Some items on our site have recently moved. Visit our News Hub for selected articles, special reports, podcasts and other resources.
TowerCast’s win could foreshadow Illumina’s loss
21 March 2023 09:26 by Natalie McNelis
Illumina probably had a sinking feeling reading TowerCast’s win last Thursday in the European Court of Justice. That’s because the central issue in that case — how antitrust authorities can capture “killer acquisitions” — is also key to its pending appeal over its Grail takeover.
In TowerCast, the court sided with an interpretation that confirmed regulators have another avenue to catch such problematic deals that escape merger control — the prohibition on abuse of a dominant position.
Illumina might fear the court will take a similarly inclusive view in its case, which involves a different “safety net” — Article 22 of the EU’s merger control regulation, which the lower court decided in July allows national competition authorities to refer deals that don’t otherwise qualify for merger control to the European Commission for review.
The underlying issue is an unease on the part of regulators in Europe and elsewhere about acquisitions of smaller rivals that sail through unopposed because the target companies don’t yet have enough presence or revenue to be subjected to mandatory merger control. Both the TowerCast and Illumina cases can be seen as an effort to recapture control over such deals.
In the TowerCast case, when the incumbent French broadcaster TDF bought its smaller rival Itas in 2016, it didn’t meet merger control thresholds. TowerCast implored the French authorities to intervene anyway, saying it was a “killer acquisition.”
It said Itas was a “maverick” on the market, aggressive in its price positioning and rapidly gaining market share, and said the acquisition itself was “part of TDF’s anticompetitive strategy” that ought to be stopped.
The case came to the court because TowerCast said that the French competition authority could and should have used dominance-abuse rules to prevent TDF from acquiring Itas. The Paris Court of Appeal referred the question to the Court of Justice of the EU — and the European Commission intervened in support of TowerCast.
In the written and oral pleadings, abuse of dominance was presented to the court as a fallback position for catching killer acquisitions, and Advocate General Juliane Kokott embraced that theory in her opinion in the case, issued last October.
Referring to “killer acquisitions,” she said that applying the “weaker instrument of punitive ex-post control under Article 102 TFEU” [the abuse of dominance rules] could help to fill the gap to protect competition, particularly for acquisitions “in highly concentrated markets, such as that in the present case, where the aim of such acquisitions is to eliminate competitive pressure from an emerging competitor”.
Even worse, from Illumina’s perspective, Pascal Berghe, representing the commission at the TowerCast hearing, explicitly drew the link between the TowerCast and Illumina cases.
“Notification thresholds are imperfect,” he said, and called the provision at issue in Illumina’s case — Article 22 of the EU’s merger control rules — “one safety net.” He then said, “the possibility of 'ex post' application of Article 102 constitutes another safety net”.
As it was
Another similarity in the two cases is an attempt to discount precedent, or legal provisions, because times have changed since they were put in place.
In TowerCast, it was the Continental Can jurisprudence, a 1973 case that said laws prohibiting abuse of dominance could be applied to mergers. The French authority — which argued it did not have such power — said that case law was only intended to fill a gap because at that time, there was no EU-level merger control. It’s been obsolete since the EU adopted its merger control regulation in 1989, it argued.
The court disagreed, saying it cannot be inferred from the “one-stop shop” principle for EU-level merger reviews that lawmakers intended to strip national authorities of their treaty-given right to prohibit abuse of a dominant position.
There are echoes of the same reasoning in Illumina’s case, where it has been argued that Article 22, colloquially known as “the Dutch clause,” was only meant to allow national competition authorities without their own merger control regimes to refer mergers for EU-level review. It’s obsolete now that most countries in the bloc have national-level controls, so Illumina has argued.
The lower-tier General Court already didn’t buy that argument, in its July 2022 holding that referrals from the EU's national competition authorities under Article 22 of the bloc's merger regulation is a legitimate alternate avenue to review such deals. It probably won’t fly in the top court either.
And one last detail to perhaps add to Illumina’s jitters: according to an order issued in the Illumina case, its appeal will be handled by the same reporting judge who handled the TowerCast appeal, judge Nils Wahl, albeit with a different advocate general this time around, Nicholas Emiliou.
The case references are C-449/21 TowerCast v Commission, and C-611/22 P, Illumina v. Commission.
26 April 2023 17:59 by Flavia Fortes, Nicholas HirstMicrosoft is set to appeal a UK block on its proposed acquisition of game developer Activision Blizzard
26 April 2023 15:20 by Andrew Boyce, Nicholas HirstMicrosoft is set to appeal a UK block on its proposed acquisition of game developer Activision Blizzard. But reversing a decision by the Competition and Markets Authority is fiendishly hard; in fact, it's never been done in a merger case — at least not in recent memory
20 March 2023 11:44 by Fiona MaxwellCredit Suisse shareholders have been spared the pain in comparison to bondholders in the bank's rush weekend takeover by UBS.