New Guidance on Article 22 EUMR Referrals to the European Commission

The European Commission (EC) has published new guidance on the application of the referral mechanism set out in Article 22 of the EU merger regulation (EUMR) allowing for mergers falling below national merger thresholds to be referred to the EC. Key Points:

..Effective immediately, the EC will start accepting referrals of transactions from EU national competition authorities (NCAs) that fall below the national merger control thresholds. To be referred to the EC, transactions must affect trade between Member States and threaten to significantly affect competition within the territory of the Member State or States making the request. The Article 22 Guidance recognises that the EC has historically discouraged such referrals.

..The EC has changed its practice because of a perceived enforcement gap regarding potentially anticompetitive mergers falling below all merger thresholds in the EU. While digital and pharma/biotech mergers are in the eye of the storm, the EC’s renewed practice is not limited to those specific sectors.

..NCAs have 15 working days to refer a merger to the EC after the transaction is “made known” to them. The Article 22 Guidance does not explain what level of knowledge would trigger this time period, leaving the parties uncertain as to whether their transaction might still be challenged, even after closing.

..This change is a very significant development for dealmakers. Any transaction that may be seen as potentially raising competition issues could end up being reviewed by the EC — no matter how small the target, and even after the deal has closed. Further, there is no clear time limit on when closed transactions can be referred to the EC.

..As these referrals may impact the timing, and even the feasibility, of transactions, parties to a concentration falling below national thresholds will now systematically need to assess whether their transaction can significantly affect competition in any EU Member State. Parties should also determine how to address any residual uncertainty — either by closing quickly and challenging a possible post-closing referral, or by seeking a modicum of certainty from the EC and relevant NCAs that they will not refer. Neither approach is without risks.

Please see full publication below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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