Could small companies with Big Data be caught by EU merger control?

On 7 October 2016, the European Commission published proposed changes to the EU merger control rules (see here) for consultation. The consultation builds on the Commission’s previous work aimed at cutting red tape and simplifying the clearance procedure for transactions that are unlikely to give rise to competition concerns, which culminated in the White Paper “Towards More Effective EU merger Control” (published in 2014) and the Simplification Package (adopted in January 2014).

The latest proposals involve:

• New thresholds based on transaction value, most likely affecting data-heavy mergers and mergers involving the acquisition of start-ups with significant commercial potential.
• Further simplification of the simplified procedure, meaning a reduced administrative burden where transactions are unlikely to give rise to competition issues.

Interestingly, the consultation does not mention the White Paper proposal to expand the reach of EU merger control to acquisitions of non-controlling minority interests (see here). It seems that these proposals were unpopular with Competition Commissioner Margrethe Vestager, who, at a key note speech in Brussels in March 2015, concluded that “the balance between the concerns that this issue raise and the procedural burden of the proposal in the White Paper may not be the right one”. It seems these proposals have been dropped, for the time-being at least.

New thresholds based on transaction value?

Under the current rules, whether a transaction will be caught by EU merger control depends solely on the level of turnover generated by the parties. This is in line with most continental European merger control traditions, but contrasts with regimes such as the UK or Spain, which also look at market share. The Commission acknowledges that the turnover-based test may mean that transactions that could give rise to competition issues, particularly those involving Big Data or the acquisition of small pharmaceutical companies with valuable IP, will avoid merger control scrutiny altogether.

As a solution to this enforcement lacuna, the Commission is considering whether to introduce an additional transaction value based test, caveated with a “measureable impact” or “industry-specific” carve out to ensure that the new thresholds are not too widely applicable. To the same end, the German government recently proposed the introduction of a size-of-transaction test which can trigger national merger filing requirements in the future. In response to criticism of an earlier draft proposal, the plans have been reformed to only catch transactions with a volume of at least EUR 400 million, where both purchaser and target have significant activities in the German market.

Further simplification of the simplified procedure

The 2014 Simplification Package widened the qualification criteria for treatment under the “simplified procedure”, which has reduced the administrative burden of EU merger clearance for many businesses (with 69% of cases now qualifying, rather than 59%).

Two years on, the Commission is considering whether the simplified procedure could be simplified further still, and is seeking comments on the following proposals:

• Reducing the amount of information that businesses must provide under the simplified procedure;
• Exempting certain categories of transaction from the notification requirement altogether, such as where the parties have minimal overlapping business activities or market shares, or where the increase in market share falls below a minimum threshold; and
• Introduction of a self-assessment or voluntary notification system for certain categories of transaction, such as extra-EEA joint ventures.

In addition, the Commission seeks views on less dramatic amendments to the regime, such as proposals to streamline the system for the referral of cases between the European Commission and Member state competition authorities, which could reduce the timetable for securing merger control clearance.

The Commission invites comments on the proposals by 13th January 2017, with the results of the consultation expected in the second half of 2017. If you have any questions about the proposals or would like to respond, please contact our experts.