Ex-Post-Merger Control: Competence Of The Competition Council

On 17 June 2016, the Luxembourg Competition Council adopted a decision in which it asserts, on the basis of Article 5 of the Law of 23 October 2011 on Competition and Article 102 of the Treaty on the Functioning of the European Union, its competence to scrutinise and, as the case may be, sanction transactions between businesses which create or strengthen a dominant position on the relevant market.

In the case at hand, a cinema operator active in the Grand Duchy of Luxembourg ("Cinema Operator") acquired, in 2013, a multiplex cinema situated in the south of Luxembourg ("Multiplex Cinema"). According to the Competition Council, the Cinema Operator occupied a dominant position in the market for operating cinemas even before acquiring the Multiplex Cinema. It considers that after the acquisition, the Cinema Operator has a quasi-monopoly on the market, whether on national or on local level.

On the basis of the judgement of the Court of Justice in Continental Can(1) the Competition Council states that the acquisition of the Multiplex Cinema may constitute an abuse of a dominant position if it affects the structure of the market to such an extent that the Cinema Operator faces no competitive pressure from its remaining competitors as they do not represent a real counterweight.

Nevertheless, the Competition Council closed the case without further action on the grounds that the acquisition of the Multiplex Cinema did not have anti-competitive effects. The Competition Council applied the "failing firm defence" according to which an otherwise problematic merger is nonetheless compatible with the common market if the deterioration of the competitive structure that follows the merger cannot to be said to be caused by the merger. This is the case when the following three cumulative conditions are met: (i) one of the undertakings involved in the transaction would in the near future be forced out of the market because of financial difficulties if not taken over by another undertaking; (ii) there is no less anti-competitive alternative purchase; and (iii) in the absence of a merger, the assets of the failing firm would inevitably exit the market. In the case at hand, the three cumulative conditions were met.

By this decision, the Competition Council stressed its authority to exercise an ex-post control of mergers which could create or strengthen a dominant position by using, in the absence of a specific merger control regime at national level, the provisions prohibiting the abuse of a dominant position.

(1) CJEU, Europemballage Corporation and Continental Can Company Inc. v Commission of the European Communities, 21 February 1973, Case 6/72