Mergers and article 81 EC Treaty
Christian Bulzomí
June 2, 2006
The pace at which things are changing in the enforcement of European competition law has led several academics and practitioners to question the expertise of national judges to deal with the specifics of competition law. The lack of particular preparation and awareness of the judiciary about the peculiarities of the field were underlined as main possible causes of mistaken decisions. Did these fears come true when a judge stopped the planned takeover by Gas Natural over Endesa through the adoption of interim measures on the basis of Article 81? In any case, the Spanish judge is not blameworthy: Even senior competition lawyers disagree on the case and hold divergent opinions.
In order to give non-competition lawyers an insight I will try to be a little bit more exhaustive in my analysis:
On the one hand, the EC Treaty prohibits in its article 81, agreements which have the object or effect of restricting competition in the internal market. Article 81 is directly enforceable on its entirety since the entry into force of Regulation 1/2003 on May 1st 2004. On the other hand, Regulation 139/2004 and the national laws on mergers and acquisitions establish substantive tests for the evaluation of mergers. Specifically, the European Merger Regulation checks if the merger or acquisition does “significantly impede effective competition, in the common market or in a substantial part of it, in particular as a result of the creation or strengthening of a dominant position” and the national provisions sound similar.
There is no doubt about the different spheres of competence of the mentioned Treaty article and the regulation. Therefore, there shouldn’t be any place for an article 81 action parallel to the administrative procedure at national level which analyzes an acquisition. However, in this particular case the judge of Gas Natural-Endesa suspended the takeover bid of Gas Natural because there might have been a previous agreement between Iberdrola and Gas Natural to eliminate Endesa from the market. The agreement establishes the obligation of Gas Natural to sell parts of its newly acquired undertaking to Iberdrola after the completion of the takeover.
If we take into consideration that, at European level, the undertakings can offer commitments in order to have their merger or acquisition approved by the Commission and in Spain the Government may approve a merger or acquisition subject to conditions which may also be structural in nature – exactly what it did in this case – the simple idea that an undertaking may not have previous contacts with a competitor to which, most likely it will have to sell parts of the undertaking it is taking over is puzzling. On the contrary, such contacts are definitely to encourage especially in a bid of this magnitude.
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Dear Christian,
You might already know that the judge in charge of the Gas Natural takeover bid has recently flunked her specialization exams in order to hold the permanent post at the Commercial Court. At the moment of granting interim measures, she was holding the post as a temporary appointment, waiting to know the results of her specialization exam.
Guess what part of the exam she failed: competition law!
It is hard to believe, but it’s as real as that.
Best wishes to everyone,
Daniel
Comment by Daniel Sarmiento — June 5, 2006 @ 10:18 pm