Towercast Casts Its Shadow On Merger Control

• Published date: 02 August 2023
• Subject Matter: orporate/Commercial Law, Antitrust/Competition Law, M&A/Private Equity, Antitrust, EU Competition
• Law Firm: Bird & Bird
• Author: Mr Hein Hobbelen and Baptist Vleeshouwers

Towercast judgment

On 16 March 2023, the Court of Justice rendered its judgment in Case C-449/21, Towercast. The judgment quickly gained wide attention because of its important implications for mergers which fall below the notification thresholds. The judgment itself however came as no surprise, as its largely confirms the Opinion of Advocate General Kokott of 13 October 2022.

It was long disputed in EU competition law whether the Court's 1973 judgment in Continental Can v Commission was still good law following the adoption of the EU Merger Regulation. In Continental Can, the Court confirmed that concentrations could constitute an abuse of an undertaking's dominant position.

However, since then, the EU legislator has set up a regime to assess intended transactions. This regime requires companies to notify transactions to the Commission for approval when certain turnover thresholds are reached. It was long debated whether this new regime prevented competition authorities from applying the general competition law rules, including the rules on abuse of dominance, to non-notifiable transactions.

In Towercast, the Court answers this question: transactions that are not notifiable under the merger control regime may nevertheless be appraised on the basis of the abuse of dominance rules, following the completion of the transaction.

Killer acquisitions v legal certainty

Some, including AG Kokott, have advocated for this outcome, arguing the abuse of dominance rules have a role to fulfil in addressing the enforcement gap left by so-called "killer acquisitions". This concept, which is often criticised as a misnomer, refers to acquisitions of innovative start-ups by larger undertakings. Since start-ups often do not generate sufficient turnover to meet the notification threshold, the acquisitions are typically not notifiable. Proponents argue that authorities should still be able to assess such an acquisition under the rules on abuse of dominance to avoid larger undertakings which use the acquisition to terminate development of the target's innovations to pre empt possible future competition.

However, others have warned that this outcome is liable to increase legal uncertainty in M&A deals due to the persisting threat of objections and investigations by competition authorities. Critics have also pointed out that reviewing transactions after their completion could have a chilling effect on innovation. Start-ups and innovators, which typically do not generate much...