Rethinking Minority Share Ownership and
Interlocking Directorships: The Scope for
Competition Law Intervention
By
Tommy Staahl Gabrielsen, Erling Hjelmeng
and Lars Sørgard
Reprinted from European Law Review
Issue 6, 2011
Sweet & Maxwell
100 Avenue Road
Swiss Cottage
London
NW3 3PF
(Law Publishers)
Rethinking Minority Share Ownership and
Interlocking Directorships: The Scope for
Competition Law Intervention
Tommy Staahl Gabrielsen
Department of Economics, University of Bergen
Erling Hjelmeng
Department of Private Law, University of Oslo
Lars Sørgard
Department of Economics, Norwegian School of Economics, Bergen
Acquisitions; Directors; Economics and law; EU law; Merger control; Minority shareholders; Share
ownership
Abstract
In this article, we discuss possible anti-competitive effects of minority share ownership and interlocking
directorships, and how action may be taken against possible harmful effects under the current provisions
in the Treaty on the Functioning of the European Union. We argue that both types of connections may
have anti-competitive effects. This works through either unilateral or co-ordinated effects, and might be
the case even if the acquiring firm does not exert any influence on the target company’s decisions. These
findings are taken into an analysis of the scope for intervention under current legal instruments (arts 101
and 102 TFEU). We distinguish between ex ante and ex post intervention, and we argue that the case law
of the Court of Justice has so far established a yet underdeveloped potential for intervention against the
acquisition of minority shareholdings as well as the creation of interlocks. Furthermore, it is demonstrated
that the limitations of information exchange laid down in arts 101 and 102 TFEU fully apply to the
transparency created by interlocking directorships.
Introduction
Minority share ownership, interlocking directorships and other links between competitors have been
something of a headache in competition law for decades. This is particularly so in oligopolistic markets,
where the anti-competitive effect of various forms of structural links may be particularly visible.1 Some
jurisdictions address the problem with specific provisions applying merger control rules to minority
transactions,2 others by directly regulating board representation issues.3 EU competition law does not
1
See the OECD Roundtable Minority Shareholdings 2008, (DAF/COMP(2008)30).
e.g. Norway, where the merger control regime extends to minority shareholdings (Norwegian Competition Act
12/2004 s.16(2)).
3
e.g. under the US Clayton Act s.8 (15 USC 19); see American Bar Association, Interlocking Directorates Handbook
(April 2011).
2
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838 European Law Review
address the issue of minority share ownership as an independent problem. On only a few occasions has
art.101 TFEU (ex 81 EC) or art.102 (ex 82 EC) been applied to the establishment of minority shareholdings.
There are no cases where the Commission has intervened against the exercise of minority rights or board
representations within existing minority holdings.
The aim of this article is to analyse whether this is an enforcement gap that should be filled—at least
partially—under the current Treaty provisions.4 We show that, according to economic analysis, minority
interests in competitors—both minority share ownership and interlocking directorships such as board
representation—can have anti-competitive effects. It is argued that both art.101 and art.102 TFEU provide
a sufficient legal basis for interventions against such anti-competitive effects, but that these articles
represent a still underdeveloped tool in this context.
We start out in the next section by defining minority interests in competitors and the topic covered in
this article. In the following section, we explain the potential anti-competitive effects stemming from
minority share ownership and interlocking directorships in light of current economic research. Then, the
potential for intervention against the establishment of minority interests in competitors and against conduct
influenced by such relationships are discussed in turn. Finally, the article discusses the issue of remedies.
Minority interests in competitors
We shall concentrate on two aspects related to the broader topic of minority interest in competitors:
minority share ownership (MSO) and interlocking directorships (ID).
MSO is defined as holding a stake in a firm where the stake is the holder’s financial interest in the
performance of the firm through the potential return earned on the shares. A passive MSO is one where
the investing company does not exert any influence in the target company, and an active MSO is one
where the investing company can exercise some form of influence in the target company.5
An MSO may be one-way or reciprocal. An investing firm may hold a one-way direct MSO in a target,
and two competing firms may each hold a direct MSO in one another, in which case the MSO is reciprocal.
ID refers to cases where executive or non-executive board members or other officers of a company
hold additional positions on one or more company boards. Such arrangements create a platform for
information exchange, since having a position in a competitor makes it possible to acquire more, and
fresher, information.
Potential anti-competitive effects
In this section, we will briefly explain the potential anti-competitive effects stemming from minority
interests in competitors through either MSOs or IDs. For this purpose, we first examine passive investments
and active investments in turn and we distinguish between unilateral (non co-ordinated) and co-ordinated
effects. Furthermore, we briefly discuss the particular problems arising from interlocking directorships,
such as reciprocal board representation.
4
For earlier contributions to this debate, see, e.g. B.E. Hawk and H.L. Huser: “‘Controlling’ the Shifting Sands:
Minority Shareholdings under EEC Competition Law” (1993–94) 17 Fordham Int’l L.J. 294; R.A. Struijlaart, “Minority
Share Acquisitions Below the Control threshold of the EC Merger Control regulation: An Economic and Legal
Analysis” (2002) 25(2) World Competition 173; F. Caronna, “Article 81 as a Tool for Controlling Minority Cross
Shareholdings between Competitors” (2004) 29 E.L. Rev. 485; A. Ezrachi and D. Gilo, “EC Competition Law and
the Regulation of Passive Investments among Competitors” (2006) 26 Oxford Journal of Legal Studies 327.
