Master Thesis, Yavor Markov

Faculty of Law
International and European Law
The Commission’s 2014 White Paper – Foreshadowing the
Closing of the Regulatory/Enforcement Gap regarding Non-
Controlling Minority Shareholdings or a Sign of
Overregulation?
Master Thesis
Master’s Programme in European Law
Master’s Specialisation in Business Law
2014/2015
Author: Yavor Markov (s4479955)
Academic supervisor: Dr. Catalin S. Rusu

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Table of Contents
1. Introduction 5
2. Applicable Law 10
2.1. A General Note 10
2.2. The Status Quo prior to ECMR. Application of Arts. 101 and 102 TFEU 10
2.3. The First Merger Regulation 14
2.4. The Merger Control Regulation. Notion of Control 15
2.5. The Ryanair/Aer Lingus Saga 19
2.6. Preliminary Conclusions 21
3. Theories of Harm 23
3.1. General Notes 23
3.2. Horizontal Acquisitions 24
3.2.1. Non-Coordinated (Unilateral) Effects 24
3.2.2. Coordinated Effects 26
3.3. Non-Horizontal (Vertical) Acquisitions 28
3.4. Effects on Potential Entry 31
3.5. Magnitude of Harmful Effects 32
4. The White Paper 36
4.1. General Notes 36
4.2. The Targeted Notification System 37
4.3. The Self-Assessment System 38
4.4. The Targeted Transparency System 39
4.5. Comparison of the Three Options 42
4.6. Potential Issues and Proportionality 44
4.6.1. Statistics 45
4.6.2. The Thresholds in the Definition of a Competitively Significant Link 47
4.6.3. The Information Notice’s Content 49
4.6.4. The Procedure’s Length 50
4.6.5. The Waiting Period 51
4.6.6. The Ex Post Dimension of the Targeted Transparency System 52
4.6.7. De Minimis Doctrine on Market Shares and Turnover Thresholds 53
5. Conclusion 56
Table of Cases 59
Bibliography 61

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1. INTRODUCTION
In a response to the increased debate on the issue of non-controlling minority
shareholdings, the European Commission (hereinafter, the Commission) published in 2014
the white paper titled ‘Towards More Effective EU Merger Control’ (White Paper).1 The
document deals with proposals for reform envisaged by the Commission to close the
regulatory/enforcement gap manifested by the Ryanair/Aer Lingus saga,2 among other
things. By and large, a new system for the control of acquisitions of such shareholdings on a
European Union (the Union, EU) level is suggested, namely the so-called Targeted
Transparency System. It is supposed to bring about substantial changes in the currently
existing system set out in Regulation 139/20043 (the Merger Control Regulation, EUMR).
The publication of the White Paper enhanced the discussion in question among jurists and
economists across the Union. It had also been the subject of attention before,4 including in
the 2001 Green Paper5 where the Commission came to the seemingly firm conclusion that
“only a limited number of such transactions would be liable to raise competition concerns that
could not be satisfactorily addressed under Articles [101] and [102 of the Treaty on the
Functioning of the European Union (TFEU)].6 Under this assumption it would appear
disproportionate to subject all acquisitions of minority shareholdings to the ex ante control of
the Merger [Control] Regulation.”7 Eventually, this proposition was discarded, albeit not
abruptly. In a speech delivered on 10 March 2011,8 the then Commissioner for Competition
and Commission Vice-President Mr Joaquín Almunia stated that EUMR did not apply to
minority shareholdings and that he believed there was an “enforcement gap” which was to
be closed provided it was “significant enough.” To that end, the Commission issued that
same year a tender purposed to determine the “mapping” of (i) the current stock of minority
shareholdings across the EU […] and (ii) the links created by minority shareholdings
1 White Paper: Towards More Effective EU Merger Control, COM (2014) 449 final. It is accompanied by the
following documents: Impact Assessment, SWD (2014) 217 final (Impact Assessment), Executive Summary of
the Impact Assessment, SWD (2014) 218 final (Executive Summary) and Commission Staff Working
Document, SWD (2014) 221 final (2014 Staff Working Document).
2 The saga comprises the legal proceedings emanating from case COMP/M.4439 - Ryanair/Aer Lingus I,
Commission decision of 27 June 2007, OJ C 47, 20.2.2008, p. 9, case T-342/07, Ryanair v. Commission, [2010]
ECR II-03457 (ECLI:EU:T:2010:280), case T-411/07, Aer Lingus v. Commission, [2010] ECR II-03691
(ECLI:EU:T:2010:281) (Aer Lingus), case COMP/M.5434 - Ryanair/Aer Lingus II, withdrawn 23.1.2009, and
case COMP/M.6663 - Ryanair/Aer Lingus III, Commission decision of 27 February 2013, OJ C 216, 30.7.2013,
p. 22.
3 Council Regulation (EC) No. 139/2004 of 20 January 2004 on the control of concentrations between
undertakings, OJ L 24, 29.1.2004, p. 1.
4 See Hawk and Huser (1993), Struijlaart (2002).
5 Green Paper on the Review of Council Regulation (EEC) No 4064/89, COM (2001) 745 final (Green Paper).
6 Then: arts. 81 and 82 of the Treaty establishing the European Community.
7 Green Paper, para. 109.
8 ‘EU merger control has come of age. Merger Regulation in the EU after 20 years’, co-presented by the IBA
Antitrust Committee and the European Commission, Brussels, 10 March 2011, SPEECH/11/166. Available at
http://europa.eu/rapid/press-release_SPEECH-11-166_en.htm (retrieved on 22 February 2015).

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transactions across the EU over the last five years”9 in order to detect potential anti-
competitive effects caused by the gap.10
Some authors11 express their skepticism towards the magnitude of harm caused by non-
controlling minority shareholdings and the purported width of the debated
regulatory/enforcement gap and hence the necessity for its closing as well. Like other
proposals for legislative amendments, the proportionality of the regulation suggested by
the White Paper with the existing merger control regime was put to question as well. Stress
has been consistently placed on the administrative burden on businesses and on the
Commission’s workload with the inevitable consequences for the Union’s attractiveness for
investments and the actual efficiency of the proposed control, to name a few.
These are the questions which the present thesis shall address and analyse by relying on
the method of analytical-descriptive research. Are the changes proposed by the White
Paper consistent with the heralded intention of preventing non-controlling minority
shareholdings from “flying under the radar” of EUMR? If yes, to what extent? Are these
changes a sign of regulation above the limit healthy for a free market economy?
Accusations of unnecessary bureaucracy and overregulation seem to have been a constant
companion of the process of European integration and especially nowadays, given the
considerable percentage of Eurosceptic parties represented in the European Parliament,12
the matter takes on an additional political significance.
In order to give answers to the above questions, this contribution shall first provide some
historical context by examining the development of the merger control regime in the
European Union. At the outset, I discuss how the Commission coped with the challenge of
minority interests between competitors in the period prior to the adoption of
Regulation 4064/8913 (the First Merger Regulation, ECMR) and its entrance into force in
1990. Back then, the Commission resorted to the use of articles 101 and 102 TFEU.14 This
approach was reflected in the doctrine developed by the Court of Justice of the European
9 See Specifications to invitation to tender COMP/2011/016.
Available at http://ec.europa.eu/competition/calls/2011_016_tender_specifications_en.pdf (retrieved on
22 February 2015).
10 Demir (2013), pp. 2-3.
11 For example, Ignjatovic and Ridyard (2012), Friend (2012), Tóth (2012), Levy (2014).
12 At the 2014 elections, the famously Eurosceptic political group “Europe of Freedom and Direct Democracy”
won 47 seats and the short lived “Identity, Tradition, Sovereignty” had 23 seats, totaling at around 9%. See
http://www.europarl.europa.eu/elections2014-results/en/election-results-2014.html (retrieved on
23 February 2015).
13 Council Regulation 4064/89 of 21 December 1989 on the control of concentration between undertakings,
OJ L 395, 30.12.1989, p. 1. Corrected version in OJ L 257, 21.9.1990, p. 13. As last amended by Regulation (EC)
No 1310/97 (OJ L 180, 9.7.1997, p. 1). Corrigendum in OJ L 40, 13.2.1998, p. 17.
14 Then: arts. 85 and 86 of the Treaty establishing the European Economic Community (TEEC).

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Communities (CJEC) in the seminal judgment in Philip Morris,15 whose seeds can later be
found in the Gillette16 decision which in turn shall also be reviewed so as to evaluate the
appropriateness of relying on Treaty competition rules in avoiding the potential undesired
effects of acquisitions of minority shareholdings.
Next, for the sake of context, I briefly touch upon the adoption of the First Merger
Regulation in 1989 and its overhaul which led to the adoption of the presently applicable
Merger Control Regulation and the new substantive test laid down therein, the test of
significant impediment to effective competition in the internal market or a substantial part
of it (the SIEC Test).17 Further, I dwell in more detail on the regulatory/enforcement gap
brought to light by the Ryanair/Aer Lingus saga, the reason behind the latest surge in the
debate surrounding minority interests and the White Paper.
Throughout the presentation of the merger control regime, special attention is given to the
notion of “control” owing to its fundamental importance for the concept of “concentration”
and therefore the applicability of EUMR on minority shareholdings falling short of
conferring decisive influence on their acquirer. The question of control is meticulously
analysed in the Consolidated Jurisdictional Notice,18 by reason of which there shall be
considerable reliance on its text.
Chapter 3 deals with the theories of harm attributed to non-controlling minority
shareholdings where economic concepts play a significant role in the legal context of the
present work. The presentation follows the traditional sequence, beginning with the
unilateral and then the coordinated effects in the event of horizontal acquisitions and
concludes with the non-horizontal (vertical) acquisitions, widely considered to be less
harmful. Theories of harm are of paramount importance for the research question at hand.
Some authors19 defy minority shareholdings’ harmful nature by playing down its effects in
every day practice or by presenting it as of a magnitude which is not of a scale to render the
EUMR’s recasting.
The following chapter focuses on the White Paper itself. It provides for a view of the
context within which it was brought about and the document’s structure. Furthermore, an
in-depth analysis of the suggested control systems designed to deal with the current issue
is provided, namely the Targeted Notification System, the Self-Assessment System and the
15 Cases C-142/84, 156/84, British American Tobacco Company and R. J. Reynolds Industries v. Commission,
[1987] ECR 04487 (ECLI:EU:C:1987:490).
16 IV/33.440, Warner-Lambert v. Gillette, Commission decision of 10 November 1992, OJ L 116, 12.5.1993,
p. 21.
17 Laid down in art. 2 EUMR.
18 Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control
of concentrations between undertakings, OJ C 95, 16.4.2008, p. 1.
19 See supra note 11.

