European Court of Justice confirms only full-function joint ventures are notifiable in Austria Asphalt case
- 11/09/2017
- Articles
On 7 September 2017, the Court of Justice of the European Union (“ECJ”) ruled on a reference from the Austrian Supreme Court that a change from sole to joint control over an existing business only needs to be notified to the European Commission under the EU Merger Regulation if the resulting joint venture meets the criteria of full-functionality. The ECJ’s decision is consistent with the Opinion of Advocate General Kokott issued earlier this year (see VBB on Competition Law, Volume 2017, No. 5).
Prior to the ECJ’s decision, there was a degree of legal uncertainty regarding whether (a) joint ventures amount to generally notifiable transactions under Article 3(1)(b) of the EU Merger Regulation, or (b) joint ventures are only notifiable under Article 3(4) if, post-transaction, they are full-function – i.e., perform all the functions of an autonomous economic entity on a lasting basis.
In its decision, the ECJ noted that Article 3(4) must be interpreted by reference to its purpose and general structure. As the purpose of the EU Merger Regulation is to ensure that changes in the control of undertakings do not result in lasting damage to competition in the internal market, the ECJ concluded that Article 3(4) of the EU Merger Regulation concerns joint ventures “only in so far as their creation provokes a lasting effect on the structure of the market”. Accordingly, a transaction will require mandatory notification under the EU Merger Regulation where joint control is acquired over a previously solely controlled existing undertaking only if the joint venture created by such a transaction “performs on a lasting basis all the functions of an autonomous economic entity” and, thus, meets the criteria for full-functionality.
The case offers increased certainty for merging parties as to when transactions involving non-market-facing subsidiaries are likely to require notification. Further, it is possible that the Commission may now revise its published guidance on the notifiability of joint ventures in the Consolidated Jurisdictional Notice. This Notice currently states that it is not necessary to consider the full-functionality criteria where several undertakings acquire joint control of another undertaking – a statement which is difficult to reconcile with the ECJ’s recent judgment.