On 16 March 2023 the European Court of Justice rendered its awaited judgement in Case C-449/21 (Towercast) dealing with the possible application of the abuse of dominance prohibition to corporate transactions falling below the established thresholds for merger control.
On 13 October 2016, the largest French television transmission service operator Télédiffusion de France (TDF) acquired its competitor Itas SAS. The transaction was below the EU and French notification thresholds, hence was not examined under the prior merger control procedure. Moreover, it did not give rise to a procedure for referral to the Commission under Article 22 of Regulation No 139/2004 (the EU Merger Regulation).
On 15 November 2017, a competitor of TDF – Towercast SASU, lodged a complaint with the French competition authority alleging that this operation constituted an abuse of a dominant position, because it hindered competition on the upstream and downstream wholesale markets for DTT broadcasting by significantly strengthening the dominant position of TDF on those markets. A preliminary question on whether the EU Merger Regulation precludes the application of Art. 102 TFEU to below-threshold concentrations was brought to the ECJ by cour d’appel de Paris (Court of Appeal, Paris, France)
Reasoning of the ECJ
Towercast’s complaint was based on the seminal Continental Can case (6/72) in which the ECJ had found that the provision of Art. 86 ECC Treaty (now Art. 102 TFEU) does not establish an exhaustive list of the abuses of a dominant position prohibited and that its purpose is “not only aimed at practices which may cause damage to consumers directly, but also at those which are detrimental to them through their impact on an effective competition structure“, hence concentrations could in principle be caught by it.
The ECJ confirmed this case law despite the fact that it precedes the adoption of the current EU merger control regime. According to the Court, the EU Merger Control Regulation forms part of a legislative whole aimed at implementing the protection of competition afforded by Art. 101 and 102 TFEU. Therefore, although the EU Merger Regulation “must be applied as a matter of priority“, that cannot preclude a concentration with a non-Community dimension from being subject to a control by the national competition authorities on the basis of the direct effect of Article 102 TFEU (a provision of primary EU law) “under certain conditions“.
In that regard the ECJ reminded that “the mere finding that an undertaking’s position has been strengthened is not sufficient for a finding of abuse, since it must be established that the degree of dominance thus reached would substantially impede competition, that is to say, that only undertakings whose behaviour depends on the dominant undertaking would remain in the market“.
The ECJ has also rejected TDF’s request to limit the temporal effect of the judgement.
Impact of the Towercast case
The ECJ’s restatement of the Continental Can findings marks the path for assessment of acquisitions which, although below the established merger control thresholds, may damage effective competition through the elimination of emerging innovative competitors. It remains to be seen whether the ex post and punitive nature of such assessment will turn out to be efficient in deterring killer acquisitions that have alarmed in recent years regulators and practitioners in technology, pharmaceutical and other markets. The temporal effect of the judgement is likely to cover past transactions falling within the applicable EU and national limitation periods for competition violations.
* The content of this article is not a legal advice and should not be relied or acted upon as such.