 9 by the Commission. The Competition Law Association (CLA) argued that the effect of theses changes would be "to make referrals easier and more frequent than is the case today" (p 49). The Joint Working Party of the Bars and Law Societies of the UK (JWP) shared the concern that increasing the number of referrals would add to uncertainty (Q 89).

63. The American Chamber of Commerce feared that the Commission's amendment would cause "procedural inefficiency and legal uncertainty to the parties to a concentration having a Community dimension and constitute a clear departure from the one-stop-shop principle" (p 127). UNICE also opposed this amendment, considering that it would increase the number of referrals to Member States (p 106). It proposed that an Article 9 request should be granted only when it has the consent of the parties (Q 299)

64. The Confederation of British Industry (CBI) wanted the requirements for referral to be "predictable and exceptional". It opposed the increased use of Article 9 and considered partial referrals to be "particularly inefficient and contrary to the interests of business" (Q 15).[30] The CBI would "firmly oppose" any measures which would significantly increase the number of referrals back to NCAs (p 2).

65. In contrast, the Competition Commission did not believe that the number of referrals would greatly increase. For one thing, Dr Derek Morris, the Chairman of the Competition Commission, did not think that, if one analysed past cases, amending Article 9 as the Commission was proposing would have led to a vast increase in the number of referrals back to Member States. Moreover, he argued that there was no magic or ideal figure for the number of cases that should be examined by the Commission under the ECMR. He reasoned that cases should go to the MTF only if they were of a cross-border nature and so should be dealt with by a supranational authority:

"the one-stop shop is about applying a Community dimension, if a Community dimension is appropriate. That is what we need to reflect [in the Regulation]. It is not about saying 'let us have everything in Brussels, irrespective of the characteristics of the case'" (Q 258).

66. Commissioner Monti explained that, as far as he was concerned, "the 'one-stop-shop' model did not imply that a case should in all circumstances be dealt with by the Commission".[31] He emphasised that the issue had to be seen "from a qualitative rather than quantitative perspective". He said that, in order for a case to be referred back to Member States, "there must clearly be a national competition problem". He added that he planned that the Commission would retain "some degree of discretion" (Q 393).

67. The Committee believes that speed is important in the referral process. Dominance is too complex and too difficult a concept to expect the Member States to demonstrate at this stage in the merger review process. The Committee therefore considers that the grounds for referral under Article 9 should be simplified. The Committee supports the Commission's proposal to amend Article 9 so that, to be granted a referral back, Member States only have to provide evidence of an "effect on competition" in a distinct national market, that is, they should no longer have to demonstrate that a merger would lead to a threat that a dominant position would be created or strengthened.


68. UNICE proposed that, where a merger was referred back under Article 9, the Member States should deal with the case under the substantive rules of the ECMR and not under the national law of the countries involved.[32] UNICE were "very much against" Member States applying their own national merger control law after an Article 9 referral since it would mean that a case would be subject to different substantive criteria in different countries. As UNICE was against referrals to more than one country in principle, it saw this as a means of ensuring the case was dealt with consistently across the Union (QQ 299, 303-05).

69. The NCC supported the proposal that the NCA should deal with referred cases "in line with ECMR procedures". It considered this would strengthen "the wider need for harmonisation of practices and greater co-operation between NCAs across the EU, to increase certainty and consistency for all interested parties" (p 193). Furthermore, the European Consumers' Organisation (Bureau Européan des Unions de Consommateurs—BEUC) "strongly support" this proposal for harmonisation, based on EU principles.[33] Mr Van Gerven, of the ACC, thought that having the NCAs apply EC law might help though he suggested that the main differences in national merger laws were procedural rather than substantive (Q 363). In its Report on the Green Paper, the European Parliament's Committee on Economic and Monetary Affairs was quite clear that the Member State to which a merger with a Community dimension has been referred "must apply Community law" to that merger.[34]

70. The Government considered that such a move would be "unnecessary" (Q 415). Article 9(8) already prevented Member States from considering anything other than competition issues in their assessment of repatriated cases.[35] The Government considered it difficult to see how this proposal for NCAs to apply the ECMR "could actually be made to work". It would not be possible for national authorities to apply all the rules of the ECMR because their institutional structures were different and they would not be compatible on procedural grounds (this would apply, for instance, to rules of timing). An alternative would be to limit the requirement to the application of the ECMR substantive test. However, this would also have "a downside attached to it" and would not necessarily be in the interests of the parties, as the national authorities would often be applying a test with which they were not very familiar (Q 415).

71. While the Committee does want to "increase certainty and consistency", it does not consider that requiring NCAs to use ECMR procedural or substantive rules for cases referred back would be the most effective or realistic way of achieving this. NCAs should not be required to apply a substantive test other than that in their national legislation because it could lead to greater confusion and delay.


