The Commission’s Article 22 EUMR Guidance: catching killer acquisitions through the merger referral procedure?

Article 22, Merger Regulation, European Commission, Guidance, killer acquisitions, GAFAM

Over the past five years, the EU’s merger control regime has been hotly debated. The main concern driving the debate has been the intensive acquisition activity in the tech and pharmaceutical sectors. However, many of those acquisitions escape the jurisdictional thresholds of the EU Merger Regulation (EUMR) and therefore cannot be reviewed by the European Commission (EC). On 26 March 2021, the EC published a new guidance on the pre-existing referral mechanism, which increases the number of acquisitions it can scrutinize. In this blog post, I start by reviewing the debate around tech acquisitions and then take a closer look at what the new guidance means for those transactions.

The debate around tech acquisitions

In 2016 already, the EC opened a consultation on the evaluation of the procedural and jurisdictional aspects of EU merger control. The focus was on the thresholds that determine the EC’s jurisdiction, which are based on the turnover of the acquirer and target. In digital and pharmaceutical markets, however, acquisition targets may play a significant competitive role without generating much turnover and thus fall outside of the scope of EU merger control. Indeed, the acquisitions of both Instagram (2012) and WhatsApp (2014) did not reach the EU thresholds, even though—especially in hindsight—those acquisitions clearly removed potential competitors from the scene. Should the merger control regime be adapted to capture those transactions?

The consultation did not immediately lead to any changes. At the same time, concern about the EUMR’s blind spots only grew. Cunningham et al. published a seminal paper in 2018 on so-called ‘killer acquisitions’, in which incumbent firms acquire innovative targets solely to discontinue the target’s innovation projects and pre-empt future competition. In a study of the pharmaceutical sector, they estimated 5.3–7.4% of acquisitions qualify as such. Importantly, these killer acquisitions disproportionally occur below the thresholds for merger review.

The term ‘killer acquisitions’ was immediately co-opted to describe acquisitions in the tech sector, but not always accurately. Indeed, while acquisitions of startups by incumbent tech companies (in particular the GAFAM, i.e. Google, Amazon, Facebook, Apple and Microsoft) are a valid source of concern, the target is often not ‘killed’. Rather, the target’s product is integrated into the incumbent’s ecosystem (in this way, acquisitions are a substitute for in-house R&D).

The target’s product is not uncommonly discontinued, but it is more difficult to discern the underlying motivation. Compared to the pharmaceutical sector, substitution between products is often less perfect, and the products (e.g. a social mechanic) are generally not patentable. Still, killer acquisitions may certainly occur. Facebook, for example, has shut down about half of its almost 100 acquisitions. Some of those, e.g. of Masquerade (bought in 2016; shut down in 2020) and tbh (bought in 2016; shut down in 2017) may qualify as killer acquisitions.

The concerns regarding tech acquisitions are exacerbated in various ways. For one, tech firms may be able to identify potential targets earlier than traditional businesses. Facebook offers an example: it bought Onavo, an app that tracks data usage on smartphones, and has used the aggregated data of its millions of users to direct its acquisition strategy. Moreover, Startups—especially VC-backed ones—already have strong incentives to sell to the incumbent. However, even when founders refuse to sell, that is not the end of it. Amazon, for example, convinced the owners of Quidsi to sell their diaper delivery service by undercutting it with prices that may have been predatory. Finally, the incumbent platform may decide to simply copy the features of the new product and subsequently rely on its established user base to win out against the entrant. After Snapchat refused Facebook’s acquisition offer, for example, Facebook copied Snapchat’s popular ‘Stories’ feature on its three major platforms (Facebook, Instagram, WhatsApp), after which Snapchat’s growth stalled.

This acquisition, strong-arming and copying process is said to result in a ‘kill zone’ around the incumbent platforms, where startups challenging them receive less and less VC funding, which stymies innovation. One venture capitalist went as far as stating: ‘We don’t touch anything that comes too close to Facebook, Google or Amazon.’ And the evidence is not just anecdotal; there is also a growing body of empirical research based on VC investment data (see e.g. here and here).

Different solutions to the same problem

How to catch those killer acquisitions, as well as those acquisitions where the target was not killed but the pressure from a significant (potential) competitor was nevertheless removed?

The first option is to change the jurisdictional thresholds. For example, in contrast to the EC, the UK Competition and Markets Authority was able to review the Facebook/Instagram transaction because its jurisdiction is based not only on turnover (which Instagram had not generated at that point) but also on the firms’ ‘share of supply’. Another potential jurisdictional test is based not on turnover but on the transaction value. Both Germany and Austria have complemented their turnover-based thresholds with value-based thresholds (of €400 and €200 million, respectively). Given that tech transactions often do have a high value (Facebook paid $1B for Instagram), such changes significantly expand the scope of merger control in the tech sector.

