European Competition Law provides a wide-ranging review of the European rules relating to competition: restrictive agreements, abuse of a dominant position, impact of intellectual property rights, procedure, merger control, State aid.

European Competition Law

In its initial version, the merger control regulation prohibited the creation or strengthening of a dominant position as a result of which competition would be significantly impeded . Now, prohibition directly refers to the impeding of competition, the creation or strengthening of a dominant position - which is still specifically mentioned - represents only one case among others of the impeding of competition ( Art. 2(3), Regulation No 139/2004) . According to the General Court, it follows from the wording of Article 2(2)  and (3) of Regulation No 139/2004 that the essential criterion for examining the compatibility of a merger with the internal market is the creation of a significant impediment to effective competition (SIEC) in the internal market, the use of the adverb “in particular” indicating that the creation or strengthening of a dominant position is one of the scenarios in which such an obstacle may be found to exist, so that a concentration creating or strengthening a dominant position does not automatically give rise to a SIEC, and that there is no automaticity between the dominant position criterion and the SIEC criterion . A significant impediment to effective competition arising from the merged entity's future decisions can only be considered a direct and immediate consequence of the merger, rendering it incompatible with the internal market, if this future behavior is made possible and economically rational by the change in the characteristics and structure of the market caused by the merger .

Furthermore, according to the Court of Justice, Article 2(3) of Regulation No 139/2004 and the recital thereto must be interpreted as meaning that the concepts of the creation or strengthening of a dominant position, on the one hand, and the existence of non-coordinated horizontal effects resulting from the elimination of an important competitive constraint on an oligopolistic market, on the other, are compatible and not mutually exclusive, since a market may be dominated by an individual undertaking while being oligopolistic, and the individual dominant position of this undertaking on such a market can be strengthened by the non-coordinated horizontal effects of a merger .

The effects-based analysis is thus gradually replacing the structure-based analysis. Consequently, even though the market share of undertakings party to the concentration still plays an essential role , other criteria are now taken into consideration. 

In the guidelines on the assessment of horizontal  and non horizontal mergers , the Commission therefore takes into account the degree of concentration of the market on which the transaction takes place. It considers that it is rather unlikely for a horizontal merger to raise competition issue on a market where the post-merger HHI  is less than 1,000, or between 1,000 and 2,000 with a delta  below 250, or above 1,000 with a delta below 150 . On the other hand, in spite of the existence of combined market shares below 30%, a concentration may hinder competition if the HHI and delta values were above those defined as initial indicators of the absence of competition concerns in the Horizontal Guidelines . In case of non-horizontal mergers, a concentration raises no competition issues where the post-merger HHI is less than 2,000 . According to the General Court, although exceeding the thresholds of the Herfindahl-Hirschmann index (HHI) does not give rise to the presumption of the existence of competition issues, the higher the excess, the greater the  likelihood of such problems .

Within this conception, factors  likely to favor non-coordinated  or unilateral effects (price increase by reduction of quantities produced)  may be directly assessed, independently of any reference to a dominant position , which represents only a means to produce them. According to the Commission, in differentiated markets, market shares, although providing an indication of the market power of the parties, may not fully reflect the competitive interaction and it is therefore necessary to examine the elements pointing towards price rises before discussing countervailing factors . 

The Guidelines on horizontal concentrations set out a non-exhaustive list of such factors :

- customers have limited possibilities of switching supplier;

- competitors are unlikely to increase supply if prices increase;

- the merged entity is able to hinder expansion by competitors due, in particular, to control over the supply of inputs or distribution possibilities, to control over a patent or brand, or to an additional financial strength;

- the merger eliminates an important competitive force , such as an undertaking selling innovative products, even if its market share is relatively small ; according to the Court of Justice, to be classified as an “major competitive force”, it is sufficient for an undertaking to play a more important role in competition than its market share or any other similar indicator would suggest; in addition, the notion of “major competitive force”, which cannot be applied exclusively to undertakings which compete particularly aggressively on price, and which would force their competitors on the market to align themselves on their prices, or to undertakings whose pricing policy would be likely to significantly alter the competitive dynamics on the market concerned, may cover the case of an undertaking which has recently entered the market concerned, and which would in the future exert strong competitive pressure on the other undertakings present on this market or an undertaking which, despite its relatively small market share, has promising products in development . Similarly, the Guidelines on Non-Horizontal Mergers characterize the existence of non-coordinated effects in the case of market foreclosure, i.e. hindering access by actual or potential competitors to sources of supply or markets, with the aim of increasing the price charged to customers .

