Member Article

The concentration between Intermarché AB and Mestdagh

The concentration between ITM and Mestdagh consisted of ITM’s acquisition of 100% of Mestdagh’s shares, and so acquiring exclusive control over Mestdagh to integrate Mestdagh’s supermarket network into ITM’s existing network in Belgium. Both ITM and Mestdagh are two players in the Belgian food retail sector. Through its network, ITM operates 77 outlets in Belgium under the “Intermarché” brand, in combination with service and supply activities.

Before the envisaged concentration, Mestdagh’s 89 points of sale were being operated under the Carrefour “Market” and “Express” brands based on a master franchise and franchise agreement entered into between Mestdagh and Carrefour Belgium.[1]Following the share purchase agreement by which ITM acquired the shares in Mestdagh, the latter terminated the franchise agreement with Carrefour on 23 December 2021, which would take effect from 1 January 2023. The idea was to align the Mestdagh sales strategy with ITM’s independent operation mode and to operate outside a franchise structure.

During the BCA’s analysis of the envisaged concentration in the first phase, Carrefour asked to intervene in the notification procedure. Carrefour considered, among other things, that the concentration could be problematic, in particular in certain catchment areas that Carrefour considered to be affected markets.

Invoked grounds for suspension

The BCA authorised the proposed concentration between ITM and Mestdagh on 9 November 2022. On 6 December 2022, Carrefour filed an application to annul and suspend the BCA’s decision based on Article IV.90 CEL. Along with other things, Carrefour requested the Market Court to order the suspension of the implementation of the contested decision, immediately and in any event before 31 December 2022, until the Market Court would have delivered its final judgment on the merits; and in the alternative, to order the suspension of the implementation of the contested decision regarding certain Mestdagh points of sale located in certain specific catchment areas.

If the Market Court were to grant the decision’s suspension, then Carrefour also requested interim measures based on Article 19, Section 3 of the Belgian Judicial Code: Carrefour requested the Market Court to order the continuation of the effects of the franchise and master franchise agreement between Carrefour and Mestdagh beyond 31 December 2022 (or, in subsidiary order, at least for certain specific Mestdagh points of sale in certain specific catchment areas), until the Market Court would deliver its judgment on the merits.

Carrefour insisted that the Market Court should make its decision before 31 December 2022, i.e. before the termination of the franchise agreement would effectively take effect at the start of January 2023.

The Market Court’s decision

At the introductory hearing, the Market Court decided together with the parties that it would first rule only on the question of the decision’s suspension before the end of December 2022, and that it would address the questions related to the interim measures and the merits of the case (i.e. the annulment of the BCA’s decision) at a later stage.

In its judgment of 23 December 2022, the Market Court therefore only ruled on the question of the suspension of the BCA’s decision authorising the concentration between ITM and Mestdagh.

Article 90, §3 CEL states that “the Market Court may, at the request of the party concerned and by an interim decision, suspend, in whole or in part, the implementation of the contested decision until the day on which the judgment is delivered. The suspension of implementation may be ordered only if serious grounds are put forward which may justify the annulment of the contested decisionand provided that the immediate implementation of the decision is likely to have serious consequences for the party concerned”(emphasis added).The Market Court recalled that in accordance with this provision:

• The non-suspension of a contested decision is the rule, and the Market Court is never forced to suspend a decision’s implementation;
• “Serious grounds” mean grounds that show a prima facie illegality or manifest error of assessment that would almost certainly result in the annulment of the contested decision;
• The party asking for the decision’s suspension must demonstrate urgency, i.e. that it is likely to suffer serious and imminent damage that would be difficult to repair.

The conditions listed above are cumulative. However, even when they are all met, the Market Court can still balance the advantages and disadvantages of a suspension measure, taking into account not only all of the parties’ rights, but also the public interest (e.g. consumers’ interests) and economic reality in which the BCA adopted the contested decision.

The Market Court first analysed the urgency requirement.

In its reasoning, the Market Court first stated that Carrefour confused, on the one hand, ITM’s acquisition of Mestdagh (a concentration that the contested decision declared admissible) with, on the other hand, Mestdagh’s termination of the franchise agreements on 23 December 2021, which took effect from 1 January 2023. According to the Market Court, the market share loss that Carrefour Belgium anticipated would be exclusively due to the end of the franchise agreements, and was therefore independent of ITM’s acquisition of Mestdagh. Since this market share loss was only due to the contracts knowingly and voluntarily entered into by the Carrefour group, Carrefour Belgium had had sufficient time to prepare for this situation.

Second, the Market Court considered that the termination of the franchise agreements between Mestdagh and Carrefour constituted a preparatory act to the concentration, agreed by the parties. In accordance with the European Court of Justice’s (“ECJ”) Ernst & Young case law,[2]since this termination did not have a direct functional link with the implementation of the concentration, it could not be considered as a transaction related to it and could therefore be implemented independently of the BCA’s decision to authorise the concentration. In other words, the termination of the franchise agreements between Carrefour and Mestdagh and the implementation could not be considered as constituting a prohibited form of so-called ‘gun-jumping’.

Finally, the Market Court noted that suspending the BCA’s decision could in any event not have the effect of ‘restoring’ the effects of the past franchise agreements between Carrefour and Mestdagh. Given that this termination had not been challenged by any judicial decision or arbitral award, it had become effective; suspending the implementation of the BCA’s decision would have no impact on the effectiveness of the termination of the franchise agreements. Moreover, under the CEL, the Market Court’s competence is limited to annulling a BCA decision authorising a concentration. This means that even if in its final judgment the Market Court annulled the BCA’s decision authorising the concentration, this would not result in restoring the effects of the franchise agreements that expired on 1 January 2023.

In light of the above, the Market Court concluded that Carrefour failed to show that the allegedly serious consequences that it had invoked were linked to the implementation of the BCA’s decision, and therefore Carrefour failed to demonstrate the conditions of urgency required to suspend the BCA’s decision. Given that there was no urgency, the Market Court did not deem it necessary to analyse the parties’ other pleas.

Conclusion

It has been a while since a third party having an interest in a notification procedure has appealed a BCA decision authorising a concentration and has sought both the decision’s suspension and annulment, in addition to interim measures.

However, it is important to note that the Market Court’s decision of 23 December 2022 only concerned Carrefour’s request for the suspension of the BCA’s decision, and that this decision therefore does not prejudge the Market Court’s final judgment on the decision’s annulment.

Finally, it is interesting to have a Belgian court’s view on the issue of gun-jumping. To substantiate its decision in this matter, the Market Court referred to the ECJ’s preliminary ruling in 2018 in the Ernst & Young case, in which the ECJ ruled in particular that “[t]he termination of a cooperation agreement, in circumstances such as those in the main proceedings, which it is for the referring court to determine, may not be regarded as bringing about the implementation of a concentration, irrespective of whether that termination has produced market effects”.[3]Given the number of questions linked to gun-jumping in recent years, such national decisions are certainly welcome for practitioners in helping to draw the line between illegal gun-jumping and the legitimate preparatory acts to a concentration.