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Targeted Transparency System,20 the latter being the one actually preferred and promoted
by the Commission. They are also among the main subjects of the 2013 Staff Working
Document21 which paved the way to the publishing of the White Paper. Next, I proceed with
the evaluation of each of the aforementioned systems with an emphasis on their
proportionality, including the main factors of administrative burden on the business and
the Commission’s workload, among other issues which raise doubts regarding the
proposals’ pertinence. Several hypothetical settings shall be considered in order to gauge
the expected impact of the different systems.
Chapter 5 provides the conclusion at which the author has arrived. It is reiterated that the
legislative intervention proposed by the White Paper is relatively undisruptive and could
introduce a merger regime more apt to detecting potentially problematic transactions of
non-controlling minority shareholdings without unjustified or excessive consequences for
the institutions or the private sector. There remains however considerable room for
improvement to be taken into consideration.
The present contribution is centered around the debate on non-controlling minority
shareholdings. It does not deal with the other topics considered in the White Paper,
namely: (i) the proposal for optimizing the case referral system between the Commission
and the national competition authorities (NCA’s);22 (ii) the proposal that the creation of a
full-function joint venture located and operating totally outside the European Economic
Area (EEA) without any impact on markets within the EEA be taken out of the scope of the
Merger Control Regulation; and (iii) exemption from notification for certain categories of
transactions, currently dealt with under the simplified procedure, that normally do not
raise any competition concerns, on account of the lack of any horizontal or vertical
relationships between the merging undertakings.23
In addition, the subject matter of this paper does not encompass the other subcategories of
interests in competitors: interlocking directorates, loans to competitors and contracts for
differences.24 Interlocking directorates are defined in the Organisation for Economic Co-
operation and Development’s 2008 Report (OECD Report)25 as referring to situations in
which one or more companies have in common one or more members of their respective
boards.26 Despite partly overlapping with this thesis’ topic in relation to some of the
20 White Paper, paras. 42-58.
21
Commission Staff Working Document. Towards more effective EU merger control, SWD (2013) 239 final,
part 1/3.
22 Ibid., paras. 59-75.
23 Ibid., para. 77.
24 Contracts for differences are derivatives on other firms’ equity or debt value: Annex I to Commission Staff
Working Document: Towards more effective EU merger control, SWD (2013) 239 final, part 2/3: Economic
Literature on Non-Controlling Minority Shareholdings (“Structural Links”) (Annex I), p. 6, footnote 14.
25 OECD Roundtable Discussions, Minority Shareholdings, 2008, DAF/COMP(2008)30.
26 Ibid., p. 24.

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harmful effects attributed to minority shareholdings, such as facilitating exchanges of
information,27 interlocking directorates remain outside of this work’s scope.
Furthermore, this contribution does not dwell on the respective remedies for non-
controlling minority shareholdings’ anti-competitive effects provided for by Member
States’ domestic legislation, be they of competition or corporate character.
Notwithstanding that, incidental references shall be drawn at the relevant places for the
sake of clarifying the research question at hand.
27
Ibid., p. 25.

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2. APPLICABLE LAW
2.1. A General Note
Before I proceed any further, it is indispensable to the understanding of the present subject
matter that the notion of non-controlling minority shareholdings be clarified. The OECD
Report suggests the following definition: “A minority shareholding exists when a shareholder
holds less than 50% of the voting rights or equity rights in a target firm.”28 Suffice it to say for
now, non-controlling minority shareholdings are those shareholdings between competitors
(or firms on different levels of the supply chain) which amount to less than 50% of the
voting or equity rights in the target and do not concurrently confer control on their
acquirer29 as per art. 3 EUMR. The 2013 Staff Working Document uses the term “structural
links” which, as discussed later in Chapter 4, in the White Paper together with the
documents supporting it, evolves into “competitively significant links.” These documents do
not lay down a definition per se, but rather embark on a legal and economic analysis of
their effects on competition.
As already articulated, the notion of control is also crucial for the understanding of the
problematic at hand. It is therefore further clarified later in this chapter in the part
dedicated to the Merger Control Regulation.
2.2. The Status Quo prior to ECMR. Application of Arts. 101 and 102 TFEU
Before the entry into force of ECMR on 21 September 1990, EU-wide merger control rules
did not exist. As Jones and Sufrin explain,30 TEEC did not contain any specific provisions,
unlike the Treaty establishing the European Coal and Steel Community (ECSC Treaty). One
explanation could be that the former was a traité-cadre, whilst the latter – a traité-loi. It
could also be that it was easier to agree on rules affecting specific industries rather than all
firms in general. Furthermore, in the long shadow of the recent Second World War, the
ECSC Treaty was considered to be politically more important and hence the greater
emphasis on merger control. After all, its purpose was to bind the coal and steel industries
of France and West Germany in such a way as to prevent any future military conflicts
between them. It is easy to understand why control on mergers would be pivotal to that
end. The Commission indicated the necessity of adopting EU merger control rules as early
as 1966, however any legislative proposals would be blocked by the lack of consensus in
28 OECD Report, p. 10.
29 Art. 3 EUMR expressly differentiates between an acquirer which is a natural person and an undertaking.
For ease of reference though, in this regard I only use the term “undertaking” as encompassing both natural
persons and legal entities as per case C-41/90, Höfner and Elser v. Macrotron, [1991] ECR I-01979
(ECLI:EU:C:1991:161), para. 21.
30 Jones and Sufrin (2014), p. 1134.

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the Council. Until such proposals were agreed upon in the 1980’s, the Commission had to
resort to the use of arts. 101 and 102 TFEU.31
At the outset, it should be noted that these articles are aimed at regulating the behaviour of
market players rather than structural lasting changes on the market.32 Still, the CJEC found
in Philip Morris33 that art. 101 TFEU applied to minority shareholdings in a competitor if
they “may […] serve as an instrument for influencing the commercial conduct of the
companies in question so as to restrict or distort competition on the market.”34 The Court laid
down the influence test which consisted of four alternative conditions: (i) the shareholding
results in legal or de facto control; (ii) the agreement gives the acquiring firm the
possibility of reinforcing its position at a later time and thereby eventually taking effective
control; (iii) the agreement provides for or creates a structure likely to be used for
commercial cooperation between the parties; or (iv) the minority shareholding requires
the firms to take into consideration each other’s interests when determining the
commercial policy.35
In para. 65 of its judgment, the Court also considered succinctly the possible application of
art. 102 TFEU. It acknowledged that an acquisition of a minority interest in a competitor
can constitute an abuse36 of a dominant position37 and therefore could fall within the
article’s ambit, but only if said shareholding “results in effective control of the other company
or at least in some influence on its commercial policy.”38 The Court had once considered this
possibility earlier, in the Continental Can39 case. In para. 26 thereof, it held that an abuse
occurs “if an undertaking in a dominant position strengthens such a position in such a way
that the degree of dominance reached substantially fetters competition.”40
The Philip Morris doctrine is reflected in recital 24 of Gillette41 where the “some influence”
test is repeated almost verbatim. In its decision, the Commission argued that “Gillette has
not only become a major shareholder in Eemland [(owner of Gillette’s main competitor
Wilkinson)], but has also become its largest creditor and has acquired important pre-emption
and conversion rights and options.” In Philip Morris the Court had set out a “safe harbour”
31 Ibid., pp. 1134-1135.
32 2014 Staff Working Document, para. 63.
34 Philip Morris, para. 37.
35 Hawk and Huser (1993), p. 299.
36 For a definition, see case C-85/76, Hoffmann-La Roche & Co. AG v. Commission, [1979] ECR-00461
(ECLI:EU:C:1979:36), para. 91.
37 For a definition, see case C-27/76, United Brands Company and United Brands Continentaal BV v.
Commission, [1978] ECR-00207 (ECLI:EU:C:1978:22), para. 65.
38 Hawk and Huser (1993), pp. 299-300.
39 C-6/72, Europemballage Corp and Continental Can Co Inc v. Commission, [1973] ECR-00215
(ECLI:EU:C:1973:22).

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for acquisitions below 25% (the one at stake was 24.9%), even if the shareholding included
rights of first refusal or similar preemption rights over other shareholders’ interests and a
substantial holding of the acquired entity’s outstanding debt. However, the “safe harbour”
was not that straightforward since the “some influence” standard would still be triggered if
the following requirements were not satisfied: (i) the acquirer obtained no special control
(e.g. veto) rights over the target’s commercial or competitive activities, beyond those rights
provided to minority shareholders under normal corporate governance provisions; (ii) the
acquirer obtained no right to name any members of the target’s board or management;
(iii) the transaction did not involve agreements providing for post-closing cooperation or
coordination of the parties’ competing activities in the EU; and (iv) the parties
implemented Chinese Wall provisions to minimise the risk of information exchanges or
other methods to facilitate collusion.42 In line with the above, despite Gillette’s 22%
minority shareholding in Eemland being below the threshold and despite its causing less
competition concern on the whole, the Commission established infringement of
art. 102 TFEU due to the existence of additional factors enabling Gillette to exercise some
influence over the target, such as its non-voting minority interest and other limited links
with Eemland.43
The Philip Morris and Gillette cases were early predecessors of the future tools designed to
cope with the issues arising out of minority shareholdings. The Commission applied the
“some influence” concept also on cases such as Olivetti/Digital44 and BT/MCI.45 Their seeds
are later visible even in the White Paper which considers a similar concept to deal with the
issue, based on alike (20%) threshold and the presence of additional rights attached to
shareholdings below that level. The use of art. 102 TFEU is however limited because it
applies to (i) dominant undertakings which are (ii) abusing their dominant position.
Therefore, a substantial part of all mergers would remain outside the article’s ambit which
is also admitted in the White Paper,46 the 2014 Staff Working Document47 and the 2013
Staff Working Document.48
Also in the OECD Report,49 the European Commission endorses the possibility to apply the
Treaty articles to passive investments between competitors, involving little or no influence
on the target company. Art. 101 TFEU however does not seem to be suitable either, as it
applies to agreements50 between independent undertakings. It seems artificial to use it on
42 Hawk and Huser (1993), pp. 302-303.
43 Ibid., p.320.
44 IV/34.410, Olivetti/Digital, Commission decision of 11 November 1994, OJ L 309, 2.12.1994, p. 24.
45 IV/34.857, BT/MCI, Commission decision of 27 July 1994, OJ L 223, 27.8.1994, p. 36.
47 2014 Staff Working Document, paras. 61-65.
48 2013 Staff Working Document, p. 6.
49 OECD Report, pp. 187-188.
50 Agreement is defined as “concurrence of wills” (Joined cases C-2/01 P, C-3/01 P, BAI and Commission v.
Bayer, [2004] ECR I-00023 (ECLI:EU:C:2004:2), para. 18).

