This month’s CLIP is the 13 October 2022 Opinion of Advocate General (AG) Kokott. It’s worth a read because her opinion that yes, the abuse of dominance prohibition under Article 102 TFEU can still apply to transactions that do not meet merger control thresholds has some important implications for companies that may be dominant.
Television transmission service Télédiffusion de France (TDF) acquired rival company Itas in October 2016. The merger resulted in a reduction from three to two players in the French market for terrestrial television broadcasting. However, the transaction did not meet the requisite turnover thresholds and so was not subject to any prior review, either by the European Commission or the French competition authority. The French authority then rejected a complaint made by TDF’s rival, Towercast, that the transaction constituted an abuse of a dominant position. The authority pointed to the clear dividing line between the merger control regime and the prohibition of conduct under Articles 101 and 102 TFEU to suggest that Article 102 TFEU was not applicable. On appeal, the Cour d’appel de Paris asked the CJEU to clarify the relationship between ‘ex ante’ merger control rules and ‘ex post’ control of abuse under Article 102 TFEU as well as the interpretation of Article 21(1) of the EU Merger Regulation (EUMR).
The AG’s legal reasoning
Article 21(1) EUMR essentially suggests that (with a limited exception for certain joint ventures) only the EUMR rules should apply to mergers. It says that Regulation 1/2003, which implements the prohibitions on anti-competitive conduct in Articles 101 and 102 TFEU, should not apply.
AG Kokott considered whether this had a ‘blocking effect’, requiring mergers to be assessed solely under merger control law and preventing a parallel or consecutive analysis under Article 102 TFEU. After all, both the EUMR and Regulation 1/2003 are designed as part of a legislative whole intended to implement Articles 101 and 102 TFEU and to ensure competition is not distorted (as the CJEU confirmed in Austria Asphalt). There is some logic to the line of thinking that if the EUMR is designed to form part of the implementation of Articles 101 and 102, and a merger does not meet the thresholds in the EUMR, then that merger is not capable of having an anti-competitive effect under a separate Article 102 analysis either.
However, AG Kokott iterated that as “Article 102 TFEU is a provision of primary law”, it is directly applicable. It therefore cannot be restricted by secondary law such as the EUMR or corresponding national laws. She also noted that while it can be presumed that a transaction that does not meet a turnover threshold does not require ex ante control, one cannot also presume that means no ex post control under Article 102 is required.
AG Kokott did note that a distinction can be drawn between transactions where no ex ante assessment under merger control law has taken place (because the relevant thresholds were not met), and transactions that are at a risk of ‘double assessment’ under merger rules and Article 102. She suggested that while Article 102 would remain applicable in principle, a transaction which has been approved under merger control rules will not be an abuse under Article 102 unless the undertaking concerned has also engaged in further abusive conduct. As a result, in practice, the supplementary application of Article 102 will only apply where the acquirer has market power, but merger thresholds are not met.
What are the implications?
A CJEU judgment that agrees with AG Kokott’s Opinion could act as a licence for competition authorities to investigate under Article 102 acquisitions by dominant companies which do not meet merger thresholds. AG Kokott specifically notes in the Opinion that applying Article 102 in this manner could make competition law more effective by enabling the review of ‘killer acquisitions’ of small, innovative start-ups.
This is also consistent with the recent change in approach of the Commission to Article 22 EUMR, which enables member states to request that the Commission initiate a merger review even where EU turnover thresholds are not met. In 2021 the Commission updated its guidance on Article 22 to encourage member states to make use of it in those situations (see here). Last month, the Commission blocked Illumina’s acquisition of Grail after relying on Article 22 to call the transaction in for review, although it’s important to note this decision itself is now under appeal.
We understand that the Commission expects there to be no more than a handful of Article 22 cases per year (see here, subscription required). However, this still adds a considerable additional burden for companies. The potential for transactions to be called in for review despite not meeting EU turnover thresholds requires a much more detailed review of each transaction for potential competition law risk. The added requirement to consider Article 102 is likely to increase this burden further.
While AG Kokott suggests that it is more likely that a dominant company that has infringed Article 102 through an acquisition will be subject to a fine rather than having the transaction unwound, there is no guarantee that will be the case. Companies that may be dominant will therefore have to be particularly careful when considering even relatively small acquisitions in the future.
This Opinion also comes relatively soon after an Opinion from AG Rantos about the ability of competition authorities to assess the GDPR as part of a competition law investigation (see here). AG Rantos noted that conduct relating to data processing may breach competition rules even if it complies with the GDPR. Ultimately, both Opinions should be taken as a sign that potentially dominant companies need to be more careful than ever to consider potential competition issues arising from their actions. Failure to do so risks inviting competition authority investigations further down the line.