CHAPTER 1. SMALLNESS OF AN ECONOMY AND MERGER
1.3. Relative smallness in the context of merger control thresholds
The size of an economy and the enterprises active therein has implications in the context of the EU and national merger control. Whether a merger falls subject to control by the European Commission depends on whether the merger has a Community dimension, which in turn depends on the turnover of the merging firms.
Table 4 below sets out the merger control thresholds of EU, Germany and Estonia to provide grounds for comparison.
Table 4: Merger thresholds of EU, Germany and Estonia
Jurisdiction Threshold
EU29 A concentration is subject to control by the European Commission if:
(a) the combined aggregate worldwide turnover of all the undertakings concerned is more than EUR 5,000 million;
and
(b) the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than EUR 250 million,
unless each of the undertakings concerned achieves more than two-thirds of its aggregate Community-wide turnover within one and the same Member State.
A concentration that does not meet the above thresholds is subject to control by the European Commission if:
(a) the combined aggregate worldwide turnover of all the undertakings concerned is more than EUR 2,500 million;
(b) in each of at least three Member States, the combined aggregate turnover of all the undertakings concerned is more than EUR 100 million;
(c) in each of at least three Member States included for the purpose of point (b), the aggregate turnover of each of at least two of the undertakings concerned is more than EUR 25 million; and
(d) the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than EUR 100 million,
unless each of the undertakings concerned achieves more than two-thirds of its aggregate Community-wide turnover within one and the same Member State.
Germany30 A concentration is subject to control by the German Federal Cartel Office (Bundeskartellamt, GFCO) if:
(a) the combined aggregate worldwide turnover of all the undertakings concerned is more than EUR 500 million;
(b) the domestic turnover of at least one undertaking con-cerned is more than EUR 25 million; and
(c) the domestic turnover of another of the participating undertakings is more than EUR 5 million.31
29 Article 1(2) and (3) and Article 4(1) of the Council Regulation (EC) No. 139/2004 of 20.01.2004 on the control of concentrations between undertakings, O.J. L 24, 29.01.2004, pp. 1–22 (ECMR).
30 Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen), the 7th revision. Available online: http://bundesrecht.juris.de/gwb/index.html (last visited 15.05.2009), (German ARC).
31 The last criterion was added to the German threshold only since 25.03.2009. See GFCO website: “Second Domestic Turnover Threshold enters into force on 25 March,
Jurisdiction Threshold
Estonia32. A concentration is subject to control by the Estonian Competition Authority (ECA) if:
(a) the aggregate turnover in Estonia of the parties to the concentration is more than EEK 100 million (approxima-tely EUR 6.4 million); and
(b) the aggregate turnover in Estonia of each of at least two parties to the concentration is more than EEK 30 million (approximately EUR 1.9 million).
Source: compiled by the author on the basis of the referred legal acts.
One can notice a drastic difference in the values of the turnovers between the three thresholds criteria. While the worldwide turnover threshold of the German merger control is five to ten times lower than the worldwide turnover criteria in the case of the EU merger control, it is still more than 75 times higher than the equivalent criterion in case of the Estonian merger control. Hence, the size of firms that a competition authority of a small economy is controlling tends to be rather different from a large economy.
It should also be noticed that the companies from small economies are only rarely subject to control by the European Commission. Only one merger involving a firm with Estonian origin was subject to control by the European Commission in 2008, and even in the case of this merger the Community dimension thresholds were not exceeded, but the merger was controlled by the Commission only as a result of the case referral.33 At the same time, only in January 2008, the European Commission was notified of eight cases involving German companies.34
Hence, the size of an economy tends to have an impact on the size of firms operating in it and the size of firms seated in the economy, which in turn, tends to have impact on the frequency of mergers involving domestic firms falling subject to control by the European Commission. Of course, not only the mergers of domestic firms have impact on the national markets, but also the transactions between foreign firms may have significant effects. National competition authorities can control such mergers if they have effects in their markets, provided the merger is not subject to control by the European Commission. It is likely that the mergers of large firms from large economies are more often felt in small economies, than the effects of the mergers of
2009”. Available online: http://www.bundeskartellamt.de/wEnglisch/download/pdf/
Merkblaetter/0904_Zweite_ Inlandsumsatzschwelle_e.pdf (last visited 15.05.2009).
32 Competition Act (Konkurentsiseadus), RT I 2001, 56, 332.
33 Commission Decision of 10.03.2008, Case No. COMP/M.4992, ArcelorMittal/
Galvex.
34 Author’s conclusion on the basis of the data available on the DG COMP web site:
http://ec.europa.eu/comm/competition/mergers/cases/index/by_year_2008.html (last visited 15.05.2009).
smaller firms from small economies are felt in large economies. In this sense, it appears balanced that mergers involving small economies’ firms are only rarely controlled by the European Commission.
However, small economies may well appear to be the losers in this situation.
The national competition authority of the home state of the merging firms, who is best placed to enforce any action against the merger should it have anti-competitive effects, has no obligation to consider the effects of the merger to other states. Where a merger of large firms with significant cross-border effects does not meet the ECMR thresholds, the large economy hosting the large firm is well placed to enforce its national merger control rules taking into account the effect in its domestic markets. A small economy may also choose to control such mergers, but if the merger raises competition problem only for the small economy (and the merger is cleared by the larger hosting countries), the small economy’s enforcement power against such merger may be rather limited (see more in Section 3.3). Yet, taken the large amount of mergers involving companies from large economies that meet the ECMR thresholds, one can assume that there is at least equally sizeable amount of mergers which remain below the thresholds, but still have significant cross-border effects, which the competition authorities of the large economies might not take into account.