Committee Reports > List of Committees > Joint > 1978 > Committee on the Secondary Legislation of the European Communities > Report No. 28 - Control of Concentrations between Undertakings

REPORT

Introduction

1. The Joint Committee has examined the Commission’s proposal for a Council Regulation on the Control of Concentrations between undertakings [R/1989/73]. This proposal emanated from the Commission in July, 1973. Examination of it by a Council Working Group has been rather drawn out and it is not possible to say when it may be adopted.

Contents of Proposal

2. The proposal is concerned with the competition policy of the EEC. It seeks to empower the Commission to exercise control over concentrations, which may affect trade between Member States, whereby a person or undertaking or group acquires control of one or several undertakings and thereby acquires or enhances the power to hinder effective competition in the common market or in a substantial part of it. The system of control proposed is similar to that already exercised by the Commission under Regulation No. 17/62 over agreements between undertakings or the abuse by large undertakings of their dominant position within the common market or in a substantial part of it. If it is amended as suggested by the Commission in the Council Working Group, the Regulation would apply to concentrations where (1) the aggregate turnover of the undertakings involved exceeds 500m. UA and their share of the market for the goods or services concerned is more than 20%, or (2) the market share exceeds 30% though the aggregate turnover is less than 500m. UA. Notification of such concentrations to the Commission would be compulsory unless the undertaking being taken over had a turnover of less than 50m. UA. If the Commission does not “commence proceedings” within three months, the concentration is presumed to be compatible with the common market. Unless special investigation or inquiries are required, a decision must be taken by the Commission within nine months of the commencement of proceedings. The Commission’s decision, based on specified criteria, may declare that a concentration is incompatible with the common market or that it is entitled to be exempted from the prohibitory provisions subject, perhaps, to stated conditions being observed. The Commission could require an existing concentration to be broken up. The Commission would have power to impose fines and periodic penalty payments to enforce compliance with the Regulation. Decisions by the Commission as well as the imposition by it of fines and periodic penalty payments would be subject to appeal to the Court of Justice.

Extension of Commission’s Powers

3. If, as a result of a concentration of the type covered by the proposed Regulation, an undertaking acquires a dominant position “within the common market or in a substantial part of it” and proceeds to abuse that position, the Commission has already the power under Regulation No. 17/62 to require the undertaking to end the abuse. Moreover, the Court of Justice has held (Case No. 6/72) that a merger itself may involve such abuse “if an undertaking in a dominant position strengthens such position in such a way that the degree of dominance reached substantially fetters competition, i.e. that only undertakings remain in the market whose behaviour depends on the dominant one”. In that case the Commission can order decartelisation. The Commission, therefore, already has substantial powers to counteract undesirable consequences of mergers. What it is seeking in the proposed Regulation is, in effect, a power to prohibit proposed mergers.

4. The Joint Committee agrees in principle that it is necessary to control mergers to ensure compliance with the competition rules of the EEC. It has, however, some doubts as to whether it is necessary to set up elaborate machinery for the control of proposed mergers of the type specified to achieve that end. As it is now more than five years since the proposal emanated from the Commission, it would seem desirable at this stage to review the position with a view to establishing if, in fact, the absence of the control proposed has, in fact, led to undesirable developments from the competition point of view.

Functions of Advisory Committee

5. If the Regulation were adopted the Commission would be obliged, before taking decisions, to consult the Advisory Committee on Restrictives and Monopolies which would consist of an official from each Member State. The Joint Committee believes that initially, at least, Member States should exercise control over the administration of the Regulation and that consequently, decisions of the Commission should only be taken with the approval of the Advisory Committee.

Time Limits for Decisions

6. If the Commission is to be given the onerous responsibility of vetting proposed mergers it seems to the Joint Committee that it must be prepared to deal with the matter with some urgency. In the Joint Committee’s view twelve months from notification is far too long to allow the Commission to come to a decision. In its opinion, the Commission should be required to commence proceedings within one month and to give a decision within two months.

Confidentiality

7. Finally, the Joint Committee would stress that in a matter as delicate as a proposed merger, the confidentiality requirements of the proposed Regulation are of paramount importance. It is essential that they be strictly observed and enforced.

Acknowledgement

8. The Joint Committee wishes to record its appreciation of the assistance it received from the Confederation of Irish Industry in considering this proposal.

(Signed) MARK CLINTON,

Chairman of the Joint Committee.

8th November, 1978.