ECJ in Towercast: plan C for tackling concentrations?
Companies beware: completed non-notifiable concentrations do not necessarily go scot-free. An ex post abuse-of-dominance investigation by national competition authorities (NCA) could still loom.
In the Towercast judgment, the European Court of Justice confirmed that acquisitions by dominant undertakings that escape ex ante review under the EU or national merger control rules may still trigger ex post review under the EU prohibition on abuse of dominance.
As a result, to catch potential anti-competitive concentrations NCAs now have not only a plan A (the EU and national merger control thresholds) and a plan B (referral of non-notifiable mergers to the European Commission; see our August 2022 newsletter), but also a plan C (the prohibition on abuse of dominance) to fall back on.
What’s more, they are not afraid to use it: the Belgian NCA is currently investigating whether Proximus potentially abused its dominant position by acquiring broadband supplier edpnet. The Dutch NCA is all for using plan C to tackle ‘creeping control’ by dominant companies.
More deal uncertainty therefore seems imminent, particularly for dominant companies. Once their completed non-notifiable acquisitions have passed the six months-referral deadline unscathed, they may still be scooped up for abuse of dominance review.
This means that in the preliminary assessment of their M&A transactions companies will need to reckon with this ever-closing net of regulatory checks, including merger control, FDI, FSR and abuse of dominance.
Background
On 13 October 2016, Télédiffusion de France (TDF) acquired Itas, making Towercast TDF’s only remaining competitor on the French market for digital terrestrial television broadcasting services. The acquisition fell below the thresholds of the EU Merger Regulation (EUMR) and the French merger control rules, and was not referred to the European Commission for review under Article 22 EUMR either. Consequently, no ex ante merger control review of the acquisition was conducted.
On 15 November 2017, Towercast lodged a complaint with the French competition authority, alleging that the acquisition of Itas constituted an abuse by TDF of its dominant position in violation of Article 102 TFEU. The French competition authority rejected the complaint. It stated that the EUMR solely and exclusively applies to concentrations, precluding the possibility to apply EU antitrust rules. Towercast lodged an appeal at the Paris Court of Appeal, which requested a preliminary ruling on this matter from the European Court of Justice (ECJ).
The ECJ’s ruling
The Paris Court of Appeal – in essence – wanted to know whether national competition authorities (NCAs) can apply Article 102 TFEU to a concentration, as defined in the EUMR, when it has not been caught by any ex ante merger control assessment.
The ECJ ruled that concentrations that escape ex ante merger control might still be subject to ex post review by NCAs under Article 102 TFEU due to the direct effect of this prohibition. The prohibition therefore applies irrespective of the EUMR. In addition, NCAs should conduct such ex post review through national procedural law.
According to the ECJ, the French NCA therefore can review the completed concentration (i.e., the acquisition of Itas) under Article 102 TFEU through its national procedural rules when:
1. the concentration does not meet the EU turnover thresholds for prior merger control;
2. the concentration does not meet the national thresholds for prior merger control, and
3. the concentration has not been referred to the Commission under Article 22 EUMR.
When applying Article 102 TFEU, the French NCA will subsequently need to verify that:
4. the buyer (TDF) held a dominant position at the time of the concentration;
5. the acquired company (Itas) was active on the same market as the buyer, and
6. the acquisition constitutes abuse, meaning that the degree of dominance thus reached would substantially impede competition, that is to say, that only undertakings whose behaviour depends on the dominant undertaking would remain in the market.
It remains to be seen how NCAs will apply the substantive test under the above-mentioned point 6 and what the implications of the finding of an abuse of dominance in these kind of scenarios will be. The ECJ remained silent on this point but Advocate General Kokott considered that in view of the primacy of behavioural remedies and the principle of proportionality, there is not usually a threat of subsequent dissolution of the concentration, but rather only the imposition of a fine. We will find out soon enough: either through the Paris Court of Appeal that can now render a judgment based on the ECJ’s answers to its questions or the Belgian Competition Authority in its Proximus-investigation.
Conclusion
This ruling confirms that the mere inapplicability of ex ante merger control, either at EU or national level, does not preclude an assessment of a transaction under Article 102 TFEU by NCAs after the concentration has been implemented.
Dominant companies will need to add another item to their M&A checklist (see also our June 2021 and January 2023 newsletters).
Note: Rens Stegink contributed to this article. He was a Legal Assistant at the Competition & Regulated Markets practice group during February-May 2023.
This article was published in the Competition Newsletter of April 2023. Other articles in this newsletter:
