Posted by Chantal Lavoie on 8 September 2017
In a very rare opportunity, the Court of Justice has provided a useful clarification to the interpretation of the concept of a "concentration" as applied to JVs under the EU Merger Control Regulation (EUMR). The case can be found here:
C-248/16 Austria Asphalt v Bundeskartellanwalt, ruling of 7/09/2017.
The facts of the case are straight forward: Austria Asphalt and Teerag Asdag sought to acquire joint control over a target JV, previously owned by Teerag Asdag. The operation therefore consisted in a change from sole to joint control over a target JV. The JV is not a full function joint venture because most of its production is intended for sale to the two groups to which the parents belong.
The Competition Court in Austria ruled that the operation amounted to a concentration under EUMR and therefore that it could not be reviewed under Austrian law. Austria Asphalt appealed to the Supreme Court of Austria. The latter stayed the proceedings and applied to the Court of Justice for a preliminary ruling on the question below
Question from referring court
The question posed to the Court of Justice is whether a change from sole to joint control over a JV amounts to a 'concentration' only if the JV is full-function, in other words if the JV performs on a lasting basis all the functions of an autonomous economic entity.
As acknowledged by the Court of Justice, the wording of Article 3 EUMR is not sufficiently clear in this respect. The uncertainty is due to the apparent contradiction between the drafting of the general provision on the concept of a 'concentration' (Article 3(1)(b) EUMR) and the more detailed provision regarding the concept of 'concentration' as applied to JVs (Article 3(1)(4) EUMR). Indeed, Article 3(1)(b) provides that a concentration arises where a change of control on a lasting basis results from an acquisition of control. However Article 3(4) also states that the creation of a JV amounts to a 'concentration' where the JV performs on a lasting basis all the functions of an autonomous economic entity.
The Court of Justice provides a welcome confirmation that in the event of a change from sole to joint control of a target JV, the change of control will amount to 'concentration' only if the JV performs on a lasting basis all the functions of an autonomous economic entity.
The Court of Justice relied on the purpose and general structure of the provision. In particular, the Court emphasised that EUMR "should apply to significant structural changes the impact of which on the market goes beyond the national borders of any one Member State." In the case of JVs, article 3 should therefore only apply where the JV brings about a lasting effect on the structure of the market. Such an interpretation also ensures a consistent application of the Merger Regulation to newly created JVs and to changes of control over JVs.
The Court of Justice rejects the Commission's stance for a wider interpretation which would have extended its jurisdiction to certain JVs not otherwise covered by the regulation where the JV is newly created.
This is important an important clarification as it excludes from the scope of the European Commission's jurisdiction (and, by extension, potentially also that of national competition authorities whose jurisdiction may also be based on similar provisions) changes in control over JVs which do not perform on a lasting basis all the functions of an autonomous entity.
The Court must also be commended in this ruling for providing a clarification which ensures consistency in the application of the Merger Regulation to all JVs and which respects the purpose and scope of the Merger Regulation.