Doomed if you clear and doomed if you block? Why the EU’s merger system is unlikely to adapt quickly to distressed M&A and industrial policy objectives

Last week's Hutchison judgement adds a new ingredient to the cocktail of case law that has made the EU's merger control regime one of the slowest and the most burdensome in the world. With Hutchison, this cocktail only becomes stronger.

The base is a solid dose of Impala (C-413/06 P). This judgment has put the Commission between a rock and a hard place. Whether it clears or prohibits a merger, it has to provide reasons to the same high standard of proof. In many other regimes in the world, clearance is the default, unless the authority establishes a significant lessening of competition to the required standard of proof. But the Commission has to investigate until it can positively establish the harm or its absence. 

Airtours (T-342/99) provides a special taste of coordinated effects. Establishing those requires a detailed prediction of the market characteristics that drive tacit collusion. Or of their absence, because this one is mixed with Impala of course. You still wonder why coordinated effects cases have become so rare? The Commission approached oligopolies through the supposedly safer route of unilateral effects. After all, economic theory suggests that any merger in such markets will reduce competitive constraints.

This is where we now add Hutchison (T-399/16). It makes the supposedly safer route of analysis just as risky. There is no presumption that concentration is bad. Unilateral effects have to be proven. But of course this also applies to their absence, so we would be misguided to assume that Hutchison will smoothen the merger control process.

The cocktail is rounded off with many flavours of potential embarrassment and losing face. The Court uses stark language where it thinks that the Commission got it wrong: "confusing", "inconsistent", "unrealistic", "implausible", "unspecific" are examples of language from the judgments mentioned above. Who would blame the Commission for taking the time and effort to thoroughly prepare its files?

Hundreds of questions in pre-notification, millions of pages of internal documents, a pre-notification process that can take the best part of a year before the formal process can even start, stopping the merger control process for several months while evidence is assessed and files are completed, requesting hundreds of stakeholders to provide their data and answers to questions. These are the side effects of the judgments.

We may be approaching a world of more distressed M&A, where speed is of the essence. There is also increasing pressure to factor industrial policy considerations, green objectives and other policy goals into merger assessments. The Court is making once again clear that the current framework is not open to any of this.