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hostile takeovers, for example,51 where there is no necessary relationship between the
companies – parties to the share purchase agreement – and the companies between which
competition is distorted.52 In BT/MCI the Commission declared that in principle art. 101
TFEU did not apply to the purchases of shares.53 Also, a public bid would circumvent the
article’s provision as there would be no agreement.54
The White Paper provides for further examples which could escape its ambit, e.g. the
articles of association of a company could hardly fit into art. 101 TFEU’s scope either, as
their purpose in general is to lay down the corporate governance of the undertaking.55
Furthermore, it could be difficult to establish, when a structural link is built up by a series
of acquisitions of shares via the stock exchange, which one of the different purchase
agreements is dealt with under art. 101 TFEU.56 It is extremely difficult to identify a
relevant agreement and even when a share purchase agreement exists, it is competition-
neutral on the surface, rendering it difficult to prove an anti-competitive object or effect.57
Furthermore, share purchase agreements are not necessarily entered into between
“undertakings”. This is so because the mere holding of shares alone would not qualify as an
economic activity58 and therefore it would not be possible to qualify the party as an
undertaking pursuant to Höfner.59 In fact, if the shares are acquired over a stock exchange,
the seller’s identity may not even be established.60
This argument however does not seem to be in line with the Court’s practice in opting for
broad teleological interpretation of the concepts of agreement and concerted practice, such
as in Limburgse Vinyl61 where it stated that the Commission cannot be expected to classify
each infringement precisely for each undertaking and for any given moment. The seminal
ruling in T-Mobile62 also contributes to the lowering of the standard of proof by setting out
that where cartelists remain active on the relevant market, they are presumed to take
account of the information exchanged with their competitors.63
Another significant conceptual feature of arts. 101 and 102 TFEU is that they foresee an ex
post control. It proved to be inefficient with regards to mergers as it was extremely difficult
51 Jones and Sufrin (2014), p. 1136; Rusu (2014), pp. 491-492.
52 Gabrielsen et al. (2011), p. 852.
53 Tóth (2014), p. 616.
54 Ibid., p. 618.
55 White Paper, para. 40.
56 See also Struijlaart (2002), p. 202.
57 European Commission (2014), p. 2.
58 That is “any activity consisting in offering goods and services on a given market” (C-180/98, Pavlov and
Others, [2000] I-06451 (ECLI:EU:C:2000:428), para. 75).
60 Gabrielsen et al. (2011), p. 851.
61 T-305/94, Limburgse Vinyl Maatschappij NV v. Commission, [1999] II-00931 (ECLI:EU:T:1999:80),
para. 696.
62 C-8/08, T-Mobile Netherlands BV and others, [2009] I-04529 (ECLI:EU:C:2009:343), paras. 44-53.
63 Rusu (2014), p. 504.

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to dissolve them once already implemented. This consideration eventually contributed to
the introduction of the First Merger Regulation and the ex ante rules therein. Still, as far as
acquisitions of minority shareholdings are concerned, it could be argued that ex post
control does not pose such an unsurmountable obstacle since it is substantially easier to
dispose of the acquired shares64 which is discussed in Chapter 4.
On that note, the 2014 Staff Working Document considered that the Treaty articles
provided for less legal certainty owing to the prior self-assessment which the concerned
companies would have to undertake and the possibility for the Commission to initiate
investigations in the future.65 Conversely, the ex ante merger control provides for more
legal certainty as the Commission is bound by short, legally binding deadlines66 which also
increases the celerity needed for share purchases. Furthermore, it concludes the
proceedings with a decision67 - a legal act amenable to legal review by the General Court.
Still, the consensus among commentators is that, except for their abovementioned
limitations, the Treaty articles can be applied to non-controlling minority shareholdings.68
Levy (2014) goes even further by stating that arts. 101 and 102 TFEU together with EUMR
allow the Commission to review potential anti-competitive effects stemming from “most
(even if not all)” structural links.69 The same view is supported, in a similar wording, in the
Commission’s contribution to the OECD Report.70
2.3. The First Merger Regulation
The first EU merger control rules were introduced with Regulation 4064/89.71 As
mentioned above, it provided for ex ante control and laid down the Dominance Test,
according to which “[a] concentration which creates or strengthens a dominant position as a
result of which effective competition would be significantly impeded […] shall be declared
incompatible with the [internal] market.”72 As the Airtours73 case later showed, this concept
allowed for a considerable regulatory lacuna, particularly with regard to
oligopolistic markets,74 and eventually ECMR was replaced by the currently in force
Regulation 139/2004.
66 Ibid., para. 64.
67 Arts. 6 (1) (a) - (b), 8 (1) - (4) EUMR.
68 Jones and Sufrin (2014), p. 1136; Rusu (2014), p. 491; Struijlaart (2002), p. 192.
69 Levy (2014), p. 4.
71
See supra note 13.
72 Art. 2 (3) ECMR.
73 T-342/99, Airtours v. Commission, [2002] ECR II-02585 (ECLI:EU:T:2002:146).
74
White Paper, para. 9.

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2.4. The Merger Control Regulation. Notion of Control
Regulation 139/200475 entered into force on 1 May 2004 and introduced an important new
feature – the SIEC Test. The SIEC Test, unlike the Dominance Test, does not rely on the
creation or strengthening of a dominant position to declare a concentration (in)compatible
with the internal market or a substantial part of it. Still, in line with recital 26 thereof, the
provisions of art. 2 (2) and (3) are framed in such a way so as that the case-law developed
under ECMR would retain its significance.76
Further, art. 3 EUMR lays down the definition of concentration. This concept has not
changed since the First Merger Regulation and, as already mentioned, it is intrinsically
intertwined with the notion of control. The key importance of control could not be stressed
more and to this question I now turn.
Recital 20 EUMR accentuates that “the concept of concentration […] cover[s] operations
bringing about a lasting change in the control of the undertakings concerned and therefore in
the structure of the market.” In conjunction therewith, art. 3 (1) EUMR sets out that “[a]
concentration shall be deemed to arise where a change of control on a lasting basis77 results
from: (a) the merger of two or more previously independent undertakings or parts of
undertakings, or (b) the acquisition, […] whether by purchase of securities or assets, by
contract or by any other means, of direct or indirect control of the whole or parts of one or
more other undertakings.” Next, para. 2 defines control as “constituted by rights, contracts or
any other means which […] confer the possibility of exercising decisive influence on an
undertaking, in particular by: (a) ownership or the right to use all or part of the assets of an
undertaking; (b) rights or contracts which confer decisive influence on the composition,
voting or decisions of the organs of an undertaking.”
It follows that the acquisition of shares constitutes a concentration under art. 3 (1) (b)
EUMR, provided that control as per art. 3 (2) EUMR is conferred. Non-controlling minority
shareholdings however do not provide for a change in control because they do not confer
decisive influence78 on their acquirer and therefore are not a concentration under EUMR
and remain outside of its scope. Decisive influence is the ability to control the strategic
commercial behaviour of the undertaking concerned.79 Such a strategic behaviour can take
the form of, inter alia, decisions on the appointment of senior management, determination
75
See supra note 3.
77 EUMR does not deal with transactions resulting only in a temporary change of control. However, a change
of control on a lasting basis is not excluded by the fact that the underlying agreements are entered into for a
definite period of time, provided those agreements are renewable (Consolidated Jurisdictional Notice (see
supra note 18), para. 28).
78 It is not necessary that the decisive influence is or will be actually exercised. The possibility of exercising it
is sufficient, provided that it is effective (ibid., para. 16).

16
of the budget, the business plan or major investments, which I consider later in this
chapter. In order to illustrate what precisely makes a minority share non-controlling, I
refer to the Consolidated Jurisdictional Notice which meticulously examines the notion of
control.80
According to para. 16 thereof, a concentration may occur on a legal or a de facto basis and
take the form of sole or joint control, with the most common means for the acquisition of
control being the purchase of shares, possibly combined with a shareholders’ agreement in
cases of joint control.81
Sole control is acquired if one undertaking alone can exercise decisive influence on the
target undertaking. Sole control can be subdivided into two forms – positive and negative.
Positive sole control is obtained by the solely controlling undertaking if it enjoys the
power to determine the strategic commercial decisions of the target, typically achieved by
the acquisition of a majority of the voting rights.82
Negative sole control is conferred where only one shareholder is able to veto strategic
decisions, but does not possess the power to impose such decisions itself. Thus, the
shareholder has the same level of influence as that usually enjoyed by the individual
shareholders jointly controlling a company, i.e. the power to block the adoption of strategic
decisions. The difference here is that there are no other shareholders enjoying the same
level of influence and the shareholder enjoying negative sole control does not necessarily
have to cooperate with the rest of the shareholders in determining the undertaking’s
strategic behaviour. Since this shareholder can produce a deadlock situation, it acquires
decisive influence.83
Sole control can be obtained on a legal (de jure) or a de facto basis.84 De jure sole control is
normally acquired where the acquirer has a majority of the voting rights in the target
company. In the absence of other elements, an acquisition which does not include a
majority of the voting rights does not normally confer control even if it involves the
acquisition of a majority of the share capital. Where the company statutes require a
supermajority for strategic decisions, the acquisition of a simple majority of the voting
rights may not confer the power to determine strategic decisions, but may be sufficient to
confer a blocking right on the acquirer and therefore negative control.85
Minority shareholdings can also confer sole control where specific rights are attached to
them, such as preferential shares to which special rights are attached enabling the minority
80 Consolidated Jurisdictional Notice, paras. 11-82.
81 Ibid., para. 17.
82 Ibid., para. 54.
83 Ibid., para. 54.
84 Ibid., para. 55.
85 Ibid., para. 56.

