Flash Forward Merger Control 2025
With the festive season approaching, we look ahead to what the new year will bring in the field of merger control. In this first edition of the Flash Forward Merger Control 2025, we take you through some of the key developments that await us in 2025 and that will potentially affect your practice and clients.
In this short newsletter, we provide insight into the potential consequences of the intended repeal of the Article 24(2) of the Dutch Competition Act (“Mw”) which stipulates that a merger cannot amount to an abuse of dominance, and the possible additions to the competition law toolbox of the Dutch competition authority (“ACM”). We also discuss the expected extension of the scope of application of the Act on security screening of investments, mergers and acquisitions (“Vifo Act”), and the possible introduction of a sector specific investment screening test for the defence industry.
- Acquisition by dominant undertaking may soon constitute abuse of dominant position
- Legislative proposal investment test defence industry suppliers
- Extending scope of application Vifo Act to new sectors
- Call-in power non-notifiable transactions
- Introduction New Competition Tool
Acquisition by dominant undertaking may soon constitute abuse dominant position
An important intended amendment is the repeal of Article 24(2) Mw, which currently precludes the application of the national prohibition on abuse of a dominant position to mergers. This exemption to the abuse prohibition is at odds with the Towercast judgment of the Court of Justice of the European Union (“CJEU”). In that judgment, the CJEU ruled that Article 102 of the Treaty on the Functioning of the European Union (“TFEU”)- the European prohibition on abuse of a dominant position – can indeed apply to concentrations that fall below the notification thresholds. The Dutch Article 24(2) Mw is currently blocking the application of this principle in purely national situations. Repealing this section achieves harmonisation with European competition law and realigns the national and European frameworks.
The legislative amendment means that in the future, the ACM can also retrospectively investigate transactions that were not subject to any notification obligation based on the turnover thresholds applicable for merger control, but where the acquiring party may have abused its dominant position with the transaction. This gives the ACM an additional tool to assess mergers and acquisitions that potentially raise competition law concerns. For M&A lawyers, this means that the risk of ex post interventions increases, even for transactions that are not notifiable. In the future, it will therefore not only be important to check the notification thresholds, but also to determine whether the buyer might have a dominant position and analyse the risk of a potential review under Article 24 Mw and/or Article 102 TFEU.
Following a positive opinion from the Council of State on 5 June 2024, the proposal was submitted on 11 June 2024. The standing committee on Economic Affairs reported on the proposed legislative amendment on 7 October 2024. On 23 October 2024, the Minister of Economic Affairs (“Minister”) requested an postponement for his response to that report. Although no date has yet been set for the entry into force of the amendment, this is expected to happen in 2025.
Legislative proposal investment screening test suppliers defence industry
Another legislative proposal that is currently pending relates to the introduction of an investment screening test specifically aimed at the defence industry. This proposal aims to strengthen, protect and better position the strategic and vital standing of the Dutch defence industry on an international level. The proposed act inter alia concerns a new sectoral screening test focusing on investments, mergers and acquisitions in the armed forces’ supply chain, including suppliers of military goods and transport. By doing so, the government aims to prevent these investments, mergers and acquisitions from endangering national security by, among other things, establishing notification requirements and approval procedures for acquisition activities that could affect the continuity of defence capabilities.
This investment test is expected to replace the current test for military goods under the Vifo Act, while complementing it by focusing on a broader group of target undertakings, namely those suppliers that are essential to the vital process of ‘Deployment Defence’ – or, in other words, the “ability of the armed forces to perform its tasks while acting with a degree of autonomy.” Suppliers are currently only covered by the Vifo Act when it comes to highly sensitive technologies. This means that the test for the defence industry will be broadened and specifically tailored to the unique requirements of the sector. The act also contains a number of provisions similar to the Vifo Act, such as a notification requirement, a standstill obligation and the possibility of imposing approvals or nullity sanctions.
The internet consultation has been completed this fall. The proposal is expected to receive further consideration in 2025.
