This posting was written by E. Darius Sturmer, Editor of CCH Trade Regulation Reporter.
At a conference on competition policy, law, and economics in Cernobbio, Italy on November 2, European Commission Vice Chair for Competition Policy Joaquin Almunia shared the latest developments in the field of merger control, placing them in the context of the recent evolution of the EC policy.
Much of his speech (“Merger review: Past evolution and future prospects”) contested the perception that the EC is “raising hurdles against the creation of large European companies” and not supporting “European champions.”
In reality, the Commission has cleared more than 4,600 deals and blocked only 22 since the EU’s merger regulation came into force in 1990. “Fewer than five in every thousand cases!” he said. Last year, the enforcement authority received 309 notifications, approved as many as 299 of them in Phase I, and blocked only one transaction, according to Alumnia.
“So let’s recognize the facts: it is simply not true that the Commission is putting the brakes on the legitimate efforts of Europe’s firms to scale up,” said the official.
Europe doesn’t lack corporate giants, he said, noting that the top 100 corporations in the world included 30 from the United States and 27 from the EU.
He further cautioned against shielding Europe’s companies from competition. “Merger control is not the place for protectionist measures,” observed the official. “The discipline imposed by a keen competition environment in the Single Market is a tonic for Europe’s companies. It prepares them to do business on the global markets and to succeed.”
Almunia cited the introduction, in the guidelines of 2004 and 2008, of strict analytical frameworks and a test for competitive harm based on economic effects. After these changes, he said, EC merger review “is now focused more on how a merger can affect the competitive dynamics of markets and less on structural aspects such as concentration levels and market shares.”
He explained that high market shares are not always problematic, while sometimes even moderate shares can impair competition, depending on the actual market conditions in which each individual deal takes place. The authority assesses the likely impact of a merger on price and other parameters—such as quality, choice, and innovation—alongside the precompetitive effects and efficiencies of a proposed deal, he said.
Almunia expressed his intent to continue streamlining the system to focus on “cases that have a real impact on competition and consumers in the internal market and require complex analyses.” He observed that there is room for improvement on one substantive point: evaluating transactions that lead to the acquisition of non-controlling minority stakes. These transactions currently escape EC scrutiny, even though they may cause significant harm to competition.
Regarding particular transactions, Almunia noted that the EC was currently reviewing Hutchison’s takeover of Orange in the Austrian mobile telephony market and the merger between UPS and TNT. “Our preliminary view is that serious competition concerns would arise in both cases, and substantial remedies are needed.” It is also analyzing Raynair’s renewed bid to acquire a controlling stake of its Irish rival, Aer Lingus.