News Update Competition
8 November 2021
On 6 October 2021, the Dutch Authority for Consumers and Markets ("ACM") published its new working method in merger control cases. The update, which replaces the version published in 2013, is intended to provide guidance for all parties involved in merger proceedings before the ACM. In this News Update, we will briefly discuss the key aspects of the new guidance ("Guidance").
KEY ASPECTS OF THE GUIDANCEDigitalisation
One of the most significant changes in practice is that all notifications (Phase I and Phase II) can now be submitted via email. Physical copies are no longer required. For comprehensive files, ACM's digital file exchange system can be used.
More emphasis on pre-notification phase
In its Guidance, the ACM actively encourages firms to discuss their concentration plans prior to the formal notification. The ACM explains that, as they are bound by strict and short statutory periods, it is helpful to start the dialogue at this stage. This is due to the pre-notification phase's purpose, which is to gain a better understanding of the transaction and its effects on competition. In turn, this may prevent the ACM from declaring a notification incomplete or asking numerous additional questions (for instance, regarding jurisdictional issues, the market definition or the market shares).
Demarcation between Phase I and Phase II
The ACM particularly addresses moving from Phase I to Phase II. While Phase I involves a relatively brief assessment of the concentration, in Phase II a more thorough investigation should clarify whether the concentration leads to actual competition concerns. This explains why the ACM seems increasingly inclined to conduct a Phase II investigation to approve the concentration without imposing any conditions (for instance, the Royal Flora, Van Drie and Benegas cases).
Data room procedure
A non-confidential version of any reports regarding the a concentration, drawn up by the ACM or external bureaus,) will, in principle, be shared with the parties as soon as possible. However, depending on the nature of the research and the information used, it is not always possible to produce a non-confidential version. If this is the case, a so-called data room procedure can be followed. The parties' advisors are only given access to the underlying information and data if they sign a confidentiality agreement. Moreover, this is only possible after the ACM has identified the potential competition concerns. The codification of this data room procedure in the Guidance is a step forward: parties now have a solid basis to request such a procedure.
Article 22 Merger Regulation
The possibility to request referrals of concentrations to the European Commission under Article 22 of the Merger Regulation was already present in the 2013 guidance, but not used often.. The Guidance is now fully in line with the Commission's current policy, which is meant to address problematic 'killer acquisitions'. To avoid that these kinds of acquisitions escape from review, the Commission encourages referrals by Member States in cases where the national merger thresholds are not met but fulfill Article 22's remaining requirements. This could lead to more referrals to the European Commission.
The ACM explicitly mentions that parties may invoke an efficiency defence: they may argue that the efficiencies resulting from the proposed concentration outweigh any potential anti-competitive effects. The ACM stresses that parties can already provide the relevant information in Phase I . Importantly, the ACM guarantees that it will not take such a defence as an acknowledgement of competition concerns. While this sounds somewhat contradictory, the ACM clarifies that efficiencies can often only be assessed in Phase II because an in-depth and extensive economic analysis is required.
Failing firm defence
In addition to the efficiency defence, the ACM explicitly states that parties may also invoke the failing firm defence. Parties can thus argue that the likely future competitive situation after the merger does not differ from the likely future competitive situation absent the merger.
Exemption standstill period
The standstill obligation of Article 34 of the Dutch Competition Act may be problematic under certain circumstances, such as impending bankruptcy leading to irreparable damage. Upon request, the ACM can therefore grant an exemption for the waiting period. It is important to note that this implies that the final assessment will only take place after the closing of a transaction. The ACM may eventually decide that a concentration should not have taken place and may order the unwinding of the transaction.
ConclusionThe Guidance on the ACM's working method in merger cases is certainly welcome as it provides additional clarity and legal certainty for businesses involved in mergers and acquisitions. From a practical perspective, the following points should be underlined:
- The push towards a pre-notification phase gives companies the opportunity to discuss cases with potentially significant competition issues with the ACM. While this may lead to a more efficient procedure in Phase I, the question whether pre-notifications will lead to fewer Phase II cases remains open. It remains to be seen whether a pre-notification phase would really lead to a more efficient procedure or whether the time won in Phase I would just be post during the pre-notification.
- Documents supporting the efficiency defence often require an in-depth and extensive economic analysis. Even if the ACM clarifies that this information can be provided in the Phase I, efficiencies can often only be assessed in Phase II. This shows a clear trend to open Phase II when this defence is invoked, and more generally, every time economic evidence has been provided.