According to the case-law, a concentration will significantly impede effective competition where: it eliminates competition between two close competitors in a market where there are no significant mitigating factors, such as the existence of competitors that could act as a disciplining element on the merged entity, or customers with the ability to directly constrain its pricing behavior ; it leaves only one remaining competitor able to exert competitive pressure which would not be sufficient to constrain the merged entity's incentive and ability to raise prices while the market is characterized by high entry barriers and the absence of any credible potential competitors ; it leads to a likely price increase by the new entity and subsequently by its competitors, which, after retaining their existing customers or even attracting new customers from the merged entity, will be incentivized to raise their prices in turn due to the increase in the demand ; it produces a high concentration ratio likely to result in a deterioration of the quality of the service provided and a price hike  or it reduces innovation incentives on a market where barriers to entry and positioning are relatively high, by bringing together two close competitors which exert a strong competitive constraint on each other whereas no other operators have the proven technology which would allow them to become credible competitors in the market in the near future . On the other hand, the mere effect of reducing competitive pressure on the remaining competitors is not, in principle, sufficient in itself to demonstrate a  significant impediment to effective competition in the context of a theory of harm based on non-coordinated effects: the merger must give rise to the elimination of the important competitive constraints that the merging parties had exerted upon each other, as well as a reduction of competitive pressure on the remaining competitors for the non-coordinated effects resulting from a concentration to be capable of leading, in certain circumstances, to a significant impediment to effective competition  . According to the Court of Justice, the standard of proof is the same for the Commission when it comes to demonstrating a significant impediment to effective competition as it is for establishing a significant impediment to effective competition that is “more likely than not” . In addition, the fact that competitors may be harmed by the fact that a merger generates efficiencies cannot, in itself, constitute an impediment to competition .

When the transaction takes place in a concentrated market, the Commission assesses the possible existence of coordinated effects. The standard of proof required to establish the existence of coordinated effects in an oligopolistic market is not materially different from that required to establish non-coordinated effects, but the more difficult it is to establish the theory of harm and the cause-and-effect relationship, the more demanding the EU court must be in its concrete examination of the evidence produced in this regard by the Commission .

Also, a vertical or conglomerate  restrictive effect may be the result of a horizontal merger. The anticompetitive effect of the transaction does not then stem from the increase in concentration resulting from the transaction, but from an increase in the barriers to entry and mobility plus the risk of becoming dependent on the new entity as it would be in a position to offer the different types of services as a bundle as opposed to on a stand-alone basis . This is also the case where the distribution and procurement markets are so closely inter-dependent that, due to a spiral effect, the creation of a dominant position on one market will lead to the further strengthening or the creation of a dominant position on the other , where the transaction limits the supply sources  or where the new entity's presumed dominant position is reflected by the strengthening of its purchasing power . According to the Commission , the overrun, on at least four markets of supply, of the so-called “threat rate” established at 22%, which, for a supplier corresponds to the percentage of turnover achieved with a client from which the loss of that customer represents a threat to the survival of its business, constitutes an index of its economic dependence on the distributor.

On the other hand the vertical link created leads neither to the creation, nor to the strengthening of a dominant position on the relevant market where customers may resort to alternative supplies on the short term  or there are significant competitors . 

Effects-based analysis naturally encourages us to look beyond the immediate effects of the transaction to take account of the factors that propagate the restriction of competition that it entails. A merger can thus have a “snowball” effect, which consists of operators carrying out their activity at a level close to the break-even point seeing their competitive position weaken at the end of the merger. This weakening is incompatible with the internal market if it concerns the competitors of the parties to the transaction, leads to an increase in costs which is reflected in prices, and involves a risk of monopolization . Network effects may arise when the value of a product for a user increases with the number of users of the same product or of compatible products. Concentration between networks, leading to the creation of a network of such a large size that the new entity will be able to either increase the costs of its competitors, or charge low prices to attract customers from competing networks , or control technical developments, in particular by setting its own data transmission standards  or become the compulsory infrastructure , is incompatible with the internal market.

