‘More questions than answers’ about jurisdiction after Austria Asphalt case

Question Mark

4 December 2017. By Natalie McNelis.

When the European Court of Justice ruled on the Austria Asphalt case this year, it was hailed for settling a long-running dispute over when the EU — rather than national regulators — has jurisdiction over joint ventures.

But is that really accurate?

Some antitrust lawyers are finding that, on deeper reflection, the case doesn’t give them a clear answer on where to file after all.

Sure, if the facts of a particular case closely parallel those of Austria Asphalt, the precedent is clear. But that rarely happens — and where it doesn’t, the court’s ruling doesn’t necessarily apply.

Indeed, lawyers studying the Austria Asphalt case are finding that it raises “more questions than answers” about jurisdiction, said Brussels practitioner Kyriakos Fountoukakos.

The case, resolved in September, dealt with a dispute about who had jurisdiction — Austrian merger regulators or their EU counterparts — over an agreement between two Vienna-based rivals, Austria Asphalt and Teerag-Asdag, to share the output of a nearby asphalt plant previously owned by Teerag-Asdag.

The European Commission intervened in the case to argue it had the right to regulate the deal, but the court rejected this on the grounds that the plant wouldn't have a presence of its own on the market.

Law firms and academics rushed out commentaries that the ruling meant joint ventures have to be independent — “full-function” in EU-speak — to trigger EU merger jurisdiction.

But the reality might not be so clear-cut, Fountoukakos argues. The court stuck closely to the “very specific scenario” before it — a change from sole to joint control over an asset. What about other variations, he said, such as a “joint-to-joint” transaction?

Devil in the detail

The court said EU merger control applies to joint ventures only if their “creation” leads to a “lasting effect” on the “structure” of the market.

Austria Asphalt was a curious case to make a point about a change in market “structure,” because the court said the asphalt plant wasn’t independent to begin with.

But what if it had been? If a previously independent company is removed from the market and turned into a dependent joint venture, does that constitute a “structural” change to the market and trigger EU jurisdiction — even though the resulting entity is not “full-function”?

For Bernhard Kofler-Senoner, who represented Austria Asphalt in the case, the answer is a simple “no.”

This hypothetical question was part of the pleadings in the case, he told MLex, and the court answered it: If it’s not a full-function joint venture at the end of the day, then it doesn’t need EU clearance.

The court said merger control “isn’t the right tool to control such a scenario — companies getting together to take another off the market.” That’s for the basic rules of EU antitrust law that prohibit competitors from colluding to disrupt competition.

But the commission argued against this outcome, and might take up the fight once again in another case under different circumstances. For example, it could reasonably argue that applying basic antitrust rules after the fact is a poor substitute for pre-emptive merger control.

Narrow definition

When asked for comment on the judgment, the commission said it gave a precedent for cases where “an existing undertaking” goes from “sole control by one company” to “joint control by the same company and another company.”

It didn’t acknowledge that the ruling had any weight outside those very narrow constraints.

And the commission hasn’t made any move to change guidelines that explicitly say a similar situation would still require an EU notification even without “full functionality” — namely, when several companies acquire joint control of another company from third parties.

Frédéric Louis, a lawyer in Brussels, says the judgment “ought to be seen as settling all these issues once and for all — there’s no need for an EU filing.” But the reality could be more complex, as the EU executive might not relinquish control so easily.

If the commission insists on taking up a case, “companies will just have to comply,” he said. “This is a fight they can little afford to engage in.”

For Fountoukakos, the only thing that is clear is the need for more guidance. “Companies have to know upfront whether or not a transaction is notifiable to the commission,” he said.

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