Italy: EU Council of Ministers Approves Merger Law

On January 20, 2004, the European Union Council of Ministers approved Council Regulation No. 139/2004 EC Merger Regulation (ECMR), a new merger law that became effective on May 1, 2004, concerning the control of concentrations between undertakings. This new regulation, which replaced Regulation 4064/89, increases the powers of the commission to review and block transactions that have a European Community scope. It also introduces more flexibility to the notification review process.

The ECMR provides a new substantive principle, which allows the commission to block a transaction that "would significantly impede effective competition, in the common market or in a substantial part of it, in particular as a result of the creation or strengthening of a dominant position." This new principle marks a transition towards the substantial lessening of competition (SLC) principle adopted in the United States. It allows the commission to take into account and forbid any transaction that may have a negative impact on the competitive process in a market, even if the commission does not demonstrate that the transaction would actually create a single or collective dominant position.

The new ECMR modifies the system for referral of cases between the commission and the national antitrust authorities. As of May 1, 2004, companies may request that the commission review transactions that do not have a community dimension but are capable of being reviewed under the national competition laws of at least three member states (so-called multiple filings). Provided that no competent member state expresses its disagreement to the referral request, the transaction will be deemed to have a community dimension. The commission will have exclusive jurisdiction to review such a transaction. There is an advantage to the reform. Companies involved in such a transaction will have to deal only with one agency (the commission) instead of the various national antitrust authorities.

The time limits for initiating proceedings and for decisions by the commission have become more flexible. Under the former regulation, the commission reviewed the notification within one month from the date a notification was received, with the possibility, in certain cases, of increasing the time period to six weeks. The new regulation provides that the time limit is reduced to 25 working days. That period begins on the working day following the receipt of a notification and, under certain circumstances, can be increased to 35 working days. With regard to in-depth Phase II investigations, the former four-month review period became 90 working days. Subject to certain conditions and especially in complex cases, the time period can be increased to 105 working days. As a result of these modifications, the commission will be able to avoid timing problems that have often occurred in complicated Phase II investigations as a result of the time limit provided for in Regulation 4064/89.

The commission’s powers of inspection have also been increased. In particular, in order to carry out the duties assigned to it by the regulation, the commission may seal any business premises and books or records for the period and to the extent necessary for the inspection. As well, there is now more flexibility in the notification of mergers. Under the new ECMR, parties may notify a transaction on the basis of a letter of intent or a memorandum of understanding before concluding a binding agreement. This change means the commission must no longer be notified of mergers with a community dimension within one week of conclusion of the agreement. Such innovation should help synchronize the ECMR timetable with other jurisdictions, such as the United States.

The fact-finding powers of the commission in the context of merger proceedings have been substantially strengthened. The potential fines for failure to respond to information requests and for supplying incorrect or misleading information in the notification have been increased to a maximum of 1 percent of the companies’ aggregate turnover.

The new ECMR is the outcome of an increasing integration of the European markets and, as a result, of the strong increase in European concentrations. This has urged the European Commission to strengthen its powers of control over concentrations and to fill the regulatory and organizational gaps that hindered its activity. 

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.

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