What Role Will Swedish Call-In Powers Play in the Future of EU Merger Control?
The European Commission (the “Commission”) recently decided to withdraw its guidance on the referral mechanism in Article 22 of the EU Merger Regulation (“EUMR”). This is a consequence of the Illumina/Grail judgement, where the European Court of Justice (the “CJEU”) held that the Commission may not accept referrals if national competition authorities lack jurisdiction under their own merger control laws. As mentioned in our previous blog post, it is now likely that national call-in powers will be of high interest for the Commission if for example a transaction has the characteristics of a “killer acquisition” or “serial acquisition”. In this blog post, we will explore the Swedish Competition Authority’s (the “SCA”) call-in powers.
The SCA’s call-in powers
Normally, a merger between undertakings shall be notified to the SCA if the aggregate Swedish turnover of the purchaser group and the target exceeds SEK 1 billion (approx. EUR 86 million) and each of the purchaser group and the target had a turnover in Sweden during the preceding financial year exceeding SEK 200 million (approx. EUR 17 million).
If the first threshold of SEK 1 billion (approx. EUR 86 million) is met but not the second threshold of SEK 200 million (approx. EUR 17 million), the SCA may still order a party to a merger to notify the merger if there are “particular grounds” (Sw: särskilda skäl). This rule allows the SCA to “call in” certain transactions that do not trigger the mandatory notification thresholds. Parties may also voluntarily notify transactions that only fulfil the first threshold but not the second.
In this context, the preparatory works to the Swedish Competition Act states that particular grounds may exist if the purchaser is a strong company that acquires a smaller competitor, including if the target is newly established on the market. Particular grounds also cover so-called serial acquisitions where a strong company acquires smaller competitors through successive acquisitions but where each separate acquisition is small. However, in practise, the SCA has considered that there are particular grounds if it receives complaints against the transaction (for example from customers or competitors) and this applies both for horizontal (between competitors) and vertical mergers (between companies in different parts of the supply chain). The SCA’s call-in powers thus also cover so called “killer acquisitions” (where a company acquires control of an innovative company to eliminate them as a possible source of future competition) and shares many similarities with the Commission’s now abandoned guidance on Article 22.
Called in mergers in Sweden
Once called in, the businesses involved must submit a formal notification to the SCA, which then conducts a thorough investigation into the potential effects on competition. There are several examples where the SCA has requested merging parties to notify transactions to the SCA although the number of call ins have varied substantially over the years. Examples of called in horizontal mergers are S:t Erik AB:s acquisition of Meag-VA System AB (2022), within the field of concrete products, Easypark’s acquisition of Inteleon (2019), within electronic systems of parking, Swedbank Franchise’s acquisition of Svensk Fastighetsförmedling (2014) (which is one of few concentrations that have been prohibited), within real estate. Additionally, examples of mergers with both horizontal and vertical dimensions are Assa Abloy’s acquisition of Prokey (2013), within lock, security and door solutions, and Bonnierförlagen’s acquisition of Pocket Shop (2012), within publishing and book sales. The existence of the call-in powers have also led to a number of voluntary notifications despite the fact that those fairly often have been assessed in a Phase II assessment (an in-depth scrutiny which adds another 90 days of investigation time to the 25 working days for the SCA to scrutinise a concentration in Phase 1).
Concluding remarks
Even though the Commission’s overly expansive interpretation of Article 22 EUMR has been annulled by the CJEU and the Commission has now abandoned its guidance, referrals to the Commission of transactions under the national thresholds may still be relevant considering the call-in powers of national competition authorities.
The SCA has, in line with several other national competition authorities, the power to call-in transactions below the merger control thresholds. A transaction may be interesting to assess if for example the transaction has the characteristics of a “killer acquisition” or “serial acquisition”. As an example, large PE-investors achieve market powers in fragmented local markets by below threshold mergers. Considering the fact that the SCA actively uses this call-in power and that the SCA participated in a number of Article 22 referrals to the Commission under the now withdrawn guidance, it will be important for businesses and their advisors to assess whether planned M&A deals may be caught by the SCA’s call-in powers.