The Court of Justice has ruled that a national competition authority may retrospectively classify a merger or acquisition that does come under the merger control rules as abuse of a dominant position.
The reason for this ruling was an acquisition on the French digital television market. Three players operated on that market: TDF, Itas and Towercast. Itas was acquired by TDF. That acquisition was not subject to European and French merger control, because the turnover thresholds were not met. The French competition authority had not requested a referral to the European Commission. Towercast then challenged the acquisition on the grounds of abuse of a dominant position (Article 102 TFEU).
The French competition authority found that the introduction of the merger rules drew a dividing line between merger control and the control of anti-competitive behaviour. The prohibition of abuse of a dominant position therefore could not be applied in its opinion. Towercast appealed this ruling. The French court then raised the preliminary question of whether a concentration that does not have a European dimension, does not meet the national notification thresholds and has not been referred to the Commission may nevertheless be classified as abuse of a dominant position.
In its judgment, the French Court of Appeal clarified the relationship between merger control and the prohibition of abuse of a dominant position. Referring to the classic Continental Can judgment, the Court of Appeal ruled that a national competition authority may indeed apply the prohibition of abuse of a dominant position to a concentration that does not meet the European and national notification thresholds and has not been referred to the Commission, because Article 102 TFEU has direct effect.
The Court of Appeal confirmed that strengthening a dominant position is not sufficient for a finding of abuse; it must be established that the degree of dominance reached by the transaction would substantially impede competition, that is to say, that only undertakings whose behaviour depends on the dominant undertaking would remain in the market. The Court of Appeal stated that past transactions may also fall within the scope of the prohibition. The French court will now have to assess whether a substantial restriction is involved and what consequences that has. Not only a fine, but also (involuntary) unbundling and the nullification of a transaction appear to be possible.
National competition authorities therefore have an additional tool to tackle transactions. A case in point is the Belgian competition authority’s investigation into Proximus’ acquisition of EDPnet. Market participants (such as customers) may also try to reverse a transaction through the courts or to claim damages. Interestingly, the Mededingingswet (Dutch Competition Act) provides that bringing about a concentration cannot be considered abuse of a dominant position (Article 24(2)). This provision deviates from the judgment and the European competition rules, which is precisely not the Dutch legislature’s intention. A change in the law is therefore required.
M&A lawyers and advisers are well advised to make a sound assessment and contractual agreements beforehand in order to avoid subsequent proceedings, especially if companies with a strong market position are involved.
Would you like to know more about the implications of the Towercast ruling for M&A transactions? View the webinar that Martijn van de Hel and Cyriel Ruers recorded on this topic.
The webinar can also be listened to as a podcast via Spotify
This blog also appeared in the Snelrecht section of the Mr. Online journal.
Information on dawn raids by ACM and the European Commission can be found at invalacm.nl
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