The economic world is constantly evolving and demands that regulatory rules be adapted to issues that did not exist when they were created. This progressive overhaul is underway at the national level, with measures to simplify and modernise the tools of French competition law implemented by the Autorité. At the European level, the change in the Commission’s approach, which now accepts that national competition authorities refer sensitive mergers to it for examination, including those below the thresholds, is a major step forward, but it is also worth noting the current revision of the Notice on the definition of relevant market.

Revision of the french merger guidelines: clarification, simplification and modernisation

On 23 July 2020, the Autorité published its new merger control guidelines, which replaced those of 4 July 2013. This publication, which followed a public consultation held in late 2019, completes a substantive modernisation process that started in 2017.

These new guidelines are intended to provide companies and their boards with an instructive presentation to help them better understand the scope of merger control in France, the way in which the procedure before the Autorité de la concurrence is conducted and, finally, the objectives, criteria and methods used for the substantive analyses.

Among the new features, we can highlight the following:

• An extension of the scope of the simplified procedure;
• An update of the section dedicated to procedural infringements (failure to notify, gun jumping) in order to incorporate recent advances in decision-making practice and case law;
• A recast of the section on competitive analysis which highlights the main criteria for analysis taken into account by the Autorité when it examines a transaction, regardless of its horizontal, vertical and/or conglomerate nature;
• A section dedicated to the principles applicable to remedies (both procedural and structural) which sets out the Autorité’s approach in this area and makes companies aware of the considerations to be taken into account when they propose commitments;
• The integration of recent decision-making practice and evolutions in case law on the subject of non-compliance with commitments, in order to make companies aware of the importance of complying with the commitments they have made to the Autorité;
• Enhanced appendices setting out the Autorité’s analysis methodology for certain recurring issues:
  – assessment of the competitive effects of a transaction on local retail markets;
  – consideration of the competitive pressure exerted by online sales in certain retail sectors;
  – provision of structural commitments models and mandate agreement models, updated to reflect recent developments in decision-making practice;
  – clarifications on requests for internal documents which may be made by the Autorité during investigations.

The guidelines also incorporate suggestions taken from the contributions to the public consultation. As such, they take into account the preference expressed by companies and their boards to be able to request the appointment of a team to examine the case prior to the notification of the merger. Following this request, the information will be communicated to the notifying party within 5 workdays.

The Autorité also undertakes to ensure that a response concerning the completeness of the notifications will generally be given within 10 workdays of the notification. An indicative period of 10 workdays is also introduced for confirming whether a transaction can be processed under the simplified procedure, which gives the notifying party more visibility to organise the timetable for finalising its transaction. Finally, certain aspects of the presentation of the competitive analysis have been clarified and adapted, in particular with regard to the time horizon of the prospective analysis.

Merger Control Guidelines, 23 July 2020

Discover our webinar on Article 22 referrals with Olivier Guersent, Director General of the European Commission’s Directorate General for Competition, Angélique de Brousse, Senior Competition Legal Officer EMEA at Johnson&Johnson and Anne Wachsmann, Partner at Linklaters

A major step forward to review sensitive transactions that could escape control

The Autorité welcomes this development, which it has repeatedly called for, in order to gain a better understanding of the phenomenon of “killer acquisitions” or “sub-threshold acquisitions”, which may be carried out by digital platforms, but also, for example, in the pharmaceutical or biotechnology sectors, or in certain highly concentrated industrial sectors. Such blind spots could raise competition concerns in terms of the competitive dynamic of the markets or maintaining incentives to innovative. This change is a major step forward in improving the handling of merger transactions, especially those involving innovative players.

One risk identified was that some transactions involving highly innovative players, which are only just starting to earn returns on their innovations in the market, may not be subject to merger controls, as the target has an insufficient turnover to trigger the notification thresholds. The takeover of Instagram or WhatsApp by Facebook are topical examples of this. Another potential problem was the possibility for an undertaking in a dominant position to buy out its various small competitors on markets with already high levels of concentration.

This change in the approach of the European Commission is therefore an excellent solution, which contributes to addressing the concerns that have been raised about the risk of a number of merger transactions that have a negative impact on competition eluding controls by competition authorities, even though they are sometimes under examination outside the European Union, for example in the United States. It is also a swift solution because it can be implemented without affecting current legislation. Finally, it is a targeted solution: all other possible measures to fill this gap in merger control, such as the definition of new notification thresholds, would have made control much more cumbersome for both companies and administrations, which would not have fulfilled the ultimate objective of precise control of a few transactions with a potentially substantial impact.

The Autorité immediately set up a market watch to detect transactions that could be referred to the European Commission. The Commission has also adopted an Interpretive Communication in order to provide companies and their boards with as much predictability as possible, it being understood that the decision-making practice that will be developed will provide additional clarifications.

Press release, 15 September 2020

Future consequences of the pandemic on market structures

An OECD study anticipates that “a structural consequence of the economic crisis triggered by the Covid-19 pandemic will probably be an increased level of concentration in markets, insofar as some firms will undergo financial distress and exit the market. Next to market exit, concentration will be favoured by M&A activities driven by companies seeking to improve their condition by merging with healthier competitors. As a result, competition authorities will be called to scrutinise a number of urgent and critical mergers, including alleged “rescue mergers”, i.e. acquisitions of firms that may be facing bankruptcy.  In this context, merger control may play a key role in preventing transactions that would result in long-lasting harm to market structures” (OECD Competition Policy Responses to Covid-19, 27 April 2020).

In cases where the targeted firm would have exited the market in the absence of the merger, the merger may sometimes be allowed to proceed despite the increased market power of the new entity. Consequently, the challenge is to carefully verify that the “failing firm defence” is indeed applicable in order to avoid a lasting negative impact on the structure of the French market in question.