Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Tuesday, April 17, 2007

National Champions and the Two-Thirds Rule in EC Merger Control

Posted by D. Daniel Sokol

Nationalism remains strong in cross border EU mergers.  That is, Member States of the EU sometimes make life very difficult from cross European mergers (the recent E.On attempt to acquire Endesa comes to mind as do some failed cross-border banking mergers) that might be beneficial to the EU but which would involve the acquisition of a country's firm by a firm of another Member State.  Another issue is one in which countries seek to promote national champions even if may create a domestic consumer welfare loss.  A new working paper by Andrew Scott entitled National Champions and the Two-Thirds Rule in EC Merger Control addresses this second issue and the potential for community-wide reform.

ABSTRACT: The 'two-thirds rule' stands as a caveat to the quantitative jurisdictional thresholds stipulated in the Merger Regulations. It prevents the attribution of a 'Community dimension' to large business mergers where two-thirds of the parties' respective turnovers are made in one and the same member state. It sees the relevant national authority and not the European Commission enjoy competence to assess the competitive effects of such a transaction. In the immediate aftermath of Gas Natural/Endesa - a case which the European Commission accepted only reluctantly did not possess a Community dimension - the Competition Commissioner mooted the legislative repeal of the two-thirds rule. The reception by member states of a proposal on these lines is unlikely to be uniformly generous. This note first reviews the origins and content of the two-thirds rule, before proceeding to consider the current momentum behind and prospects for successful reform. It suggested that a wider rapprochement between divergent perspectives on the best approach to achieving economic development both within and across the member states of the EC - and in particular on the problematic issue of support for 'national champions' - will likely be necessary before any revision can occur.

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