72. Witnesses were keen to limit the number of circumstances in which the Commission could refuse an Article 9 request. The Competition Commission suggested that there should be two criteria: the Commission should have to be able to disprove the argument that there was a strict national market or identify cross-border activities that the NCA had not identified. It considered that, combined with the proposed amendments to the criteria for requesting a referral, these could deliver a near-to-automatic system that would, "in the vast majority of cases, lead to a merger being dealt with at the right level (QQ 258-59). The OFT also said that the Commission should be able to refuse a request for an Article 9 referral only if essentially the Member State had it wrong and the merger was one that had cross-border effects (i.e. if the case was one that really should not have fallen to a Member State because it did not just have solely national effects) (Q 204).

73. The criteria upon which the Commission can refuse to grant a referral back should be strictly limited. They also need to be clear and unambiguous.


74. The Government strongly supported the Commission's suggestion that guidelines be issued on how the new system will operate in practice. This would have the benefit of maximising transparency (p 151). They urged the Commission to outline how it proposed to use its discretion over referrals. The JWP regretted the fact that there was currently very little guidance from the Commission on Article 9 (Q 89). Even witnesses, such as the CLA, who opposed altering Article 9 strongly urged the Commission "to issue clear, unambiguously worded guidelines explaining its policy in this area" (p 49).

75. The Government also argued that, in order to further the predictability of the referral process, reasoned decisions capable of challenge should be published "in all cases" (p 151). The Competition Commission considered transparency to be "critical" to the successful working of Article 9. This would have to include not only published guidelines on the whole mechanism but also "publication of the outcome" (Q 259).

76. Commissioner Monti agreed that publication of the Commission's decisions on referrals under Article 9 and of guidelines defining the Commission's discretion would help to make the Article "more predictable and transparent". Moreover, he appreciated the effect that ensuring all decisions were "fully reasoned" would have on these objectives. He added that "steps have been taken to ensure the publication of all referral decisions taken so far" (Q 391).

77. The Committee considers that the Commission should issue, as soon as possible, guidelines on the implementation of Article 9 and supports the call for greater transparency in decision making under that Article.


78. The Green Paper suggested that the Commission should be able to refer cases to Member States on its own initiative and without a specific request from a Member State. The Green Paper notes that such a decision would nonetheless normally involve prior consultation between the Commission and the relevant Member State. The idea is that this amendment would basically mirror the current option for Member States to refer cases to the Commission under Article 22(3) (see paragraphs 86-95 below).

79. Again witnesses were divided on this issue. On the one hand, the CBI saw "no good reason for such a proposal" (p 6). The American Chamber of Commerce also opposed it (p 127). The JWP felt that such a move would "disproportionately undermine the principle of the 'one-stop shop'," concluding that "Article 9 referrals should be made only pursuant to a request from a Member State" (p 32). UNICE would only support this amendment if the referrals had to have the consent of the parties in order to go ahead (Q 300)

80. On the other hand, the Competition Commission saw such an amendment to Article 9 as "a key element" in ensuring that mergers were examined by the most appropriate regulatory regime. The Government were also "content in principle" with the idea of referrals at the Commission's initiative and saw it as "an important possibility". Mr Burnside, of Linklaters, had "no objection" to this amendment. Mr Kirch, of the ACC, believed that such referrals would happen very infrequently in practice. But the Government pointed out that the Commission was "already increasingly taking the initiative over Article 9 referrals in an informal way".[36]

81. Where the Commission's initial analysis on a case suggests that it would be better dealt with by a national authority, the Commission should be able to take the initiative to refer it back to the relevant NCA. Article 9 should be amended accordingly. Such an amendment would not have any greater implication for the principle of the one-stop shop than a Member State being able to make an Article 9 request.

82. However, the right of referral should not be absolute. Referrals back at the Commission's initiative should be preceded by prior consultation between the Commission and the Member State. Moreover, such referrals back should be subject to the agreement of the Member State: a national authority should not be required to deal with cases which it considers raise trans-national or cross-border issues that the Commission should address.


83. If the '3 plus' rule is adopted in Article 1(3) and this has the effect that substantially more mergers fall to Brussels for initial consideration, it may well be necessary to have a system whereby more of those cases than at present would then come back to the Member States.

84. The Committee is aware of concerns that amending Article 9 to make referrals back easier could lead to delay, increased legal uncertainty and inconsistent application in decision-making. However, as John Vickers, the Director General of the Office of Fair Trading, said, it is "well worth the price in terms of flexibility to ensure that things are, where possible, considered in the most sensible place, to have that element of unpredictability about where that location will be" (Q 210).

85. In order to counter the concern over uncertainty, the Committee supports the principle that all the Member States should employ common criteria and standards. We encourage a process of convergence to this end.