17
shareholder to determine the strategic commercial behaviour of the target, e.g. the power
to appoint more than half of the members of the supervisory or administrative board. Sole
control can also be exercised by a minority shareholder which has the right to manage the
activities of the company and to determine its business policy on the basis of the
organizational structure (e.g. as a general partner in a limited partnership).86
Negative sole control could arise on a legal basis where the shareholder holds 50% of the
voting rights, whilst the remaining 50% is held by several other shareholders (assuming
this does not lead to positive sole control on a de facto basis), or where it could exercise a
veto right where a supermajority is required for strategic decisions, irrespective of
whether it is a majority or a minority shareholder.87
Sole control can be acquired on a de facto basis as well, where, for example, the
shareholder is highly likely to achieve a majority at the shareholders’ meetings, given the
percentage of its shares and based on the voting pattern from shareholders’ meetings from
previous years. The Commission will carry out a case-by-case assessment resting on
criteria such as whether the remaining shares are widely dispersed, whether other
important shareholders have structural, economic or family links with the large minority
shareholder or whether other shareholders have a strategic or a purely financial interest in
the target company. If under the above criteria, a minority shareholder is likely to have a
stable majority of the votes at the shareholders’ meeting, then that large minority
shareholder is considered to have sole control.88 Furthermore, an agreement which
provides an option to purchase shares in the near future is another possible example of
how de facto control can be conferred.89
Likewise, joint control can also be acquired on a legal or de facto basis. It exists where two
or more shareholders have the possibility of exercising decisive influence over the target
undertaking. In contrast with sole control where the shareholder alone can determine the
strategic decisions, decisive influence in this sense normally means the power to block
actions which determine the strategic commercial behaviour of an undertaking. Joint
control is characterised by the possibility of a deadlock situation resulting from the power
of two or more parent companies to reject proposed strategic decisions. It follows,
therefore, that these shareholders must reach a common understanding in determining the
commercial policy of the joint venture and that they are required to cooperate.90 The
Consolidated Jurisdictional Notice discerns three forms of joint control: where the parent
companies have equal voting rights or rights to appoint an equal number of members to
the decision-making bodies; veto rights and joint exercise of voting rights.
86 Ibid., para. 57.
87 Ibid., para. 58.
88 Ibid., para. 59.
89 Ibid., para. 60.
90 Ibid., para. 62.

18
The first form of joint control is self-explanatory, so I consider in more detail straight the
second one, veto rights. Joint control may exist even where there is no equality between
the two parent companies in votes or in representation in decision-making bodies or where
there are more than two parent companies. This is the case where minority shareholders
have additional rights which allow them to veto strategic decisions on the business policy
of the joint venture. They must go beyond the veto rights normally accorded to minority
shareholders in order to protect their financial interests as investors in the joint venture,
such as changes in the statute, an increase or decrease in the capital or liquidation.91
However, veto rights on strategic decisions which provide for decisive influence and
therefore confer joint control typically include decisions on issues such as appointment of
senior management, determination of the budget, the business plan or major
investments.92 Some market-specific veto rights can also confer joint control.93
The third form of joint control is the joint exercise of voting rights. In the absence of
specific veto rights, two or more minority shareholders may obtain joint control if they
have a majority of the voting rights and act together in exercising these voting rights. This
can result on a de jure basis, from a legally binding agreement to this effect (pooling
agreement),94 or it may be established on a de facto basis where common interests between
the shareholders motivate them to exercise their rights in a mutually beneficial way.95
Para. 78 describes another setting where mutual dependency between a majority and a
minority shareholder could exist. This may be the case where, for example, the majority
shareholder is a mere financial investor, whilst economically and financially dependent on
the minority shareholder which possesses the market-specific know-how.
The degree of control (or rather – influence) conferred by a minority shareholding, as well
as its effects on competition and the (limited) scope of the Commission’s jurisdiction in
addressing those effects, were in the center of the heated debate surrounding the
Ryanair/Aer Lingus saga. Upon notification of a concentration, the parties are obliged under
Section 3.5. Form CO96 to indicate any minority shareholding of 10% or more. Then, under
the appraisal proceedings set out in the Merger Control Regulation, these pre-existing non-
controlling minority stakes can be assessed by the Commission accordingly. If found to be
an impediment to effective competition, their divestiture can be ordered under
art. 8 (4) EUMR as long as the concentration has been implemented. This was the setting in
91 Ibid., para. 66.
92 Ibid., paras. 68-71.
93 Ibid., para. 72.
94 Ibid., para. 75.
95 Ibid., paras. 76-77.
96 Annex I to Commission Regulation (EC) No 802/2004 of 21 April 2004 implementing Council Regulation
(EC) No 139/2004 on the control of concentrations between undertakings, OJ L 133, 30.4.2004, p. 1, amended
with Commission Implementing Regulation (EU) No 1269/2013, OJ L 336, 14.12.2013, p. 1.

19
the Tetra Laval/Sidel97 case, for example, where the minority interest held by Tetra Laval
was considered to allow the retention of economic incentives to refrain from competition.
By contrast, in the Ryanair/Aer Lingus proceedings, the minority shares were acquired
before the launched and prohibited controlling bid, which rendered art. 8 (4) EUMR
ineffective, thereby exposing the regulation’s regulatory/enforcement gap.98 The saga
illustrates best this issue and to it I turn my attention now.
2.5. The Ryanair/Aer Lingus Saga99
In a nutshell, the facts on the case are as follows: Ryanair acquired 19.21% of the share
capital of its competitor Aer Lingus between 27 September and 5 October 2006 on financial
markets. On 23 October 2006, eighteen days after its announcement, Ryanair launched a
public bid for the total share capital of Aer Lingus, which was notified to the Commission on
30 October pursuant to EUMR. As of 28 November, Ryanair owned 25.17% of Aer Lingus’
share capital. On 20 December, the Commission decided to initiate Phase II investigation,
thereby causing the public bid to lapse automatically under Irish law. On 27 June 2007, the
Commission adopted a decision under art. 8 (3) EUMR that the proposed merger was
incompatible with the internal market and prohibited it.100 Following the decision, Ryanair
further increased its shareholding to 29.3% by August 2007.
The Commission, in accordance with recital 20 EUMR, considered during the proceedings
the entire operation comprising the acquisition of shares before and during the public bid
period as well as the public bid itself to constitute a single concentration.101 As early as the
preliminary examination procedure and also later, following the decision to initiate
Phase II proceedings, Aer Lingus requested the Commission to treat Ryanair’s shareholding
and its public bid as a single concentration and to require it to dispose of its shareholding
and to take the necessary interim measures in accordance with art. 8 (4) - (5) EUMR.102 By
contrast, in its decision from 11 October 2007103 DG Competition argued it did not possess
the jurisdiction under paras. 4 and 5 since their provisions applied only to implemented
concentrations within the meaning of art. 3 EUMR, whereas the 25.17% were not part of
such, neither did they grant Ryanair de jure or de facto control.104 Owing to the Irish
provision that, upon initiation of Phase II investigation by the Commission, a public bid
lapsed automatically, Ryanair was prevented from acquiring the remaining part of Aer
Lingus’ capital which would have conferred on it control and would have therefore
97 COMP/M.2416 – Tetra Laval/Sidel, Commission decision of 30 January 2002, OJ L 38, 10.2.2004, p. 1.
98 Rusu (2014), pp. 492-493.
100 Buhart and Lesur (2013), p. 5.
101 Para. 12 of Decision C(2007) 3104, case COMP/M.4439 – Ryanair/Aer Lingus I.
102 Aer Lingus, para. 18.
103 Commission Decision C(2007) 4600, case COMP/M.4439 – Ryanair/Aer Lingus I.
104 Ibid., points 10-11.

20
constituted a concentration. As van de Walle de Ghelcke (2011) points out,105 were the
national legislation governing the acquisition different, DG Competition’s decision could
have met Aer Lingus’ demands, as in, for example, Tetra Laval/Sidel where French
corporate law rules allowed for the public bid to be successfully completed. Accordingly,
the Commission had the jurisdiction to request from Tetra Laval to divest its pre-existing
non-controlling minority shareholding. Thus, an inconsistency between national regimes
was unveiled that could lead to rather undesirable potential consequences.
Aer Lingus also supported the view that the remaining share constituted a partial
implementation of the concentration and therefore should be treated as such and fully
dissolved.106 Following the Commission’s decision from 11 October 2007, the airline lodged
an action for failure to act under art. 265 TFEU.107 Subsequently, the General Court upheld
the Commission’s conclusions in its 2010 judgment. The Court’s mainly linguistic analysis
concluded that the term “implemented” in art. 8 (4) - (5) EUMR only encompasses “full
consummation” of the transaction and the Commission could only act had control been
acquired by Ryanair.108
There remained however the contradiction between the Commission’s treatment of the
separate acquisitions of shares and the public bid as a single concentration during the
investigation and the final outcome where the minority shareholding did not have the same
fate as the prohibited (and not implemented) concentration it allegedly formed part of. The
General Court resolved this dilemma in the following manner: it argued that the single
concentration concept only played a role in the examination procedure109 where the
Commission sought rather to prevent situations in which a concentration is implemented
even though it might still be declared incompatible with the internal market.110 The
derogation to the stand-still clause provided for in art. 7 (2) EUMR is applied automatically
so long as the interested parties notify the Commission of the concentration without delay
and do not exercise the voting rights attached to those securities.111 Therefore, when the
Commission requested Ryanair not to exercise its voting rights, whereby it was also
pointed out that those voting rights did not grant Ryanair control of Aer Lingus, it merely
asked Ryanair to avoid putting itself in a situation in which it would be implementing a
concentration liable to give rise to a measure adopted on the basis of art. 8 (4) - (5) EUMR if
105 Van de Walle de Ghelcke (2011), pp. 21-22.
106 Ibid., p. 20.
107 Case Aer Lingus.
108 Van de Walle de Ghelcke (2011), p. 20.
109 “[A]t that stage, [...] the Commission is not concerned with ‘restoring the situation prevailing prior to the
implementation of the concentration’ in the event that it were to adopt a decision declaring incompatibility, even
where the notified concentration has been implemented. Those concerns arise only once a final decision has been
adopted and when it is necessary to draw consequences from that decision after it becomes apparent that the
situation at hand is not in accordance with it.” (Aer Lingus, para. 79).
110 Ibid., para. 80.

