Australia: Minority report: When are acquisitions of small shareholdings subject to antitrust scrutiny?

EU proposes to extend its merger control powers to cover acquisitions of smaller shareholders.

When one business acquires control of another – whether by public takeover, private share purchase agreement, or acquisition of assets – this is generally treated by antitrust and competition authorities as a "merger" which needs to be assessed for its effect on competition under the "merger control" regime in the antitrust/competition jurisdiction(s) affected. This is for the obvious reason that the two businesses were previously independent of each other, but are now under common control – so that, if they were competitors of each other on the same market or markets, the transaction eliminates competition between them and reduces competition on the market overall.

But what if a company acquires only a minority interest in another company – say, a shareholding of just 25 per cent? This, too, is potentially problematic in competition terms if the companies compete with each other, because:

  • The minority shareholder will have a financial interest in the success of the company in which it has the shareholding and therefore will be less inclined to compete so vigorously against it; and
  • The minority shareholder might have a degree of influence over that other company (e.g., through the ability to block certain resolutions at shareholders' meetings, or to appoint directors to the board), and might use that influence to procure that the other company's commercial strategy is aligned with its own, rather than competing vigorously against it.

For these reasons, many jurisdictions apply their merger control regimes to the acquisition of minority interests. The following are notable examples.

United Kingdom

The UK merger control regime applies to acquisitions of majority control over another company, but also to acquisitions of lesser shareholdings, including the acquisition of the ability to exercise "a material influence".

  • The concept of "material influence" has been developed over time in various cases, and is not strictly defined by a shareholding threshold, but by a combination of factors such as shareholdings, ability to appoint board directors, special rights attaching to the shareholding, and influence arising out of commercial and structural links such as being a major creditor to the company.
  • The fact that a shareholding above 25 per cent gives the holder the ability to block a special resolution at a shareholders' meeting (that is a resolution defined in UK companies law as requiring a 75 per cent vote among shareholders) entails that such a shareholding will normally be held to confer "material influence".
  • But it is clear that even smaller shareholdings can also confer material influence. Guidance on merger control from the new UK competition authority, the Competition and Markets Authority, states that:
  • "Although there is no presumption of material influence below 25 per cent, the CMA may examine any shareholding of 15 per cent or more in order to see whether the holder might be able materially to influence the company's policy. Exceptionally, a shareholding of less than 15 per cent might attract scrutiny where other factors indicating the ability to exercise material influence over policy are present".28

In an actual case, the acquisition by the pay-TV broadcaster BSkyB of a 17.9 per cent shareholding in the free-to-air TV broadcaster ITV was held by the UK competition authorities, in January 2008, to confer "material influence", and therefore to be a merger, and was prohibited because of competition concerns. BSkyB was required to sell shares such that its shareholding in ITV was reduced to a level below 7.5 per cent29.


In Canada, merger control is triggered by share acquisitions leading to majority control, but also by share acquisitions leading to:

  • A shareholding of more than 20 per cent in a public company;
  • A shareholding of more than 35 per cent in a private company; or
  • "Significant interest", which (like the UK's "material influence" – see above) could occur with very low shareholdings, or indeed no shareholdings if there are contractual or other rights that confer such influence.

United States

In the United States, acquisitions of minority shareholdings can trigger a requirement to make a merger filing (notification) under the Hart-Scott-Rodino Act. There is no shareholding threshold, but any acquisition that results in the acquirer holding voting securities in another company to the value of more than US $70.9 million (about GB £43.3 million or €53.0 million).30


In Germany, the acquisition of majority control constitutes a merger triggering a notification (filing) obligation – whether this is a shareholding above 50 per cent of voting rights, or de facto majority control (e.g., the ability to command a majority at a shareholders' meeting, even though one has less than 50 per cent of voting shares, because other shareholdings are widely dispersed and in practice their shareholders do not attend).

In addition, the acquisition of smaller minority shareholdings can give rise to notification obligations in Germany:

  • An acquisition resulting in an interest of 25 per cent or more constitutes a merger under the German rules; and
  • Acquisitions below 25 per cent that confer a "competitively significant influence" over the other company count as mergers. The existence of a "competitively significant influence" will depend on a variety of factors – such as the right to appoint members of the board, special rights attached to the shareholding, shareholder information rights, and so on. In one 2008 case, the acquisition of a 13.75 per cent shareholding, coupled with the right to appoint three out of 12 board members were held to be sufficient to confer a "competitively significant influence";31 the acquisition was prohibited, and the acquirer was obliged to sell its shareholding.

The current debate – the EU situation

The EU Merger Regulation considers that a merger (or, in its terminology, a "concentration") arises only with an acquisition of "decisive influence". The threshold for this is higher than the UK's material influence or Germany's "competitively significant influence", and arises on acquisitions of:

  • A majority of the voting rights;
  • A de facto majority of the voting rights – i.e., where, in practice, the shareholder is highly likely to achieve a majority at shareholders' meetings, because other shareholdings are widely dispersed and the holders are unlikely to attend; or
  • Veto rights over strategic commercial decisions such as approval of the business plan budget and/or the appointment and dismissal of senior management – whether held solely32 or jointly with other shareholders (for example, in a joint venture).

