2021 has been a record-setting year in global M&A activity. Total transaction volume topped $5.5 trillion, exceeding prior peaks in 2007 and 2015 that remained below $5 billion.1 In parallel, the number of global merger control filings increased. The European Commission (EC) alone received 403 merger filings in 2021, which is 44 more than in 2020 and the second highest figure in the history of European Union (EU) merger control. This Advisory first reviews key developments in EU merger control in 2021 and highlights developing trends.2 The second part analyzes key themes of important EC merger decisions adopted in 2021.

Key themes in EC merger decisions

New Article 22 EUMR referral policy seeks to create EC review power for transactions not requiring any merger filings within the EU

In March 2021, the EC published a new Guidance on the application of the referral mechanism set out in Article 22 of the Merger Regulation (EUMR) to certain categories of cases (Guidance).3 Article 22 EUMR concerns concentrations that do not require an EC filing because the merging parties' revenues fall below the EUMR's notification thresholds. To enable the EC to nevertheless review such transactions, Article 22 EUMR foresees the possibility for Member States to refer such transactions to the EC. Under recent practice, Member States only referred transactions that were notified to them under their national merger control rules. The Guidance brings an important change: it encourages Member States to refer certain transactions that do not trigger national filings. Thus, transactions that do not require merger filings anywhere in the EU can now be reviewed by the EC following an Article 22 EUMR referral. A referral launched prior to closing obliges the merging parties to suspend closing until EC clearance has been obtained. A referral is also possible after the deal has closed, although the EC will generally not consider a referral appropriate when more than six months have passed since closing.4

The Guidance marks the end-point of the EC's review of the appropriateness of the EUMR's revenue-based notification thresholds. These thresholds had been criticized for failing to capture acquisitions by powerful incumbents of nascent competitors with low revenues, so-called ‘killer acquisitions', even if the target had significant competitive potential and the deal value was high. Unlike the Department of Justice (DOJ) and the Federal Trade Commission (FTC) in the United States and the Competition and Markets Authority (CMA) in the UK, the EC (and most Member State competition authorities) lack the power to review transactions that do not meet the notification thresholds. This led to a perceived gap in the European merger control system with regard to killer acquisitions that did not trigger filing requirements within the EU. The EC initially considered introducing an alternative notification threshold based on transaction value, similar to thresholds that were introduced at national level in Germany and Austria in 2017.5 The EC has now dropped these plans and instead decided to activate the existing Article 22 EUMR referral mechanism to capture such transactions.

A Member State can launch a referral request under Article 22 EUMR if the transaction ‘affects trade between Member States' and ‘threatens to significantly affect competition within the territory of the Member State or States making the request'. These pre-conditions for referral are met relatively easily.6

The Guidance encourages Member States to refer transactions if the target has an actual or future competitive potential that is greater than its current revenues indicate. By way of example, paragraph 19 of the Guidance suggests that this would be the case if the target:7

  • is a start-up or recent entrant with significant competitive potential;
  • is an important innovator or is conducting potentially important research;
  • is an actual or potential important competitive force;
  • has access to competitively significant assets (raw materials, infrastructure, data or intellectual property rights); and/or provides products or services that are key inputs/components for other industries.

These features can arise in all industry sectors, but the Guidance targets the pharma and digital sectors in particular.8

The EC has announced it will monitor transaction activity in publicly available sources and cooperate closely with Member States to identify suitable referral candidate transactions. Moreover, the Guidance invites third parties, such as competitors and customers of merging parties, to bring referral candidate cases to the EC's attention.9

Most Member States are cooperating with the EC under the new referral policy. However, some of them, notably Austria and Germany, have declared they will adhere to the old policy and only consider referring cases that meet national filing thresholds.

Illumina's acquisition of Grail is the first transaction captured by the new policy. Announced in September 2020, the acquisition was not filed to the EC or in any Member State. However, actively encouraged by the EC, France made a referral request in March 2021 and was subsequently joined by Belgium, Greece, Iceland, the Netherlands, and Norway. The EC's April 2021 decision accepting the referral is currently under appeal at the EU's General Court (GC),10 whose judgment is expected in mid-July. As the parties proceeded to closing in August 2021 while the EC's review was pending, the EC started an investigation against Illumina11 for violating the EUMR's standstill obligation. The EC also imposed interim measures12 that notably require Grail to be kept separate from Illumina and be run by an independent hold separate manager.13

