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The Policy of the EEC on Concentrative Joint Ventures

Published online by Cambridge University Press:  21 July 2009

D.S. Nava
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Abstract

The EEC Treaty contains no specific provisions for the control of concentrations. Only the competition rules. Articles 85 and 86 EEC, could be considered as possible legal instruments for regulating concentrations. The Commission has had to examine whether and to what extent these provisions could be used to this end.

The Commission's view has been that Article 85 does not apply to operations resulting in structural change, as is the case of concentrations and concentrative joint ventures. Cooperative operations, such as cooperative joint ventures, on the other hand fall to be assessed under Article 85. The Philip Morris case has made this position uncertain. According to the extensive interpretation of this judgement Article 85 is now applicable to certain concentrations and thus to concentrative joint ventures.

There is no such uncertainty regarding the role of Article 86 in controlling concentrative joint ventures, for the Court has established in the Continental Can case that concentrations can be caught by Article 86.

With the adoption in 1989 of the Regulation on concentration control the Commission finally has a legal instrument specifically designed to regulate concentrations. However, only concentrations and concentrative joint ventures which comply with certain turnover thresholds (the so-called concentrations or concentrative joint ventures with a Community dimension) can be assessed by the Commission under the Regulation. This means that the provisions of the Regulation can not be applied to concentrative joint ventures beneath the threshold.

Because of the difficulty in distinguishing concentrative operations from cooperative ones, the Commission published the Notice regarding the concentrative and cooperative operations under the Regulation on the control of concentrations.

Type
Student Contributions
Information
Leiden Journal of International Law , Volume 5 , Issue 1 , February 1992 , pp. 53 - 67
Copyright
Copyright © Foundation of the Leiden Journal of International Law 1992

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References

1. See Art. 66 ECSC-Treaty.

2. Article 85 prohibits agreements between undertakings, decisions of associations and concerted practices which may affect trade between Member States and have as their object or effect the prevention, restriction or distortion of competition within the common market. Article 86 prohibits the abusive exploitation of a dominant position within the common market or within a substantial part of it by one or more undertakings in sofar as trade between Member States is likely to be affected by it.

3. Thirteenth Report on Competition Policy (1984). Point 53. A majority of authors uses his definition by the Commission. See. e.g.. I. van Fael. J. Fellis. Competition Law of the EEC 255 (1990): F.L. Fine. Mergers and Joint Ventures in Europe: The Law and Policy of the EEC 56 (1989).

4. See C.W. Fellamy. CD. Child. Common Market Law of Competition 194 (1987): R. Whish. Competition Law 691 (1989).

5. See Art. 3(2) Regulation 4064/89 on the control of concentrations, infra note 23.

6. Bellamy., C.W. Childs., G.D. supra note 4. at 430.Google Scholar

7. The Problem of Industrial Concentration in the Common Market. Competition Series No. 3. at 21–27 (1966).

8. The main grounds advanced by the Commission were: because of the fact that Article 85 requires an agreement between undertakings concentrations which come about as a result of hostile takeover or slock exchange acquisition can not be caught by it: Article 85(2). which renders automatically void agreements falling within Article 85( 1), is unsuitable fordealing with concentrations: the exemptions of Article 85(3). which are limited in time and must be revised periodically, arc inappropriate in the light of the irreversible structure changes in the undertakings concerned; the procedural rules laid down in Regulation 17/62 are inadequate for the application of Article 85 to concentrations. See. supra note 7.

9. Article 86 too is inadequate for concentration control, for it can only be applied if one of the undertakings involved has a dominant position. This means that a lot of concentrations cannot be caught by this article. Other shortcomings are: Article 86 does not provide for exemptions: the procedural rules for the implementation of Article 86 in Regulation 17/62 are not suitable for concentration control. See R. Whish. supra note 4, at 747–749.

10. SHV/Chevron. O.J. 1975. L 38/14.

11. De Laval/Stork. O.J. 1977. L 215/11.

12. Examples are to be found in the informal decisions by the Commission. See Zip Fastners. Seventh Report on Competition Policy (1978), Points 31–32; Kaiser/Estel, Ninth Report on Competition Policy (1980), Point 131; Himont, Seventeenth Report on Competition Policy (1988), Point 69.

13. See. e.g., KEWA, O.J. 1976, L 51/15.

14. Case 6/72, Europemballage Corporation and Continental Can Corporation v. Commission (Continental Can). ECR 1973, 215.

15. Cases 142 and 156/84. ‘Fritish American Tobacco Company and R.J. Reynolds Industries ’. Commission (Philip Morris). ECR 1987.4487.