For the second step, the factors favoring unilateral effects are weighed up with mitigating factors such as the customers' buying power or the relative level of entry barriers to establish the competitive balance of the concentration. 

Former Article 2(3) of Council Regulation No 4064/89 of 21 December 1989, OJ L 395, 30/12/1989, amended by Regulation No 1310/97 of 30 June 1997, OJ L 180, 9/06/1997. Although proof of the creation or strengthening of a dominant position  within the meaning of Regulation No 139/2004 may in certain cases  constitute proof of a significant impediment to effective competition,  that observation does not mean that the second criterion is the same in  law as the first, but only that it may follow from one and the same  factual analysis of a specific market that both criteria are satisfied, see Case T-399/16 CK Telecoms UK Investments Ltd, Judgment of 28 May 2020, LawLex202000000537JBJ.

The objective of the reform was in particular to facilitate the control of oligopolistic market situations and to improve the control of non-horizontal concentrations.

The delta, i.e. the change in the HHI, is a useful proxy for the change in concentration directly brought about by the merger.

See Commission Notice No 2004/C 31/03, at pts 19 et seq. The Guidelines (at pt 20) however reserve a series of cases where:- one of the parties is a potential entrant or a recent entrant;- one of the parties is an innovator;- one of the parties is a maverick firm;- one of the parties has a market share of 50% or more;- there are cross-shareholdings; - there are indications of coordination.

Commission Decision M.6497 of 12 December 2012, Hutchison 3G Austria/Orange Austria, LawLex201700000647JBJ.

See Commission Notice No 2008/C 265/07, at pts 25 et seq.The Guidelines on non-horizontal mergers reserve the following cases:- mergers which involve a company that is likely to expand significantly in the near future;- significant cross-shareholdings or cross-directorships;- one of the parties would disrupt coordinated conduct;- there are indications of coordination.

For issues arising from the taking into account of the HHI, see Case T-405/08 Spar Österreichische Warenhandels AG, Judgment of 7 June 2013, not available in English: when neither the market shares nor the other factors examined indicate competition problems, the Commission cannot be reproached with having disregarded the guidelines by not considering the degrees of concentration in the contested decision. Also see Case T-240/18 Polskie Linie Lotnicze “LOT”, Judgment of 20 October 2021, not available in English, holding that the fact that the slot allocations held by the notifying party at Berlin airports may, at certain times, exceed the 30% threshold referred to in the non-horizontal Merger Guidelines and that the Commission did not verify whether the HHI was below 2000 does not allow it to consider that the notifying party violated the guidelines, since, according to them  those levels of market share and concentration relate to the determination of the market power of the undertakings concerned at post-merger and the possession of significant market power on at least one of the relevant markets is only a necessary, but not sufficient, condition for establishing the existence of competition problems since none of the three cumulative conditions relating to foreclosure of the input market is fulfilled in the present case. 

Upward pricing pressure (UPP) constitutes one of those factors, see Commission Decision M.6497 of 12 December 2012, cited above; Case T-399/16 CK Telecoms UK Investments Ltd, Judgment of 28 May 2020, LawLex202000000537JBJ, while indicators of upward pressure on prices, such as the GUPPI or UPP  tests, may be useful for screening purposes, by enabling the competition  authorities to judge the need for a more thorough investigation, they  must not be regarded as credible forecasts of price increases or  simulations of mergers.

In the guidelines, the Commission describes unilateral effects as non-coordinated effects, as opposed to the coordinated effects characterizing situations of collective dominance.

