EU MERGER LAW: fundamentals Eleanor M. Fox Professor, New York University School of Law ABA Antitrust Section Spring Meeting 2005

Background The EC Treaty contains no merger control Merger law adopted 1989, effective 1990: Conferred authority to challenge mergers Centralized control in Brussels; a one-stop shop Standard before 2004 amendment- mergers illegal if they: “create or strengthen a dominant position as a result of which effective competition would be significantly impeded” “create or strengthen a dominant position as a result of which effective competition would be significantly impeded” SEE SLIDE 5 FOR AMENDED TEST Notification and waiting, with deadlines

Enforcement: 1990s Active enforcement against horizontal, vertical, conglomerate mergers Active enforcement against horizontal, vertical, conglomerate mergers –Concern with price-raising, leveraging, portfolio effects Active against multinational mergers Was the “dominance” standard limited to dominance? –Court of Justice held that dominance standard met by proof of “collective dominance” Kali & Salz 1998

REFORM: Court suggests Merger Regulation might not reach unilateral effects Court suggests Merger Regulation might not reach unilateral effects Amendment adopted to –close this possible gap, simplify referrals between Commission and member states, provide more flexible deadlines, and give guidance on analysis Council amends Merger Regulation –Commission adopts Horizontal Merger Guidelines Similar to US horizontal merger guidelines Similar to US horizontal merger guidelines

COUNCIL REG. 139/2004 New standard - includes unilateral effects –“A concentration which would SIGNIFICANTLY IMPEDE EFFECTIVE COMPETITION …, in particular as a result of the creation or strengthening of a dominant position, shall be declared incompatible with the common market.”

What is caught? (When is a merger of community dimension?) Combined aggregate world turnover (“TO”) is > 5 billion EUR > 5 billion EUR Aggregate Community TO of each of at least two of the firms is > 250 million EUR Unless each firm has > 2/3 of its Community TO in one and the same member state OR: combined worldwide TO is > 2.5 billion EUR –In each of at least 3 member states combined aggregate TO is > 100 million In each of at least 3 of these member states, aggregate TO of each of at least 2 firms is > 25 million –Aggregate Community TO of each of at least 2 firms is > 100 million EUR –Unless each firm concerned has > 2/3 of its aggregate Community TO within one and the same member state

MANY MORE RULES! Conforming with ICN recommendations, the Merger Regulation was amended to –give parties more freedom to decide time to notify –Requires notification prior to implementation and following conclusion of agreement, announcement of public bid, or acquisition of controlling interest; also allows notification where firms demonstrate good faith intention to conclude agreement or make a bid How long can Commission take to decide? w/i 25 working days, must decide if merger raises serious questions Extended to 35 if Commission identifies concerns Must decide w/i 90 days of opening second phase –Extensions allowed up to 20 more days

THE DRAMA OF SUBSTANCE Boeing/McDonnell Douglas (Comm. 1997) Boeing/McDonnell Douglas (Comm. 1997) GE/Honeywell (Comm. 2001) Airtours/First Choice (CFI 2002) Tetra Laval/Sidel (ECJ 2005) Conglomerate mergers may be caught but their harms are “uncertain, and difficult to establish” Standard of review-close scrutiny: The Court must decide whether the evidence is “accurate, reliable and consistent” and contains all the information necessary “to assess a complex situation and whether it is capable of substantiating the conclusions drawn from it.”

A new era of building bridges?