Joint referrals to the Commission—Article 22(3)

86. The Green Paper also aims to facilitate the referral of cases in the opposite direction, that is, from one or more Member States to the Commission. Article 22 allows Member States to request that the Merger Task Force take a case that has no Community dimension within the meaning of Article 1. The Committee asked whether it should it be easier for Member States jointly to refer national cases to the Commission.

87. Article 22 was originally included in the Merger Regulation in 1989 to deal with the absence of effective merger control regimes in a number of Member States. Article 22 enabled a Member State to ask the Commission to assume jurisdiction where they could not examine the merger themselves. However, all the Member States, except Luxembourg, now have merger control laws and so Article 22 now serves a slightly different purpose. Amendments made in 1997 were intended to allow two or more Member States to make joint referrals to the Commission where they felt that the Commission was better placed to act (it is therefore complementary to Article 1(3) and its operation reflects that of Article 9). It has been used in this way in only two cases.[37] However, the drafting was not originally intended for this type of situation and the NCAs have said that understanding how the Article now works is difficult. They say that the Commission's procedure and timetables, both for the parties and for the Member States, are hard to define.

88. The Article's main purpose now is to try and catch cases where, because of the turnover of the parties in particular countries, the case falls to national jurisdiction, yet the merger would affect wider markets.[38] The Competition Commission saw Article 22 as providing a mechanism to try to address that shortfall in regulatory oversight and to enable such cases to be dealt with by the MTF (Q 251). The Competition Commission thought, operating in such a way, Article 22(3) should be "an extremely important mechanism […] an important bulwark" for Member States (Q 261).

89. Nonetheless, the regulators were clear that the Article needed reform. The Government viewed it as "important" that the Commission address the current weaknesses in this Article since difficulties in its drafting had caused "a number of problems" and made it "very difficult to use" (p 152; Q 425). The Government considered that Article 22 could provide a "useful complement" to the new system of establishing jurisdiction that the Commission is proposing in Article 1(3) and saw it as having "an important role to play as part of the corrective mechanism" (p 153; Q 425).

90. The JWP went further and believed that Article 22 was a "more promising mechanism for dealing with the 'problem' of multiple filing than an adjustment to the thresholds in Article 1(3)" (p 32). The JWP considered that "the Member States should determine whether they believe there is a case of such importance that the Commission should look at it" (Q 87). The JWP believed that "the principle" of Member States being able voluntarily to renounce their jurisdiction in favour of the one-stop shop of the Commission was "a good one" and preferable to it happening automatically as the Commission proposed (p 32). The JWP stressed that "Article 22(3) referrals should not be allowed simply on the basis that the parties would obtain the administrative benefit of avoiding multiple filings." It said that "referrals should not be available at the request of the parties to a concentration". Its proposal to amend Article 22(3) and retain a mandatory scheme of notification for the thresholds in Article 1(3) would thus avoid any risk of forum shopping (p 32).

91. Whether or not Article 22(3) is amended in conjunction with amendments to Article 1(3), there are procedural weaknesses that need addressing. For instance, at present, the request to refer a case has to be made within one month of when the merger is "made known to Member State(s)". There is much confusion surrounding the meaning of this provision. Does it mean the notification date? What about when there is no mandatory notification system? What about when a merger is effective in different Member States at different times? The Government said this provision was "unclear" and specifically wanted clarification of its meaning. The OFT confirmed that "it is actually difficult to know when the article is complied with" (Q 212). There was also a question about the timetable for the article. The Commission needed to clarify the deadline by when joint referrals had to be made and the point at which the ECMR timetable began to run following referral (Q 212).

92. For the OFT, too, these problems were "real issues." Clarification "would doubtless make future use of the article much easier" (Q 212). The OFT explained that its request, made with other NCAs, was only successful because of the Association of European Competition Authorities.[39] For the article to operate more efficiently in the future, this body of NCAs might need to be more formalised. The OFT concluded that these procedural difficulties were "serious issues" and the article needed to be "reformed so that it is easier to operate." (Q 212)

93. Because of the current absence of an efficient information exchange network between the Member States' competition authorities and in the absence of greater harmonisation of national rules, BEUC considered that amending Article 22(3), to make it easier for Member States to make joint referrals, could not in itself ensure that all mergers of a Community dimension were examined by the Commission.[40]

94. It should be easier for Member States jointly to refer national cases to the Commission. The Commission should, after consultation, bring forward proposals for a re-drafted Article 22(3) that will address these procedural weaknesses.

95. Greater co-operation between the Member States' competition authorities is to be encouraged. This might be achieved through greater use of the meetings of the European Competition Authorities.