5
On the distinction see OECD Policy Roundtable, Minority Shareholdings 2008 (DAF/COMP(2008)30), p.21.
Passive investments are also referred to as pure “financial investments”.
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Minority Share Ownership and Interlocking Directorships 839
Passive MSO investments
Passive investments can lead to either a lessening of competition between the involved parties (unilateral
effects) or a collusive outcome in the industry (co-ordinated effects).
Unilateral effects
If a firm acquires a minority share in a competing firm, the acquiring firm has an incentive to behave less
aggressively.6 The reason is that the acquiring firm will receive a fraction of the profits in the competing
firm through its minority share. By behaving less aggressively, for example setting a higher price, the
competing firms will benefit from the dampening of competition in the industry. All else being equal, the
competing firms will sell more since some of the customers will leave the firm that has raised its price.
The mechanism is analogous to the unilateral effect in a full scale merger, although the effect is scaled
down since the acquiring firm receives only a fraction of the acquiring firm’s profit. An additional reciprocal
MSO can be expected to add to the anti-competitive effect from a one-way MSO.
As long as there is no lowering of variable cost following MSO, the unilateral effect is expected to
dampen competition irrespective of the mode of competition, i.e. whether firms are capacity constrained
or not. However, the profitability of MSO will depend on the mode of competition.
The mode of competition is normally explained in terms of “Bertrand” or “Cournot”. When firms are
capacity constrained, economists refer to the mode of competition as Cournot (or quantity) competition.
When firms compete in Cournot competition they choose output as the strategic variable. Under Cournot
competition, quantities are strategic substitutes, meaning that if a competitor increases his output your
best response is to reduce your output. The alternative is Bertrand (or price) competition in which case
firms have no binding capacity constraint. Under Bertrand competition price is the strategic variable.
Prices will be strategic complements in the sense that if a competitor reduces its price, your best response
is to reduce your price as well. The latter involves tougher competition than the former.
When firms are not capacity constrained and competition is in prices (denoted as Bertrand competition
from now on) both one-way and reciprocal MSOs are profitable for the firms. MSOs will increase the
price of firm A (and of firm B if the MSO is reciprocal). The optimal response for the other firms in the
same industry is to increase its prices as well, which is beneficial to the holder(s) of an MSO.7 It is also a
general result that the more widespread MSOs are in a Bertrand industry, the more beneficial they become.
When firms are capacity constrained and competition is in output (denoted as Cournot competition
from now on) and products are homogeneous, an MSO is unprofitable because of the outsiders’ free-riding
on the MSO.8 Suppose firm A has a one-way share in firm B. Firm A should then optimally reduce its
quantity to compete less aggressively with B. However, both firm B and other competitors would respond
6
Among the first to show the unilateral anti-competitive effects of partial ownership were R.J. Reynolds and B.R.
Snapp, “The competitive effects of partial equity interests and joint ventures” (1986) 4 International Journal of
Industrial Organization 141, and T.F. Bresnahan and S.C. Salop, “Quantifying the competitive effects of production
joint ventures” (1986) 4 International Journal of Industrial Organization 155. The unilateral effect is further discussed
in D. Flath, “Vertical integration by means of shareholder interlocks” (1989) 7 International Journal of Industrial
Organization 369 and W. Nye, “Can a joint venture lessen competition more than a merger?” (1992) 40 Economics
Letters 487. See also D.P. O’Brien and S.C. Salop, “Competitive effects of partial ownership: Financial interest and
corporate control” (1999) 67 Antitrust Law Journal 559.
7
See Ø. Foros, H. J. Kind and G. Shaffer, “Mergers and Partial Ownership” (2011) 55 European Economic Review
916.
8
This was first shown in D. Flath, “When is it rational for firms to acquire silent interests in rivals?” (1991) 9
International Journal of Industrial Organization 573, and it is also discussed in D. Reitman, “Partial ownership
arrangements and the potential for collusion” (1994) 26 Journal of Industrial Economics 313. See also DotEcon:
Minority interests in competitors, a research report submitted to Office of Fair Trading (London: March 2010).
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840 European Law Review
to A’s decrease in its sale by expanding output to such an extent that firm A would ultimately lose from
taking a share in firm B. A similar intuition also applies with reciprocal MSOs, that is, when both A and
B hold a share in each other.
With differentiated goods and Cournot competition, both one-way and reciprocal MSOs may be optimal
for the undertakings. The reason for this is that product differentiation dampens the response from the
outsiders, and thereby the MSO on its own can be profitable. It can be shown that small MSOs are optimal
when product differentiation is small, and the optimal share of MSO increases with product differentiation.
In line with the previous result, the larger the number of rivals, the less likely is it that a given degree of
product differentiation will lead to profitable MSOs.
This suggests that, under Cournot competition, firms must be sufficiently linked through MSOs for the
MSOs to be jointly profitable for the firms. Under Bertrand competition, an MSO is always profitable for
the involved parties. However, MSOs are even more profitable to an outsider. In that respect there will
not be an equilibrium with MSOs, as it would pay for a firm to not be a part of such a web of MSOs and
free-ride on the rest of the web. But given that firms do choose MSO, an anti-competitive, unilateral effect
can be expected irrespective of the mode of competition.
