Brussels is back to business today (9 January) – the first working Monday of the year for EC officials and for many EU affairs professionals. A relaxation of state aid rules for certain sectors and an EU sovereignty fund are on top of the agenda for broader EU institutions, that are under pressure – among other things - to respond to the US Inflation Reduction Act, while the European Parliament is rocked by a corruption scandal of unprecedented proportions.
In a world where trade barriers are going up, EU merger control could come under pressure to serve industrial policy goals, a mission which it has always resisted. Near future developments include new foreign subsidies reporting rules, set to enter into force in October with the aim of ensuring a level playing field globally, and bolstered FDI rules and regimes to fend off takeovers of strategic assets.
As the ball gets rolling again, here is a recap of four key merger control developments in 2022 that are likely to have an impact in 2023.
1. O2/Hutchison: cold shower for telco M&A. Advocate General Juliane Kokott’s opinion in October, supporting the EC’s prohibition of the acquisition of O2 by CK Hutchison [HKG:0013], sent a chilly vibe to the M&A community, which had been briefly galvanized by the GC’s earlier judgment overthrowing the decision. The opinion – which still needs to translate into a final ECJ judgment - signals that four-to-three consolidation in mobile markets will still face a rocky path. All eyes will be on MasMovil’s announced JV with Orange [EPA: ORA] in Spain, which is projected to be filed with the EC in Q1 this year. The deal’s lengthy prenotification talks show that the parties are probably aiming to leave no stone unturned in terms of concerns and remedies, before the EC review clock starts ticking.
2. Konecranes/Cargotec: EC, UK and US divergence: Agency officials always spend a great deal of words in praising cooperation efforts on cross-border reviews. In practice, however, the Konecranes/Cargotec case dealt a hard blow to this narrative last Spring, when the EC, CMA and DoJ issued different conclusions on the same deal, with the CMA and DoJ prohibitions contrasting with the EC’s conditional clearance. The review brought to the surface procedural differences in market testing between the EC and CMA, while it confirmed the US agencies’ tough stance on mergers in the Khan/Kanter era. In general, the case yielded a picture of a conservative, procedural EC, versus less predictable Anglo-Saxon agencies.
3. Activision/Microsoft: ecosystems. The last word is yet to be said on this deal, although the FTC’s challenge at the end of 2022 has dealt it a pretty hard blow. While the subject matter – videogames – is not perceived as life-changing technology, the repercussions of this review could be far reaching, depending on the view that agencies take of ‘ecosystems’. This notion broadens the scope for assessing a deal’s impact beyond strict product market definitions, much to the dismay of dealmakers, who see another chunk of merger control predictability ooze away.
4. GRAIL/Illumina: Article 22. The debate around the US biotech case is becoming a tired one, with observers starting to wonder whether they have been worrying about widespread application of what appears instead to be a very rare situation in terms of technology and facts. Initially a flagship for the EC’s novel Article 22 referral policy, the review has turned into a litigation nightmare with several open fronts, from jurisdiction to gun-jumping. In the meantime, Article 22 is alive and kicking and has seen a handful of referrals since the policy was announced in the autumn of 2019, the last of which was Oticon Medical/Cochlear. All of these, however, qualified for merger review in at least one member state, unlike GRAIL/Illumina, which remains an exception.
This is an example of our weekly State of Play column that offers editorial commentary from our Regulatory Editor EMEA Francesca Micheletti on the main deals undergoing merger review with the European Commission and other major European authorities, as well as FDI reviews. It provides highlights on the upcoming week. The opinions expressed here are those of the writer only.
