Merger referrals under Article 22 of the EU Merger Regulation (EUMR)
EU merger control aims to prevent cross-border M&A deals that hamper competition in the EU internal market. The EC has exclusive jurisdiction to assess concentrations provided the turnover of the parties exceeds the relevant EU turnover thresholds so that the transaction is considered to have an “EU dimension”. Absent an EU dimension, transactions do not benefit from the one-stop shop review before the EC but may still require merger control approval at Member State level provided the relevant national thresholds are met.
Article 22 of the EUMR allows Member States to ask the EC to review M&A deals that do not have an EU dimension if the following requirements are met:
- First, the transaction must constitute a concentration under the EUMR (i.e., a merger or an acquisition of (sole or joint) control over another business). In contrast, the acquisition of a non-controlling minority stake in another business that may trigger merger review at national level (e.g., in Austria and Germany) is not subject to referral and cannot be reviewed by the EC.
- Second, it must affect trade between Member States.
- Third, the transaction must threaten to significantly affect competition within the territory of the Member State or Member States making the request. For this, there must be a prima facie risk that the transaction could significantly impede competition by (i) eliminating an important competitive force (e.g., elimination of a recent or future entrant or a merger between two important innovators); (ii) reducing competitors’ ability and/or incentive to compete, including by making their entry or expansion more difficult or by hampering access to supplies or markets; and/or (iii) leveraging a strong market position from one market to another by means of tying or bundling or other exclusionary practices.
In the past, the EC discouraged Article 22 referrals in transactions that fell outside the referring Member State’s national merger control thresholds on the basis that cross-border effects were unlikely to arise in these circumstances. This afforded businesses significant comfort that their deals would not trigger merger review in the EU, where the EU and national merger control thresholds were not exceeded.
This policy has now changed. The EC will now actively encourage and accept referrals even in cases where the transaction is not notifiable at EU and national level. The EC sees this as a necessary tool to close a (perceived) enforcement gap and to react to “a gradual increase of concentrations involving companies with low turnover, but with high competitive potential in the internal market”.1 The EC’s Guidance Paper of 26 March 2021 describes the types of cases that may be suitable candidates for an Article 22 referral and the criteria the EC may take into account when exercising its discretion to accept such referrals.2