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It appears that global antitrust regulators are singing from the same hymnal when it comes to the potential for post-closing scrutiny of deals that aren’t subject to pre-merger notification regimes.  This Cooley memo discusses a recent decision from the EU’s highest court holding that the absence of a pre-merger notification requirement doesn’t necessarily mean a deal doesn’t raise antitrust concerns. Here’s an excerpt summarizing the Court’s ruling:

The Towercast case involved an acquisition by Télédiffusion de France (TDF), a French provider of digital terrestrial broadcasting services, of one of its rivals, Itas. The deal was not reportable for merger review to the European Commission (EC) or the French Competition Authority (FCA). After the TDF/Itas deal closed, Towercast, a competitor, complained to the FCA that TDF had abused its dominant position by the acquisition. The FCA dismissed the complaint on the basis that it lacked competence to review the transaction retrospectively, because it was not reportable under the merger control rules. Towercast appealed the FCA’s decision, and the Court of Appeal of Paris requested guidance from the Court of Justice of the European Union (CJEU) on the relationship between the rules on abuse of dominance and merger review.

The CJEU noted that merger control rules assume that acquisitions that satisfy certain thresholds can have harmful effects on the market structure and competition – and so, must be notified for pre-merger review. The CJEU clarified, however, that this does not mean that acquisitions that do not meet the thresholds for review should never be subject to post-merger investigation under the abuse of dominance rules, which apply generally and independently of the merger control rules. The CJEU ruled in 1973, in Continental Can, that a firm holding a dominant position, in certain circumstances, may abuse that position contrary to Article 102 TFEU by way of an acquisition. In the decades since, specific merger control rules were adopted, but those rules did not affect the applicability of Article 102 TFEU.

On that basis, mergers & acquisitions that are subject to mandatory pre-merger review (under the EU Merger Regulation or corresponding member state laws) are immune from abuse of dominance claims under Article 102 TFEU. But where pre-merger reviews are not triggered, competition authorities and courts remain free to investigate whether an acquirer that holds a dominant position on a relevant market has abused that dominant position by acquiring a competitor. In that analysis, a finding of abuse presupposes that the acquisition strengthened the acquirer’s dominant position to such a degree that competition is ‘substantially’ impeded in the sense that the behavior of all remaining rivals ‘depends’ on the acquirer.

The memo says that the Towercast decision isn’t expected to open the floodgates to post-closing enforcement actions in the EU.  It notes that those actions present significant challenges when it comes to effective remedies, particularly because of the problems associated with attempting to “unscramble the eggs” of a closed deal.  It also points out that the standard for post-closing intervention under Article 102 is much higher than the standard that applies in the case of pre-merger review.

– John Jenkins