Earlier this month AG Kokott delivered an opinion that quickly caught the attention of the (EU) competition law community. It covered a matter which has long been left unaddressed after the introduction of EU (and national) merger control rules, namely the possibility to apply art. 102 TFEU to concentrations. According to AG Kokott, this possibility, which has been thought to be excluded, can nevertheless be relevant for concentrations where no ex-ante review took place. This option would serve as an important complement for the effective enforcement of competition law policy particularly in the context of killer acquisitions. This post therefore looks into to what extent the approach suggested by AG Kokott would indeed fill in (some of) the remaining gaps in (EU) merger control and whether this approach can even create new avenues for dealing with killer acquisitions with the entrance into force of the DMA.
Factual background of the case and the question(s) raised
The factual situation in the case brought before the CJEU in the context of a preliminary ruling procedure (ex. Art. 267 TFEU) revolves around an abuse of dominance complaint, filed in France, by Towercast against TDF Infrastructure Holding SAS due to its acquisition of Itas SAS. According to the complaint, this acquisition allowed TDF to significantly strengthen its dominant position in the upstream and downstream wholesale markets for digital transmission of terrestrial television services. This is due to the fact that such markets were already high concentrated at the time of the concentration and, according to Towercast, only three companies were still active on such markets at the time, namely Towercast, Itas and TDF. The latter having by far the largest market share of the three. Despite these circumstances, the acquisition was below the thresholds of the EUMR as well as of the French merger control framework and was therefore not subject to any ex-ante review prior to its implementation.
The French competition authority rejected the complaint by the Towercast as it was of the view that concentrations were to be addressed solely within the EUMR or national merger control frameworks. Therefore art. 102 TFEU would not be applicable in situations where not anticompetitive conduct distinct from the concentration manifested, which did not seem to be the situation in this case. Towercast appealed the (rejection) decision before the Court of Appeal Paris, which referred a preliminary question to the CJEU on whether art. 21(1) of the EUMR can prevent the application of art. 102 TFEU by a national competition authority where the concentration falls below the notification thresholds of the EUMR and national merger control rules, and no referral under art. 22 EUMR was made.
In other words, can you have an ex-post assessment of a concentration where no ex-ante review was possible?
Hierarchy of norms and direct applicability – art. 102 TFEU vs. EUMR
AG Kokott was quick to indicate that art. 102 TFEU is a primary law provision with direct applicability (and effect) which means that its application in practice cannot be limited by a norm of secondary law such as art. 21(1) of the EUMR (paras. 33-39). In this regard, the AG notes that the fact that the EUMR is intended to be used as the main tool for assessing concentrations does not take away from the direct effect of arts. 101 and 102 TFEU (para. 43), nor can there any national law or practice that would be capable of doing so due to the primacy of EU law (para. 36). When drawing on the greater context of EU antitrust law and EU merger control the AG points to relationship between the two frameworks where the application of art. 102 TFEU can contribute to effective protection of competition in the internal market in so far it concerns concentrations that are undesirable from a competition policy perspective but fall below the EU and national notification thresholds. This is namely the case with the so called ‘killer acquisitions’ that appear to have emerged as category of gap cases. According to the AG national authorities should in such cases be able to rely on the ex-post assessment possibility of art. 102 TFEU as a last resort (para. 48).
This of course leads to the questions of what is the relevance of the previous case law of the Court in Continental Can and can there be a situation of parallel or consecutive application of art. 102 TFEU and merger control rules, which AG Kokott also addressed. According to the AG, in situations where the EUMR has been applied art. 102 TFEU would no longer be relevant. Although in such cases art. 102 TFEU continues to possess direct effect and be directly applicable, it would not be possible to qualify a concentration which has been approved under the EUMR as an abuse of dominance (para. 60). Finding an abuse in such cases would require identifying anti-competitive actions that go beyond the implementation of the concentration as such. According to the AG, this mode of application together with the limited scope of art. 102 TFEU should help improve the effectiveness of the protection of competition with minimum detrimental effects on the implementation of concentrations in practice (para. 63). Finally, when it came to the possibility to limit the effects of this eventual finding in time, the AG argued there would be no reason for such a limitation since the clarification in this case did not result in an interpretation that could not have been foreseen, and in fact there is no reason why parties should have any doubts with regard to the applicability of art. 102 TFEU and the case law of Continental Can (paras. 65-67).
With the above in mind, it is worth considering what the opinion of AG Kokott could entail in the context of ‘killer acquisitions’ which the AG mentions specifically as a type of gap cases.