96. The Government considered that it would also "be logical" for the Commission itself to be able to request that an Article 22 referral be made and saw "no reason" why this should not be permitted. The article could then operate as a form of reverse Article 9 (p 152; Q 425). Such a change was supported by both the NCC and the OFT (p 194; Q 213). Dr Morris saw it as vital to combating any forum shopping that could arise if Article 1(3) were to be made optional, as "it may well be the European Commission that is the first to identify that there is a series of cross-border activities such that it should go to the Commission" (Q 263). The Committee agrees that the Commission should be able to request that an Article 22 referral be made.


97. The Competition Commission called on the European Commission to issue clear guidelines on Article 22 (Q 261). We support the view that the Commission should issue guidelines on the implementation of an amended Article 22(3).

12   There are now also a number of large international or global mergers that have substantial effects within the EU. Such mergers may be notified to the Commission at the same time as to other jurisdictions outside the EU. One of the principal goals of the newly established International Competition Network is to move towards convergence in international merger control. We discuss this issue further below (paragraphs 122-29). Back

13   QQ 1, 12, 83, 94, 363; pp 5, 105, 127, 193; cf. BEUC/X/016/2002. Back

14   See paragraph 24 of the Green Paper. Back

15   QQ 3, 85, 88-89; p 193. Back

16   COM(2000)399 final. This report is summarised, updated and expanded upon in the annexes to the Green Paper (pages 59-111). Back

17   The number of referrals under Article 1(3) is low and decreasing. In 2000, only 20 out of 345 notifications to the Commission (5.8 per cent) were made under Article 1(3). In 1999, it was 34 out of 292 notifications (11.6 per cent). In comparison, in 2000, there were 75 multiple notifications to three or more Member States. Furthermore, the number of multiple-filings that are made to three or more Member States is increasing. In 1998, 22 per cent of all multiple filings were made to three or more Member States; in 1999, the figure was 32 per cent; by 2000 it had risen to 35 per cent. Back

18   Under the current Regulation, a merger has a Community dimension where: (a) the combined aggregate world-wide turnover of all the undertakings concerned is more than €5000 million; and (b) the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than €250 million, unless each of the undertakings concerned achieves more than two-thirds of its aggregate Community-wide turnover within one and the same Member State. Back

19   This is also the view of the European Parliament's Committee on Economic and Monetary Affairs (A5-0217/2002). Back

20   QQ 203, 252, 412; pp 31, 150. Back

21   The Green Paper contains a substantial and very detailed annex of the Commission's analysis of the ECMR thresholds (see pages 59-108). Back

22   QQ 252, 412; pp 150, 188; cf. BEUC/X/016/2002. Back

23   The Commission first proposed this amendment in its Green Paper of January 1996, but the proposal did not receive much support at that time. Back

24   See Annex 1 of the Green Paper. Back

25   The CBI, UNICE and the ICC argued for the harmonisation of national merger rules within Europe (QQ 8, 297; p 188). Back

26   The Commission's report to the Council in June 2000 (COM(2000)399 final) suggested further consideration of this possibility, but it has now dropped this proposal. Back

27   A5-0217/2002. Back

28   The Green Paper suggests that for the purposes of a referral back "there would not seem to be any need for even defining the geographic scope of the relevant market/s, provided that the effects do not extend beyond the Member State's borders." Back

29   BEUC, the European Consumers' Organisation, also supports this amendment (BEUC/X/016/2002), as does the European Parliament's Committee on Economic and Monetary Affairs (A5-0217/2002). Back

30   Under Article 9(3)(b), the Commission can refer "the whole or part of the case to the competent authorities of the Member State concerned". Back

31   Speech "Review of the EC Merger Regulation-Roadmap for the reform project", given at the Conference on Reform of European Merger Control, in the British Chamber of Commerce, Brussels, on 4 June 2002. Back

32   Under Article 9(3)(b), the Commission refers cases back to Member States "with a view to the application of that State's national competition law." Back

33   BEUC/X/016/2002. Back

34   A5-0217/2002. Back

35   Article 9(8) stipulates that in applying the provisions of Article 9 "the Member State concerned may take only the measures strictly necessary to safeguard or restore effective competition on the market concerned." Back

36   p 152; QQ 258, 365-66, 424; cf. BEUC/X/016/2002. Back

37   General Electric/Unison in December 2001 and Promotech/Saltzer in January 2002. Back

38   For example, in the BASF/Takeda case neither company had any assets in the United Kingdom; the case impacted on a world-wide market. Back

39   The ECA consists of the competition authorities in the European Economic Area (EEA) (the 15 Member States of the European Community, the European Commission and of the EEA, EFTA States and the EFTA Surveillance Authority). In contrast to the EC network of competition authorities, which will concentrate on the application of EC anti-trust rules, the ECA is intended to discuss issues linked to the application of national competition law. Back

40   BEUC/X/016/2002. Back

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