Competition08/03/04 / cata_european-union-news

As a part of modernisation of the EC competition law system, the Council adopted on 20 January 2004 the long awaited new merger control regulation. The main rationale behind it is to ensure that mergers are examined by the best placed authority, that multiple filings in several EU Member States are avoided and that the timetable for the review is improved. The reform is also a response by the Commission to a series of judgements of the Court of First Instance in 2002 which annulled certain Commission decisions disapproving a merger.

To sum up, the new Merger Regulation, which shall replace the existing Merger Regulation no. 4064/1989, brings about three major changes.

Firstly, the key rule of the so called “one stop shop” continues to be applicable, however, the concept has been expanded so as to avoid that multiple filings must be made in several EU Member States in case the merger does not attain the so called Community dimension. Consequently, the companies will be able to ask, even during the pre-notification period, the benefit of the one stop shop if they have to notify in three or more Member States. Should none of such Member States oppose such a request, the concentration will be considered to be of a community dimension and will be reviewed only by the Commission. This should reduce costs, bureaucracy and legal uncertainty.

Secondly, as regards the substantial test, the Commission, when deciding whether a merger must be challenged or not, shall appraise whether the merger would significantly impede effective competition, in the common market or in a substantial part of it. The concept of significant impediment should be interpreted as including the concept of dominance as applied so far, however, it will be extending also to the anti-competitive effects of a concentration resulting from the non-coordinated behaviour of undertakings which would not have a dominant position on the market concerned.

Finally, certain important changes have been implemented from a procedural point of view. The merger will no longer need to be notified within the one-week deadline. Given that the merger may, as a rule, not be implemented prior to its authorisation by the Commission, it is in the companies´ own commercial interest to obtain regulatory clearance from the Commission as soon as possible. It is also explicitly provided that a prior notification of a concentration, e.g. based on a letter of intent, is possible. Also, the timetable for a merger review by the Commission has been adapted to be more flexible while still predictable. The new timeline should allow enough of time for merging companies to discuss remedies to competition issues raised by a merger as well as to enable the Commission to perform its review up to the necessary standards. The first phase shall, instead of one month, take 25 working days after the notification and may be extended up to a total of 35 working days. Should the Commission find a need to open an in-depth inquiry into a merger, the second phase will take place over no more than 90 working days (as opposed to current four months) with possible extensions upon request of the notifying companies or, subject to their consent, upon request of the Commission.

In addition to the new Merger Regulation, the Commission has also issued Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings and Best practices on the conduct of EC merger control proceedings. These two documents are not binding over companies or Member States and are aimed at providing legal certainty to companies and other interested parties as to how the Commission intends to act in this domain.

The Merger Regulation shall come into force on 1 May 2004.

Judgment of the Court of Justice in Bayer (Joint cases C-2/01 P and C-3/01 P) of 6 January 2004

The Court of Justice rejected an appeal against a decision of the Court of First Instance (“CFI”). In its ruling, the CFI had found that the Commission had incorrectly assessed the facts of the case and made an error in the legal assessment of those facts. The CFI had annulled the decision of the Commission and ordered the Commission to pay the costs of Bayer AG.

The Commission had taken the view that there was an agreement within the meaning of Article 81(1) EC, thus prohibited under Community competition rules, between the pharmaceutical company Bayer and its Spanish and French wholesalers to limit parallel exports to the United Kingdom of a drug against cardio-vascular disease (Adalat/Adalate). The Commission argued that the restrictions imposed by Bayer on its French and Spanish wholesalers in order to fight against the parallel imports from their countries to the United Kingdom were accepted and obeyed by the wholesalers, therefore forming an agreement restricting competition. The restrictions consisted of a reduction of supplies to those wholesalers, irrespective of their increasing demands.

There was however not an export prohibition established on behalf of Bayer. Contrary to the findings of the Commission, the wholesalers did not submit to the restrictions and discovered new ways, including orders by separate agents. The conditions for an agreement were therefore not met, as there was no intention nor any action on the side of wholesalers to come to such an agreement and their formal reduction of ordered drugs was deemed by the Court not to constitute a proof of the Commission’s finding.