The restriction of competition consists in the possibility for the parties to the concentration of unilaterally increasing their prices or reducing the quantity of products offered in one of their establishments, in order to cause a switch of the demand from that establishment to their other stores, see e.g. Commission Decision M.1628 of 9 February 2000, TotalFina/Elf, LawLex200500005291JBJ, on the possibility for the new entity to raise its prices with a strong likelihood that its competitors would follow suit; M.2187 of 9 October 2001, CVC/Lenzing, LawLex200400002653JBJ, on the capacity to create shortage of supply in order to keep prices high; M.2650 of 26 June 2002, Haniel/Cementbouw/JV (CVK), LawLex200700002007JBJ, for a concentration enabling the joint venture, due to the presence of one of the parent companies on a closely related market, to unilaterally increase prices and therefore to act independently of its competitors and purchasers; M.4494 of 20 February 2007, Evraz/Highveld, LawLex200700001712JBJ, for a concentration which is likely to encourage the new entity which holds a 70-80% market share and is vertically integrated to reduce supplies and to raise its prices in order to evict competitors on a downstream market, in an industry were alternatives are rare; M.4844 of 3 October 2007, Fortis/ABN AMRO Assets, LawLex200800000300JBJ, on the risk resulting from a transaction which combines the first and fourth operator on an already highly concentrated market, characterized by the existence of high barriers to entry, to encourage the parties to extract more profit from the existing customer base rather than to conduct an aggressive price policy against competitors.

Commission Decision M.6905 of 8 May 2014, Ineos/Solvay/JV, LawLex201700000648JBJ: an operation that will generate non-coordinated effects leading to the creation of a dominant operator, able to increase prices and reduce output on the market concerned, with other suppliers -even if taken collectively - having no incentive to offset this increase, and in the absence of competitive constraint exerted by imports, is likely to impede competition.

Commission Decision M.5658 of 17 November 2011, Unilever/Sara Lee Body Care, LawLex201700000649JBJ.

Art. 2(2): “Concentrations which would not significantly impede effective competition in the common market or in a substantial part of it, in particular as a result of the creation or strengthening of a dominant position, shall be declared compatible with the common market”.

Commission Notice No 2004/C 31/03, at pts 26 et seq.

Case T-399/16 CK Telecoms UK Investments Ltd, Judgment of 28 May 2020, LawLex202000000537JBJ, considering that even if the operators concerned are relatively close competitors in some of the segments of a concentrated market comprising four mobile network  operators, that factor alone is not sufficient to prove, in the present case, the elimination of the important competitive constraints which the parties to the concentration exerted upon each other and cannot suffice to establish a significant impediment to effective competition as, if that were not the case, any concentration resulting in a reduction from four to three operators would as a matter of principle be prohibited.

Case T-399/16 CK Telecoms UK Investments Ltd, Judgment of 28 May 2020, LawLex202000000537JBJ. The Commission makes an error of law and an error of assessment in finding that an “important competitive force” does not need to stand out  from its competitors in terms of impact on competition, particularly insofar as such a position would allow it to treat as an important competitive force any undertaking in an oligopolistic market exerting competitive pressure, which would allow the Commission to prohibit, by that fact alone, horizontal concentrations in such markets and would infringe the principle of legal certainty, since the Commission could  thus omit to analyze the possible elimination of the important competitive constraints that the merging parties exert upon each other in favor of a theory of harm based solely on a reduction of competitive  pressure on the remaining competitors.

The Commission's reasoning which seems to imply that an undertaking which has historically played a disruptive role will necessarily play the same role in the future and cannot reposition itself on the market by adopting a different pricing policy, is vitiated by an error of assessment of the historic role played by that undertaking on the market, and in particular its value as evidence of a significant impediment to effective competition, see Case T-399/16 CK Telecoms UK Investments Ltd, Judgment of 28 May 2020, LawLex202000000537JBJ, holding that the mere growth in gross add shares over several consecutive years of the smallest mobile network operator in an oligopolistic market, which has in the past been classified as a “maverick” by the Commission and in the Statement of Objections in the present case, does not in itself  constitute sufficient evidence of that operator's power on the market or of the elimination of the important competitive constraints that the  parties to the concentration exert upon each other.  

