On 9 July 2014, the European Commission launched a public consultation on proposals to improve merger control at the EU level with the publication of a White Paper ("Towards more effective EU merger control"). A key element of these proposals relates to the acquisition of non-controlling minority shareholdings.

The White Paper follows EU public consultations in 2009 and 2013 on the working of the EU Merger Regulation (Regulation 139/2004) and sets out detailed reform proposals to address a number of issues identified as a result of those consultations. Comments are invited on the White Paper's proposals until 3 October 2014.

The most significant of the White Paper's proposals is for the Commission to be given the power to review certain acquisitions of a non-controlling minority shareholding.

Currently, the EU merger rules do not allow the Commission (unlike the position with regards to certain Member States or jurisdictions such as the US or Japan) to examine the effects of the acquisition of minority stakes which might lead to a reduction of competition in the relevant market. The Commission's proposals are designed to catch only those transactions that raise competition issues and not any minority investment or restructuring transactions under which financial institutions may acquire equity stakes for a limited period of time.

The White Paper advocates a "targeted" transparency system under which an undertaking would be required, based on a self-assessment carried out by the acquirer and the target, to submit information to the Commission if it proposes to acquire a minority shareholding that qualifies as a "competitively significant link". This would be defined as requiring:

  • An acquisition in a competitor or vertically-related company (the "competitive link"), where:
  • The acquired shareholding is (i) around 20% (however, the White Paper also notes that the OFT has set a threshold at 15% above which it may examine any case), or (ii) between 5% and 20%, but accompanied by additional factors such as rights which give the acquirer a "de-facto" blocking minority, a seat on the board of directors or access to commercially sensitive information of the target.

Following the notification, the Commission would decide whether to initiate an investigation and call for further information. There may also be a waiting period (possibly 15 days) following the submission of information during which the parties will not be able to close their transaction. The Commission could also issue interim measures in the case of a transaction that has been fully or partially implemented before an investigation is started. This new system should fit with the merger control regimes currently in place at the EU and national level.

The White Paper also includes proposals designed to make case referrals between Member States and the Commission more business-friendly and effective and also to exclude certain non-problematic transactions from the Commission's merger review powers, such as the creation of joint ventures that will operate outside the EEA and will have no impact on European markets, or at least to simplify the notification requirements for such cases.

The White Paper is available at: http://ec.europa.eu/competition/consultations/2014_merger_control/mergers_white_paper_en.pdf.

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