On 26 March 2021 the EU Commission (Commission) published revised guidance on the referral mechanism set out in Article 22 of the EU Merger Regulation (EUMR), under which the Commission will now accept referrals from Member States for deals that fall below the domestic jurisdictional thresholds of the referring country, in order to capture more transactions involving nascent competitors and innovative companies.  The changes have been made as a result of a 2016 Commission consultation that looked, amongst other things, at options to address the issue of so called ‘killer acquisitions’ through changes to the turnover-based thresholds by adding a new value-based threshold, or expanding the use of Article 22 EUMR to widen the scope for referrals to the Commission.

The concept of so-called ‘killer acquisition’ typically refers to established competitors acquiring innovating companies with strong competitive potential in the early stages of their development, in order to avoid potential competition further down the line.  The limited turnover of the target means that such transactions will often not qualify for a review under those merger control regimes which, like the EUMR, operate a turnover-based jurisdictional threshold.  In some jurisdictions, such as Germany and Austria, value-based thresholds have been introduced in order to capture such deals.

The Commission’s Staff Working Paper, published on 26 March, sets out the findings of its evaluation of the jurisdictional and procedural aspects of EU merger control. The Commission concludes that the current turnover thresholds allow it to capture most transactions it should be reviewing, but that encouraging and accepting more referrals under Article 22 EUMR, also where the transaction does not meet the national merger control thresholds, could give the Commission the flexibility to target more concentrations that merit review at EU level, without imposing notification obligations on transactions that do not.

Article 22 EUMR referrals

Under Article 22 EUMR one or more Member States can request the Commission to examine a concentration that does not have an EU dimension and does therefore not meet the jurisdictional thresholds of the EUMR, where that transaction affects trade between Member States and threatens to significantly affect competition within the Member State making the request.

There is nothing in the legislation or guidance to stop Member States from making such a referral for a transaction that does not meet their own national merger control thresholds, but over the years the Commission developed a practice of discouraging referral requests under Article 22 from Member States that did not have jurisdiction over the transaction at stake under their national regimes as it considered that such transactions were not likely to have a significant impact on the internal market.

Key features of the revised guidance

Given its change in approach to below national thresholds transactions, the Commission has issued practical guidance to clarify its revised approach. The guidance indicates the types of cases that may be suitable candidates for referral even where the transaction does not qualify under the national regime of the referring Member State, and clarifies some of the procedural aspects.

Appropriate cases

The categories of cases listed as appropriate for referral under Article 22 despite not meeting the national jurisdictional thresholds of the referring Member State are cases where the turnover of at least one of the undertakings concerned does not reflect its “actual or future competitive potential”.  A list of non-exhaustive examples includes:

  • start-ups or recent entrants with significant competitive potential
  • important innovators or undertakings involved in potentially important research
  • actual or potential important competitive forces
  • undertakings with access to competitively significant assets (eg raw materials, infrastructure, data, IPRs)
  • undertakings providing products or services that are key inputs or components for other industries

The Commission will also take into account whether the value of the consideration received by the seller is particularly high compared to the current turnover of the target.

The examples are not comprehensive and are not limited to any specific economic sectors.

Suspension obligation

Member States can request a referral even where transactions have already been completed.  The Commission will typically not consider a referral appropriate where the transaction has been implemented for more than six months, unless the level of the potential competition concerns and detrimental effect on consumers would justify intervention.

The Commission will inform the parties to a transaction as soon as possible where it is considering a referral request.  This does not require undertakings to refrain from any action in relation to the implementation of the deal, although the parties may decide to take measures such as delaying implementation until it has been decided whether a referral request will be made.  There are no formal ‘hold separate’ measures such as the initial enforcement orders regime under UK merger control.

The suspension obligation (under Article 7 EUMR) applies to the extent that the concentration has not been implemented on the date on which the Commission informs the parties that a referral request has been made.  It ceases to apply if the Commission decides not to examine the concentration.

Cooperation with other competition authorities

The Commission will work closely with international and with the national competition authorities of the Member States in order to identify concentrations that qualify under the revised regime, and it encourages the merging parties and third parties to come forward and inform the Commission of a potential referral candidate.