However, the EC did not pursue changes to the jurisdictional thresholds. Commissioner Vestager stated that ‘it’s not easy to set a threshold like that at the right level’:

If it’s too high, it doesn’t really help – you still end up missing a lot of the cases that matter. On the other hand, if you set it low enough to make sure that you see all those mergers, you risk making companies file a lot of cases that simply aren’t relevant. So right now, changing the merger regulation, to add a new threshold like this, doesn’t seem like the most proportionate solution.

Instead, the EC will rely on a tool that has been at its disposal all along: the referral mechanism. According to Article 22 of the EUMR:

One or more Member States may request the Commission to examine any concentration … that does not have a Community dimension [i.e. does not meet the turnover thresholds] but affects trade between Member States and threatens to significantly affect competition within the territory of the Member State or States making the request.

The idea doesn’t come out of nowhere; after all, the Facebook/WhatsApp transaction made it to the EC after a referral from three Member States (albeit under Article 4(5)). In the past, the EC discouraged referral requests from Member States that did not have original jurisdiction over the transaction (based on their thresholds, turnover-based or otherwise). In its new guidance, however, the EC has clarified that Article 22 is applicable also to concentrations that do not meet the jurisdictional criteria of referring Member States.

The EC also posited some guiding principles to assess when a transaction fulfils the conditions of Article 22. In particular, a transaction must threaten to significantly affect competition in the Member State making the request. The Member State is required to provide prima facie evidence of a possible significant adverse impact on competition. Relevant indications include ‘the elimination of a recent or future entrant or the merger between two important innovators’, which seems to hint at killer acquisitions.

The EC adds that ‘the categories of cases that will normally be appropriate for a referral … consist of transactions where the turnover of at least one of the undertakings concerned does not reflect its actual or future competitive potential’. Value-based thresholds are brought in through the backdoor as ‘the Commission may also take into account whether the value of the consideration received by the seller is particularly high compared to the current turnover of the target.’

The policy change has a significant impact on legal certainty. The EUMR binds the EC to tight deadlines to review a transaction, which the parties can only implement once a decision has been reached (within those time limits). However, the new guidance holds that ‘the fact that a transaction has already been closed does not preclude a Member State from requesting a referral’. The EC limits its discretion somewhat by stating that it ‘would generally not consider a referral appropriate where more than six months has passed after the implementation of the concentration’.

The guidance ends with some procedural provisions that determine the respective roles of national competition authorities, the merging parties, third parties and the EC in this process. Some further time limits are imposed, but their ‘triggers’ are not always fixed. For example: ‘If no notification is required, a referral request must be made at most within 15 working days of the date on which the concentration is otherwise made known to the Member State concerned’. Other Member States may then join the request within 15 working days, and the EC decides whether to examine the transaction at the latest 10 working days after the expiry of that period.


Will the new guidance make merger review more effective? The EC will certainly be able to scrutinize more transactions. For example, on 31 March 2021, Austria notified the EC of Facebook’s acquisition of the customer service Kustomer for $1B. Given the above time limits, the EC must decide whether to take the case in the first week of May. Clearly, the further implementation of the mechanism will depend greatly on how Member States and the EC make use of their considerable discretion when referring/accepting acquisitions.

In any case, the fact that the EC can now review transactions that are already being implemented is a complete turnaround from previous procedure. The guiding principle of the EUMR—(relatively) short and certain procedures—is now at risk. While the EC puts in place some safeguards, it remains to be seen whether those are enough.

The last question is one of incentives: how will the shift in policy effect the behaviour of incumbents and startups? The general intuition here is that ‘making it too difficult for startups to be acquired … may unintentionally reduce incentives to invest in the first place.’ When one substitutes intuition for economic models, the effects are more mixed. In particular, restricting buyouts may increase the novelty of innovation pursued by startups.



Friso Bostoen

Blog Editor

Assistant Professor of Competition Law and Digital Regulation, Tilburg University

Friso Bostoen is an assistant professor of competition law and digital regulation at Tilburg University. Previously, he was a Max Weber Fellow at the European University Institute. He holds degrees from KU Leuven (PhD, LLM) and Harvard University (LLM). Friso’s research focuses on antitrust enforcement in digital markets. His work has resulted in numerous international publications, presentations, and awards (including the AdC Competition Policy Award 2019 and the Concurrences PhD Award 2022). In addition, Friso edits the CoRe Blog and hosts the Monopoly Attack podcast.

>> Friso’s CoRe Blog posts >>

Related Posts

18. Mar 2024
by Daniel Mandrescu
competition law, abuse of dominance, apple app store, the digital markets act

The Apple App Store – A New Kind of Hallmark Case

After almost three years since the Commission sent Apple its statement of objections, which was significantly trimmed down, the Commission reached a finding of abuse for which it imposed a whopping fine of 1.8 billion euros. Alongside this case, Apple was also involved in an almost identical case running parallel in the Netherlands, with similar findings. Meanwhile, during these procedures, […]
16. Nov 2023
Features by Daniel Mandrescu
platforms, dma, gatekeepers, digital markets act, apple, google, microsoft, smasung

Rebutting the gatekeeper status – what does it take?