16. This paragraph raises some questions. The Court states that it is not necessary to consider to what extent Rothmans International occupies a dominant position. Rothmans International? Why not Philip Morris? Does not the Court mean Philip Morris instead of Rothmans International, for it is Philip Morris that is a party to the agreement which may infringe Article 86 and not Rothmans International. Or did the Court have a collective dominant position in mind? The answer can only be guessed at.

17. See.e.g., J.-'F.'F;laisé, Application des régles de concurrence du Traité aux opérations de concentration 3 RTDE 471 –476 (1989); Feenstra, J.J., Fusiecontrole door de EEG na net Philip Morris arrest. De NV 60–76 (1988)Google Scholar; Fine, F.L., supra note 4, at 19–22; Merger Control in the EEC: A Survey of European Competition Laws 273–277 (1988).Google Scholar

18. This is the reason why a concentration brought about by the acquisition of shares on the stockexchange or a hostile takeover bid can not be caught by Article 85.

19. Commission Press Release, IP/87/497 of Nov. 18.1987. See also Seventeenth Report on Competition Policy (1988), Point 101. Fut an examination of the informal decisions of the Commission indicates that it has not acted upon this possibility of concentration control by means of Article 85.

20. See. e.g., I. van Fael. J. Fellis. supra note 3. at 303–304: P.V.F. Fos, J.H.V. Struyck. Concentratie controle naar EEG-recht. Sociaal Economische Wetgeving (SEW) 346–360 (1989): M. Fierstra. Communautaire concemratiecontrole. SEW 331(1990): M. Friend. Controlling Mergers. 13 ELRev. 189–196 (1988); M.R. Mok, SEW 271–274 (1989); T.R. Ouervanger. Fusiecomrole en mededingingsrecht. Tijdschrift voor Vennootschapsrecht. Verenigingen en Stichtingen (TVVS) 5–11 (1988): V. Korah. P. Lasok. Philip Morris and it's aftermath-merger control?. 25 CMLRev. 333–367 (1988).

21. See, supra note 9.

22. OJ. 1989, L 395/1. rectified O.J. 1990. L 257/13.

23. Article 235 provides the following: “If action by the Community should prove necessary to attain, in the course of the operation of the common market, one of the objectives of the Community and this Treaty has not provided the necessary powers, the Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament, take the appropriate measures”. See Recital 8 of the preambule to the Regulation.

24. See Regulations 1017/68. OJ. 1968. L 175:4056/86. OJ. 1986. L 378/4: 3975/87. OJ. 1987. L 374/1.

25. Recitals 6 and 7.

26. Art. 1. The very high turnover thresholds have been strongly criticized. As a consequence of these high turnover thresholds only very large concentrations will fall within the scope of the Regulation. Smaller but in relation to the market large concentrations stay out of reach.

27. Art. 2. This article is a kind of mixed bag. It contains elements of both Articles 85 and 86. Some of the factors mentioned in Paragraph 1 which the Commission shall take into account when appraising a concentration, call Article 85(3) to mind. Paragraph 2 mentions dominant position, but unlike Article 86, it is not required that there be an existing dominant position. The mere creation of such a position can result in an infringement of the Regulation.

28. Commission notice regarding the concentrative and cooperative operations under Council Regulation (EEC) No. 4064/89 of Dec. 21.1989 on the control of concentration between undertakings. O.J. 1990, C 203/10.

29. The notice also deals with other links between undertakings besides minority shareholding, such as cross-shareholding, representation on controlling bodies of other undertakings, transfers of undertakings or parts of undertakings, joint acquisition of an undertaking with a view to its division.

30. See SHV/Chevron. supra note 10.

31. Article 21 (1) of the Regulation provides: “Subject to review by the Court of Justice, the Commission shall have the sole jurisdiction to take the decisions provided for in this Regulation”.

32. Cases 209–213/84. Ministere Public v. L. Asjes and others (Asjes). ECR 1986. 1424.

33. Case 66/86, Ahmed Saeed Flugreisen and Silver Line Reisebüro GmbH v. Zentrale zur Fekämpfung unlauteren Wettbewerbs e.V. (Saeed). ECR 1989. 803.

34. Case 127/73. Felgische Radio en Televisie and Sociéditeurs v. SV Sabam and NV Fonior (Sabam I). ECR 1974.51.

35. Fierstra, M., supra note 20, at 343–344.Google Scholar

36. Ottervanger, T.R., Steenbergen, J., De Europese Concentratieverordening. TVVS 113 (1990).Google Scholar