The chairman of the Dutch competition authority, the Authority for Consumers and Markets (“ACM”), Martijn Snoep already alluded in a blogpost (in Dutch) last November to the possibility (or wish) of the ACM being empowered to assess mergers below the turnover thresholds. This novel competence has already been put to practice in several countries like France, Denmark and most recently in Belgium. The Dutch government has now published a proposal for consultation that would result in a general call-in power for below threshold concentrations (the draft ‘Call-in Power Act’ - in Dutch). This naturally gives rise to a pertinent question: what does this mean for future mergers and acquisitions?

How to …: the process of killing killer acquisitions

The proposed ‘Call-in Power Act’ (the “Call-in Proposal”) provides the ACM competences and powers to ensure that below threshold concentrations – the current threshold to notify concentrations consists of (1) a cumulative turnover exceeding €150 million and (2) two undertakings involved have a turnover in the Netherlands exceeding €30 million each – can be subject to the ACM’s merger controls. This should specifically target so-called killer acquisitions, roll-up mergers and local or regional takeovers that could lead to competitive concerns in the eyes of the ACM. Such transactions currently fall outside the ACM’s direct ambit – save if these concentrations constitute an abuse of a dominant position according to the Towercast-doctrine. The Call-in Proposal’s explanatory memorandum (in Dutch) mentions several explicit examples of strategies that could be perceived as harmful, such as private-equity takeovers in the veterinary services market or the acquisition-strategy of a general practitioners organisation with a strong local presence that, after ceasing its operations, left many consumers without sufficiently accessible healthcare. 

The legislature considered three options to deal with these potentially anti-competitive strategies. First, lowering the current thresholds in general or in relation to specific sectors. Besides increasing the workforce of the ACM, imposing thresholds for specific sectors would only be enacted after the competitive concerns in that sector would have been identified and, by that time, may already have materialised. Introducing a market share threshold as part of the current thresholds was posed unsuccessfully as a second option, due to the uncertainty about identifying the exact scope of the markets involved. Thirdly, the legislature considered the now proposed option for a call-in competence apart from the current thresholds as advocated by the ACM. 

The Call-in Proposal – what does it entail?

It is now proposed that the ACM has the ability to call-in a concentration within four weeks after the earliest of the following three moments:

1. If the undertakings involved publicly announce their intended concentration in the Netherlands;
2. When the ACM becomes aware of the intention to establish the concentration; or
3. Six months after the concentration has been put into effect.

Within four weeks after the earliest of these three occurrences, the ACM will request the undertaking(s) involved to provide information to assess whether the concentration could significantly impede effective competition on the relevant market, especially in cases where the concentration creates or strengthens a dominant position. Following the Dutch General Administrative Law Act, undertakings subject to such request are generally required to comply with such requests. 

The ACM will need to decide, based on the received information, if it obliges the undertakings to notify the transaction and, if the concentration did not yet enter into effect, to prohibit the putting of the transaction into effect until it has been notified (in other words, impose a stand-still obligation). If the concentration has already been put into effect, which is possible in case the ACM calls-in at moment #3, the aforementioned stand-still obligation and concentration prohibition do not apply.

Subsequently, the ACM will inform the involved undertakings within four weeks of receiving the notification if the undertakings need a licence to complete the concentration. In that situation, the regular licence procedure in accordance with the Dutch Competition Act will be followed, including the possibility to request the ACM to exempt them from the prohibition to enact the concentration during the ongoing process. 

In the case the ACM does not require a licence, the ACM could nonetheless impose conditions on the concentration in return for not leaving the licence aside. Where the ACM does consider a licence to be required for a concentration and does not grant an unconditional licence, the consequences differ if the concentration has already been implemented or not. In the former situation, the undertakings involved are given 13 weeks to implement conditions prescribed by the ACM or – in the case the undertakings do not apply for a licence or if the ACM refuses to grant a licence – to undo the concentration. Concentrations that have not yet been implemented could be obliged to comply with conditions imposed by the ACM before effectuating the concentration or could face a refusal of the requested licence.

We have included a visual below reflecting the process of the proposed call-in powers.

Complications: unclarity for undertakings involved and contractual implications 

One of first thoughts crossing the minds of readers of the Call-in Power proposal is the uncertainty it brings for undertakings engaging in acquisitions, mergers or joint ventures. Contrasting the clear and predefined turnover thresholds, the looming possibility of the ACM calling-in a concentration, even after closing, may scare undertakings in the Netherlands. Additionally, this may impact transaction documents and other arrangements since these need to include provisions anticipating possible calling-in by the ACM. 

The uncertainty of the possible interference by the ACM is partially countered by the deadlines included in the draft Act for the ACM to make use of its powers. Depending on the actions by the undertakings involved – in particular if the intended concentration is publicly announced (moment #1) or even flagged to the ACM (moment #2) – the timelines when the ACM can call in are rather clear, namely within 4 weeks from that moment. The parties involved thus may want to flag a proposed transaction to the ACM pro-actively to limit potential delays.

Originally, ACM’s chair, Martijn Snoep, indicated that he would be in favour of an increase of the statutory notification thresholds, which have never been changed since the Dutch Competition Act entered into force in 1998, as a trade-off for the additional administrative burden that the call-in powers could bring to Dutch industry. This suggestion did not make it to the proposal, so the call-in power brings only an additional burden. Whether the additional burdens and unclarity on undertakings would be sufficiently opposed by reaching the aims pursued by this draft Act, remains to be seen. Passing the parliamentary hurdles would be the first step for this proposal. 

If you need more information or further guidance in this area, please contact Pauline Kuipers, Tialda Beetstra and Quirijn Mohr.

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