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

The “failing company defense” was introduced in American antitrust law by the decision of the Supreme Court, Citizen (394 US 131, 1969) and was taken up for the first time by the 1992 Merger Guidelines. An anticompetitive merger under US law may be exempted from the prohibition laid down in Article 7 of the Clayton Act if the defendant brings evidence that the target company runs the risk of faili …

Conditions

The “failing company defense” was introduced in American antitrust law by the decision of the Supreme Court, Citizen (394 US 131, 1969) and was taken up for the first time by the 1992 Merger Guidelines. An anticompetitive merger under US law may be exempted from the prohibition laid down in Article 7 of the Clayton Act if the defendant brings evidence that the target company runs the risk of failing to meet its payments and cannot be reorganized and that there is no less prejudicial alternative in terms of competition (repurchase by a less powerful or non competing undertaking).

Although the reasoning underlying the failing company theory may sometimes be dubious, it is not part of an exemption or takeover-based analysis but of a purely competition-orientated analysis: due to the difficulties of the target undertaking which would have disappeared from the market in any event, the causal link between the merger and the harm to competition is broken. In its Guidelines on the assessment of horizontal mergers , the Commission lays down as a basic requirement for the compatibility of the concentration, that the deterioration of the competitive structure that would follow the merger cannot be caused by the merger . The prohibition of a merger is not justified if a deterioration of the competitive structure of the market would in any event deteriorate to at least the same extent without the merger .

Admitting the “failing company defense” is subject to three conditions :

- the acquired company would in the near future have been forced out of the market in the absence of the merger ;

- there is no less anti-competitive alternative purchase ;

- the failing undertaking would inevitably be forced out of the market in the absence of the merger; the inevitable nature of the disappearance of the assets is established where the acquired undertaking's market share would be taken over by the acquiring undertaking in case of disappearance of the purchased undertaking , and this condition must be assessed over a reasonable period corresponding to the lifetime of the products on the relevant market  and the takeover must be the direct result of the transaction .

The failing company defense must be dismissed where it is not established that the inevitable disappearance of an undertaking would allow the purchasing company, in the absence of a takeover as part of a merger, to acquire the same market share while, by contrast, the notified transaction would strengthen its dominant position by allowing it to use the potential of a new formula .

Commission Notice No 2004/C 31/03 of 5 February 2004, Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings, at pt 89.

See Case C-68/94 France and Société commerciale des potasses et de l'azote and Entreprise minière et chimique v Commission [1998] ECR I-1375, LawLex200500004280JBJ.

Commission Decision  M.6360 of 2 September 2013, Nynas/Shell/Harburg refinery: even though the proposed transaction is likely to lead to higher market shares for the combined entity than closure, the higher market share of the purchaser does not indicate anticompetitive effects,  relative to the closure scenario, insofar as the proposed transaction will preserve the existing production capacity in the assets and will add more capacity as a result of the verifiable expansion and as the additional capacity will be available on the EEA market at lower variable costs. which will likely have a positive effect on EEA prices relative to the scenario in the absence of the concentration.

Commission Notice No 2004/C 31/03 of 5 February 2004, Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings, at pts 90 et seq.

Commission Decision M.2314 of 11 July 2001, BASF/Eurodiol/Pantochim, LawLex200400002674JBJ: a concentration may be regarded as a "rescue merger" if there is no less anti-competitive alternative purchase and where, in the absence of a takeover, the acquired undertakings and the assets to be purchased would inevitably and rapidly disappear from the market; M.2810 of 1st July 2002, Deloitte & Touche/Andersen UK, LawLex200500004196JBJ: following the bankruptcy of the parent company of one of the players on a market once dominated by five firms, the merger of the national branches of two worldwide active groups is authorized where, in particular, the survival of that player depends upon its repurchase by one of the other four firms in a market requiring a worldwide network; M.2816 of 5 September 2002, Ernst & Young France/Andersen France, LawLex200500004198JBJ. See also noticing that the acquired undertaking would not be fully forced out of the market: M.1221 of 3 February 1999, Rewe/Meinl, LawLex200400002627JBJ.

Commission Decision M.308 of 14 December 1993, Kali - Salz/MdK/Treuhand, LawLex200700001998JBJ.

Case C-68/94 France and Société commerciale des potasses et de l'azote and Entreprise minière et chimique v Commission [1998] ECR I-1375, LawLex200500004280JBJ: a concentration must be found compatible with the common market where it is certain that the acquired undertaking would be forced out of the market if not taken over, the acquiring undertaking would gain the market share of the acquired undertaking if it were forced out of the market, and there is no less anti-competitive alternative purchase. See also on the dismissal of the failing company defense. Commission Decision M.993 of 27 May 1998, Bertelsmann/Kirch/Premiere, LawLex200500004166JBJ: evidence of the "failing" nature of a service likely to render legitimate an anticompetitive merger is not sufficient where it is not established that the acquired service would be forced out of the market if not taken over, that the purchasing undertaking would gain the market share of the acquired undertaking if it were forced out of the market and that there is no less anti-competitive alternative purchase.

Commission Decision M.2621 of 11 November 2003, Seb/Moulinex, LawLex200500005378JBJ.

Commission Decision M.2621 of 11 November 2003, Seb/Moulinex, LawLex200500005378JBJ: taking into account in the competition analysis the recovery potential of the brands of the target group, which went bankrupt before the merger, is subject to the condition that recovery of the market shares be sufficiently probable, it is a direct result of the merger - if not, the losses of market shares observed must be considered structural - and that the purchaser has significant innovative, commercial and financial capacity.

Commission Decision M.890 of 26 June 1997, Blokker/Toys 'R' Us, LawLex200400002569JBJ.

European Competition Law

346. Conditions

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346. Conditions

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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