On March 16, in a preliminary ruling requested by the Paris Court of Appeal regarding Towercast’s appeal of the French Competition Authority’s decision in the TDF case, the Court of Justice of the European Union decided (ECJ, 16 March 2023, Case No C-449/21) that a merger that has no EU dimension and falls below the relevant threshold of concentration can, at the national level, still be subject to an ex post control based on the prohibition of abuse of a dominant position under Article 102 of the TFEU.
Initially, the French Competition Authority rejected Towercast’s complaint against TDF’s acquisition of sole control of competitor Itas, stating that since the transaction was below the relevant thresholds set forth in EU Merger Regulation No. 139/2004 and Article L. 430-2 of the French Code of commerce, it could not be forbidden under the prohibition of abuse of dominant position. According to the authority, the introduction of a EU regulation governing mergers rendered the application of Article 102 of the TFEU to mergers moot, in the absence of a distinct relevant behavior of the company in question following the transaction (decision 20-D-01 of January 16, 2020, relating to anticompetitive practices in the digital terrestrial television broadcasting sector).
The Paris Court of Appeal, in examining Towercast’s appeal, referred the following question to the Court of Justice: Can a merger be scrutinized by a national competition authority as constituting an abuse of dominant position prohibited by the TFEU’s Article 102, with regard to its impact on the structure of competition in a given national market, when the transaction (i) does not have a Community dimension within the meaning of Regulation No. 139/2004, (ii) is below the threshold for mandatory ex ante merger control under national laws, and (iii) was not referred to the European Commission under Article 22 of that regulation?
In its decision, the Court of Justice stated that it believed the EU legislature did not intend to undermine the ability of national regulations and Article 102 of the TFEU to regulate anticompetitive practices resulting in an abuse of dominate position in connection with a merger, and the court rejected the reasoning of the French Competition Authority, stating that such an interpretation “ultimately amounts to ruling out the direct applicability of a provision of primary law by reason of the adoption of a piece of secondary legislation.” The court further stated that “notwithstanding the principle […] that Regulation No. 139/2004 is the only regulation applicable to concentration operations, it is the procedural law of the Member States that is applicable to concentrations with a non-Community dimension.”
After a brief review of its case law in Continental Can (ECJ, 21 February 1973, Case No 6-72), in which the court endorsed a similar solution before the adoption of Regulation No. 139/2004, the court stated that the application of this regulation “cannot preclude a concentration operation with a non-Community dimension […] from being subject to a control by the national competition authorities and by the national court son the basis of the direct effect of Article 102 TFEU, having recourse to their own procedural rules".
Thus, a concentration that was not subject to premerger control because the relevant thresholds under the EU Merger Regulation and national merger control rules were not met can be subject to ex post control both (i) on the basis of Article 22 of EU Regulation No. 139/2004, which allows national competition authorities to refer the transaction to the EU Commission for examination, and (ii) if there is no Article 22 referral, on the basis of the prohibition of abuse of a dominant position under Article 102 TFEU.
However, the Court of Justice pointed out that the existence of an abuse of a dominant position by the acquirer cannot be based solely on the finding that its dominant position in a given market was strengthened after the acquisition of another company in that same market. Instead, it is up to the competition authority or the court to establish that “the degree of dominance thus reached would substantially impede competition that is to say, that only undertakings whose behavior depends on the dominant undertaking would remain in the market".
National competition authorities seem ready to use this new means to control transactions. Only days after the CJEU Towercast judgment, the Belgian Competition Authority announced, on March 22, that it had opened an ex officio investigation into a possible abuse of a dominant position committed by Proximus in the context of the acquisition of Edpnet.
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