21
found to be incompatible with the internal market.112 In other words, that concept is only
relevant to safeguard the effectiveness of the Commission’s final decision,113 whereby the
Commission limits the risk of finding itself in a situation in which a decision finding
incompatibility would need to be supplemented by a decision to dissolve in order to put an
end to control acquired even before decision on its effects on competition has been
taken.114 Based on the above, no partial implementation had taken place.115
This outcome contradicts the Court’s approach in Cementbouw116 and is not consistent with
recital 20 EUMR either. Thereunder, a series of transactions in securities within a
reasonably short period of time is equated to a concentration under art. 3 EUMR. The
recital does not imply that this essentially substantive rule is of a rather procedural nature
for the needs of the derogation to the stand-still clause.117 Doubts remain that had the
Court not embarked on such an interpretation, the Commission would have been found
competent to order Ryanair’s minority interest’s dissolution.
2.6. Preliminary Conclusions
To sum up, before the entry in force of the first EU-wide merger rules in 1990, the
Commission used arts. 101 and 102 TFEU to tackle minority shareholdings’ anti-
competitive effects. This was exemplified in the seminal cases Philip Morris and Gillette.
Due to these provisions’ objective limitations though, a number of potentially harmful
transactions remain outside their ambit. Yet, it is considered that they still can be of a
residual use as regards transactions which do not confer control and thereby elude the
presently applicable Merger Control Regulation’s scope.
Furthermore, in this chapter it was shown that under EUMR the Commission has the
jurisdiction to request the dissolution of pre-existing non-controlling minority
shareholdings in the event of a notified and implemented concentration (as in Tetra
Laval/Sidel), but cannot do the same where no control has been conferred. Thus, the (still
on-going before the British competition authorities) Ryanair/Aer Lingus saga possibly
exposed the regulatory/enforcement gap regarding non-controlling minority
shareholdings. An enforcement gap – with respect to some ownerships which, in spite of
manifesting anti-competitive effects, may escape the Commission’s assessment, and a
regulatory gap – EUMR is equipped to only catch transactions conferring control, although
non-controlling acquisitions may raise competitive concerns too.118 It is paramount for the
further analysis at hand to underscore that the gap also pertains to minority shares
114 Aer Lingus, para. 83.
116 C-202/06 P, Cementbouw Handel & Industrie BV v. Commission, [2007] ECR I-12129 (ECLI:EU:C:2007:814).
118 Rusu (2014), p. 495.

22
acquired on a self-standing basis, outside of the setting in the saga where the minority
interest was reviewed in the context of an independent concentration. Throughout the
legal proceedings, Aer Lingus pointed at Ryanair’s shares’ anti-competitive influence on its
commercial behaviour, even though this influence was not decisive within the meaning of
the Merger Control Regulation. What are therefore the concerns raised by such
shareholdings that merit the legislative amendments suggested in the White Paper? In the
following chapter I deal with the harmful effects on competition attributed to non-
controlling minority shareholdings.

23
3. THEORIES OF HARM
3.1. General Notes
In paras. 28-38, the White Paper lays down the various ways in which the acquisitions of
non-controlling minority shareholdings can cause anti-competitive concerns, similar to
those attributed to full mergers. Likewise, their harmful effects are exacerbated if the links
are between close competitors with significant shares in markets which are highly
concentrated or entry to which is particularly difficult.119 In general, it is required that the
transactions significantly increase market power,120 i.e. the ability of one or more firms to
profitably increase prices, reduce output, choice or quality of goods and services, diminish
innovation, or otherwise influence parameters of competition.121 Annex I to the 2013 Staff
Working Document provides a more detailed economic analysis of the suggested theories
of harm.
Structural links provide their owners with two types of rights – financial interests (cash-
flow rights) and corporate rights. Financial interests entitle their owners to a proportionate
share of the profits from the undertaking’s commercial activity, whereas corporate rights
grant them the ability to influence the target’s competitive decisions,122 including pricing
and product selection and sale of the company’s assets.123 The two types of rights usually
go hand-in-hand, but can also differ substantially. It is conceivable that even very small
shares can de facto provide their owner with influence on account of the rest of the
shareholders’ dispersion and lack of protection.124 De jure the same can be achieved
through financial interests accompanied by special corporate rights or if the acquirer can
form coalitions with the rest of the shareholders.125
With regard to the degree of influence they provide, non-controlling minority
shareholdings are subdivided into passive (or silent financial interests;126 those having no
influence on the target’s decisions) and active (those having some influence on the target’s
decisions). The OECD Report provides for essentially the same definition, using the words
“a degree of control over the target.”127 Passive structural links represent a mere financial
investment in the activities of the target company,128 such as non-voting stock. They are not
119 Annex I (see supra note 24), para. 44; OECD Report, p. 183.
120 White Paper, para. 28. See also Struijlaart (2002), p. 184.
121 Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of
concentrations between undertakings, OJ C 031, 05.02.2004, p. 5 (Horizontal Merger Guidelines), para. 8.
122 Annex I, para. 1.
123 Salop and O’Brien (2000), p. 568.
124 Annex I, paras. 26 and 28. See also Spector (2011), pp. 14-15.
126 According to Spector (2011), p. 15, this expression is sometimes used to describe ownership of a
“relatively high share of a company without [exercise] of any control.”
128 Ibid., p. 21.

24
accompanied by any special corporate rights and consequently cannot influence the
target’s behaviour, but can nevertheless raise anti-competitive concerns by inducing their
owner to increase his prices to the consumers’ detriment.129 Those structural links which
confer some degree of influence are considered to cause competition concerns with greater
likelihood.130
In the White Paper, the Commission follows the pattern previously established with its
guidance documents where it first considers horizontal acquisitions (between actual or
potential competitors on the same relevant market)131 and second, non-horizontal
(vertical) acquisitions (between companies operating at different levels of the supply
chain).132 I stick to the same sequence in the following exposition.
3.2. Horizontal Acquisitions
3.2.1. Non-Coordinated (Unilateral) Effects
Acquiring a minority shareholding in a competitor may lead to non-coordinated anti-
competitive effects in the form of reduced incentives to compete because such a
shareholding may increase the acquirer’s incentive and ability to unilaterally raise prices or
restrict output.133 This would in turn lead to withdrawal of demand to the benefit of its
competitor, the target, resulting in profits increase on its part, but will also result in fall of
the consumer surplus.134 By virtue of its cash-flow rights, the shareholder could then
internalise the positive effects on its rival. For this reason, the higher the share’s
percentage is, the higher the owner’s incentives are to lower its output. Reciprocal
shareholdings (or cross-shareholdings) double the expected drop in the market.135 In such
a setting, both undertakings would have incentives to adopt the unilateral behaviour
described above, resulting in bigger consumer deadweight loss, with its magnitude brought
closer to monopolist levels.
Still, the effects of the internalisation are weaker in comparison to a full-scale merger as the
acquirer only recoups a fraction of its losses from the target’s profits and also because the
price increasing effect can only apply to the acquirer.136
This was the setting in the concentration case Siemens/VA Tech.137 Siemens held a pre-
existing 28% non-controlling minority shareholding in SMS Demag which competed with a
129 Annex I, paras. 30-31.
131 Horizontal Merger Guidelines, para. 5.
132 Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of
concentrations between undertakings, OJ C 265, 18.10.2008, p. 7 (Vertical Merger Guidelines), para. 4.
133 In accordance with the Reynolds-Snapp theorem (Tóth (2014), p. 602). See also OECD Report, p. 25.
135 OECD Report, pp. 25, 35.
137 COMP/M.3653 – Siemens/VA Tech, Commission decision of 13 July 2005, OJ L 353, 13.12.2006, p. 19.

25
subsidiary of the Austrian engineering group VA Tech. On account of the financial interest
combined with the information and voting rights accompanying Siemens’ share, under
art. 6 (1) (c) EUMR, the Commission concluded that the merger would lead to a reduction of
competition in the metal plant-building market. It was inferred that Siemens would have
privileged access to information on SMS Demag’s participation in related tenders.138 The
merger was eventually cleared with a decision under art. 8 (2) EUMR following
commitments offered, including, inter alia, the disposal of Siemens’ minority interest.
If the structural link is active and confers corporate rights on its acquirer, it is possible that
similar internalisation effect is achieved, whereby the target’s incentives to compete are
reduced. Material influence would allow the share’s owner to act on the target firm’s
strategic decisions so as to induce it to raise its own prices or restrict its own output.139
Thus, the internalisation’s anti-competitive effects would be more serious as the acquirer
would fully benefit from its competitor’s increased prices, but would only suffer a fraction
of its losses, proportionally to its financial participation.140
The minority shareholder is also able to further limit the competitive strategies available to
the target with the result of weakening its competitive force.141 The acquirer could
influence the adoption of special resolutions in general meetings concerning, inter alia, the
approval of significant investments, raising capital, changing the product or geographical
scope of the business, engaging in mergers and acquisitions142 and advertising.143
It can be recalled that this was one of Aer Lingus’ objections against Ryanair’s bid. The
same argument was raised in the Toshiba/Westinghouse144 concentration case. The
Commission considered there existed a possibility Toshiba would use its 24.5% pre-
existing minority interest and respective veto and information rights and representation in
Westinghouse’s competitor Global Nuclear Fuels (GNF) and some of its subsidiaries to
prevent its expansion into the market where the merged entity would be active and
thereby foreclose its future entry. Eventually, following Toshiba’s commitments to give up
its board and management representation in GNF and to waive its veto rights and the rights
to obtain confidential information, the merger was cleared with a decision under
art. 6 (1) (b) EUMR.145
138 White Paper, para. 31; 2014 Staff Working Document, para. 53.
139 Spector (2011), p. 15.
144 COMP/M.4153 – Toshiba/Westinghouse, Commission decision of 19 September 2006, OJ C 10, 16.1.2007,
p. 1.