It has been shown that it can be more anti-competitive if a firm’s controlling shareholder rather than
the firm itself invests in the firm’s competitor.9 By cutting production in the company it controls the price
in the industry will increase and the investor benefits indirectly through the increased profit earned on the
competitor’s shares. On the other hand, it earns less profit in the controlling firm since this firm takes the
burden of curtailed production in the industry. The lower the share in the controlling company, the less
important this latter effect will be. Consequently, a firm’s controlling shareholder has incentives to cut
more production in the controlling firm than would have been cut if it had owned all the shares in the
controlled company.
In sum, passive MSOs are expected to produce potentially important anti-competitive unilateral effects
and firms have incentives to choose MSO in particular when they compete in prices (Bertrand competition).
Co-ordinated effects
Co-ordinated effects will be present if firms are able to attain higher prices than those prices that maximise
profits in the short run (static prices, if no co-ordination at all). As is well known from the analysis of
horizontal mergers, there are several conditions that must be met for co-ordination to emerge. In particular,
co-ordination is more likely to emerge if (1) it is relatively simple to reach a common understanding on
the terms of the co-ordination; (2) firms are able to monitor to a sufficient degree whether the terms of
co-ordination are being adhered to; (3) there is a credible deterrent mechanism; and (4) the reaction of
outsiders does not undermine the co-ordination.10 When analysing MSOs, the key question is whether the
market structure in the industry and the existence of MSO will make it more likely that those conditions
are met.
Whether minority shareholding makes it more likely that co-ordinated effects are present or not depends
on whether MSO will make it more tempting to deviate from a co-ordinated outcome or not. To answer
this, we must assess how MSO will influence the positive short-term gain from deviating, and the long-term
loss from triggering competition. On the one hand, the short-term gains from deviating from a co-ordinated
outcome will be smaller with MSO, because firms will internalise part of the losses they inflict on other
firms when they deviate. This tends to stabilise co-ordination between the firms in the industry. On the
other hand, the profits after deviation (when firms compete) will be either higher or lower with MSO. In
9
See D. Gilo, “Passive investments”, Ch.67 in American Bar Association, Issues in Competition Law and Policy
(2008).
10
See EU Horizontal Merger Guidelines [2004] OJ C31/3, para.41.
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Minority Share Ownership and Interlocking Directorships 841
Cournot competition, we know from the previous section that MSO in some instances can lead to lower
profits when firms compete. If this is the case, both the short-term and the long-term effects tend to stabilise
the co-ordinated outcome. With Bertrand competition, and in some other instances with Cournot
competition, we know from the previous section that MSO will lead to higher profits when the undertakings
compete. This suggests that, in relation to the long-term effect, it will be more difficult to sustain collusion.
In that case there will be two opposing effects from MSO (short v long-term), and it is unclear a priori
which will dominate.11
We have seen in the previous section that it is first and foremost under Bertrand competition that firms
have incentives to undertake one-way MSOs. Hence in this case one would suspect that there would be
fewer incentives for collusion simply because the relative gain from colluding is smaller. On the other
hand, with Cournot competition it might be that MSO leads to more incentives to co-ordinate behaviour.
Under Bertrand competition involving homogeneous products, the non-collusive outcome would yield
zero profit regardless of whether MSOs are held or not. Under collusion, an MSO will make the incentive
to deviate smaller for the investing firm(s) by the same reasoning as above. In that respect, MSO will
never destabilise a collusive outcome.12 However, as in collusive models with asymmetric firms, MSO
only helps to stabilise a collusive outcome if the firm with the largest incentive to deviate acquires an
MSO, and this will typically be the firm with the smallest market share. With differentiated products, the
presence of MSOs will in addition lessen the severity of punishment, and this will tend to destabilise
collusion. Insofar as MSOs increases transparency, MSOs may also serve to stabiliae collusion by enabling
firms to respond quicker to deviations.
As noted above, the stability of collusion is determined by the firm having the most to earn from
deviating, and this will normally be the smallest firm in the industry. However, if a large firm meets a
small firm in one market, and in another market the relative size of the two firms is reversed, then aligning
the incentive constraints over the two markets will make collusion easier for a given discount factor for
the firms. The essence is that, by considering the two markets together, size differences between firms
get smaller. When MSOs reduce size differences between firms, for instance if smaller firms acquire
stakes in larger firms, this will therefore certainly tend to stabilise collusion.
Conclusion—passive investments
In general, MSOs have an ambiguous effect on collusive stability. MSOs may stabilise collusion, and one
important mechanism is when MSOs serve to align size differences between firms.13
If an MSO is passive and there is no potential for co-ordinated effects, we expect this to produce
anti-competitive unilateral effects. The obvious reason is that the acquiring firm now has stakes in the
target company, and, if the acquiring firm behaves less aggressively, it can benefit through its share of
profits in the target company. The potential for anti-competitive effects is present even with one-way
MSO, but will be larger the more MSO links there are between competing firms. A controlling shareholder
investing in the firm’s competitor has stronger incentives to dampen competition than the firm itself.
11
D.A. Malueg, “Collusive behaviour and partial ownership of rivals” (1992) 10 International Journal of Industrial
Organization 27 shows that if competition is à la Cournot, the destabilising effect may dominate the stabilising effect
discussed above.
12
This is shown in D. Gilo, Y. Moshe and Y. Spiegel, “Partial cross ownership and tacit collusion” (2006) 37 Rand
Journal of Economics 81.
13
Clearly, if MSOs are associated with efficiency gains, this may be an independent motive for their use. However,
the potential for such efficiencies seems limited.
