Belgium and the Netherlands - Trend towards Closer Competition Scrutiny of Small Transactions Intensifies
The trend towards closer competition scrutiny of small acquisitions, even if these transactions do not satisfy the financial thresholds provided for by EU merger control rules or relevant national legislation, yesterday gained further traction in Belgium and the Netherlands. The life sciences industry will take note.
In what it must regard as a personal victory, the Belgian Competition Authority (BCA) announced last night that it would end the abuse of dominance proceedings which it had started in March 2023 following the takeover of the telecommunications business of Edpnet by market leader Proximus (see, attached press release). The decision follows the sale of Edpnet by Proximus to rival Citymesh.
Damien Gerard, the BCA’s chief prosecutor, characterised the sale as a welcome boost for competition in Belgian telecommunications markets as it is likely to strengthen the development of a new full-fledged telecommunications operator. In March 2023, the BCA had challenged the acquisition of Edpnet by Proximus on the grounds that this amounted to an abuse of dominant position on the part of Proximus in breach of Article 102, Treaty on the Functioning of the European Union (TFEU), and Article IV.2, Code of Economic Law, the equivalent Belgian statutory provision (see, Van Bael & Bellis Life Sciences News and Insights, 23 March 2023). The BCA’s move against Proximus on the basis of the abuse of dominance rules followed on the heels of the Towercast judgment in which the Court of Justice of the European Union (CJEU) had held that a merger or an acquisition of a business that does not reach the financial thresholds for review under European Union or national merger control rules may, post-transaction, still be made subject to an abuse of dominance review by a national competition authority pursuant to Article 102 TFEU.
On 21 June 2023, the BCA issued a standstill and hold-separate order requiring Proximus to observe a series of interim measures to maintain the viability, competitive ability, and autonomy of Edpnet (see, Van Bael & Bellis Life Sciences News and Insights, 23 June 2023).
The BCA has now established an important marker for its jurisdiction over M&A transactions under the traditional abuse of dominance rules, while avoiding possible judicial scrutiny by the Markets Court, Belgium’s judicial authority that oversees market regulators such as the BCA.
In a note which he published yesterday on his blogspot (see, attachment), chairman Martijn Snoep of the Dutch competition authority Autoriteit Consument & Markt (ACM) called for expanded merger control powers that would allow his competition authority to review smaller mergers that are not caught by the existing thresholds for merger review. Snoep is therefore advocating a change to the Dutch Competition Act that would grant ACM the power to require parties to a given transaction to notify their deal for review if competition problems are suspected to exist, even though the deal is not notifiable under the prevailing Dutch merger control rules. The route favoured by Snoep, an expansion of ACM’s statutory merger review powers, is thus different from the path followed by the BCA in successfully challenging the acquisition of Edpnet by Proximus under the abuse of dominance provisions.
Snoep believes the desired power is necessary to keep tabs on two types of small acquisitions:
- Acquisitions in local markets or in product- or service-specific niche markets. Snoep expresses a specific concern regarding successive small acquisitions by the same firm which he likens to “stringing together beads”. He points to a recent series of acquisitions of veterinary practices and general practitioner practices in the Netherlands by private equity firms.
- “Killer” acquisitions. These allow firms with market power to buy start-ups with a promising technology but, for the time being, very little or no sales. Like many policymakers before him, Snoep refers to the pharmaceutical sector as an industry in which the acquisition of the budding firm “can protect the company with market power against future competition”.
Snoep’s request to the Dutch parliament is inspired by the powers which the European Commission already benefits from under Article 22 of the EU Merger Regulation and which the Commission has now relied on in three recent cases over a limited period of time, most prominently in its efforts to prevent Illumina, the US genomics company that produces next generation sequencing systems, from acquiring Grail, the developer of blood-based cancer detection tests that result from genomic sequencing (for a discussion of the most recent development in this case, see, Van Bael & Bellis Life Sciences News and Insights, 13 October 2023).