Luxembourg still has no national merger control system meaning that, contrary to all other countries in the EU, mergers, acquisitions and creations of joint ventures potentially raising competition concerns in Luxembourg can proceed without the prior clearance by (and therefore prior notification to) the national competition authority, the Conseil de la concurrence, where the transaction has no EU dimension (and thereby no requirement for European Commission approval).
This has not prevented the Conseil de la concurrence from recently investigating a merger retroactively. On 22 June 2016, it published a decision relating to the acquisition in 2012 by the Utopia group, owner of numerous cinemas in Luxembourg, of another cinema, Ciné Belval.
Although the Conseil de la concurrence found no competition law concerns were raised in the case at hand due to the particular circumstances involved (the target was apparently going out of business), the adoption of such a decision, based on the prohibition of an abuse of dominance, is extremely significant. This is because it is the first time that the Conseil has investigated the legality of a merger in competition law. It therefore sends a clear message to economic operators, particularly those with significant market power in Luxembourg.
These companies must now be careful when deciding to acquire another company or the activities of another company in Luxembourg and should assess the effect that the transaction could have on competition in the country. Such caution is recommended even before the potential implementation of a merger control regime in the country, which the Conseil is keen to introduce. So it is now possible that such mergers be investigated after their completion, following a complaint to the Conseil by a competitor, for instance, as was the case in Utopia. Therefore, a merger or acquisition with an impact on the Luxembourg market should be prospectively assessed for compatibility with EU merger control principles.
It remains to be seen what precise types of transactions will be investigated by the Conseil de la concurrence. At the moment, without other decisions by the Conseil, one cannot exclude definitively that the Conseil decides to look at mergers where the buyer does not have a dominant position on the market before the transaction, contrary to the Utopia investigation. On the other hand, the good news for investment funds is that they should not be affected when proceeding with acquisitions, so long as they do not have shareholdings in companies active in Luxembourg or do not strengthen those shareholdings, given the lack of effect on the Luxembourg market.
The Utopia decision also demonstrates once more that the Conseil is looking to enforce competition law in the broadest sense in the country. It has already used its current powers relating to prohibiting anticompetitive agreements between companies and abuses of dominance to investigate State-owned companies and organisms. It has also already rendered opinions on draft legislation, sometimes on its own initiative, to encourage effective competition in Luxembourg, even commenting on State aid compliance despite having no powers to do so. Now, in the same vein, it is aiming to apply EU merger control principles notwithstanding the lack of any formal merger control regime in Luxembourg.
in collaboration with Thomas Evans - Associate - (thomas.evans@arendt.com)