The deadline for appeals on the gatekeeper designation under the DMA is nearing its end.  Since the DMA imposes gatekeepers with demanding obligations, it is only natural that the potential subjects of this regulation will attempt to contest this status. What remains, however, to be clarified is what prospective gatekeepers can put forward as evidence to avoid being designated as […]
07. Nov 2023
Features by Daniel Mandrescu
app store, apple, abuse of dominance, platforms, ACM, art. 102 TFEU.

The ACM vs. Apple AppStore – A Second Chance To Get It Right

The Dutch case concerning the Apple App Store appears to make a (welcome) comeback. The case that started in 2019 came to a rather disappointing end in the summer of 2022 when the Dutch competition authority issued a public statement that gave the impression that it was satisfied with Apple’s adjustments to the App Store front in the Netherlands. This […]
26. Oct 2023
by Daniel Mandrescu
airport travel, competition law, platforms, antitrust, EUMR,, etraveli

Booking / eTraveli: assessing envelopment strategies and mixing up market power thresholds

About a month ago the European Commission announced that it was prohibiting the acquisition of eTraveli by Booking Holdings ( The prohibition, which is a rare occurrence in itself, did not attract much attention beyond comments on the ‘ecosystem’ theory of harm which it may have introduced. But this case offers more than that. First, it shows that current practice […]
31. Aug 2023
by Parsa Tonkaboni
The ECJ Judgment in CK Telecoms – Setting the Record Straight? - 0122 Blog post

The ECJ Judgment in CK Telecoms – Setting the Record Straight?

Introduction On 13 July 2023, the European Court of Justice (‘ECJ’) delivered its highly anticipated ruling in CK Telecoms UK Investments v European Commission (‘CK Telecoms’). The Grand Chamber judgment is significant at the most fundamental level. It clarifies some of the core legal concepts and principles at the very heart of EU merger control. The five crucial issues the […]
08. Mar 2023
Features by Friso Bostoen
Requiem for an objection: the Commission drops half of its App Store case - zhiyue 7DOU5NlNIcE unsplash

Requiem for an objection: the Commission drops half of its App Store case

On 28 February 2023, the European Commission (EC) sent Apple a new Statement of Objections (SO) ‘clarifying its concerns over App Store rules for music streaming providers’. Rather than a clarification, or an expansion of the previous SO, the new SO dropped one of the two objections—an unusual move, especially at this stage of the proceedings. When a startup shuts […]
18. Jan 2023
Features by Daniel Mandrescu
competition law, abuse of dominance, refusal to supply, Lithuanian railways, bronner, essential facility, art. 102 TFEU

Case C-42/21P Lithuanian Railways – another clarification on the Bronner case law and the non-exhaustive character of art. 102 TFEU

The recent case of Lithuanian Railways provides yet another clarification on the scope of application of the Bronner case law. The Judgement of the CJEU reconfirms exceptional character of the Bronner case law and the type of situations it is intended to apply to. By doing so the CJEU potentially helps prevent future disputes of a similar  nature in the […]
03. Jan 2023
Features by Daniel Mandrescu
facebook, competition law, abuse of dominance, art. 102 TFEU, multisided platforms, dominant position, tying and bundling, unfair trading conditions, competition economics, european commission,

On-platform Tying or Another Case of Leveraging- A Discussion on Facebook Marketplace

Just before 2022 ended the Commission sent a statement of objections to Meta regarding the potential abusive behaviour of Facebook. According to the statement of objections, Facebook may be engaging in (i) abusive tying practices with regard to Facebook Marketplace as users (i.e. consumers) that log into Facebook and are automatically also offered access to the Facebook Marketplace, without the […]
27. Oct 2022
Features by Daniel Mandrescu
tv broadcasting; competition law; art. 102 TFEU; antitrust; merger control

Opinion of AG Kokott in Case-449/21 (Towercast): filling gaps in EU merger control and creating new routes for dealing with killer acquisitions through the DMA 

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 […]
26. Sep 2022
by Carlo Monegato
The modernisation of EU merger control - State Aid Uncovered SM posts 1 2

The modernisation of EU merger control

THE MODERNISATION OF EU MERGER CONTROL The long-awaited judgment in the Illumina/Grail art. 22 EUMR dispute was announced on 13 July 2022. The General Court confirmed that the European Commission has the power to decide on a merger, referred to it by a Member State, that does not meet the EU thresholds nor was it notified nationally. What follows is […]

Subscribe to our newsletter for updates on legal developments, upcoming conferences, workshops, and publications in your areas of interest.

Stay up to date: Newsletter Subscription