 Case C-581/22 P Thyssenkrupp AG, Judgment of 4 October 2024, LawLex202400007566JBJ: the concept of “important competitive force” which makes it possible to take into account situations in which the market shares of an undertaking could lead to its importance in terms of competition being underestimated, according to paragraph 37 of the guidelines on horizontal mergers, is compatible with point 14 of those same guidelines, according to which market shares, although relevant, give only useful first indications of the competitive importance of market participants. 

Commission Notice No 2008/C 265/07, pt. 18.

Commission Decision M.7061 of 10 September 2014, Huntsman Corporation/Equity Interests held by Rockwood Holdings, LawLex201700000653JBJ.

Commission Decision M.7555 of 10 February 2016, Staples/Office Depot, LawLex201700000650JBJ.

Commission Decision M.7421 of 19 May 2015, Orange/Jazztel, LawLex201700000651JBJ.

Commission Decision M.5232 of 23 September 2008, WPP/TNS, LawLex201000001449JBJ.

Case T-58/20 NetCologne Gesellschaft für Telekommunikation mbH, Judgment of 13 November 2024, not available in English; Case T-58/20 Tele Columbus AG, Judgment of 13 November 2024, not available in English: the fact that a concentration gives rise to an addition of market shares or involves potentially dominant undertakings is not sufficient to consider that such a concentration would be incompatible with the internal market, provided that it does not significantly impede effective competition in the internal market or a substantial part of it.

Commission Decision M.6410 of 26 July 2012, UTC/Goodrich, LawLex201700000654JBJ.

Case T-399/16 CK Telecoms UK Investments Ltd, Judgment of 28 May 2020, LawLex202000000537JBJ: The Commission may not find that a mere decline in the competitive pressure which would result, in particular, from the loss of an  undertaking having more of an influence on competition than its market share would suggest, is sufficient, in itself, to prove a significant impediment to effective competition, insofar as this would amount to confusing three concepts, namely the concept of a “significant impediment to effective competition”, which is the legal criterion referred to in Article 2(3) of Regulation No 139/2004, the concept of “elimination of [an] important competitive [constraint]”, referred to in recital 25 of that regulation, and the concept of elimination of an “important competitive force”, based on the Guidelines, and would  considerably broaden the scope of Article 2(3) since any elimination of  an important competitive force would amount to the elimination of an important competitive constraint which, in turn, would justify a finding of a significant impediment to effective competition. See along the sames lines Case T-240/18 Polskie Linie Lotnicze “LOT”, Judgment of 20 October 2021, Polskie Linie Lotnicze “LOT”, not available in English: the mere fact that, in the absence of the concentration at issue, some of the slot at Berlin airports transferred to the notifying party could have been allocated to other airlines thereby reducing the barriers to entry for the latter with respect to those airports, is not sufficient in itself to demonstrate that the concentration would be likely to significantly impede effective competition.

Case C-581/22 P thyssenkrupp AG,  Judgment of 4 October 2024, LawLex202400007566JBJ, stating that the applicant is not entitled to argue that the evidentiary requirement applicable to the Commission is stricter with regard to the existence of significant impediments to effective competition than when a significant impediment to effective competition would be “more likely than not”, since, given the symmetrical structure of Article 2, paragraphs 2 and 3, of Regulation No 139/2004 and the forward-looking nature of the Commission's economic analyses in the field of merger control, it must be considered that, in order to declare a merger incompatible or compatible with the internal market, it is sufficient for the Commission to demonstrate, on the basis of sufficiently significant and concordant evidence, that it is more likely than not that the merger concerned would or would not significantly impede effective competition in the internal market or a substantial part of it; Case T-58/20 NetCologne Gesellschaft für Telekommunikation mbH, Judgment of 13 November 2024, not available in English.

Case T-240/18 Polskie Linie Lotnicze “LOT”, Judgment of 20 October 2021, not available in English, stating that even if it can generate efficiencies, which may harm competitors, the implementation by the new entity of more advantageous loyalty programs for its customers does not constitute a significant impediment to effective competition.

Case T-399/16 CK Telecoms UK Investments Ltd v Commission, Judgment of 28 May 2020, LawLex202000000537JBJ: the fact that a network-sharing agreement may, when it is concluded,  result in pro-competitive effects which counteract the restrictions it  contains, does not necessarily mean that the termination, renegotiation,  or that each subsequent alteration to its balance following a  concentration may necessarily be characterized as a significant  impediment to effective competition.