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842 European Law Review
Active MSO investments
Active investments are those whereby the acquiring firm may exercise some form of influence on the
target company. Effects stemming from the ability to exert influence are treated in this section, while
information exchange stemming from ID is treated in the next section.
Unilateral effects
When MSO is coupled with influence over the target’s decisions, the latter will reinforce the
anti-competitive effect from the MSO. Under Cournot competition, the influence over the target makes
it possible for the acquiring firm to prevent the target from increasing its output. However, the output will
still increase from the other firms in the industry, thus potentially making the MSO unprofitable.
Under Bertrand competition, an MSO with some control over the target will reinforce the negative
competitive impact as the upward pressure on price will presumably be stronger in the target company,
and consequently outside competitors will react to an MSO with larger price increases than if the investment
is purely financial.
It has been shown that partial ownership with control can be even more anti-competitive than a full-scale
merger.14 If company A owns less than 100 per cent of the shares in company B (the target company), it
is in the interest of company A that the target company cut down on production (if quantity setting) or set
a high price (if price setting). If company B sets a high price, company A will benefit from this through
more sales (if the products are substitutes). If company A through its partial ownership can control the
prices charged by company B, it would benefit from a rather drastic increase in company B’s price. The
reason is that a fraction of the loss incurred by company B is covered by the other share owners in company
B.
This illustrates that, even if a share owner has gained corporate control, the anti-competitive effects can
depend on whether it owns all shares in the target company or only a fraction of them.
Co-ordinated effects
An MSO with control over the target will work much in the same way as a full merger or the reduction
of the number of independent decision makers in the industry. This will tend to ease collusion, and the
most important mechanism seems to be to correct incentives for deviation by smaller firms. In that respect
smaller firms acquiring shares in larger firms might be problematic. This effect will emerge in addition
to the forces of passive MSO investments discussed in the previous section.
Conclusion—active investments
As soon as an MSO investment is large enough to exert influence on the target company (active investment),
one may observe a sudden increase in the anti-competitive unilateral effect. MSO has a more ambiguous
effect on the stability of co-ordination. This means that under certain circumstances MSOs may facilitate
co-ordination crating co-ordinated effects.
Interlocking directorships
The most important, potentially anti-competitive, effect of ID stems from the potential for information
exchange. ID can facilitate exchange of information about sales and prices, product design and strategic
moves by the firm, but also other types of sensitive information. IDs will thus have potentially
14
This is shown in Foros et al., “Mergers and partial ownership” (2011) 55 European Economic Review 916.
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Minority Share Ownership and Interlocking Directorships 843
anti-competitive effects even without MSOs, owing to increased transparency. This means that the effects
of IDs can be disentangled from the effects of MSO we discussed in the previous sections.
Unilateral effects
If we leave aside the question of co-ordination, information exchange between rivals can have an ambiguous
effect on the consumers and social welfare. It can be beneficial for the firms and the consumers, for
example if more information about demand shocks enables the firms to improve its precision in anticipating
periods of low and high demand. On the other hand, more detailed information in some instances can
enable the firms to better adapt their behaviour towards one another so that they will end up by competing
less fiercely even in a setting without collusion. In the existing literature, it has been shown that the net
effect for consumers and society depends on the nature of competition (Cournot versus Bertrand), and on
the type of information that is exchanged.15 It is difficult to draw simple and clear-cut competition policy
lessons from this literature.
Co-ordinated effects
Information exchange may also change the incentives for co-ordinated behaviour. Several reasons have
been suggested as to why interlocking directorships leading to increased information exchange may
stabilise co-ordinated behaviour. First, it may be easier to reach a common understanding on the terms of
the co-ordination. If firms are more informed about each other’s strategies, for example, they can more
easily co-ordinate future behaviour. Secondly, information exchange can help them to be informed promptly
about any possible deviation by the other company. This enables them to react more quickly to any
deviation, which tends to lessen the incentive to deviate. For example, information exchange may help
them to overcome demand uncertainty and then overcome any breakdown of coo-rdination due to shifting
demand conditions.16
However, more information about the rivals’ products and customers has an ambiguous effect on the
stability of co-ordination. If you have more detailed information on the rival’s most valuable customers
and products (the highest price-cost margin), your deviation can be targeted towards those segments and
thereby become more profitable. In that respect, it destabilises co-ordination. At the same time, such
information will make it possible for the firms to directly target certain customers group, which typically
leads to tougher competition after any deviation. According to this effect, information exchange may lead
to a more stable co-ordinated outcome.
All in all, ID has an ambiguous effect on co-ordination. It must be analysed in the same manner as
co-ordinated effects in a full-scale merger. This means that one should distinguish clearly between vertical
and horizontal interlocking directorships. Within a vertical distribution system, for example between a
producer and a retailer, it is well known that co-ordination can benefit both the firms and the consumers.
Information exchange between competing firms (horizontal information exchange) can promote a
15
See K.U. Kühn and X. Vives, Information Exchanges among Firms and their Impact on Competition (Luxemburg:
Office of the Official Publications of the European Communities, 1995). For an updated discussion, see M. Bennett
and P. Collins, “The law and economics of information exchange: The good, the bad and the ugly” (2010) 6 European
Competition Journal 311.
