Interview with Jean-François Bellis on the 20 years of EU Merger Guidelines and the prospects for revision

As the European Commission prepares a new set of guidelines to modernise the EU framework to the evolving markets, Jean–François Bellis, founder of Van Bael & Bellis and leading practitioner with decades of experience in competition law, offers a retrospective look at the twenty years of application of the current merger guidelines and raises the four most significant issues surrounding their revision. These four issues concern the European Champions debate, the legal uncertainty generated by the judgements Towercast and Illumina and the integration of non-economic concepts on the one hand and on the other, the integration of highly speculative factors in the legal analysis of merger control.

The creation and economic foundation of the current merger guidelines

The current merger guidelines have been in place for over two decades and marked a significant turning point in the development of EU merger control. Originally, merger control emerged as an extension of the Court’s caselaw on abuse of dominance. The Court interpreted Article 102 TFEU as covering mergers carried out by dominant firms when such transactions strengthened an already dominant position. The initial 1990 merger regulation extended that concept to cover mergers that also created a dominant position. As a result, the first merger cases handled by the Commission during that period focused primarily on whether a transaction would create or strengthen a dominant position. At that time, economic analysis played a relatively limited role in the assessment. 

In the 2004 Merger Regulation and its accompanying guidelines, the focus of the analysis significantly changed: serious economic analysis was introduced to merger control, explains Bellis. The assessment was no longer limited to determining whether a merger would create or strengthen a dominant position. Instead, the Commission also began examining whether a merger could significantly impede effective competition in the internal market. The analysis is now about “anticipating the future impact of the merger on competition,” which is “highly speculative.” The consequent requirement of carrying out economic analysis in merger control represents the main difference from enforcement under Article 101 TFEU. According to Bellis, the forthcoming guidelines are expected to keep this strong economic orientation.

Does the EU merger framework prevent the emergence of European champions?

One of the most politically sensitive issues surrounding EU merger control today concerns the idea that EU competition enforcement prevents the emergence of so-called “European champions.” This issue became particularly visible following the Siemens/Alstom saga. In this case, the parties to the transaction claimed that it served the purpose of better competing on international markets with, for instance, Chinese competitors. But the Commission prohibited the merger nonetheless because it considered that it would restrict competition inside the EU. 

This episode raised the question of whether the Commission should consider in its analysis the impact of the merger in the world market rather than looking strictly into the EU market. In Bellis’s view, however, this debate doesn’t make too much sense. He explains that the Commission is required by the EU Merger Regulation (EUMR) to assess the impact of the merger on competition inside the EU or the EEA and “it’s not something that can simply be modified through guidelines.” 

One may reflect on whether or not there should be some kind of exception made for mergers considered strategic in certain sectors. But with the general reluctance of the Commission to go into that direction, it is unlikely to do so, which subsequently, has drawn criticism from countries such as France and Germany. 

Bellis concludes that the creation of EU Champions is probably not something that can be resolved by changing the wording of the guidelines. It’s rather a “broader policy issue” that the revised guidelines won’t be able to address on their own. 

The legal uncertainty created by the Towercast and Illumina judgements

The two-decade-long application of the current guidelines were also marked by two infamous judgments: Towercast (C-449/21) and Illumina (C‑611/22 P). They introduced significant legal uncertainty into EU merger control practice and continue to raise concerns regarding their impact on the revision of the guidelines.

In Towercast, the Court of Justice allowed the use of Article 102 on abuse of dominance, to challenge ex post facto a merger on the ground that it has strengthened an existing dominant position. This caselaw was later invoked in the Proximus case (CONC-RPR-23/0002) where the Belgian Competition Authority challenged the concentration between Proximus and a small Belgian company after it was approved (see also Norton Rose Fulbright, 2023). But the problem with this approach, as Bellis noted, was that an intervention by a competition authority after a merger has been carried out creates enormous legal uncertainty (see also Justine Haekens, 2023).

In Illumina, an attempt was made by the Commission to rely on Member States’ power to refer mergers to the Commission under Article 22 of the EUMR to still review a transaction that it normally wouldn’t be able to. This provision, often referred to as the “Dutch clause,” was originally introduced to allow Member States that did not have their own merger control regime to refer a concentration affecting competition on their territory to the Commission, so that the latter could still assess the transaction under EU competition law. 

However, in this case, the Commission tried to use this mechanism in a different way, relying on it to examine mergers involving companies whose turnover is too low to meet the notification thresholds set out in the EUMR. These transactions often concern so-called “killer acquisitions,” where a large company acquires a small start-up and thereby eliminates a potential future competitor. Because such start-ups typically generate very limited turnover, they would normally fall below the thresholds that trigger merger notification, explains Bellis.