Extending scope of application Vifo Act to new sectors
The Vifo Act, which came into force on 1 June 2023, allows the government to review investments and acquisitions of vital companies and providers of sensitive technologies for risks to national security (see also our first and second Competition Newsflash on the Vifo Act). In light of the rapidly changing geopolitical situation, a legislative proposal is pending to further extend the scope of the Vifo Act to new sectors and technologies. The explanatory memorandum explains that this extension aims to further safeguard the national security of the Netherlands.
The proposed act concerns an amendment to the Decree on the Scope of Application of Sensitive Technology, which regulates which sensitive technologies fall within the scope of the Vifo Act. The proposal sees the addition to that decree of biotechnology, artificial intelligence, advanced materials and nanotechnology, sensor and navigation technology and nuclear technology with medical use. In February 2024 a motion was carried requesting that the Dutch vegetable and seed breeding sector be included in the scope of the Vifo Act, given its crucial role in food security and innovation. The vegetable and seed breeding sector was nevertheless not included in this proposal.
For M&A lawyers, this development means that mergers and acquisitions in an increasing number of sectors may be subject to national security tests. This requires an even sharper analysis of transaction risks, timelines and notification requirements when clients operate in or are involved in vital or strategic sectors.
The internet consultation on the proposal will take place from 19 December 2024 to 31 January 2025. The proposal will then be submitted to the Council of State to deliver its opinion. The Ministry of Economic Affairs considers it possible that the act could then enter into force in the second half of 2025.
Call-in power non-notifiable transactions
An expected extension of the ACM’s powers concerns the so-called call-in power. This addition to the ACM’s toolbox aims to deal with transactions that do not meet the current turnover thresholds but still (potentially) raise competition law concerns. The ACM refers to large companies that gain or increase their market power through successive small acquisitions (roll-up acquisitions), or so-called killer acquisitions, where companies with a strong market position acquire potential competitors to prevent (or: ‘kill’) future competition. These transactions now remain largely outside the ACM’s supervision, which in certain cases can be detrimental to competition. The introduction of a call-in power would allow the ACM to assess transactions falling below the turnover thresholds if they raise competition concerns.
The ACM has stated on several occasions that it considers the introduction of a call-in power necessary. On 4 September 2024, a motion on its introduction was carried in the House of Representatives. The Minister has promised to study the potential introduction of the call-in power and present the results as well as possible legislative proposals in 2025.
Introduction New Competition Tool
In addition to adjustments to traditional competition instruments, such as the prohibition on abuse of a dominant position, the New Competition Tool (“NCT”) is gaining ground as an addition to the ACM’s current toolbox. This tool allows competition authorities to intervene in case of market failure, without there having to be a breach of competition law. Market failures, for example caused by specific market characteristics or the behaviour of companies, can lead to a lack of effective competition and can disadvantage consumers. For example, the ACM recently brought out a report on the savings market and found that limited competition led to low savings rates. Other than finding that (in its view) there is market failure, the ACM cannot currently intervene in such situations. With the NCT, regulators can address the cause of such problems and actively reform the market structure to promote healthy competition.
Unlike existing competition rules, the NCT does not focus on individual breaches or “wrongdoing” of undertakings, but on structural problems in the market that impede competition. The tool enables preventive action and faster intervention in the face of impending competition concerns. In doing so, regulators can take drastic steps, such as opening up markets or limiting market power. The UK Competition & Markets Authority has had similar powers for some time. The ACM is now actively advocating the introduction of an NCT in the Netherlands. For M&A lawyers, this would mean that market investigations by the ACM could be more frequent and new intervention measures could impact markets in which their clients operate, even without any wrongdoing.
Currently, the introduction of an NCT in the Netherlands is mainly a desire expressed by the ACM. The minister has promised to study the possible introduction of an NCT. The results of this study, as well as any legislative proposals, are expected in 2025.
Thank you for reading this first edition of the Flash Forward Merger Control and we wish you happy holidays and a successful new year!
Team Competition – bureau Brandeis
Bas Braeken – Jade Versteeg – Lara Elzas – Timo Hieselaar – Demi van den Berg – Joost van Belois