16
If uncertainty concerning demand conditions exists, a low price can be due either to low demand or to a deviation
from the collusive outcome by a rival firm. If one is unable to distinguish, it has been shown in the literature that a
rational recourse for firms is to start a price war when the price falls below a certain threshold level. This was first
discussed in E.J. Green and R.H. Porter, “Noncooperative collusion under imperfect price information” (1984) 52
Econometrica 87. If firms have information about demand conditions, they can avoid starting a price war in those
cases where a low price is caused by low demand and only start a price war if a rival deviates.
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844 European Law Review
co-ordinated outcome, and therefore it is a potential for harmful effects. Vertical interlocking directorships
are normally benign to consumers, except in cases where rivals can be foreclosed.17
Conclusion—interlocking directorships
ID leads to exchange of information, and this may have either unilateral or cordinated effects. If there is
no potential for co-ordination, it is difficult to infer from market characteristics whether ID is pro- or
anti-competitive under unilateral effects. The potential for harm to consumers from ID is larger if a potential
for co-ordination already exists. ID in vertical relationship will normally, except for cases with the potential
for foreclosure, not have any anti-competitive effect, while the potential for anti-competitive effects is
present with ID between competing firms (horizontal relationships).
Intervention at the stage of acquisition
This section examines the scope of application of the European Community Merger Regulation,18 the
cartel prohibition and the abuse prohibition to transactions leading to MSOs. Its focus is on interventions
against the very establishment of shareholdings which may create anti-competitive effects.
Merger Regulation
The existence of MSOs may be relevant in several distinct contexts under the ECMR. First, the acquisition
of a minority shareholding may itself trigger the Commission’s competence under the Regulation, if the
acquisition leads to a change of control. Secondly, pre-existing minority shareholdings held by the parties
to a concentration may impact on the substantive analysis of a separate concentration. Thirdly, MSOs
impact in several ways on the question of merger remedies. In this section, these aspects are briefly dealt
with in turn.
Concept of control
According to art.3 ECMR, a concentration is deemed to exist on the basis of, among others, a lasting
change of control over an undertaking. The concept of control is defined in terms of the possibility to
exercise decisive influence:
“Control shall be constituted by rights, contracts or any other means which … confer the possibility
of exercising decisive influence on an undertaking.”19
The acquisition of a minority shareholding will only confer control under certain circumstances. Such
may be the case on a de jure or de facto basis.20 Sole control on a de jure basis may be established if the
minority shareholding is combined with special rights, which are often laid down in the shareholders’
agreement. CCIE/GTE provides a good illustration. In the case, CCIE acquired only 19 per cent of the
17
The fact that vertical co-ordination is less harmful than horizontal co-ordination is clearly spelled out in the
Commission’s Non-Horizontal Merger Guidelines [2008] OJ C265/07, para.11: “Non-horizontal mergers are generally
less likely to significantly impede effective competition than horizontal mergers.”
18
Regulation 139/2004 on the control of concentrations between undertakings [2004] OJ L24/1.
19
Regulation 139/2004 art.3(2).
20
See the Consolidated Jurisdictional Notice to the Merger Regulation [2008] OJ C95/1, s.BII 1.2 and paras 54–61.
This article will not discuss the concept of control in any detail, but points out some key issues in order to draw
conclusions as to the appropriateness of the ECMR as a device for the control of minority shareholdings. See also the
discussion by Ezrachi and Gilo, “EC Competition Law and the Regulation of Passive Investments among Competitors”
(2006) 26 Oxford Journal of Legal Studies 327.
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Minority Share Ownership and Interlocking Directorships 845
voting rights of EDIL, but held a permanent seat on the board as well as the right to appoint the chairman
and the CEO. The directors appointed by CCIE also had veto rights over all significant decisions.21 Veto
rights granted to a minority owner may also confer control in and of themselves.22 Such may also be the
case if the management of the company is assigned to one of the owners.23 On a de facto basis, MSOs may
establish sole control where the other shares are widely dispersed and the smaller shareholders do not
attend at the shareholders’ meeting.24 Financial arrangements may also be sufficient to exercise control
on a de facto basis. In KLM/Air UK a shareholding of 14.9 per cent was held to be sufficient, together
with a complex package of financial arrangements.25 The combination of several MSOs may entail joint
control, on either a de jure or a de facto basis.26
The test of “control” focuses on the possibility of exercising influence in the target company. That focus
is clearly appropriate with regard to some of the anti-competitive effects described above. It does not,
however, cover the possible negative effects stemming from information flowing back to the investing
company or alterations of its incentives.27 Consequently, the concept of control addresses only partly the
potentially negative effects stemming from the acquisition of minority shareholdings.
Substantive analysis
As explained above, the acquisition of a minority shareholding conferring sole or joint control may lead
to both unilateral and co-ordinated anti-competitive effects. The existence of minority shareholdings may,
however, also play a role in the substantive analysis of concentrations in a more indirect way, in that
pre-existing minority shareholdings in third parties may affect the substantive analysis of a separate
concentration under the ECMR. This is particularly the case in oligopolies, where the existence of structural
links between the undertakings in the form of cross-shareholdings, IDs etc. may increase the likelihood
of co-ordination.28 Pre-existing MSOs may thus reinforce the harmful effects of other transactions in the
market.
