Growing concerns about the effect that some acquisitions falling below the mandatory merger notification thresholds may have on innovation and effective competition are increasingly shaping competition policy within the EU.

Last week the Belgian competition authority closed an investigation opened earlier in March 2023 involving a possible abuse of dominance arising from an acquisition in the telecommunication sector (press release here). The proceedings were initiated on the basis of the Towercast judgment of the ECJ according to which mergers can be challenged under the rules governing abuse of a dominant position (more on that here). In early 2023, the leader on the Belgian telecom market Proximus acquired its main broadband internet competitor on a national level – EDPnet – which was subject of judicial reorganization following financial difficulties. As a result of the investigation by the Belgian competition authority, Proximus ultimately decided to divest EDPnet to another competitor.

Earlier in October, the European Commission ordered for the first time the reversal of a closed transaction in the life sciences sector, i.e. Illumina’s acquisition of GRAIL Inc., a company active in the emerging market for blood-based cancer detection tests. In September 2022, the EC prohibited Illumina from buying Grail over concerns that the merger would negatively impact innovation, but the parties decided to proceed with the deal, allegedly in breach of EU merger control rules. The proceedings were based on Article 22 of the EU Merger Regulation, i.e. another mechanism allowing the review of transactions below turnover thresholds that nevertheless affect trade between Member States. The reported total consideration of the transaction (c. EUR 8bn) and the parties’ willingness to accept the risk of severe fines (which materialized in a EUR 432 million fine for Illumina) showed that the value of the target indeed exceeded by far its current turnover.

Particularly important is that the Illumina/Grail transaction was below the mandatory turnover thresholds in each affected Member State, hence it should have been close to impossible to predict its scrutiny at the early stages of the transaction process. Nevertheless, the EC considered that this does not prevent it from reviewing the deal under Art. 22 of the EUMR. The EC’s approach was confirmed by a judgement of the General Court of 13 July 2022 and is currently under review by the ECJ. Unless the ECJ rules to the contrary, it seems that the EC will actively pursue this line of enforcement. In August 2023 it announced the opening of two other investigations into transactions which neither reach the notification thresholds set out in the EUMR nor are notifiable in any Member State (Qualcomm/Autotalks and EEX/Nasdaq Power).

The bottom line is that the authorities’ growing interest in transactions which do not meet the mandatory notification requirements will likely increase legal uncertainty and regulatory risk in deal making. The need of robust antitrust analysis when contemplating multijurisdictional transactions will increase.

The opinions and information in this article are not a legal advice and should be relied or acted upon as such.