On 16 March 2023, the EU Court of Justice ruled that the Treaties’ prohibition of abuse of dominance allows an ex post control of a concentration of undertakings when that concentration was not subject to ex ante merger review (Case C-449-21).
With its landmark Towercast judgment, the EU Court of justice (the “Court”) confirms that its Continental Can case law (Case 6/72), a 1973 judgment allowing the application of the rules on abuses of dominance to concentration operations (Article 102 TFEU), is still relevant. The Continental Can judgment was rendered before the adoption of Regulation n°139/2004 on the control of concentrations between undertakings (the “Merger Regulation”), which organises a system of ex ante control of concentrations which reach a certain EU threshold. The question therefore arose as to whether the principles set out in that judgment remained applicable following the adoption of the Merger Regulation.
With the Towercast judgment it is now clear that concentrations which are not subject to ex ante merger review, at EU or national level, may still be subject to antitrust scrutiny if it is suspected that these concentration amount to an abuse of a dominant position by the acquiring undertaking.
• What happened?
With the liberalisation of the French audiovisual area, Télédifusion de France (“TDF”), previously in a situation of monopoly on the market for digital terrestrial television broadcasting services, was suddenly facing competition from, inter alia, two competitors, namely Itas and Towercast. In 2016 however, TDF acquired sole control over Itas. This transaction fell below the European and national thresholds for mandatory merger control and was also not referred to the Commission under Article 22 of the Merger Regulation. It was therefore not subject to any ex ante competition scrutiny.
After the transaction closed, Towercast lodged a complaint with the French competition authority (the “FCA”), arguing that the acquisition constituted an abuse of a dominant position, inasmuch as it allowed TDF to significantly strengthen its dominant position on the market for digital terrestrial television broadcasting services. The FCA opened an investigation but concluded, in 2020, that it was not appropriate to continue these proceedings as the adoption of the Merger Regulation had drawn a clear dividing line between the control of concentrations and the control of anti-competitive practices. According to the FCA decision, Article 102 TFEU could no longer be applied to a concentration operation, except if the abusive conduct could be separated from that operation.
The FCA decision was appealed by Towercast before the French courts. In this context, the referring court decided to refer the matter to Luxembourg. In particular, it asked if the Merger Regulation should be interpreted as precluding a national competition authority from qualifying a concentration which is below the thresholds for mandatory ex ante control laid down (i) in EU law, or (ii) in national law and (iii) has not been referred to the European Commission (the “Commission”) under Article 22 of the Merger Regulation, as constituting an abuse of dominance prohibited by Article 102 TFEU.
• What did the Court say?
The Court considers that, although the Merger Regulation aims at introducing a one-stop shop system for concentrations involving significant structural changes, it cannot be inferred from this that the EU legislature intended to render the control carried out at national level on a concentration, in the light of Article 102 TFEU, devoid of purpose. It recalls that, on the contrary, the Merger Regulation forms part of a legislative package intended to implement Article 102 TFEU and to establish a system of control ensuring that competition is not distorted in the internal market. Hence, although that regulation introduced an ex ante control for concentrations that reach the EU thresholds, it does not preclude an ex post control of concentrations that do not meet those thresholds.
According to the Court, the interpretation that led the FCA to close its investigation amounts to ruling out the direct applicability of a provision of primary law (Article 102 TFEU) by reason of the adoption of secondary legislation covering certain types of conducts (the Merger Regulation). As Article 102 TFEU prohibits any abuse of a dominant position, that solution is not acceptable insofar as it creates a situation where potential abuses of dominance resulting from a concentration operation would be exempted from this prohibition because they do not reach the thresholds triggering mandatory ex ante merger control under the Merger Regulation.
The Court also confirms that its ruling also applies to transactions which were closed prior to the adoption of the Towercast judgment, thereby rejecting the parties’ request to limit the temporal effects of its judgment.
• Why is it significant ?
This ruling is significant as it means that, even if the Commission and national competition authorities in the EU do not have jurisdiction to review a transaction under merger control rules, a dominant undertaking cannot exclude antitrust intervention when it acquires another undertaking. In other words, the risk of regulatory or judicial intervention lives on, even after the deal closes, if it is demonstrated that such acquisition by the dominant undertaking amounts to an “abuse” within the meaning of Article 102 TFEU. To do so, the competent authority will have to establish that the degree of dominance reached through this operation will substantially impede competition, that is to say that only undertakings whose behaviour depends on the dominant undertaking would remain in the market.
For further information about this case and/or for general legal advice relating to European and Belgian competition law, please contact Pierre de Bandt, Chloé Binet or Tatiana Ghysels.