On several instances, the Commission has raised objections to a concentration because of MSOs in
third parties. For example, in Thyssen/Krupp, where Krupp held 10 per cent of the competitor KONE, the
concentration was cleared on the proviso that Krupp would commit to waiving its right to nominate one
member of the KONE board.29 In Allianz/AGF, the Commission was concerned about the minority
shareholding of Allianz in Coface (24.9 per cent).30 Further, there were to be additional structural links
between Allianz and AGF.31 The concentration was cleared pursuant to the proviso that the shareholding
would be reduced and that the members of the managing board of AGF would leave the management
board of Coface.32 A different situation arose in Allianz/Dresdner, where the concentration cumulated the
21
IV/M.258 CCIE/GTE (1992) at [8]. See J. Faull and A. Nikpay, The EC Law of Competition, 2nd edn (Oxford
University Press, 2007), para.5.44 for further examples, as well as the Jurisdictional Notice, paras 56–58.
22
See J. Cook and C. Kerse, EC Merger Control, 5th edn (2009), para.2-027, citing COMP/M.1920 Nabisco/United
Biscuit (2000).
23
Jurisdictional Notice, para.57, Cook and Kerse, EC Merger Control, 2009, para.2-029, citing COMP/M.4225
Celsa/Fundia (2006).
24
See Faull and Nikpay, The EC Law of Competition, 2007, para.5.43, Jurisdictional Notice, para.59.
25
IV/M.967 KLM/Air UK (1997).
26
See further on the concept, Jurisdictional Notice, paras 62–82.; Cook and Kerse, EC Merger Control, 2009, paras
2-031 to 2-035.; and Faull and Nikpay, The EC Law of Competition, 2007, paras 5.48–5.56.
27
See the sections on passive MSO investments and on interlocking directorships.
28
See A. Lindsay, The EC Merger Regulation: Substantive Issues (Sweet & Maxwell, 2006), Ch.8.13.
29
IV/M.1080 Thyssen/Krupp (1998) at [31] and [35].
30
IV/M.1082 Allianz/AGF (1998).
31
IV/M.1082 Allianz/AGF (1998) at [46]–[55].
32
Along the same lines, in Generali/INA Generali accepted commitments regarding shareholdings in other companies
as well as a pledge to remove extensive interlocking directorships (COMP/M.1712 (2000)); see in particular [68]–[70]
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846 European Law Review
parties’ indirect minority shareholdings in a third party (Münchener Rück), in a way which would likely
give the merged entity de facto sole control.33 Again, the transaction was cleared under the proviso that
the shareholding would be reduced.
Despite the recognition of harmful effects of MSOs in substantive merger analysis, the control of such
investments depends on the scrutiny of separate transactions. For that reason, the ECMR does not provide
a suitable tool for dealing with the acquisition of MSOs as a separate problem.
Remedies
In the Remedies Notice, divestiture of minority shareholdings in competitors is treated in a separate
section.34 The Commission states that,
“The divestiture of a minority shareholding in a joint venture may be necessary in order to sever a
structural link with a major competitor, or, similarly, the divestiture of a minority shareholding in a
competitor.”35
As demonstrated above, divestiture/reduction of minority shareholdings in competitors outside the
transaction itself have been offered as remedies and accepted by the Commission in a number of cases.
If a transaction has been completed, the Commission will normally order a full divestiture in order to
restore competition to the level that existed prior to the transaction.36 However, in certain cases the
Commission has allowed the parties to retain an MSO, even when it was opposed to a full merger.
Blokker/Toys R Us involved asset purchase, leases and franchise agreements, transferring control of Toys
R Us’ toy outlets in the Netherlands to Blokker.37 The operation was carried out through Blokker’s subsidiary
Speelhoorn, and had already been implemented. The parties accepted the following commitments under
art.8(4):
“Blokker undertakes not to retain a minority shareholding in Speelhoorn that exceeds 20%. Blokker
undertakes to transfer to Toys ‘R’ Us a minority shareholding corresponding to its own shareholding.
Blokker and Toys ‘R’ Us will both be entitled to a maximum of one seat on the board of Speelhoorn
which will comprise five members. Furthermore, Blokker and Toys ‘R’ Us will not be granted any
special rights beyond those typically provided to minority shareholders. Blokker undertakes that it
will not interfere with Speelhoorn’s freedom to determine independently its commercial policy.”38
and [74]–[76]). In Nordbanken/Postgirot (COMP/M.2567 (2001)), the Commission accepted an undertaking to reduce
Postgirot’s holding in Bankgirot (a competing payment system) “to no more than 10% and refrain from any shareholder
rights going beyond minority protection rights safeguarding the financial value of its stake” (at [59]). In the undertakings
submitted by Nordbanken, questions on exchange of information and board representation were addressed: “(i) the
Member and the alternate Member of the Board of Directors of Bankgirot nominated by Nordbanken resign from the
Board of Directors, (ii) Nordbanken and Postgirot representatives in the Bankgirot working groups or other fora resign
from them, and (iii) no commercial information available to the Board, the working groups and other Bankgirot fora
be made available to Nordbanken.” Other examples are case COMP/M.1453 AXA/GRE (1999) and COMP/M.1980
Volvo/Renault (2000).
33
COMP/M.2431 Allianz/Dresdner (2001).
34
Commission notice on remedies acceptable under Council Regulation 139/2004 and under Commission Regulation
802/2004 [2008] OJ C267/1.
35
Commission notice on remedies acceptable under Council Regulation 139/2004 and under Commission Regulation
802/2004 [2008] OJ C267/1 para.58.
36
See art.8(4) decision in case COMP/M.2416 Tetra Laval/Sidel (2005) at [31]–[39]. where the issue is discussed
at length (no minority shareholding permitted). The art.8(3) decisions in the case was later annulled; see Tetra Laval
v Commission (T-5/02) [2002] E.C.R. II-4381; [2002] 5 C.M.L.R. 28.
