The ECJ issued an important ruling on 16 March 2023 in Towercast case (C-449/21), in which it clarified that mergers which are not notifiable under the EU or national merger control rules can be reviewed based on Article 102 TFEU. This means that an acquisition by a dominant undertaking may, under certain conditions, represent in itself abuse of dominance. The application of abuse of dominance rules to the below-the-threshold mergers will be especially applicable to the so-called “killer acquisitions”, where a dominant player acquires a small but prospective competitor before the latter can become a viable threat to the former’s market position. Such acquisitions may harm consumers, particularly in the pharma industry.
The application of Article 102 to merger control is not a novelty. It was confirmed by the ECJ in Continental Can (Case 6-72). However, the Continental Can case was decided in 1973, before the adoption of the merger control regulation in the EU. After the adoption of the Merger Regulation with its ex ante control regime in 1990, the perception that Article 102 is no longer an appropriate instrument for assessment of mergers prevailed. Towercast has come full circle and the expectation is that the national competition authorities are likely to increasingly use abuse of dominance tools to challenge potentially harmful acquisitions which fly below the merger control radars (the Belgian NCA has already initiated an investigation into Proximus’ acquisition of edpnet on the basis of abuse of dominance rules on 22 March, only 6 days post-Towercast).
Towercast sets a high standard for finding that an acquisition of a competitor is abuse of dominance. A mere finding that the undertaking’s dominant position is strengthened by the acquisition is not enough – the authority must prove that the degree of dominance achieved through the transaction would “substantially impede competition”. However, the very threat of a probe into the transaction which is below the threshold will present a risk in M&A transactions by dominant undertakings. That risk will have to be handled through an ex ante analysis of potential anticompetitive effects of the transaction.
The Towercast judgement is not expected to have much impact on merger control in Serbia, Montenegro and Bosnia and Herzegovina. Merger control thresholds in Serbia and Montenegro are notoriously low, so any significant transaction rarely falls below them. On the contrary, a large number of foreign-to-foreign transactions without meaningful local nexus are notifiable.
Furthermore, the authorities in Serbia, Montenegro, and Bosnia and Herzegovina already have a legal basis within the merger control framework to review concentrations falling below the turnover thresholds. Under the competition laws of Serbia and Montenegro, the authorities may conduct ex-post review of the transaction which is below the threshold if the parties to the transaction have high aggregate market share (60% in Montenegro, 40% in Serbia). In Bosnia and Herzegovina, the joint market share threshold of 40% is a stand-alone basis for a merger notification.
Considering these characteristics of the local merger control regimes, as well as the fact that the application of the abuse of dominance rules requires a higher standard of proof of anticompetitive effects, it is unlikely that the NCAs authorities in Serbia, Montenegro or Bosnia and Herzegovina will focus on ex-post control of non-notifiable transactions under the abuse of dominance framework.