26
3.2.2. Coordinated Effects
Minority interests in competitors may further lead to tacit or explicit collusion by
influencing the market participants’ ability and incentive to coordinate so as to achieve
supra-competitive profits,146 especially if, absent coordination, the competition on the
market is intense and the companies can credibly adopt aggressive deterrent strategies.147
According to Spector (2011), collusion can be supported primarily by the increased
possibilities for acquisition of contacts and information exchange which arise out of
structural links so that cartelists can reach a common understanding on the terms of the
coordination.148 Furthermore, the minority interests in their competitors would make them
indirectly suffer from their losses on account of their cash-flow rights.149 This way,
collusion would be further stimulated.
However, the mere existence of links between players on the same market cannot be
conclusive of the likeliness with which coordination would occur. In this regard, the
following three cumulative prerequisites must be fulfilled:150 (i) the market must be
sufficiently transparent so as to allow cartelists to monitor the compliance with the terms
of the coordination and to detect possible deviations therefrom; (ii) the deterrence of such
deviations is enabled through fear of retaliation which is sufficiently severe and credible,151
and (iii) reactions from current or potential competitors or consumers must not jeopardise
the results from the coordination.152 Absent the threat of punishment, participating
undertakings could avoid heavy losses by maintaining prices close to marginal costs and
reduce their output if market prices fall below their costs.153
Structural links thus facilitate the implementation of more aggressive punishment
strategies. The ownership of a minority interest may enhance transparency due to the
privileged insight it offers to its owner into the target company’s commercial activities.154
Passive structural links, and a fortiori also active ones,155 may have access to information
which is unattainable to an independent competitor, e.g. plans to expand, to merge with or
to acquire other firms, to invest, to expand production or to enter or expand into new
148 Spector (2011), p. 18.
149 Kühn and Rimler (2006), as cited in Annex I, para. 56.
152 Ibid., para. 8. See also case Airtours (see supra note 73), para. 62, case C-413/06 P, Bertelsmann and Sony
Corporation of America v. Impala, [2008] ECR I-04951 (ECLI:EU:C:2008:392), para. 123, and Horizontal
Merger Guidelines, para. 41.
155 Yet, this inference cannot be backed by economic sources since, as acknowledged in Annex I, p. 12,
footnote 39, there is no literature on the coordinated effects stemming from active structural links.

27
markets.156 This is particularly so in reciprocal ownership links (cross-shareholdings)
which can lead to strengthening of information exchange157 since both undertakings have
the right of access to the other’s more or less sensitive commercial information.
As mentioned above, transparency allows the cartelists to monitor any deviations from the
collusive scheme and so it may also increase the credibility and severity of any threat of
retaliation.158 Structural links’ importance in this regard is proportional to the degree of
the ability to undertake an aggressive retaliation strategy. One such example could be
engaging in price wars where the potential deviator is forced to incur the losses of the firm
in which it owns shares.159 Thus, incentives to deviate are reduced. Notwithstanding that, if
minority shareholdings could soften competition following the break-down of the collusive
scheme, as shown in Section 3.2.1. on unilateral effects, it could be expected they would
rather increase the incentives for deviation and render collusion more difficult for their
owners.160 It is considered, though, that in practice the collusion-facilitating effect normally
dominates the effect of decreased incentives to collude.161 This is more so in highly
competitive markets absent collusion. If competitors on such a market engage in a collusive
scheme for a longer period of time, this would lead to supply of ever increasingly
homogenous products.162 This way, following the scheme’s break-down, unilateral
behaviour would not result in as high profits due to the lack of products’ competitive
advantages and as a result incentives for deviation are lowered.
In the absence of transparency though, by virtue of its financial interest, the minority
shareholder could still catch deviations from the collusion’s terms. If the target firm
engages in independent behaviour which results in higher profits, it could be easily
detected by the higher dividends paid off to the shareholders.163
Despite structural links’ generally resulting in similar anti-competitive effects as full
mergers, there is a significant difference between them. While it is considered that a
merger with a maverick company164 would increase the effects of collusion,165 the same
cannot be confirmed in relation to acquisitions of passive minority interests in such a firm,
according to economic theory.166 By contrast, if the minority shareholder is the maverick,
the anti-competitive effects are expected to be more pronounced than in acquisitions by
157 Annex I, paras. 9 and 47.
160 Ibid., paras. 50-51.
161 Gilo et al. (2006), p. 83.
163 Spector (2011), p. 18.
164 A firm which, by virtue of its lower costs or greater quality, has a greater incentive to deviate than its rivals
(Ibid., p. 18).
165 Horizontal Merger Guidelines, para. 42.
166 Gilo et al. (2006), p. 88.

28
less competitive companies because it signals to the other players on the market that it
would not contend as aggressively.167 The reasons behind this outcome lie in the
maverick’s reduced incentives to compete, considered earlier in the section dedicated to
unilateral effects.
Finally, another scenario for a punishment strategy can be one where the colluding
undertakings are involved in a joint venture, even if it is active on another unrelated
market.168 In the event of deviation, the maverick firm could then be forced to participate in
the losses incurred by the joint venture, a corollary of the other parents’ deliberately
uncooperative behaviour.
Coordinated effects were the source of concern for the Commission in the merger case of
VEBA/VIAG.169 VEBA and VIAG, as well as their competitors RWE and VEW, were German
energy operators. The latter pair also began a merger procedure at the same time, however
their concentration was examined in parallel by the Bundeskartellamt. The two mergers
would have resulted in a duopoly on Germany’s wholesale electricity market. All the
companies concerned possessed pre-existing controlling and non-controlling minority
shareholdings in regional and local electricity suppliers. The complex web of
shareholdings, together with the duopoly’s high market shares and increased market
power, caused considerable concerns to the Commission that they might induce
coordination.170 The merger was cleared with a decision under art. 8 (2) EUMR after
commitments by the parties to dispose of their minority shareholdings.
3.3. Non-Horizontal (Vertical) Acquisitions
Just as non-horizontal mergers are generally less likely to produce anti-competitive effects
than horizontal mergers,171 non-horizontal structural links are also less likely to be more
harmful than horizontal ones. Even though acquisitions of minority stakes generally raise
less concern in comparison to full mergers, some vertical links can still have more
pronounced anti-competitive effects if they confer more influence.172 This could be so
because the acquirer of the minority shareholding only internalises a part, rather than all,
of the target’s losses as a consequence of a foreclosure strategy.173 Conversely, where price
discrimination is not possible on the upstream market, vertical partial integration could
even lead to pro-competitive effects, such as the avoidance of double marginalization.174
Double marginalization has been defined as occurring when both the upstream and
167 OECD Report, pp. 32, 35.
169 COMP/M.1673 - VEBA/VIAG, Commission decision of 13 June 2000, OJ L 188, 10.7.2001, p. 1.
171 Vertical Merger Guidelines, para. 11.

29
downstream firms have monopoly power and each firm reduces output from the
competitive level to the monopoly level, creating two deadweight losses. Following the
merger, the vertically integrated firm can collect one deadweight loss by setting the
downstream firm's output to the competitive level.175 However, in line with this
contribution’s subject matter, below I dwell on the three most pronounced anti-
competitive effects of vertical structural links – input foreclosure, customer foreclosure and
distortive effects stemming from information rights. Since it is maintained in Annex I that
there is no literature on coordinated effects of vertical acquisitions and that they are also
believed to play often only a minor role in vertical transactions,176 I do not follow here the
previous subchapter’s structure of observing first unilateral and then coordinated effects.
Unlike where the avoidance of double marginalization is possible, if the supplier can
discriminate among its client base, competitive concerns could arise out of its forward
integration177 with a downstream firm. The input foreclosure being at stake here is less
likely to occur in comparison to full-fledged mergers as the shareholder accrues only a
proportion of the downstream profits. Also, if the structural link is active, input foreclosure
is less likely to be further aggravated.178 This is so because in active links corporate rights
play a more important role than cash-flow rights and therefore the incentive to pursue
foreclosure in search of additional profits from the target does not increase materially, but
rather the level already achieved is maintained.
As long as upstream price discrimination is possible, in the event of a backward
integration179 through an active structural link, the downstream firm could induce the
upstream firm to restrict output to its downstream rivals despite negative implications on
upstream profits. This is made possible through the combination of corporate rights in the
upstream firm (necessary for the ability to foreclose) and cash-flow rights in the
downstream firm (necessary for the incentive to foreclose). 180 The downstream
shareholder bears only a fraction of the cut profits, but fully benefits from its direct
competitors’ losses.181 It is for this reason partial backward integration proves itself to be
even more conducive to input foreclosure than a full merger,182 as reasoned above.
Similarly, the ownership of a passive shareholding in the same setting could also increase
the downstream firm’s ability and incentive to internalise the supplier’s upstream profits
from sales to the acquirer’s downstream competitors and thereby soften the competition
175 Giddy (2009).
176
Annex I, p. 5, footnote 6.
177 When an upstream firm owns shares in a downstream firm (ibid., para. 60).
179 When a downstream firm owns shares in an upstream firm (ibid., para. 60).
180 Spector (2011), p. 17.
182 Ibid., paras. 69 and 71.

30
on the relevant downstream market183 through raising its prices184 to the detriment of
consumers. Conversely, where upstream players cannot discriminate between customers,
passive structural links in them are considered unlikely to raise non-horizontal competitive
concerns, but may rather improve coordination along the vertical chain.185 They can also
facilitate the access to information which is discussed later in this subchapter.
Case IPIC/MAN Ferrostaal AG186 dealt with the issue of input foreclosure arising out of
IPIC’s acquisition of MAN Ferrostaal. The latter held a pre-existing 30% shareholding in
Eurotecnica, an undertaking which owned the only existing non-proprietary technology for
melamine production in the world and also a supplier, whereas IPIC controlled AMI, one of
two major melamine producers on a global scale, the other one being DSM. The 30% share
granted MAN Ferrostaal material influence over Eurotecnica’s licensing and engineering
business since, as per its statutes, a number of decisions needed to be taken with
supermajority and provided all shareholders with extensive information rights. The
Commission was concerned that the merger between IPIC and MAN Ferrostaal could result
in the correspondence between Eurotecnica and its clients leak to AMI, which would
subsequently facilitate the foreclosure of AMI’s competitors. Furthermore, concerns over
deterrence of new entries arose. Also, the transparency on the highly concentrated
melamine market would have increased markedly, thereby facilitating coordination
between AMI and its main competitor DSM.187 The merger was eventually cleared with a
decision under art. 6 (1) (b) EUMR following commitments by MAN Ferrostaal to divest its
entire shareholding.
Customer foreclosure is also one of the conceivable anti-competitive effects that could
arise out of vertical acquisitions of non-controlling minority shareholdings, especially in
the event of a forward integration which confers some influence on the acquirer.188 By
selling at higher prices to the downstream target, the supplier would internalise only part
of its losses, but would fully benefit from the increased upstream profits. Thus, partial
integration would actually be more conducive to customer foreclosure than a full
merger.189
Minority shareholdings can be further used for passing of market-sensitive information
between competitors.190 A passive structural link in a forward integration could enable
the upstream shareholder to gain view of the contracts between the target and other
186 COMP/M.5406 – IPIC/MAN Ferrostaal AG, Commission decision of 13 March 2009, OJ C 114, 19.5.2009,
p. 8.

