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Below-Threshold Transactions under Scrutiny in the European Union, any Lessons for the Region?

Below-Threshold Transactions under Scrutiny in the European Union, any Lessons for the Region?

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On 16 March 2023, the Court of Justice of the European Union (“ECJ”) published its judgment on Towercast’s appeal against the French Competition Authority’s decision in Towercast’s case (Case No. C-449/21), confirming that abuse of dominance rules may equally apply ex post to transactions in which national and EU merger control thresholds were not met.

This case was brought to the public’s attention as an exception to the previously established rule and practice that only transactions which fulfil EU and national thresholds should be ex ante investigated by the competition authorities within a merger control proceeding. By this judgement, the ECJ established a mechanism to review below-threshold transactions ex post, which may be controversial in practice and arguably undermine the principle of legal certainty. The practice appears to have the greatest impact on the so-called “killer acquisitions”.

The concept of killer acquisitions

By definition, killer acquisitions occur when incumbent, established firms acquire small, innovative firms, which usually leads to the shutting down of the target company and its business. Accordingly, their main aim is to destroy an actual or potential competitor. In these transactions, the interest of both sides is fulfilled, as the acquirer protects the market for its existing products, whereas the shareholders of the target company receive the payment. However, the consumers lose out on the variety and quality of the products. That is why killer acquisitions potentially come under the radar of the competition authorities. The concept of reviewing killer acquisitions is mainly formed to cover transactions in the tech and pharma industries, where the target is still in the early stages of its development and has low turnover, and therefore, its acquisition may not be subject to merger control. The European Commission (“EC”) has thus interpreted Article 22 of the EU Merger Regulation (dealing with referrals of cases of the national member states to the EC) in a novel manner, considering that a national competition authority can rely on this regulation, even if a transaction does not fall within the scope of its national competences. 

Towercast case

Towercast SASU (“Towercast”) appealed to the French Competition Authority (“FCA”) that the completed acquisition of Itas by Télédiffusion de France (“TDF”) constituted an abuse of dominance. As background, after the acquisition of Itas, TDF’s only remaining competitor in the French market for digital terrestrial television broadcasting services was Towercast. The acquisition was completed in October 2016 and was not reviewed by any authority as it fell below both the EU and French merger control thresholds nor was it referred to the EC under Article 22 of the EU Merger Regulation. The FCA initially rejected Towercast’s appeal, stating that the introduction of an EU Merger Regulation rendered the application of the abuse of dominance rules in Article 102 of the TFEU inapplicable to mergers. The Paris Court of Appeal referred to the ECJ and asked whether a national competition authority could find that a merger constitutes an abuse of dominance, in circumstances where that merger fell below national and EU merger thresholds and where it was not referred to the EC under Article 22 of the EU Merger Regulation.

The ECJ took a stance that a concentration that was not subject to ex ante merger control because the relevant thresholds under the EU Merger Regulation and national merger control rules were not met, can be subject to ex post control both (i) on the basis of Article 22 of EU Merger Regulation, which allows national competition authorities to refer the transaction to the EC for examination, and (ii) if there is no Article 22 referral, on the basis of the prohibition of abuse of a dominant position under Article 102 of the TFEU. This is due to the supremacy of European law and the objective of European competition law to protect the internal market from distortions, i.e. Article 102 of the TFEU is the primary law, and it cannot be overridden by the EU Merger Regulation, which is secondary law. Also, the ECJ concluded that for a finding of an abuse of dominance to be established on this ground, an acquisition must substantially impede competition such that it results in the market consisting of only companies whose behaviour depends on the dominant company and mere strengthening of dominance is insufficient.

Illumina/Grail case

The Towercast case is not the first case where a transaction that does not meet the relevant merger filing thresholds was examined. The most notable case was Illumina/Grail case (M. 10188), where the EC blocked the transaction even though it did not meet merger filing thresholds under the EU Merger Regulation or under any national regulation in any member state. More precisely, this was the first time the EC has reviewed the below-threshold transaction and prohibited its implementation. Grail is a nascent company, a start-up developing blood tests for the early detection of cancer, whereas Illumina is a well-known company supplying sequencing- and array-based solutions for genetic and genomic analysis. The EC based its jurisdiction to open an in-depth investigation relying on Article 22 of the EU Merger Regulation.

Despite the ongoing in-depth investigation, Illumina closed the deal and acquired Grail. On 19 July 2022, the EC announced that it had issued a statement of objection outlining its preliminary findings that Illumina and Grail had breached the standstill provisions under the EU merger control rules and issued an interim injunction requiring Illumina to keep Grail completely separate pending the order to unwind the transaction. The parties appealed the interim measures before the General Court of the European Union and the judgment is still pending. Along with issuing its prohibition decision, the EC stated that it intends to issue a separate decision ordering the unwinding of the transaction and the restoration of Grail’s independence.

In that case, the EC concluded that “the concentration enabled and incentivized Illumina to foreclose GRAIL’s rivals, who are dependent on Illumina’s technology, from access to an essential input they need to develop and market their own tests” and that commitments offered by Illumina were not sufficient to prevent the harm to innovation. Having that in mind, it was held that the proposed acquisition may reduce competition and innovation in the emerging market for the development and commercialization of cancer detection tests based on sequencing technologies.

