The Advocate General’s Opinion in Case C-449/21Towercast rendered on 13 October is interesting reading in particular in the context of «killer acquisitions».

The dispute in the main proceedings before Cour d’appel de Paris concerns the question as to a supplementary or «gap-closing» application of Article 102 TFEU in relation to the national rules on merger control. The question referred to the ECJ seeks to clarify whether the Merger Regulation has the effect that concentrations are to be assessed exclusively based on merger control law and whether application of Article 102 TFEU is excluded (referred to as a ‘blocking effect’).

The dispute in the main proceedings and the request for a preliminary ruling to the ECJ were based on an action brought by the French company Towercast against the decision of the French competition authority dismissing a complaint by Towercast alleging abuse of a dominant position by the French company TDF Infrastructure Holding (‘TDF’).

Towercast had lodged a complaint with the French competition authority concerning the acquisition (of control) of the company Itas by TDF. Towercast had alleged that that acquisition constituted an abuse of a dominant position because TDF hindered competition on the upstream and downstream wholesale markets for digital transmission of terrestrial television services by significantly strengthening its dominant position on those markets.

TDF’s acquisition of Itas was below the notification thresholds provided for in the EU Merger Regulation and under French competition law. The transaction was thus not subject to ex ante control by the Commission or the French competition authority. Nor was there a referral to the Commission under Article 22 of the Merger Regulation. Article 22 provides that:

«One or more Member States may request the Commission to examine any concentration … that does not have a Community dimension … but affects trade between Member States and threatens to significantly affect competition within the territory of the Member State or States making the request.»

The French competition authority had rejected Towercast’s complaint because the alleged abuse of a dominant position had not been demonstrated. According to the French competition authority, the EU Merger Regulation has drawn a clear dividing line between merger control and the control of anticompetitive practices under Articles 101 and 102 TFEU, with the result that the Merger Regulation applies solely and exclusively to concentrations. Therefore, in the view of the French competition authority, Article 102 TFEU is not applicable where no anticompetitive conduct distinct from the concentration is manifested.

The Advocate General’s conclusion was that the EC Merger Regulation:

«must be interpreted as not prohibiting a national competition authority from reviewing a concentration which has no Community dimension within the meaning of Article 1 of that regulation, is below the thresholds for mandatory ex ante assessment laid down in national law, and has not been referred to the Commission under Article 22 of that regulation, in order to determine whether it constitutes an abuse of a dominant position under Article 102 TFEU, in the light of the structure of competition on a market which is national in scope.»

If the ECJ upholds the Advocate General’s proposal, this means that a concentration that does not meet the EU or national merger control thresholds can be assessed under the dominance provision in Article 102 TFEU.

The Advocate General pointed out that:

«the exclusion, prescribed in Article 21(1) of the Merger Regulation, of the applicability of Regulation No 1/2003 to concentrations does not answer the question as to the applicability of Article 102 TFEU. The answer to that question is all the more important where, as in the present case, the concentration in question does not meet either the EU or the national thresholds and has not been referred to the Commission under Article 22 of the Merger Regulation, with the result that there is no ex ante assessment under merger control law.»

In answering the question, the Advocate General pointed out that particular importance is to be attached to the Article 102 TFEU status of primary law and its direct applicability. The direct applicability of Article 102 TFEU and its position in the hierarchy of norms is, according to the Advocate General, sufficient to justify the conclusion that its applicability to concentrations cannot be excluded by the Merger Regulation.

The Advocate General also concluded that supplementary application of Article 102 TFEU «is likely to contribute to the effective protection of competition in the internal market.» This is because she considers that a «gap» in protection has emerged in recent years in the coverage and control of acquisitions of innovative start-ups, for example in the fields of internet services, pharmaceuticals or medical technology («killer acquisitions»):

«This concerns situations in which established and powerful undertakings acquire emerging undertakings which do not yet have a large turnover and which operate in the same, neighbouring, upstream or downstream markets, at an early stage of their development in order to eliminate them as competitors and consolidate their own market position. In order to ensure effective protection of competition in that respect also, it should therefore be possible for a national competition authority to resort at least to the ‘weaker’ instrument of punitive ex post control under Article 102 TFEU, provided that the conditions for it are met. Such a need may also exist in the case of acquisitions in highly concentrated markets, such as that in the present case, where the aim of such acquisitions is to eliminate competitive pressure from an emerging competitor.»

The Advocate General also discusses the significance of the judgment in Continental Can and legal certainty. In Continental Can the ECJ stated that

«Abuse may … occur if an undertaking in a dominant position strengthens such position in such a way that the degree of dominance reached substantially fetters competition, i.e. that only undertakings remain in the market whose behaviour depends on the dominant one.»

The legal certainty question was not deemed to raise concerns in relation to ex post application of Article 102 TFEU, because in view of the settled case-law on the direct applicability and the judgment in Continental Can, «those concerned cannot have developed a belief, in good faith, that that provision would be interpreted differently» in a merger control context than in other dominance cases. A risk of serious difficulties was, therefore, also excluded. Thus, the legal certainty issue was considered no different than in other competition law cases where the parties bear the risk of interpreting the rules correctly.