Luxembourg is the last EU Member State without a legal framework on merger control. At present, the Competition Authority (the "Authority") can only intervene ex post by sanctioning a merger to the extent it amounts to an abuse of dominant position and impose a fine but without being able to intervene in a structural way. Mergers threatening competition in Luxembourg could be reviewed by the European Commission under certain conditions and according to a specific procedure defined in EU merger control law.
Merger control protects consumers by assessing whether a proposed transaction could adversely affect competition and therefore result in a reduction in choice, quality, innovation and an increase in prices of the products and services concerned. Bill No 8296 submitted to Parliament on 23 August 2023 (see link here – only in French) introduces an ex ante merger control in Luxembourg based on a mandatory notification requirement defined by turnover thresholds and a standstill obligation.
The main features of the proposed regime are set out below.
Scope of application
Concentrations, i.e. transactions leading to a durable change in control over an undertaking, must be notified if two cumulative thresholds are met: (i) the total combined turnover in Luxembourg of all the undertakings concerned exceeds €60 million and (ii) the turnover in Luxembourg of at least two of the undertakings concerned individually exceeds €15 million (Article 1(2)). These thresholds will be re-evaluated three years after the entry into force of the future law.
In the case of insurance and reinsurance companies, turnover in Luxembourg is assessed on the basis of gross premiums paid by persons resident or established in Luxembourg. For credit and other financial institutions, turnover in Luxembourg is based on products sold and services provided to customers and end investors resident or established in Luxembourg (Article 1(4)).
Apart from private equity transactions, acquisitions carried out by investment funds, securitisation funds, securitisation vehicles or pension funds do not fall within the scope of the Bill (Article 1(6)).
Exceptionally, the Authority may examine on its own initiative a concentration that does not meet the above thresholds if the transaction is likely to have a restrictive effect on competition in Luxembourg (Article 6). According to the commentary of the Bill, it is expected that the Authority will rarely make use of this provision.
There will be no retroactive effect for concentrations which have been agreed or published or which have been completed before the date of entry into force of the new regime (Article 54).
The obligation to notify and standstill obligation
Concentrations have to be notified before completion (Article 3(1)) and cannot be implemented before authorisation (Article 5(1)). The fact of notification will be published on the Authority's website (Article 4).
It will be possible to file a simplified notification for transactions that are unlikely to have a significant effect on competition. Informal pre-notification discussion should be made possible according the legislator's comments. This would be welcomed in practice and should be available to find out whether the Authority wants to examine a concentration that does not meet the thresholds.
The review procedure
There are two review phases.
In phase I, the Authority has to take a decision within 25 days. During that period, the Authority will carry out a case-by-case analysis of the product and geographic market on the basis of the facts and by reference to the principles set out in the Commission Notice on the definition of relevant market for the purposes of EU competition law (Article 28). In the commentary of the Bill, the legislator indicates that, given the country's economic openness and significant cross-border flows, the Authority may be led to adopt geographic market definitions that go beyond the national framework more often than other authorities.
The Authority may either decide that the transaction does not fall into the scope of application of the future law and authorise it, or find that serious doubts exist that it may affect competition, in which case phase II will be triggered.
In phase II, a decision has to be taken within 90 days (Article 27). The Authority examines whether the merger is likely to significantly harm competition, in particular by creating or strengthening a dominant position. In addition, it assesses whether the merger will contribute sufficiently to economic progress to offset any harm to competition (Article 30).
The parties may propose commitments to remedy the anti-competitive effects of a concentration (Article 32). Following these proposals, the Authority may subject its decision to conditions and obligations (Article 35).
The evocation power
The Bill also provides for an evocation power, which would allow the government following a phase II decision, on its own initiative, to take a decision with respect to the concentration for reasons of general interest relating to industrial, economic or financial development, the competitiveness of the undertakings concerned in the face of international competition or the creation or retention of jobs (Article 44). The commentary of the Bill indicates that it is expected that the government will make use of this power only in a very small number of cases.
A special exemption for the financial and insurance sector
Another non-competition law feature proposed in the Bill is the exemption of certain concentrations involving certain companies in the banking and insurance sector from the proposed regime, notably in the context of an early intervention, reorganisation or resolution measure or in other cases of urgency defined by the Bill, such as situations where there is a need to 1° preserve the financial stability of Luxembourg; 2° avoid a serious threat to the stability of the Luxembourg financial system if the merger or acquisition did not take place; or 3° protect the interests of depositors or investors (Article 48).
Potential sanctions
A fine of up to 10 per cent of the total worldwide turnover of the companies concerned in the last completed financial year can be imposed if the obligation to notify has not been complied with or the transaction has been completed without authorisation (Article 18(2)). Where a concentration has already been implemented and is declared incompatible or where a concentration has been implemented in breach of a condition attached to a decision, the Authority may order the undertakings concerned to dissolve the concentration in order to restore the pre-merger situation. If such restoration is not possible, the Authority may take any other appropriate measure to restore, as far as possible, the situation prior to the implementation of the concentration (Article 18(3)).
Expected timing
It is not possible to give an indication on timing of the possible adoption of the future law at this stage since parliamentary procedures have just started. Due to the parliamentary elections of 8 October 2023, the parliamentary commission for economic affairs will not start discussing the Bill at this stage.
Some specific features proposed in the Bill such as the possibility for the Authority to call in transactions below the thresholds, a governmental evocation power for reasons of general interest as well as an exemption for certain transactions in the banking and insurance sector in specific circumstances of urgency may give rise to debate.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
