ON 13 JULY 2022, THE LUXEMBOURG MINISTRY OF THE ECONOMY (THE “MINISTRY”) PUBLISHED A PRELIMINARY REPORT ON ITS PUBLIC CONSULTATION ON THE INTRODUCTION OF A MERGER CONTROL REGIME IN LUXEMBOURG (THE “REPORT”).
Merger control seeks to scrutinise concentrations of competitive power by requiring certain transactions to be notified to national or supranational competition authorities before they are carried out. If a transaction needs to be notified, the relevant competition authority performs a substantive review of the concentration, during which the parties are typically barred from closing the transaction until the authority has given it the green light.
At present, all EU Member States except Luxembourg have national merger control regimes.
With the launch in January 2022 of a public consultation procedure on creating a national merger control regime, the government signalled its desire to draw level with other EU Member States and introduce merger control in Luxembourg. One key finding reflected in the Report is that such an initiative gleaned broad support from respondents.
The public consultation aimed to gather key stakeholders’ views on what features a potential future national merger control regime should have. The respondents included companies, associations, consumer protection representatives as well as legal and business advisors. The Ministry and the Competition Council also exchanged views with the EU Commission and national authorities of neighbouring and other EU Member States.
Alignment with existing merger control systems while accounting for Luxembourg specifics
The Report underlines on page 36 that, as the last EU Member State to adopt [a merger control regime], it would, in fact, be logical for Luxembourg to take broad inspiration from pre-existing rules and concepts used by both the EU Commission and other national competition authorities – for example, with respect to defining what constitutes a “concentration”, or to procedural aspects like splitting investigations into two phases or offering a simplified procedure. By the same token, it should be the national competition authority, the Luxembourg Competition Council, that is charged with reviewing concentrations within determinable and appropriately short periods.
The Ministry’s Report also stresses that, as the public consultation made clear, a new merger control regime should not be detrimental to Luxembourg’s financial sector (e.g. it should not impose an obligation to notify authorities of operations involving investment vehicles with no targets in Luxembourg), and should take due account of particularities of the country. The Report underlines that country-specific factors may have an impact on:
- whether the notification system should be mandatory, voluntary or hybrid
- the turnover thresholds on Luxembourg markets that will trigger notification
- whether a political veto over merger control decisions should be provided for.
The Report states that these questions will be examined in more detail during the next consultation and deliberation stages leading up to a first draft bill.
Majority support for a mandatory regime with domestic turnover thresholds
The Report states that the vast majority of stakeholders (88%) are in favour of a mandatory system or one with mandatory components. Other stakeholders expressed a preference for a voluntary, more flexible system, especially in the years following implementation of the new regime. The Ministry explains in the Report that if a mandatory system were chosen, there would have to be a standstill obligation preventing companies from implementing transactions until the authorities gave clearance.
60% of the respondents argued that the notification thresholds should be placed on turnover, potentially mirroring the French and Belgian approach with both aggregate and individual domestic turnover thresholds applied to at least two undertakings. Only few stakeholders were in favour of market share thresholds, and the Ministry indicated that market share data is often not readily available.
The Ministry also warns on page 5 that (as a general rule) notification thresholds would need to be constantly reviewed, as the objective should be to avoid creating excessive administrative burden, both for companies and for the national authority, while also allowing the latter to review potentially problematic operations.
The Ministry specifies that it is essential for the thresholds to reflect a connecting link to Luxembourg, stemming from the Luxembourg-located activity of at least two parties involved in the transaction and/or of the target for acquisition.
Finally, many stakeholders and the Ministry underline the importance of allocating sufficient resources to the Luxembourg Competition Authority to enable the efficient and timely review of notifications.
According to the Ministry, the Report marks the start of the drafting stage for a future merger control law, which will be discussed and adapted in the coming months in close cooperation with the Competition Council. A first draft will be laid before Parliament in spring 2023, following which the bill will be debated and the Council of State – as well as other relevant committees and chambers – will have an opportunity to provide feedback. While the duration of the legislative process is difficult to predict, it is unlikely that a law will be passed before the end of 2023.