The EUMR was originally designed to provide legal certainty through strict criteria determining when a transaction must be notified to the Commission. Companies therefore know in advance when notification is required at EU or national level. With the approach in Illumina, however, there is no more certainty. Even if a merger does not meet the EU thresholds nor the Member State’ threshold, where, in other words, it would have normally fallen outside the jurisdiction of both, it may still be subject to the obligation to notify the Member State. In some instances, such referrals occur at the Commission’s own instigation, which is why the Illumina case also brought a lot of legal uncertainty in the merger control process.

The Commission having lost the case, Bellis nevertheless believes that the Illumina case is unlikely to significantly constrain the institution in practice. In his view, the Commission and the Member States can relatively easily adapt to the ruling. If Member States introduce in their legislation the possibility for their competition authorities to “call in” mergers that fall below national notification thresholds, the situation changes. In such circumstances, the referral would be based on national legal competence, meaning that the Illumina judgment would no longer apply in the same way.

As a result, it would be relatively straightforward for Member States to adjust their legislation to allow the referral of such transactions to the Commission. According to Bellis, this explains why the Commission did not appear particularly concerned about losing the Illumina case, since the practical consequences of the ruling can be mitigated through changes in national merger control regimes.

The potential integration of non-economic and highly speculative factors in EU merger control

The last two issues raised by Bellis concern the necessity to define the potential integration into the legal analysis of non-economic aspects such as the protection of the environment or the supply chain and the integration of highly speculative concepts such as innovation.

The former is about whether non-strictly economic or at least non-competition factors should be introduced into the analysis of a merger. Some of the questions, for example, are whether a merger, even if it limits competition within the EU, should nevertheless be approved because it is useful from an environmental standpoint, or because it ensures the reliability of supply chains. In other words, should the protection of the environment and the protection of the supply chain be introduced as new exceptions that could be used by the Commission to authorise mergers otherwise prohibited? Can such considerations legitimately be integrated into competition analysis or should they instead be addressed through other regulatory instruments? These are some of the questions which the new merger guidelines will need to address. 

The latter concerns the role of “innovation” in merger control. Innovation has only become a significant factor in merger analysis over the past five to seven years and was therefore not addressed in detail when the current guidelines were adopted. Because it is new, the notion has yet to be more clearly defined. For the moment, Bellis describes innovation as a “highly speculative” concept and the question of how the impact on the market should be determined when a merger creates a risk of negatively affecting innovation is another question the new guidelines will have to clarify.

Taken together, Bellis identifies these four main issues that are currently surrounding the debate on the revision of the merger guidelines. While some, such as the concerns about European champions, go beyond what the guidelines will potentially be able to address on their own, innovation and how the Commission will assess its impacts on competition along with the integration of non-economic factors will hopefully be clarified in the new merger guidelines.

The time-consuming pre-notification process: an issue that remains

Beyond these four concerns, Bellis further points to a burdensome procedural aspect that remains in the EU merger control system, particularly with regard to the notification process. Quite frankly, he explains, the existing guidelines themselves are largely satisfactory; the real issue, according to him, lies in how they are applied in practice by the Commission. Fifteen years ago, Bellis co-authored an article with two colleagues from Van Bael & Bellis, Porter Elliott and Johan Van Acker, proposing ten suggestions to improve the functioning of EU merger control: “The current state of the EU merger control system: Ten areas where improvements could be made” [1]. This article was presented in a session of the Fordham Law School Annual Competition Law Conference which was attended by then Competition Commissioner Joaquín Almunia. Bellis was later informed by DG Comp officials that they took notice of the recommendations for the improvement of the merger control system and acted on some of them. Nevertheless, one of the main problems identified in the article was the considerable amount of time required to obtain approval for a merger and that still hasn’t changed. 

What is particularly problematic is the length of the pre-notification phase, which can sometimes last up to a year before a transaction is formally notified to the Commission. During this stage, companies engage in extensive discussions with the Commission before being allowed to actually submit the official notification. In Bellis’s view, this preparatory phase can become extremely burdensome. The Commission receives hundreds of notifications annually but the vast majority of mergers raise no serious competition concerns. As he points out, these routine cases, while lackluster in terms of legal theory, consume a disproportionate amount of legal resources and personnel.

Given the fact that the Commission mostly either approves the transaction outright or with conditions and commitments, which account for around 90% of notifications, Bellis questions the proportionality of the current system. For society, he says, “that is a waste of time.” He is, however, also aware that the procedural concerns are not something that the revised guidelines can address. The problem relates more to administrative practice and the way the Commission applies the regulation than to the wording of the guidelines themselves. 

For Bellis, the current revision exercise is valuable primarily because it stimulates a broader debate about the objectives of merger control in today’s economic environment. Many of the issues raised during the consultation process may never be reflected directly in the final guidelines, but the discussions themselves remain generally very useful.

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[1] J.-F. Bellis, P. Elliott and J. Van Acker, “The current state of the EU merger control system: Ten areas where improvements could be made,” published in Chapter 13, International Antitrust Law & Policy: Fordham Competition Law, 2011, pp. 325-352.