Dutch merger control reforms being explored amidst ‘killer acquisitions’ risk

Currently, the Autoriteit Consument & Markt (Authority for Consumers and Markets, ACM) can only scrutinise proposed mergers and acquisitions where the annual turnovers of both the acquiring and the target companies in the Netherlands exceed €30 million. In those circumstances, the parties are obliged to notify the deal to the authority for clearance.

In a recent blog, Martijn Snoep, chairman of the board of the ACM, said, though, that “small acquisitions” can “still cause competition problems” and characterised the absence of powers enabling the ACM to ‘call-in’ such deals for review as a “gap” in the existing legal framework in the country. This, he said, presents a risk of “killer acquisitions” being completed without scrutiny.

“Suppose a company already has market power and finds out that there is a new company that has developed a revolutionary new technology that has yet to be brought to market,” Snoep said. “An acquisition of such a new company can protect the company with market power from future competition. But because the new company does not yet have any turnover, the acquisition remains below the thresholds and ACM is left empty-handed. These kinds of 'killer acquisitions' occur in the pharmaceutical sector and in the digital economy, but they are also not inconceivable in other sectors that are in transition, with strong vested interests.”

Snoep said competition authorities in some other EU countries, such as in Ireland, Italy, and Sweden, as well as the European Commission, already have ‘call in’ powers. He said the ACM is keen to learn from the experience of other countries and plans to “exchange views on this subject with specialists and interested parties” in the coming months.

Frits Burg of Pinsent Masons, an Amsterdam-based expert in corporate transactions, said: “The ACM is currently exploring possibilities and will organise expert meetings in the coming period. There are various downsides to the suggested call-in power – the most significant one is the lack of certainty it will bring for parties. The ACM expects that issue would be addressed by parties voluntarily notifying their intended acquisitions, but this is doubtful – although a voluntary notification would be made, stakeholders could still file complaints and it is unclear what the risks are. Also, when making a voluntary notification, an acquirer implicitly commits to the fact that it might be rolling-up competition and thereby putting itself in the spotlight.”

Burg said that it has been common for businesses seeking to grow to acquire other companies – under a so-called ‘buy-and-build strategy’ – to do so, for years. However, he said that there has been growing focus among policymakers, regulators and consumer groups over how that is impacting competition in certain sectors.

“While it is right for the ACM to respond to concerns raised about buy-and-build strategies, their impact on competition, and how that may affect the availability, quality and cost of goods and services in markets, that does need to be balanced against the risk of introducing a new system of review that causes uncertainty for businesses and investors. I’m curious what the coming discussions will bring – but the ACM should think about clearly defining sectors and limiting any new call-in powers to defined situations so that parties can anticipate,” he said.

Alan Davis, competition law expert at Pinsent Masons, said: “Competition authorities across Europe are increasingly seeking to identify and scrutinise so-called ‘killer acquisitions’, as well as ‘creeping acquisitions’ that may lead to a buyer accumulating market power over time; the ACM chairman’s suggestions are aligned with this direction of travel.”

“The approach to these types of cases by the UK’s Competition and Markets Authority under its merger control regime – which enables them to call-in transactions that have not been voluntarily notified – may provide some practical guidance for businesses on how to pre-emptively engage with a competition authority to reduce legal uncertainty and help smooth the path for merger approval,” Davis said.