ECJ confirms when a move from sole control to joint control constitutes a concentration

Teerag Asdag AG ("TA") (part of a road-building construction group), is the sole owner of a plant which manufactures asphalt used in road construction.  TA intends to transfer this plant to a newly formed company, which would be jointly controlled (50:50) by itself and Austria Asphalt GmbH & Co OG ("AA") (part of another international construction company). Given most of the plant's production is intended for its controlling parents, the joint venture would not be considered as "full-function" (i.e. performing on a lasting basis all the functions of an autonomous economic entity) under the EUMR.

The parties notified the transaction in Austria.  However, the first tier Austrian court held that the Austrian authority did not have jurisdiction to review the transaction on the basis that it qualified as a relevant "concentration" for review under Article 3(1)(b) EUMR. AA appealed this decision, resulting in a preliminary reference by the Austrian Supreme Court to the ECJ.

The ECJ considered the purpose of the relevant EUMR provisions, and held that Article 3 EUMR only concerns joint ventures in so far as their creation results in a lasting effect on the structure of the market. It found that to hold otherwise would lead to an unjustified difference in treatment between newly created joint venture undertakings (which are only subject to EU merger control if they are full-function), and those involving a pre-existing undertaking (which would be subject to EU merger control regardless of whether, post-transaction, the joint venture entity was full-function).

Confirmation of this fundamental point has important practical implications for companies and their advisers. On the one hand, in respect of non-full-function joint venture transactions, parties will not have to wait for EUMR clearance before implementation. However, this also removes the certainty of the one-stop-shop regime in respect of such transactions, which may still fall within the scope of national merger control regimes which do not follow the EUMR definition of a concentration (such as the UK, Germany, Poland and Austria), and may still be at risk of being investigated by the Commission under Article 101 TFEU, to the extent the transaction could lead to anticompetitive coordination between the parent undertakings.

This may lead to more focus on the full-function criteria in future, both by parties to a joint venture transaction (who may wish to gain the certainty of EUMR clearance), and the European Commission itself (in order to ensure that its ability to review potentially problematic transactions is not limited as a result of this decision).

In addition, the judgment:

• seems to imply that if a solely-owned undertaking which was previously active on a market ceases to be so active following the addition of a new controlling shareholder, it is subject to Article 101 rather than the EUMR, and 
• appears to conflict with the Commission's Consolidated Jurisdictional Notice, in particular paragraph 91.  This states that a joint acquisition of an existing undertaking which has a market presence though sales is a concentration for EUMR purposes regardless of whether the joint venture will be full function post-transaction (at least where the shareholders are all new).

Co-author: Danica Barley, Associate