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 Merger Regulation does not include any possibility of exemption for reasons not related to competition. Article 2(1)(b) provides that the Commission must take into account in its appraisal, “the development of technical and economic progress provided that it is to consumers' advantage and does not form an obstacle to competition”. However, the notion of technical and economic progress is only  …

Basis

The Merger Regulation does not include any possibility of exemption for reasons not related to competition. Article 2(1)(b) provides that the Commission must take into account in its appraisal, “the development of technical and economic progress provided that it is to consumers' advantage and does not form an obstacle to competition”. However, the notion of technical and economic progress is only one of the factors considered in the appraisal presented as having the exclusive aim of measuring the impact of the merger on competition. The Commission has now established in both its guidelines on the assessment of horizontal  and non-horizontal mergers , the efficiency gains theory.

Like the efficiency gains defense of US law, the theory is based on the idea that the positive effects of a merger in terms of economic efficiency are in certain circumstances sufficient to make up for the anticompetitive effects it may produce. In this way, although a horizontal merger reduces the number of undertakings present on a market and facilitates oligopolistic collusion and interdependency, it also enables the undertaking initiating the merger to reach an optimum size more rapidly and to achieve economies of scale which can then be passed on to consumers. While a vertical or conglomerate merger may eliminate competitors at each stage of the economic process and reduce or suppress all potential competition, it can allow the parties to save on business costs, improve research or finance their activities on neighboring markets. The Commission states in its Guidelines on the assessment of non-horizontal mergers that the fact that competitors may be harmed because a merger creates efficiencies cannot in itself give rise to  competition concerns and the General Court  deems that reasoning to be applicable by analogy in the context of a horizontal concentration, or even in the context of a tight oligopoly.

Efficiency gains relate to all of the synergies the new entity is able to achieve post-merger. Such efficiencies may be quantitative (reducing production costs, achieving economies of scale , new manufacturing techniques) or qualitative (new products, improved products  etc.). In terms of consumer benefits, efficiencies relating to fixed costs are less likely to be passed on  within a reasonable time-frame than reductions in marginal costs which immediately affect a firm's profit maximizing price/output decisions . Efficiencies are taken into account where three cumulative conditions are fulfilled : they have to benefit consumers , be merger-specific and be verifiable .  Furthermore, they must be sufficient to offset the impediment to competition caused by the merger . Thus, according to the Commission, where a transaction would result in the creation of near-monopoly on a number of markets, any efficiencies would have to be particularly substantial . On the other hand, such gains are taken into account when they are able to more than offset the price increases estimated on the relevant market  .

According to the General Court, the condition relating to the verifiability of efficiency gains does not require the notifying party to provide data capable of being independently verified by a third party or documents, dated pre-merger, which serve to objectively and independently assess the scope for efficiency gains generated by the acquisition but merely means that when the necessary data are not available to allow for a precise quantitative analysis, it must be possible to foresee a clearly identifiable positive impact on consumers, not a marginal one .

The concept of the “pass-on” of efficiency gains to consumers does not mean that if a merger generates cost savings, the parties must be likely to pass them on to their customers, insofar as the pass-on of cost savings does not prevent the parties from being able to claw back those gains . In fact, the requirement of making the efficiency gains benefit consumers is often linked to the existence of competitive pressures: such benefit is unlikely if the market power of the new entity is very high. Efficiency gains are relevant to the competitive assessment when they are a direct consequence of the notified merger, i.e. they cannot be achieved by less anticompetitive alternatives . Lastly, efficiencies must also, as far as is possible, be quantifiable .

The burden of proving the positive effects of the merger falls to the parties  but the difficulty of proving the effects can vary depending on the type of efficiency gains involved . The Commission, without expressly defining the term, also demands that efficiencies be “timely” i.e. that they should not occur too far in the future . According to the EU court, the Commission cannot be censured for having expressed its concerns regarding the extrapolation from historical data prior to the merger, insofar as, given the multitude of changes which had taken place over the previous ten years, it was impossible to impute any efficiency gain from a 2002 merger into a transaction that had to be completed in 2012 . Even if they satisfied the three criteria of the Horizontal Merger Guidelines (verifiable, merger-specific and benefit to consumers), efficiency gains cannot be taken into consideration where there remains significant uncertainty regarding the timing of their implementation .