31
suppliers and sell at profit maximising prices. This way, the incentive to foreclose other
downstream firms is reduced too.191 The information so gathered provides the acquirer
with the more convenient option to adjust its own commercial behaviour so as to better its
performance and fully benefit from it rather than count on its limited cash-flow rights in
the target and incur indirectly part of the losses from the higher supply prices.
Information rights can also be of key importance when the vertically related markets take
the form of tenders and backward integration of passive links is at stake. Shareholders
would possess more information and would know the true value of the sold item, hence
they would not fear overpayment (winner’s curse). In such a setting, the owner of even a
small shareholding in a potential supplier (in the case of a very scarce output) or a
potential customer (in the case of “scarce order”) can gain significant advantage.192 Thus,
bidders with some toehold can bid more aggressively and it becomes more likely that the
partially integrated firm would win the tender, while paying a relatively low mean price.
Such a result however would not be based on the company’s merits and so could lead to
inefficiencies.193
According to Spector (2011),194 if a shareholder possesses cash-flow rights (incentive) in a
potential supplier together with information rights (ability) which can provide it with
necessary information as to the auctioned good’s value, it can offer a higher bid and
internalise the additional profits. If the remaining bidders are aware that the vertically
integrated tenderer has reliable information, they would be induced to submit lower bids.
Therefore, the shareholder’s chances to win the tender go up substantially. It is not
necessary that the winning bid results in higher consumer prices, but it provides the
winner with an advantage not based on its merits and could again result in productive
inefficiencies, as inferred in the preceding paragraph.
3.4. Effects on Potential Entry
Unlike Annex I, the White Paper does not treat the matter of non-controlling minority
shareholdings’ effects on potential entry. Nevertheless, it seems appropriate to briefly
consider this issue.
It is believed that structural links could deter future entry in two ways: by significantly
impeding third party’s access to the target’s equity via acquisition or by rendering the
acquirer’s entry on the market where the target is active less likely.195
192 Spector (2011), p. 17.
194 Spector (2011), p. 17.
195 OECD Report, pp. 183-184.

32
Additionally, the minority shareholder could also induce the target to not enter the market
where it is already active (this was one of the Commission’s concerns in
Toshiba/Westinghouse, discussed above in Section 3.2.1.).196 Such a decision can be justified
by the fact that the consequent losses would only be partly internalised by the stake holder.
Another possibility is, where horizontal structural links are at stake, that the shareholder
prevents a third party from buying shares in its competitor, especially if that third party
would enhance the target’s competitiveness.197 Otherwise, horizontal structural links
generally soften competition on the market as discussed earlier in this chapter and, absent
high barriers to entry, could facilitate entry and thereby mitigate the anti-competitive
effects of the existing minority shareholdings.198 For that to happen, the new entrant would
need to be a maverick which does not espouse a cartelist behaviour. The lower the barriers
to entry are, the less expensive it is to infiltrate the new market.
In conclusion, the very prospect alone of input or customer foreclosure, also discussed
above, could render market entry less attractive as well.199
3.5. Magnitude of Harmful Effects
In observing the theories of harm arising out of structural links, both the Commission and
the legal and economic literature consistently draw parallels between the acquisitions of
non-controlling minority shareholdings and full-fledged mergers. Whereas it is
acknowledged that harm can be caused in principle, there are substantial discrepancies
between opinions on its real magnitude. The Commission, by conceding that structural
links can also produce efficiencies akin to full-fledged mergers,200 indirectly admits that the
matter of their anti-competitive effects might not be as straightforward as it might first
seem. Indeed, neither the White Paper nor any of the documents accompanying it raise the
question of efficiencies brought about by non-controlling minority shares, but that does not
necessarily entail that counterbalancing effects cannot occur. In that vein, there have been
commentators who diminish the degree of harm caused by them.201 As it is of paramount
importance to the issue of overregulation with which I deal in the next chapter, here I dwell
on the magnitude of minority interests’ anti-competitive effects.
Authors such as Gilo et al. (2006) appreciate non-controlling minority shareholdings’
harmful effects with a degree of reservation. While acknowledging that their anti-
competitive effects are not to be overlooked, they conclude that if a firm’s controller holds a
stake in a rival firm, passive investment by this rival in the controller’s firm warrants a
200 Ibid., paras. 81-82.
201 Among others, Ignjatovic and Ridyard (2012), Barth and Restrepo-Rodríguez (2013), Levy (2014).

33
lenient antitrust approach.202 Levy (2014) is of the opinion that non-controlling minority
shareholdings will only rarely raise competition concerns.203 Similarly, Kalbfleisch (2011)
argues that complications are unlikely to arise except when oligopolistic markets with high
barriers to entry are at stake.204 Struijlaart (2002) also notes that many authors are
unwilling to attribute anti-competitive effects to vertical structural links.205
Ignjatovic and Ridyard (2012) go further.206 According to them, with respect to unilateral
effects, the acquirer’s ability to weaken the target as a competitive force would be rather
limited due to the lack of control and hence merely amounts to a “theoretical risk.” The
remaining shareholders would resist its policies as they have interest to keep the
undertaking competitive and profitable. Any such situation would appear contrary to all
notions of good corporate governance which should not allow for a company to be run
against its shareholders’ interests. Therefore, a minority shareholding (absent specific veto
rights) only rarely confers influence over strategic decisions with a substantial impact.207
Moreover, the effect of reduced incentives to compete due to internalisation of the target’s
profits is denied its substantial consequences by other commentators too. Levy (2014)
argues that in practice the minority shareholder’s incentives to compete with the target
firm remain strong as it gains all the profits from its own business, but only a share of the
target company’s profits.208 Likewise, the acquirer of a horizontal interest would suffer
fully from its own losses and gain only a part of the competing target’s profits if it were, for
example, to restrict its own output so as to increase its competitor’s earnings.
As far as coordinated effects are concerned, some authors209 underscore, firstly, the
extremely small number of merger decisions dealing with collusion. Secondly, by reason of
the limited control they provide on the target and the isolated effect on the market as a
whole, structural links are likely to only marginally affect the firms’ incentives and abilities
to engage in coordination rather than be leading players on the market instead. In order for
the minority shareholdings to have a substantial impact on the companies’ abilities to
collude, they need to be either widespread across the whole relevant market or to involve a
maverick firm.210
It is further stressed that the acquirer’s information rights could not do a lot for monitoring
compliance with the collusive scheme. On one hand, this hardly contributes to a greater
202 Gilo et al. (2006), p. 93.
203 Levy (2014), p. 7.
204 Kalbfleisch (2011), p. 41.
205 Struijlaart (2002), p. 183.
206 Ignjatovic and Ridyard (2012), pp. 5-6.
207 Levy (2014), p. 5.
208 Ibid., p. 4.
209 Ignjatovic and Ridyard (2012), p. 6.
210 Ibid., p. 6.

34
transparency of the market as a whole and on the other, the provided information would be
asymmetric in not allowing the target to gather intelligence on the shareholder’s strategic
decisions and would do little for sustaining the coordinated effects unless the target
happens to be an industry maverick.211 In addition, it should be also noted that in practice
the information which is disclosed on shareholders’ meetings would often come to the
general public’s knowledge eventually.212 Last, but not least, usually only the larger
shareholders would actually engage in effective monitoring, while the smaller ones would
only follow their lead, especially if they are dispersed. Unless they form alliances, it is
generally less expensive for minority shareholders to exit the undertaking rather than vote
against the board (“to voice”) and remain actively involved with the target’s strategies.213
Another argument in support of the limited nature of minority shareholdings’ harmful
effects is the benefits recapture problem. According to Dubrow (2001),214 this is one of the
real world factors215 which need to be taken into consideration in the analysis of structural
links. Essentially, the benefits recapture problem means that shareholders might not be
able to be aware that when they increase their products’ prices, this will also increase their
investment’s value. Furthermore, they can never be certain if their risk would pay off.
Further with respect to certainty, the acquirer may be expected to compete less fiercely
with the target firm only if (i) it is able to predict the relationship between demand and
price; (ii) it is confident that, by raising prices for its own products, it will benefit the target
firm and not instead divert sales to rivals (or encourage new entry); (iii) it is able to predict
the extent to which it will recoup its losses; and (iv) it is confident that the benefits it
secures by increasing the target firm’s sales will outweigh the profits it would otherwise
have secured itself. These conditions will be met only in exceptional circumstances,
though.216
Finally, another argument in support of the view that acquisitions of non-controlling
minority shareholdings are not inherently harmful is that they are even capable of
providing a limited gamut of efficiencies. Same as full mergers, these efficiencies need to
benefit consumers, be merger specific and verifiable.217 They can come in the form of
lowering prices218 or increasing output, improving product quality, variety and innovation,
among other things.219 In that vein, Annex I concedes that synergies are limited for
horizontal links, whereas there might be some with respect to vertical links, such as
211 Ibid., p. 6.
212 Struijlaart (2002), p. 179.
213 Ibid., pp. 186-187.
214 As cited in Demir (2013), p. 15.
215 The other two are incomplete information and management's incentives, see ibid., p. 14.
216 Levy (2014), p. 4.
218 See also Struijlaart (2002), p. 183.