Regional perspective – the Western Balkans

Even though the ECJ’s stance in relation to investigations of the below-threshold transactions ex-post is clear now, it remains to be seen whether the competition authorities from the Western Balkans will adopt the same or similar approach. All the countries in the Western Balkans rely heavily on the EU rules and practices of the EC as well as on the jurisprudence of the EU courts.

What is more, the competition laws and the relevant by-laws in the Western Balkans represent by and large, blueprints of the corresponding EU legislation. Accordingly, every country in the Western Balkans has transposed Article 102 of the TFEU into its current competition law and one could argue the legal basis for investigating the below-threshold transactions, ex-post, as a potential abuse of dominant position seems to be in place. What is more, some countries in the region have explicit provisions enabling them to review transactions ex-post provided certain market share thresholds have been reached as a result of the transaction. Specifically, Article 62 of the Serbian Competition Law provides for the basis of an ex-post merger control review of implemented concentrations, if the Serbian competition authority determines that the joint market share of the parties to the concentration on the market of the Republic of Serbia amounts to at least 40% as a result of the transaction.

A similar provision is envisaged in Montenegrin Competition Law enabling the Montenegrin competition authority to order the parties to file a merger notification for a transaction that does not fulfil the merger filing thresholds, should the joint market share of the undertakings concerned on the relevant market in Montenegro exceed 60%. Although we are not aware of any cases where these provisions have been used in practice, following the latest ruling of the ECJ, they might just become used by the authorities. Some other countries in the Western Balkans have included market shares in their merger filing thresholds. For example, if the combined market share of the undertakings concerned exceeds 40% or 60% that could trigger an ex-ante merger filing obligation in Bosnia and Herzegovina and North Macedonia, respectively.

Therefore, ex-post investigations of transactions, whether through the application of the available merger control rules or through the application of the abuse of dominance rules, might come into the spotlight of the competition watchdogs more than ever, following the Towercast ruling.

Nevertheless, the competition authorities in the Western Balkans still seem to be very formalistic in applying competition rules and seem to be reluctant to develop their practice in directions that have not already become well-established EU practice. Also, they are dealing with quite a large number of merger filings due to low merger filing thresholds (which in most countries can be met by one party alone) and non-application of the “local effects” doctrine (resulting in foreign-to-foreign transactions being regularly reviewed by the competition authorities in the Western Balkans). Therefore, they are dealing with ex-ante control quite a bit.


Until recently, acquisitions that formally do not fulfil the merger filing thresholds were, as a rule, falling outside of the competition authorities’ powers to investigate them. However, this is now subject to a change at the EU level. The ECJ’s ruling has already influenced some of the European countries who decided to follow such practice and have commenced investigations, e.g. Italy and Belgium. Italy even went a step further – it published the Notice providing guidance for the exercise of its power to require the notification of concentrations that are below the Italian turnover thresholds.

We note that the issue for the competition authorities in the Western Balkans might be to recognize and assess the impact of such transactions. The ultimate goal should arguably be to examine not only those transactions that risk breaching formal provisions of law but also those that may negatively influence the market (most notably innovation) even though they formally do not fulfil the turnover thresholds.

Taking into account that the ECJ based its argumentation in the Towercast case, mainly, on Article 102 of the TFEU, the provision which exists in all competition laws in the countries of the Western Balkans, it can be assumed that the competition authorities in the Western Balkans have a legal basis to follow the same practice, i.e. to monitor and investigate the below-threshold transactions through abuse of dominance loupe. In applying this practice, the need for legal certainty is particularly prominent, not only from a substantive but also from a procedural perspective (e.g. the term after which a transaction should not be investigated should be clearly prescribed in order to ensure legal certainty of the transactions and legal system in general).

Therefore, the competition authorities will have to balance and carefully assess all the effects of an ex-post review while at the same time, they will have to ensure that all due process rights of the parties involved are observed. The companies, on the other hand, together with their legal advisors will have to look at their transactions more creatively now given that even the transactions falling below the prescribed merger filing thresholds may come under the investigation of a competition authority if concerns from an abuse of dominance perspective have been identified.

By Bojana Miljanovic Hussey, Partner, and Jovana Dordevic, Junior Associate, Karanovic & Partners

Serbia Knowledge Partner

SOG in cooperation with Kinstellar is a full-service business law firm in Serbia that provides foreign and domestic clients with premium-quality legal advice and assistance across a wide range of key areas of corporate law. The firm was founded in 2015 by a group of seasoned, internationally-trained lawyers. SOG has developed a distinctively dynamic culture, bringing together top talent, fostering entrepreneurship, and maintaining exceptional relationships with its clients.

SOG has achieved consistent growth in the volume of its business, accompanied by an exponential increase in the number of hired associate lawyers and the firm’s network of business contacts. SOG has a robust client base of multinationals, investment and private equity firms, and financial institutions. Clients praise SOG for being commercially minded, very responsive and knowledgeable.

Establishing permanent cooperation with Kinstellar is part of realising SOG's long-term development strategy to be the leading provider of legal services in the Western Balkans market.

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