The EU Merger Regulation sets the rules which the European Commission uses to determine if it must approve a merger or similar transaction. In short, the European Commission will review a merger only if it is relatively large. On the other hand, the national competition authority of a member state will review a merger if it is not big enough to affect trade throughout the European Union.
The EU Merger Regulation uses the turnover of the merging companies to determine if the transaction is both large enough, and has a sufficient EU dimension, so it should be subject to European Commission merger review. A transaction must satisfy either of two tests:
Test 1:
- The firms involved in the merger together have a worldwide turnover of at least 5 billion euros, and
- Turnover in the European Union of at least 250 million euros (the EU dimension).
Test 2:
- The firms involved in the merger together have a worldwide turnover of at least 2.5 billion euros, and
- In each of three member states the firms have a combined turnover of at least 100 million euros.
- In two of these three member states a turnover of at least 25 million euros.
- Turnover in the European Union of at least 100 million euros (the EU dimension).
It a transaction satisfies either of these tests, then the companies must complete form co. Form co requires firms to provide extensive information. In fact, form co requires so much information that, to lower the burden on both the European Commission and companies, the EC Merger Regulation sometimes allows companies to complete short form co. In simplified cases, ones which do not raise true competition concerns, companies need only complete short form co. For example, since competition law almost never prohibits a merger if there is no horizontal overlap among the relevant business, firms entering into such a transaction may use this simplified procedure and short form co.
The Merger Regulation divides EU Merger Control into two phases. During Phase I the European Commission will not only review the merger notification, it will also contact customers, competitors, and other market participants. After 35 working days the European Commission must either approve the transaction, approve it with conditions, or, it if believes the transaction may violate EU competition law, start a Phase II investigation.
During Phase II the Commission will investigate its competition concerns in great detail. It will consult with third parties and, probably, a member state’s national competition authority. It has 90 working days, with some possible extensions, to either approve, approve with conditions, or prohibit a transaction.
In March 2021 Commissioner Vestager greatly expanded jurisdiction of merger control in the European Union when she announced the Commission’s Article 22 Guidance. Commissioner Vestager said that Article 22 EUMR would allow the Commission to examine a merger even if it does not meet the turnover thresholds which the Merger Regulation normally requires to allow the Commission to review a transaction and determine if it may harm effective competition. The merger may not even have an EU dimension. Further, the transaction may not even meet the national turnover thresholds which would allow the national competition authority of a member state to review the transaction. The European Commission used Article 22 to subject to the Merger Regulation a merger between a very large company and one with a very small market share.
A merging party can appeal a merger regulation decision. Companies first appeal a commission decision to the General Court, where the merging party can raise question of both fact and law. The next appeal is to the European Court of Justice. At this EU court the merging party can only raise issues of law.