EU proposes banning strategic acquisitions with less than 30% ‘effective control’

28 Aug

Legal Report – EC proposes changes to EU jurisdiction on merger approval


corporate acquisition cartoon

Do you consider yourself a big fish? There are plenty of sharks out there too.


The European Commission has issued a white paper outlining its proposed changes to its legal ability to approve or prohibit corporate mergers with a European dimension. Its dramatic new powers could widen the scope of acquisitions falling under its remit to those without the 30% share denoting effective control.

  • The emphasis now is on minority shareholdings which create a “competitively significant link” between investors. Such a condition requires both that
  • The acquisition is of a minority shareholding in a competitor or vertically related company (there is a commercial rivalry between acquirer and target)
  • The definition of “significant” entails that the acquired shareholding is either around 20%, or between 5% and 20% but coupled with additional factors. These include: rights that give the acquirer a “de facto” blocking minority, a seat on the board of directors, or access to commercially sensitive information of the target.

Acquisitions meeting the above criteria should be reported to the Commission, upon which they would be published on the website; however, it would not be necessary to make formal notification on Form CO, unless the Commission then deemed a full investigation was necessitated.

  • Another update posited would streamline case referrals, reducing the number of forms required from a merger participant from two to one; retaining Form CO and eliminating Form RS. National competition authorities would, though, still have the right to object to a domestic merger being referred upwards if they want to retain jurisdiction.

If national regulators oppose the referral, the EC will step back and let them take sole responsibility – there will no longer be shared legal cases, where some aspects of the case are referred to the EU authority for a second, alternative opinion.

  • Regarding Article 4(4), which allows the parties concerned to have their case transferred back from the Commission to a national competition authority: the justification used for such a move will change from the merger’s having a ‘significant impact’ on competition in a defined market in “one or more member states” to its having its “main impact” in a single market in the Member State.

Previously, requiring the offeror parties in a merger to argue that its successful conclusion would have a “significant impact” was seen as “self-incrimination” so they seldom made use of this contingency.



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