Filling (some) gaps – killer acquisitions under the EUMR
The suggested approach of AG Kokott in this case is certainly able to have an added value for the effective protection of competition, at least theoretically. Applying art. 102 TFEU to concentrations which escaped the scope of merger control rules because they fall short of certain turnover thresholds allows to further extend the effect based approach of competition law in this context. Such an application allows competition authorities to look beyond the jurisdictional thresholds and evaluate the concentrations based on their (actual or potential) detrimental effect on competition. In essence it allows the review of additional harmful concentrations, in a pinpointed manner, without having to lower the notification thresholds which may result in a significant increase of notifiable concentrations that would otherwise be rather inefficient.
In practice, however, the potential added value of this possibility is rather limited. First, it requires that the acquiring undertaking has a dominant position in the same market or a related market to that of the target. Second, it requires that the act of the concentration as such is detrimental to competition. Although undertakings will typically not engage in non-beneficial acquisitions, not every acquisition can be said to help solidify one’s dominant position in a specific market in a way the fulfils the criteria of Continental Can. This is particularly so when dealing with the acquisition of companies (or their IP rights) at a very early stage of their development since it is harder to evaluate the competitive significance of such an acquisition post-transaction. Accordingly, one would expect that in the absence of significant concentration and high barriers to entry, finding a concentration to constitute an abuse in such circumstances would be rather demanding. In this regard, it would be interesting to consider whether an entire portfolio or track record of (non-reviewed) acquisitions taken together could constitute an abuse rather than only looking at each transaction individually. Third, in the rare event that a non-notifiable concentration is found to constitute an abuse under art. 102 TFEU, existing practice with regard to remedies may diminish the potential added value of such a finding. Otherwise put, even if an abuse is established in such cases, the tendency to rely on behavioral rather than structural remedies to bring infringements to an end will inevitably limit the effectiveness of such procedures to tackle anti-competitive harm. This is also (regrettably) noted by AG Kokott herself (see para. 63).
In the context of merger control such a tendency is undesirable since concentration almost inherently bring about changes to market structure(s) and therefore any competitive had harm potentially resulting from them should be tackled in a similar manner. At the EU level this is in fact the tendency of Commission in the context on the EUMR, where structural remedies constitute the go-to solution when dealing with concentrations that raise potential competitive concerns (see Commission notice on remedies). Therefore, utilizing this option in practice will require a change of approach in terms of remedies, which can be argued is justified given the nature of the abuse in such cases that is directly related to the structure of (certain) markets.
With the above mentioned in mind, one can argue that making use of the art. 22 of the EUMR possibility, as made possible by the recent Illumina / Grail judgement, may be a better a better alternative for competition authorities to tackle ‘killer acquisitions’ that would otherwise escape legal scrutiny. The route clarified by the AG opinion in this case is in this regard more useful for competitors of the concerned dominant undertakings in comparable cases that seek to challenge non-notifiable ‘killer acquisitions’ that did not trigger the interest of the national competition authority.
New routes – killer acquisitions and the DMA
The possibility to apply art. 102 TFEU to non-notifiable ‘killer acquisitions’ is not only an interesting complement to existing merger control rules but perhaps also to the DMA which also includes a provision that may cover such type of acquisitions. According to art. 14(1) of the DMA gatekeepers in the sense of art. 3 of the DMA must inform the Commission about all their prospective concentrations; both notifiable and non-notifiable ones. The provision does not include a review procedure, however, according to art. 14 (4) of the DMA the Commission will transfer such information to the competent authorities of the member states (i.e. competition and data protection authorities). This in turn will presumably allow Member States to decide whether they will make use of art. 22 EUMR for some of these concentrations. With the interpretation in this case, competition authorities can then also choose, instead, to make use of art. 102 TFEU. According to AG Kokott, the possibility to use art. 22 EUMR as such does not prevent the applicability of art. 102 TFEU (para. 47).
The choice between the two routes would of course depend on the circumstances of each case including: the presence of dominance, the nature of the harm and the required remedy for restoring it (structural vs. behavioral). No to mention that such a possibility would only be limited to the non-notifiable concentrations of gatekeepers in the sense of the DMA which are also dominant in the sense of art. 102 TFEU. Nevertheless, this combination can have yet another deterring effect for anti-competitive acquisitions by big tech giants beyond extending the DMA obligations of art. 5 and 6 to the targets in such acquisitions as is made possible by art. 14(3) of the DMA.
The opinion of AG Kokott in this case may indeed help reinforce the effective protection of competition in the context of merger control in general and killer acquisition in particular albeit in a limited capacity. It now remains to be seen whether the CJEU follows this option and if so if the possibilities created by it will also be utilized in practice by competition authorities as well as private parties.