37
IV/M.890 Blokker/Toys R Us (1997).
38
IV/M.890 Blokker/Toys R Us (1997) at [123].
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Minority Share Ownership and Interlocking Directorships 847
Another example is offered by Schneider/Legrand.39 According to the art.8(4) decision, “Schneider and
the other minority shareholders should between them have less than 5% of Legrand’s capital and the
voting rights attached thereto”.40 Although Schneider was allowed to retain a maximum of 5 per cent, the
company would also be prohibited in the future from increasing its share, which effectively meant that
the Commission opposed any minority shareholdings above that ceiling—regardless of changes in control.
The reasoning of the Commission was based on a “modified HHI delta” theory, the use of which has been
heavily criticised.41
Orders of divestiture cannot extend to a pre-existing minority shareholding in the target company, unless
it is considered as a part of the concentration under scrutiny. A special situation arose in the Ryanair case.
Shortly after Aer Lingus had been listed, Ryanair launched a public bid, which was notified to the
Commission. Just before announcing its intention to bid, Ryanair acquired in total 29.3 per cent of Aer
Lingus’ shares by way of several transactions. The bid (being a hypothetical transaction) was prohibited
by decision under art.8(3) of the ECMR in June 2007.42 Aer Lingus complained, arguing that the
Commission should have ordered the divestiture of Ryanair’s minority shareholding. Although the
acquisition was regarded as a single concentration, the General Court found that this was outside the scope
of art.8(4) of the ECMR.43 Consequently, where a public bid is considered under the ECMR, and the
acquirer already has minority shareholdings, divestiture cannot be ordered as a remedy with regard to the
pre-existing minority shareholding if the public bid is prohibited before the transaction has been completed.
If the public bid has been completed, the Commission will in such a situation normally order a full
divestiture.
Assessment
Under the MR, acquisitions of MSO are only covered when a change of control is entailed. Consequently,
the potential anti-competitive effects stemming, for example, from passive investments and exchange of
information cannot be addressed under the ECMR. This deficit of the ECMR extends to active investments
falling short of the control threshold.
However, all effects described in the section on passive MSO investments above are relevant to the
substantive analysis under art.2 of the ECMR, typically where pre-existing minority shareholdings reinforce
the co-ordinated effects from a merger or takeover. Thirdly, the keeping or future acquisition of MSOs
may be regulated in the context of remedies. Although the ECMR thus partly deals with MSO, it does not
provide a coherent and comprehensive legal framework for these situations.
Article 101—Philip Morris
The Philip Morris doctrine
Article 101 applies to restrictive agreements and/or concerted practice between undertakings. This may
also comprise agreements on the sale and purchase of shares, indicating that the establishment of an MSO
may be challenged directly under art.101.
39
COMP/M.2283 Schneider/Legrand (January 30, 2002) at [24]–[31].
Article 8(4) decision in COMP/M.2283 Schneider/Legrand (2002).
41
See J. Temple-Lang: “Two important Merger regulation judgments: the implications of Schneider-Legrand and
Tetra Laval-Sidel” (2003) 28 E.L. Rev. 259, 269–271. The art.8(3) decision in the case was later annulled: see
Schneider v Commission (T-310/01) [2002] E.C.R. II-4071; [2003] 4 C.M.L.R. 17.
42
COMP/M.4439 Ryanair/Aer Lingus (2007), upheld by the General Court in Ryanair v Commission (T-342/07)
[2011] 4 C.M.L.R. 4.
43
Aer Lingus v Commission (T-411/07) [2011] 4 C.M.L.R. 5 at [57]–[66].
40
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This was the case in the Philip Morris case, which pre-dates the adoption of the ECMR.44 In that case,
Philip Morris acquired 30.8 per cent in Rothmans (from Rembrandt Group Ltd) but only 24.9 per cent of
the votes. The agreement was cleared (in the form of negative clearance), subject to commitments requiring
Philip Morris not to be represented on Rothmans’ board and a Chinese wall to be established in order to
prevent the transferral of sensitive information that might influence the strategic behaviour of Philip
Morris.45 The Court agreed with the Commission’s clearance.
The Court’s assessment rests on the following general statement:
“Although the acquisition by one company of an equity interest in a competitor does not in itself
constitute conduct restricting competition, such an acquisition may nevertheless serve as an instrument
for influencing the commercial conduct of the companies in question so as to restrict or distort
competition on the market on which they carry on business.”46
It follows that an acquisition of a minority shareholding will never in itself amount to a restriction of
competition. Such effect may only be established on the basis of an analysis of the concrete impact of the
transaction.47 The Court, then, goes on to address such particular circumstances. According to the Court,
acquisitions of minority shareholdings may be problematic under the following circumstances: MSO leads
to de facto or de jure control48; the agreement gives the acquiring firm the possibility of reinforcing its
position at a later time49; the agreement provides for or creates a structure likely to be used for commercial
co-operation between the undertakings50; the minority shareholding requires the firms to take into
consideration each other’s interests when determining their commercial policy.51
It is evident that the concerns under the first situation are addressed by the ECMR. Although there
might be a theoretical scope or need for the application of art.101 to transactions falling short of a Union
dimension, concerns relating to exercise of decisive influence over a competitor are addressed adequately
under the Regulation. The second situation—possibility of reinforcing the positions at a later point of
time—is also addressed under the MR, since options which are likely to be exercised may bring an
undertaking within the control of another.52 In any case, merger control competence will be triggered once
the option is exercised.