The new referral policy can have a major impact on deal timing and deal certainty. If triggered pre-closing, an Article 22 EUMR referral delays closing significantly14 and merging parties may have to agree to remedies to address substantive concerns or, in an extreme case, face a prohibition decision. A post-closing review entails the risk of post-closing remedies or dissolution of the transaction. To handle this uncertainty, the parties can ask the EC for early guidance as to whether a contemplated transaction makes a strong referral candidate.15 But this may lead to delay and attract the EC's attention to transactions that would otherwise have passed unnoticed. Moreover, merging parties can inform Member State authorities about the transaction in an attempt to trigger a 15-working days period during which Member States must decide whether or not to launch a referral request. However, this too will take time and requires significant resources.16

The new referral policy requires companies to factor in these increased uncertainties when negotiating deal timetables, closing conditions, risk allocation provisions, and other parts of transaction agreements. Practical options to reduce uncertainty have to be considered carefully and early in deal planning. That said, the number of Article 22 EUMR referral requests launched after the policy shift does not suggest that the procedure will be used in as many cases as commentators initially feared. In 2021 and through spring 2022, Article 22 EUMR referrals were only made in the Illumina/Grail and Meta/Kustomer transactions. Illumina/Grail involved a transaction of the type directly targeted by the Article 22 Guidance, i.e., those that do not require a filing in any Member State. By contrast, Meta/Kustomer was initially filed in Austria and then referred to the EC by Austria and nine other Member States that did not have national jurisdiction.17 However, the low number of referrals may be misleading, as the EC is understood to be waiting for the judgment in the pending appeal against its decision to accept the referral in Illumina/Grail.18 If the EU courts endorse the new approach, the Article 22 EUMR referral mechanism may be used more frequently going forward.

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1. New York Times, “Deal Book Newsletter: The Deals of the Year”, 18 December 2021.

2. Developments until April 2022 have also been taken into account if they related to events in 2021.

3. EC, Guidance on the application of the referral mechanism set out in Article 22 of the EUMR to certain categories of cases, 26 March 2021.

4. Guidance, paragraph 21. 

5. At the end of 2021, the German and Austrian competition authorities updated their joint guidance on the application of their respective transaction value thresholds. Austria and Germany also increased their traditional revenue thresholds in 2021 in order to reduce the number of national filings.

6. Guidance on the interpretation of these referral conditions can be found in the Guidance, in the EC's Notice on Case Referral in respect of concentrations (“Notice on Case Referral”), 5 March 2005, and in the European Competition Authorities (“ECA”) Principles on the application, by National Competition Authorities within the ECA, of Articles 4(5) and 22 of the EC Merger Regulation, January 2005.

7. In addition, paragraph 19 explains that the EC will also take into account if the value of the consideration received by the seller is particularly high compared to the current revenues of the target.

8. Guidance, paragraph 10.

9. Guidance, paragraphs 23 and 25.

10. Case T-227/21, Illumina v Commission. Illumina's separate challenges of the French and Dutch decisions to request a referral were dismissed by French and Dutch courts.

11. EC press release, “Mergers: Commission starts investigation for possible breach of the standstill obligation in Illumina / GRAIL transaction”, 20 August 2021.

12. EC press release “Mergers: Commission adopts interim measures to prevent harm to competition following Illumina's early acquisition of Grail”, 29 October 2021. The interim measures were appealed by the parties before the GC, see Case T755/21 - Illumina v Commission and Case T-23/22 - Grail v Commission.

13. The EC's substantive review of the transaction is still ongoing at the time of publication of this Advisory

14. Following a Member State request for referral, the EC will inform all other Member States who then have 15 working days to join the request. After this period has passed, the EC will take up to 10 working days to decide whether or not to accept a referral. If accepted, the merging parties will typically have to go through the normal EC filing process.

15. Guidance, paragraph 24.

16. Under Article 22(1) sub-paragraph 2 EUMR, the 15-working days period starts with a national notification or at the time the transaction is ‘made known to the Member State'. According to paragraph 28 of the Guidance, which repeats almost identical language already used in paragraph 31 of the ECA Principles and footnote 43 of the Notice on Case Referral, a transaction is ‘made known' once the NCA obtains “sufficient information to make a preliminary assessment as to the existence of the criteria relevant for the assessment of the referral”. To meet this standard, the merging parties will typically have to submit to the national authority a meaningful level of detail.

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