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 76 to 88.

Commission Notice No 2008/C 265/07 of 18 October 2008, Guidelines on the assessment of non horizontal mergers under the Council Regulation on the control of concentrations between undertakings, at pt 21, which refers to the section of the guidelines on horizontal mergers dealing with efficiency gains.

Commission Decision 7421 of 19 May 2015, Orange/Jazztel, LawLex201700000651JBJ: although the efficiencies related to the elimination of double marginalization of mobile services provided by the notifying parties have been demonstrated to the standards required by the Horizontal Merger Guidelines and can be accepted, they do not offset entirely the significant anticompetitive effects generated by the merger.

Commission Decision M.6166 of 1 February 2012, Deutsche Börse/NYSE Euronext, LawLex201700000652JBJ: absence of consideration of the claimed efficiencies which would have had to be particularly substantial given the fact that the concentration would have given rise to a situation of near-monopoly on a number of markets, insofar as some of those efficiencies could be achieved through less anticompetitive means, are not verifiable or, if they are, would have pass-on effetcs to customers although the size of this effect could not be determined.

Commission Decision M.7630 of 8 Janaury 2016, FedEx/TNT Express, LawLex201700000674JBJ: the existence significant merger specific efficiencies resulting from the operation is established where they could not be achieved to a similar extent by less anticompetitive alternatives and as, even if the results of the Commission's price concentration analysis had been statistically significant, they would have more than offset the price increases estimated on the national markets concerned.

Case T-342/07 Ryanair Holdings plc. [2010] ECR II-3457 LawLex201000001305JBJ.

Case T-175/12 Deutsche Börse AG, Judgment of 9 March 2015, LawLex201700000663JBJ.

Commission Decision M.053 of 2 October 1991, Aerospatiale- Alenia/de Havilland, LawLex200400002474JBJ.

Commission Decision M.5141 of 17 December 2008, KLM/ Martinair, LawLex201000001351JBJ.

Case T-296/18 Polskie Linie Lotnicze "LOT", Judgment of 20 October 2021,  not available in English: where the Commission considers, on the basis of Article 6(1)(b) and (2) of Regulation 139/2004, that, in view of the commitments made by the intervening party, the concentration in question is not likely to constitute a significant impediment to effective competition in the internal market or a substantial part thereof, it is not necessary for the notifying party to demonstrate efficiency gains.

Although it is easy to prove the passing on to final consumers of variable cost reductions, it is not so for economies of scale; however the latter are nonetheless most often relied on by merging parties.

See however Commission Decision M.4439 of 27 June 2006, Ryanair/Aer Lingus, LawLex200800000318JBJ, which specifies that the efficiency gains relating to fixed costs are, in terms of benefits for consumers, less likely to be passed on within a reasonable time than reductions of marginal costs that immediately affect decisions relating to optimal profitability yield/price of a company.

The General Court of the Union is not bound either by the Commission's guidelines or by its previous practice, but it may nevertheless, in the context of its task of interpreting European Union law, adopt the guidance and the economic or legal assessments contained in them, Case T-399/16 CK Telecoms UK Investments Ltd, Judgment of 28 May 2020, LawLex202000000537JBJ.

Commission Decision M.7612 of 1 September 2016, Hutchison 3 G UK/Telefonica UK, LawLex201700000672JBJ.

Commission Decision M.053 of 2 October 1991, Aerospatiale- Alenia/de Havilland, LawLex200400002474JBJ; M.2608 of 18 October 2001, INA/FAG, LawLex200500004191JBJ.

Commission Decision M.3732 of 15 July 2005, Procter & Gamble/Gillette, LawLex200900000153JBJ.

Commission Decision M.4439 of 27 June 2005, Ryanair/Aer Lingus, LawLex200800000318JBJ.

For an example of application, see, Commission Decision M.4439 of 27 June 2006, Ryanair/Aer Lingus, LawLex200800000318JBJ.

The concept of consumer refers to both intermediary and final consumers and includes the actual and potential customers of the parties to the concentration.

The notifying parties must communicate in a timely manner all the information necessary to prove that the alleged efficiency gains are merger-specific and are likely to be achieved.

European Competition Law

347. Basis

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Les notions juridiques connexes

347. Basis

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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