35
alleviating double marginalization, mitigating inefficiencies caused by asymmetric
information or improving the service provided by downstream firms. Moreover, especially
with view to R&D, difficulties arising out of incomplete contracts could be overcome and
cross-shareholdings could facilitate the aligning of incentives of companies involved in
alliances or joint ventures.220
3.6. Preliminary Conclusions
In sum, the Commission and jurists and economists are unanimous that potential anti-
competitive harm stems from non-controlling minority shareholdings, albeit generally less
serious in comparison to full-fledged mergers. Horizontal acquisitions of structural links
cause more concern than between undertakings on different levels of the supply chain,
while active shareholdings cause more concern than passive ones. The classic theories of
unilateral and coordinated effects apply here as well, with the main risks to competition
being restriction of output, price increase, input foreclosure, deterrence of future entries.
Whereas the Commission seems determined to adopt changes to the merger control regime
on account of the theories of harm considered earlier in this chapter, many commentators
remain of the opinion that their effects are rather of a theoretical nature and do not raise
substantial issues in practice, certainly not of such a magnitude as to warrant risky
legislative amendments. This clash of views paves the way for the discussion on the
workability and proportionality of the suggestions published in the White Paper, the topic
of Chapter 4.

36
4. THE WHITE PAPER
4.1. General Notes
White papers adopted by the Commission represent proposals for legislative actions in a
specific area.221 Once public consensus is built around them, whereby the potential
addressees and other parties concerned have provided their opinions, they can serve as a
foundation for the actual Commission proposal sensu stricto with which it exercises its
legislative initiative under art. 17 (2) of the Treaty on European Union (TEU). In 2014, only
one such document was published, namely the White Paper, titled ‘Towards more effective
EU merger control’, around which the present discussion is centered. It brings together the
results of the public consultation put through by the 2013 Staff Working Document and
Annexes I and II accompanying it.
The White Paper is supported by the 2014 Staff Working Document which analyses in more
detail the proposed policies, together with an Impact Assessment which weighs the
potential benefits and costs of the different options and the Executive Summary of that
impact assessment.222
As mentioned in the Introduction, the White Paper’s two main topics are the proposals
regarding the acquisitions of non-controlling minority shareholdings and the streamlining
of the case referral system between the Commission and the national competition
authorities. It also provides for a brief substantive review of mergers after the 2004 reform
of the First Merger Regulation which is appreciated as successful. The proposals in the
White Paper address the more immediate problems currently facing EU merger control.
The Commission’s long-term goal however is the creation of a true “European Merger Area”
(EMA) where a single set of rules will apply to mergers in the whole Union, including on a
national level.223 In the pursuit of EMA, the Union could once again become the motor
behind change just like back in 1989 when it introduced the merger control regime,
thereby inciting the Member States to pass their own anti-trust legislation too. The White
Paper does not go in any further details, but the adoption of regulation on control of
minority shareholdings could be expected to lead to “soft” harmonisation in the field in that
the 25 jurisdictions without competences over this matter would possibly follow suit.
Further miscellaneous issues dealt with in the documents are the proposals that the
creation of a full-function joint venture located and operating totally outside the EEA
without any impact on markets within the area be taken out of EUMR’s scope and that
certain categories of transactions, currently dealt with under the simplified procedure, that
normally do not raise any competition concerns, on account of the lack of any horizontal or
221 See http://europa.eu/legislation_summaries/glossary/white_paper_en.htm (retrieved on 14 March 2015).

37
vertical relationships between the merging undertakings, be exempted from notification.
Out of the above, only the topic of minority shareholdings is of interest to the contribution
at hand and on it I dwell further on.
In order to tackle all potential sources of harm to competition stemming from the
acquisitions of non-controlling minority shareholdings, the Commission suggests that a
system for control of these transactions be introduced which complies with three
principles, enumerated in para. 42 of the paper. It lays down that the chosen system must
(i) capture the potentially anti-competitive acquisitions, (ii) it must avoid any unnecessary
and disproportionate administrative burden on companies, the Commission and the NCA’s
and (iii) it must fit with the merger control regimes currently in place at both the EU and
national level. In order to address the regulatory/enforcement gap, the proposed system
ought to answer two questions: which cases the Commission should be competent to
review (pertaining to the “regulatory” limb) and what the most suitable procedure to that
end would be (pertaining to the “enforcement” limb).224 The substantive test applied on
minority shareholdings would remain the current SIEC Test as laid down in the Merger
Control Regulation.225
The White Paper proceeds next with consideration of three possible systems, namely the
Targeted Notification, the Self-Assessment and the Targeted Transparency System. They
differ not only in procedural aspects, but also in relation to their administrative and
enforcement costs, the degree of legal certainty they provide and the degree of adherence
to the principle of proportionality, among other things. The three systems are consequently
reviewed below one by one.
4.2. The Targeted Notification System
The pure notification system consists in extending the Merger Control Regulation’s current
scope to all acquisitions of non-controlling minority shareholdings.226 This would
admittedly be too burdensome for the businesses, DG Competition and also the NCA’s.227 As
a result, a modified version, namely the Targeted Notification System (TNS), is given
consideration by the Commission. The modification foresees that TNS would only apply to
potentially problematic acquisitions, i.e. purchases of shareholdings (i) in a competitor or a
vertically related company (such as supplier or customer), which are (ii) either above a
certain threshold (e.g. around 20%) or below it and above 5%, however accompanied by
additional rights such as, inter alia, board representation, the right to block special
resolutions and information rights giving access to strategic information. These cumulative
criteria would either be incorporated in the body of the Merger Control Regulation or in
225 Ibid., para. 114.
227 Impact Assessment, paras. 53, 57.

38
additional guidelines, whereas the Commission’s preference tends to the former option so
as to carve shareholdings of under 5% out of art. 21 (3) EUMR’s ambit and thereby leave
them under the Member States’ competence.228 Upon submitting prior notification under
art. 4 EUMR, the normal stand-still obligation in art. 7 (1) EUMR shall apply, whereby the
parties would not be able to close the transaction before the Commission’s clearance
decision. Lastly, the NCA’s would be able to request a referral within 15 working days
following receipt of the parties’ notification forwarded by the Commission, in line with the
existing rule of art. 9 (2) EUMR.229
4.3. The Self-Assessment System
The Self-Assessment System (SAS) provides for ex post control and generally resembles the
anti-trust regime under arts. 101 and 102 TFEU. It would not require the parties to submit
a notification prior to the completion of the acquisition, but the Commission would be
competent to initiate investigation against potentially problematic cases based on its own
market intelligence or complaints.230 “Safe harbours” would be introduced for acquisitions
of minority shareholdings below 5%, for example, and there would be guidance published
on the types of transactions the Commission would likely select for investigation. Finally,
Member States would also be entitled to request referral of those cases of which they
acquire knowledge in accordance with their own legislation.231 Bardong (2011) argues
that, as a start, an ex post control could be introduced as a transitional measure so as to
allow for case practice to be built up first.232
As the lack of obligation for notification and the possibility for subsequent investigation
would clearly lead to reduction in legal certainty, it is recommendable for SAS to provide
for voluntary submission which DG Competition would examine and issue a decision on. As
articulated earlier, its decision is a legal act as per art. 288 (4) TFEU and as such is, under
art. 263 TFEU, amenable to legal review by the General Court and can be appealed on
points of law before the Court of Justice as a final instance.233 However, the possibility for
voluntary filing of full notification is set out only in para. 11 of the Executive Summary and
denied immediately after, in para. 15, where, according to the inserted table, the
availability of this option is indicated with “n/a”. Table 1 on p. 26 of the Impact Assessment
provides for the same indication. Neither the White Paper nor the 2014 Staff Working
Document discuss voluntary submission with regard to SAS. The only other occasion where
228 Ibid., p. 25, footnote 44.
229 Executive Summary, paras. 12-13; Impact Assessment, paras. 57-59.
230 White Paper, para. 43; Impact Assessment, para. 54.
231 Impact Assessment, paras. 55-56.
232 Bardong (2011), p. 36.
233 See art. 256 (1) TFEU in conjunction with art. 58 Protocol (No 3) on the Statute of the Court of Justice of
the European Union (OJ C 83, 30.3.2010, p. 210).

39
it is considered is in table 3 in the Impact Assessment234 where it is said that the
respondents to the public consultation “widely support[ed] the possibility of a voluntary
notification [proposed in the 2013 Staff Working Document235] as it gives legal certainty to
[the] parties”. Still, this sentence does not amount to an unequivocal indication. The
Commission needs to clear this contradiction.
4.4. The Targeted Transparency System
The Targeted Transparency System (TTS) is the one to which the Commission gives its
clear preference. Thereunder, the parties would have to submit an information notice for
potentially problematic transactions, pursuant to their own self-assessment. Therefore,
TTS chiefly envisages ex ante control, similarly to the Targeted Notification System, but
possesses an ex post aspect as well, discussed later in this subchapter, rendering it partly
akin to the Self-Assessment System.
Only the acquisition of a “competitively significant link” (CSL) would trigger the obligation
for submission of information notice. This term is the successor of the “structural link” used
throughout the 2013 Staff Working Document and the two annexes thereto. It arises where
there is a prima facie competitive relationship between the acquirer’s and target’s
activities, be it of horizontal or vertical nature. Therefore, the definition for CSL comprises
two limbs: (i) vis-à-vis its competitive character – the parties must be in a competitive
relationship, and (ii) vis-à-vis its significance - the link would be considered significant if it
is above a threshold of around 20%236 or, alternatively, between 5% and 20%, but
accompanied by additional factors such as possession of a de facto blocking minority, a seat
on the board of directors or access to commercially sensitive information.237 This division
reflects the possible fluctuations in the degree of influence conferred on the acquirer. In
principle, the Targeted Transparency System would only be triggered when material
influence over the target’s behaviour is conferred (i.e. the CSL is active). However,
regardless of the level of influence, it may lead to a change in the acquirer’s financial
incentives so that it would adjust its own commercial behaviour instead (also in the event
of a passive CSL),238 as discussed in more detail in the previous chapter.
Given the above criteria, the parties concerned would have to self-assess if the acquisition
of the shareholding represents a competitively significant link and submit the information
234 Impact Assessment, p. 32.
236 The White Paper’s wording in para. 47 is not consistent with the supporting documents’ language. The
exact words used in it are “shareholding [which] is […] around 20%” which contradicts the rationale behind
TTS: cf. paras. 78 and 89 of the 2014 Staff Working Document or para. 57 of the Impact Assessment.
Furthermore, the quoted percentages are shares of the voting or equity rights in the target company, as
considered earlier in Subchapter 2.1., although the White Paper does not expressly draw such a delineation.

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