EU: Something old, something new, something borrowed – AG Kokott suggests abuse of dominance standards to non-reportable concentrations
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On 13 October 2022, Advocate General (“AG”) Kokott delivered the opinion in Towercast (Case C-445/21). In this non-binding opinion to the Court of Justice, the AG concluded that transactions that are not notifiable under EU or national thresholds may nevertheless be appraised on the basis of the prohibition of abuse of a dominant position following the completion of the transaction. An assessment under Article 102 of the Treaty on the Functioning of the European Union (“TFEU”) is in principle excluded whenever concentrations have already been green-lighted under merger control rules.
The Towercast case concerns an acquisition in the French market for terrestrial television broadcasting. Prior to 2016, three players were active in this space, namely Towercast, Itas and TDF. In June 2016, the undertaking with the largest market share, TDF, acquired its competitor, Itas. This transaction was not subject to any merger review as the concentration failed to meet both the EU and the French merger thresholds. Moreover, no referral request was made by the Commission or any other competition authority. Remaining competitor, Towercast, subsequently lodged a complaint with the French Competition Authority (“FCA”), arguing that the transaction constituted an abuse of dominance under the relevant French and EU competition rules. The FCA rejected the complaint and on appeal, the Paris Court of Appeal referred a preliminary question to the Court of Justice.
In essence, the Paris Court of Appeal enquires whether Article 21(1) of the EU Merger Regulation (“EUMR”) – which establishes that the EUMR alone applies to concentrations as defined under this regulation – precludes the application of the standard of abuse of dominance to non-reportable transactions. In contrast to the FCA, AG Kokott argues that secondary law provisions (such as the EUMR) are not able to limit the applicability of Article 102 of the TFEU to below-threshold concentrations. The AG’s standpoint is based on the direct applicability of Article 102 of the TFEU and the superior position of the latter in the hierarchy of norms under EU law.
This view is noteworthy, as the AG therefore holds that the Court’s Continental Can ruling is still good law following the adoption of the EUMR. This seminal judgment, dating back to the pre-EUMR era, confirmed the application of Article 102 of the TFEU to concentrations constituting an abuse of dominance. The AG further clarifies that once a concentration has received merger clearance, competition authorities should generally refrain from reviewing transactions under Article 102 of the TFEU.
Interestingly, AG Kokott also concludes that Article 102 of the TFEU has a supplementary role to fulfill in addressing the enforcement gap left by “killer acquisitions”. This concept refers to acquisitions of innovative start-ups by powerful undertakings, staying under the radar of merger control as the target does not generate a sufficiently large turnover to meet national or EU thresholds. In this context, the AG notes that in order to ensure effective protection of competition, national authorities should have the possibility to apply the standard of abuse of dominance. This standpoint, if followed by the Court, raises an interesting policy question on the interplay between the application of Article 22 of the EUMR under the Commission’s novel referral policy and the supplementary role of Article 102 of the TFEU in the context of non-reportable transactions.
Pursuant to the Commission’s 2021 guidance on the application of Article 22 of the EUMR, national competition authorities are encouraged to refer certain transactions to the Commission, even where national thresholds are not met. The driver behind this policy shift – the Commission traditionally discouraged referrals under Article 22 of the EUMR – is to avoid killer acquisitions in the digital and pharmaceutical sectors to slip through the cracks of merger review.
The Opinion of AG Kokott is available here.
For more information, please contact Hein Hobbelen or Jonathan Saké.
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In essence, the Paris Court of Appeal enquires whether Article 21(1) of the EU Merger Regulation (“EUMR”) – which establishes that the EUMR alone applies to concentrations as defined under this regulation – precludes the application of the standard of abuse of dominance to non-reportable transactions. In contrast to the FCA, AG Kokott argues that secondary law provisions (such as the EUMR) are not able to limit the applicability of Article 102 of the TFEU to below-threshold concentrations. The AG’s standpoint is based on the direct applicability of Article 102 of the TFEU and the superior position of the latter in the hierarchy of norms under EU law.
This view is noteworthy, as the AG therefore holds that the Court’s Continental Can ruling is still good law following the adoption of the EUMR. This seminal judgment, dating back to the pre-EUMR era, confirmed the application of Article 102 of the TFEU to concentrations constituting an abuse of dominance. The AG further clarifies that once a concentration has received merger clearance, competition authorities should generally refrain from reviewing transactions under Article 102 of the TFEU.
Interestingly, AG Kokott also concludes that Article 102 of the TFEU has a supplementary role to fulfill in addressing the enforcement gap left by “killer acquisitions”. This concept refers to acquisitions of innovative start-ups by powerful undertakings, staying under the radar of merger control as the target does not generate a sufficiently large turnover to meet national or EU thresholds. In this context, the AG notes that in order to ensure effective protection of competition, national authorities should have the possibility to apply the standard of abuse of dominance. This standpoint, if followed by the Court, raises an interesting policy question on the interplay between the application of Article 22 of the EUMR under the Commission’s novel referral policy and the supplementary role of Article 102 of the TFEU in the context of non-reportable transactions.
Pursuant to the Commission’s 2021 guidance on the application of Article 22 of the EUMR, national competition authorities are encouraged to refer certain transactions to the Commission, even where national thresholds are not met. The driver behind this policy shift – the Commission traditionally discouraged referrals under Article 22 of the EUMR – is to avoid killer acquisitions in the digital and pharmaceutical sectors to slip through the cracks of merger review.
The Opinion of AG Kokott is available here.
For more information, please contact Hein Hobbelen or Jonathan Saké.
VISIT OUR COMPETITION & EU HOMEPAGE