In a recent example, the US Federal Trade Commission flagged the acquisition by Illumina of Grail, a  business involved in developing a cancer detection test, to the EU Commission as potentially problematic.  The FTC is looking to block the transaction on the basis that it is a risk to innovation in relation to early detection of cancer.

The EU Commission asked the national competition authorities concerned whether anyone was interested in making an Article 22 referral and a referral request was made by the French competition authority, supported by the Dutch and Belgian competition authorities.  Illumina is challenging the EU Commission’s attempts to take jurisdiction over a deal below EUMR and national jurisdictional thresholds in the Dutch and French courts.

Timing – Member States have 15 days from when the deal is “made known” to them

Where a transaction is below the national thresholds and therefore no notification is required, a referral must be made within 15 working days of the date on which the concentration is otherwise ‘made known’ to the Member State concerned, ie sufficient information is available to make a preliminary assessment as to whether the criteria for referral are met.

Once a referral request has been made, the Commission will inform the undertakings concerned and the relevant competition authorities of the Member States without delay.  Other Member States then have 15 working days to consider whether or not to join the initial request.

The Commission must decide whether or not to examine the transaction at the latest 10 working days after the expiry of the 15 working days period for Member States to join the referral request. If it does not adopt a decision within this time period it will be deemed to have adopted a decision to examine the concentration in accordance with the request.

The timetable is compressed in the interest of certainty for business, but the main issue for delay is the timeframe for the Member State concerned to be ‘made known’ of the transaction and have sufficient information to carry out the relevant assessment. Companies might consider proactively informing the relevant national authorities to ensure that the 15 working days period is triggered.

Implications for businesses

The main criticism of the revised approach is the fact that it may reduce legal certainty for businesses that will have completed in good faith a transaction that does not meet the jurisdictional thresholds of any relevant merger control regime. A counter-argument is that on the whole  businesses acquiring a target meeting the characteristics for making the deal a potential candidate under the revised referral regime are likely to have a good idea that there may be a risk of referral.

The alternative option, of wholesale changes to the jurisdictional thresholds under the EUMR, would probably have been more disruptive and would have risked catching many more transactions with no significant competition impact, ultimately resulting in a greater regulatory burden.

How can a risk of an Article 22 referral be captured in transaction documents?

If a deal is referred to the Commission, this might lengthen the overall deal timeline and companies are therefore advised to carefully consider a referral risk early on.

In addition, a referral risk, even by Member States without jurisdiction, needs to be reflected in the transaction documents. This might include – in addition to respective condition precedents – a long stop date accommodating possible referral scenarios. Companies may wish to proactively inform Member States of a deal with sufficient information (i.e. make the deal “known”) to trigger the 15 day deadline and hence know whether a referral request is made.

Consultation on changes to the EUMR procedural rules

The Commission has also launched a consultation on the revision of certain procedural aspects of the EUMR.  The Commission is looking at expanding and clarifying the scope of cases falling under the simplified procedure as set out in the Notice on Simplified Procedure and reviewing the notification requirements set out in Commission Regulation 802/2004 implementing the EU Merger Regulation.

The aim is to:

  • Identify additional cases that are unlikely to raise competition concerns and can therefore be assessed under the simplified procedure
  • Ensure sufficient safeguards so the simplified procedure does not apply to cases that merit a detailed review
  • Ensure effective, efficient and proportionate information gathering
  • Explore possibilities to reduce the average time needed for clearance of non-problematic cases
  • Simplify the notification of concentrations and making permanent the possibility of electronic notifications, introduced in response to the Covid-19 pandemic

Submissions to this consultation are invited by 18 June 2021.


Kyriakos Fountoukakos
Kyriakos Fountoukakos
Managing Partner, Brussels
+32 2 518 1840
Mark Jephcott
Mark Jephcott
Partner, London
+44 20 7466 2323
Marcel Nuys
Marcel Nuys
Partner, Dusseldorf
+49 211 975 59065
Sergio Sorinas
Sergio Sorinas
Partner, Paris
+33 1 5357 7677
Kristien Geeurickx
Kristien Geeurickx
Professional Support Lawyer, London
+44 20 7466 2544