Acquisitions of minority shareholdings can count as mergers under the EU Merger Regulation where they are accompanied by the veto rights referred to above, or where they confer de facto majority control. A recent case shows that de facto majority of voting rights can be achieved with quite low shareholdings: in September 2013, the European Commission held that a shareholding as low as 26.51 per cent of voting rights conferred de facto majority control, on the basis that

"the historic voting pattern at shareholders' meetings and the position of other shareholders indicated that [the acquirer] is likely to have a stable majority of the votes at the shareholders' meeting."33

Nevertheless, the EU Merger Regulation will not catch shareholdings as low as those that can be caught under the UK's "material influence" test or Germany's "significant competitive influence" test. This is significant because most competition regimes within the EU adopt the EU definition of a "merger" ("concentration") – although, as explained above, not the UK or Germany – as, indeed, do a number of competition jurisdictions outside the EU.

Example: the Ryanair/Aer Lingus case in 2013

The limitations on the EU Merger Regulation's ability to "catch" acquisitions of minority shareholdings has been dramatically highlighted in the past year in the case of scrutiny by competition authorities of the proposed takeover by the Irish airline Ryanair of its main competitor, Irish airline Aer Lingus, and the pre-existing acquisition by Ryanair of a minority shareholding in Aer Lingus.

By way of background, the basic rule of merger control within the EU is that the European Commission has jurisdiction over transactions where the parties' turnover exceeds certain thresholds, and, where the European Commission does not have jurisdiction (usually because the parties' turnover is below those thresholds), national competition authorities within the EU may exercise jurisdiction. As we have seen, the definition of "merger" differs as between the EU merger control regime and that of the UK authorities. For Ryanair/Aer Lingus, the European Commission had jurisdiction to examine the proposed takeover (i.e., acquisition of full control),34 but the UK authorities were left to examine Ryanair's pre-existing 29.82 per cent shareholding in Aer Lingus, which conferred material influence.35 In other words, different authorities were examining transactions between the same parties because, in spite of the parties exceeding the EU turnover thresholds, the EU regime (unlike the UK regime) did not apply to Ryanair's minority shareholding acquisition.

It is this supposed "anomaly" that the European Commission is now proposing to address.

The European Commission's proposals for change

In June 2013, the European Commission published a consultation paper with several proposals for changing the EU Merger Regulation.36 The more important of these is that the concept of "merger" (or "concentration") in the EU Merger Regulation regime should be extended to cover a wider range of transactions, including minority shareholding acquisitions. Although the Commission did not propose a specific level, the proposal talks about "structural links".

  • By way of example, the European Commission contemplates a range of possibilities such as any shareholding above 10 per cent, any shareholding conferring special shareholder rights such as veto rights or board representation, or concepts such as the UK's "material influence" or Germany's "competitively significant influence".37
  • A problem with this approach is that, because the EU merger regime is a mandatory notification system (unlike the UK), unless there is a relatively "bright light" to define what constitutes a notifiable "merger" ("concentration"), parties risk facing significant penalties and other adverse consequences for non-notification when they did not realise that their transaction was a notifiable merger. (In Germany, there is also a mandatory notification system, although the notification burden is somewhat less than under the EU regime.) The European Commission consultation paper proposes a possible solution to this which is that for mergers that are purely based on "structural links" (i.e., meeting the new, wider definition, but not the old one), there would be a voluntary notification system as in the UK.

The debate on the European Commission's proposal continues. If the proposals contemplated by the European Commission take effect, they can be expected to result in many more transactions having to be notified to the European Commission.


28 UK Competition and Markets Authority, Mergers: Guidance on the CMA's jurisdiction and procedure – consultation document, CMA2con, July 2013, paragraph 4.20.
29 UK Department for Business Enterprise and Regulatory Reform, final decisions by the Secretary of State for Business, Enterprise and Regulatory Reform on British Sky Broadcasting Group's acquisition of a 17.9 per cent shareholding in ITV plc, January 29, 2008.
30 This figure is adjusted annually every February.
31 German competition authority (Bundeskartellant) merger decision, A-TEC Industries / Norddeutsche Affinerie, February 28, 2008.
32 European Commission merger decision, Case COMP/M.1920 Nabisco / United Biscuits, May 5, 2000, paragraph 5.
33 European Commission merger decision, Case COMP/M.6957 IF P&C / Topdanmark, September 23, 2013, paragraphs 7 to 11.
34 European Commission merger decision, Case COMP/M.6663 Ryanair / Aer Lingus III, February 27, 2013.
35 UK Competition Commission merger report, Ryanair Holdings / Aer Lingus Group, August 28, 2013.
36 European Commission, Staff Working Document, towards more effective merger control, SWD (2013) 239 final, June 25, 2013.
37 Commission Staff Working Document (as above), paragraph 3(a).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions