Transactions above a certain size are subject to merger control and therefore to preliminary examination by the European Commission. Once verified and approved, one can perform the transaction as logged in. Transactions below the threshold were not subject to any control. So far, so familiar. With the Judgement of the European Court of Justice (ECJ) of 16 March 2023 in the Towercast case, this is now changing – with considerable consequences in practice.

The relationship between the three pillars of antitrust law, the ban on cartels, the prohibition of abuse of dominant position and merger control has so far been characterised by the fact that they had to be applied independently of each other. It is true that case constella-tions were conceivable in which several mechanisms were used. However, since the ECJ judgment Continental Can, antitrust investigations have generally been carried out exclusively in advance (ex ante). If the Commission concluded that the concentration was not to be notified, the antitrust investigation ended with this step. This is now changing:

Preliminary proceedings and initial case Towercast

In recent years, three main companies have been active in the television broadcasting market in France: Télédiffusion de France (TDF), Itas and Towercast. In October 2016, TDF, which had by far the largest market share, acquired sole control of Itas. The transaction did not meet the European or national turnover thresholds, so that the transaction did not have to be notified to the European Commission or the French competition authority and was not subject to any preliminary examination by those authorities.

Towercast remained as TDF's only competitor on the French market for television broad-casting and filed a complaint with the national competition authority in November 2017 on the grounds that the merger would lead to a significant strengthening of TDF's dominant position and thus to a violation of the prohibition of abuse. In January 2020, however, the French competition authority rejected Towercast's complaint because the applicability of Article 102 TFEU requires abusive conduct by TDF that can be clearly distinguished from the merger.

Towercast filed an appeal against this with the Court of Appeal in Paris (Cour d'appel de Paris) in March 2020. Due to the hitherto non-existent case law of the ECJ on the relationship between ex ante merger control (ECMR) and ex post abuse control (Article 102 TFEU), the Court of Appeal made a reference for a preliminary ruling to the ECJ and essentially wanted to know from the latter whether mergers are reviewable exclusively by way of merger control pursuant to Article 21 (1) ECMR ("blocking effect") or whether ex post application of Article 102 TFEU is also possible.

ECJ judgement and reasoning 

The ECJ ruled that national competition authorities are not precluded from reviewing and, if necessary, prohibiting a merger under Article 102 TFEU, provided that the merger is below the relevant turnover thresholds for mandatory ex ante control and the case is not to be transferred to the European Commission under Article 22 ECMR. Consequently, the ECJ's ruling allows for an ex-post review of mergers by the abuse control of Article 102 TFEU, even if there was no prior obligation to notify the merger.

The ECJ explained that the primary objective of the ECMR is to prevent lasting damage to competition through the restructuring of companies. Therefore, the ECMR is to be counted among a set of legal provisions which serve the implementation of Article 101 TFEU and thus the objective of undistorted competition within the EU. Although the ECMR is the "only applicable procedural instrument" for the examination of mergers, it cannot be inferred from this that the Union legislator intended to restrict the scope of application of Article 102 TFEU. Therefore, Article 21 (1) of the ECMR could declare the ECMR to be the only applicable procedural regulation, but could not prevent the application of the directly applicable and higher-ranking Article 102 TFEU.

The prohibition of abuse of a dominant position (Article 102 TFEU) is a provision which does not require any further specification and does not contain a taxative list of prohibited conduct, so that the control of mergers can be subsumed under these facts. Although the ECMR provides for ex ante control of mergers for good reasons, it can be concluded from the systematics of the Procedural Regulation that mergers of non-Community significance can be subject to ex post control.

The ECJ would like to limit the applicability of ex post control to specific cases: The prohibition of abuse of Article 102 TFEU shall only apply if (i) the European and national turnover thresholds are not reached and (ii) no referral to the European Commission according to Article 22 TFEU has taken place.
Furthermore, the ECJ did not want to impose any time limits on the effects of the judgment, which would mean that retrospective controls would also be possible in the case of mergers that have already been carried out in good faith below the turnover thresholds.

Consequences for the practice

The practical effects of the decision are already becoming apparent: Already one week after the publication of the judgement, the Belgian competition authority initiated abuse control proceedings against the Belgian company Proximus due to the takeover of edpnet - with explicit reference to the findings of the ECJ. Accordingly, in future mergers should also be subject to a more stringent risk assessment based on the prohibition of abuse under Article 102 TFEU in order to prevent adverse consequences for the companies involved. However, the extent to which all this is compatible with the basic economic idea of antitrust law (keyword: excessive restriction of private autonomy and competition) currently appears questionable.

Ultimately, the ECJ's Towercast ruling will significantly change merger control practice to date, as the competent authorities will be able to review mergers retrospectively and prohibit them if necessary.