Commission Decision M.7758 of 1 September 2016, Hutchison 3 G Italy/WIND/JV, LawLex201700000671JBJ; M.7612 of 11 May 2016, Hutchison 3 G UK/Telefonica UK, LawLex201700000672JBJ. 

Commission Decision M.6800 of 16 June 2015, PRSfM/STIM/GEMA/JV, LawLex201700000670JBJ.

Commission Decision M.1221 of 3 February 1999, Rewe/Meinl, LawLex200400002627JBJ.

Commission Decision M.190 of 22 July 1992, Nestlé/Perrier, LawLex200500004234JBJ.

Commission Decision M.784 of 20 November 1996, Kesko/Tuko, LawLex200500004387JBJ; M.877 of 30 July 1997, Boeing/McDonnell Douglas, LawLex200400002566JBJ; M.1684 of 25 January 2000, Carrefour/Promodes, not available in English; Case T-22/97 Kesko v Commission [1999] ECR II-3775, LawLex200500004261JBJ.

Case T-58/20 Tele Columbus AG, Judgment of 13 November 2024, not available in English.

Commission Decision M.1684 of 25 January 2000, Carrefour/Promodes, not available in English.

Commission Decision M.1309 of 28 April 1999, Matra/Aérospatiale, not available in English.

Commission Decision M.1085 of 6 February 1998, Promodes/Catteau (not available in English); M.946 of 30 June 1997, Intermarché/Spar (not available in English).

Commission Decision M.1879 of 29 September 2000, Boeing/Hughes LawLex200500004732JBJ.

Commission Decision M.1069 of 8 July 1998, WorldCom/MCI, LawLex200500004397JBJ.

Commission Decision M.1741 of 28 June 2000, MCI WorldCom/Sprint, LawLex200500004486JBJ.

Commission Decision M.1027 of 27 May 1998, Deutsche Telekom/BetaResearch, LawLex200500004396JBJ;In the same vein, Commission Decision M.6570 of 30 January 2013, UPS/TNT Express, LawLex202000001880JBJ: the concentration is not compatible with the internal market insofar as  the new entity's non-integrator competitors, unlike the new entity, will  be unable to exert a sufficient competitive constraint in the network  industry concerned, which requires investment in infrastructure and  sometimes the outsourcing of certain activities to third parties, even  though outsourcing  reduces control over the value chain, operational  efficiency and the quality of the services provided.

Case C-581/22 P Thyssenkrupp AG, Judgment of 4 October 2024, LawLex202400007566JBJ, stating that since the concepts of, on the one hand, the creation or strengthening of a dominant position and, on the other hand, the existence of non-coordinated horizontal effects resulting from the elimination of an important competitive constraint on an oligopolistic market are not mutually exclusive and that the clearest non-coordinated horizontal effects occur when the merged entity obtains or strengthens an individual dominant position, the General Court cannot be faulted for having erred in law in considering that the Commission could to a similarly tailored extent rely on the same factors and indicators to demonstrate that the proposed merger could have led to the creation of a dominant position or to non-coordinated horizontal effects.

Just as the existence of very large market shares is highly important  and the relationship between the market shares of the parties involved  in the concentration and those of their competitors is relevant evidence of the existence of a dominant position or of a significant impediment  to effective competition, in that it enables the competitive strength of the competitors of the undertaking in question to be assessed, a  particularly small market share of one of the parties involved in the  concentration tends to suggest, prima facie, an absence of any  significant impediment to effective competition, especially where the  other operators have much larger market shares, Case T-399/16 CK Telecoms UK Investments Ltd, Judgment of 28 May 2020, LawLex202000000537JBJ.

Commission Notice No 2004/C 31/03 of 5 February 2004.

Commission Notice No 2008/C 265/07 of 18 October 2008. 

The Herfindahl-Hirschmann index (HHI), which is equal to the sum of the squares of the individual market shares of each of the undertakings active on the market, varies between 0 (atomistic market) and 10,000 (pure monopoly).

323. Competition analysis