The concerns related to the last situations outlined above may be considered together; as both entail
future co-ordination falling short of exercise of control. In its judgment, the Court disposed of the third
concern by its finding that:
“The 1984 agreements do not contain any provisions regarding commercial cooperation or create a
structure likely to be used for such cooperation between Philip Morris and Rothmans International.”53
44
BAT/Reynolds v Commission (142 and 156/84) [1987] E.C.R. 4487.
BAT/Reynolds (142 and 156/84) [1987] E.C.R. 4487 at [46]. For a general treatment of the Philip Morris doctrine
see Caronna, “Article 81 as a Tool for Controlling Minority Cross Shareholdings between Competitors” (2004) 29
E.L. Rev. 485.
46
BAT/Reynolds (142 and 156/84) [1987] E.C.R. 4487 at [37].
47
The need for such case-by-case analysis is stressed by the Commission in BT/MCI: “As a general rule … Article
[101] (1) does not apply to agreements for the sale or purchase of shares as such. However, it might do so, given the
specific contractual and market contexts of each case, if the competitive behaviour of the parties is to be coordinated
or influenced.” Decision 579/94 [1994] OJ L 223/36 at [44].
48
BAT/Reynolds (142 and 156/84) [1987] E.C.R. 4487 at [38].
49
BAT/Reynolds (142 and 156/84) [1987] E.C.R. 4487 at [39] and [45].
50
BAT/Reynolds (142 and 156/84) [1987] E.C.R. 4487 at [38].
51
BAT/Reynolds (142 and 156/84) [1987] E.C.R. 4487 at [48].
52
Jurisdictional Notice, para.60; Cook and Kerse, EC Merger Control, 2009, para.2-018.
53
BAT/Reynolds (142 and 156/84) [1987] E.C.R. 4487 at [47].
45
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Minority Share Ownership and Interlocking Directorships 849
It added that “the companies have undertaken not to exchange information which might influence their
competitive behaviour”.54 This is important, because it demonstrates that not only commercial co-operation
explicitly provided for in the agreement may bring the transaction within art.101, but also that the creation
of a structure (e.g. in the form of board representation) bringing about exchange of sensitive information
may bring the transaction within the reach of art.101.
Finally, the Court considered whether the minority shareholding would require the parties to take each
other’s interests into consideration when determining their commercial policy. On this point, the Court
discusses both issues of control as well as incentives stemming from “passive” investments. First, the
Court refused the argument that Philip Morris would gain control over Rothmans. As regards the commercial
incentives of Philip Morris, it held that:
“Although Philip Morris, because of its share in the profits of Rothmans International, has an interest
in the success of that company, its first preoccupation must, according to the Commission, remain
that of increasing the market share and turnover of its own companies. Philip Morris thus retains a
considerable interest in limiting any increase in Rothmans International’ s market share by its own
industrial and commercial efforts … There is nothing in the evidence before the Court to invalidate
that assessment by the Commission.”55
It follows, indirectly, that the Court recognises the relevance of the effects stemming from “passive
investments”. Consequently, and depending on the circumstances, such effects may bring the acquisition
of an MSO within the scope of art.101.
This brief analysis demonstrates a number of points:
1.
2.
3.
4.
5.
a potential impact on market behaviour must be analysed on a case-by-case basis;
the Philip Morris doctrine in essence covers situations now regulated by the ECMR; but
anti-competitive effects stemming from passive investments falling short of control or
influence may be addressed by art.101;
board representation may give rise to competition law concerns under the doctrine, both as
a means of influencing behaviour below the threshold of control and by giving rise to
anti-competitive exchange of information;
Chinese walls may be considered necessary in order to avoid infringements.
Application of the doctrine
The most famous case where the Philip Morris doctrine was explicitly applied is perhaps Warner
Lambert/Gillette. In that case, Gillette acquired 22 per cent of the equity of its main competitor Eemland,
controlling the wet shaving brand Wilkinson. The transaction was mainly considered under the abuse
prohibition.56 However, the Commission also considered art.101, in particular with a view to a bundle of
commercial co-operation agreements. The Commission noted that:
“Even though in the circumstances of this case Gillette’s acquisition of an equity interest in Eemland
as such may not suffice for the finding of an infringement of Article 85 (1) it has to be noted that it
was accompanied by a number of agreements which have as their object or effect a restriction of
competition between Gillette and Eemland … These agreements must be assessed together and in
the context of the operation as a whole.”57
54
BAT/Reynolds (142 and 156/84) [1987] E.C.R. 4487 at [47].
BAT/Reynolds (142 and 156/84) [1987] E.C.R. 4487 at [50]–[51].
56
See further on the case in that context below.
57
Warner Lambert/Gillette Decision 252/93 [1993] OJ L 116/21 at [34].
55
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It follows that the Commission applied the alternative concerning commercial co-operation, that is,
circumstance 3 above. The future co-operation was analysed on its own merits, and was found to infringe
art.101.
In BT/MCI, British Telecom acquired a 20 per cent shareholding in MCI Communications Corp. The
Commission,
“assessed whether the presence of BT’s nominees to the board of MCI could give rise to coordination
of the competitive behaviour of the two companies, in particular given the access that BT will have
to MCI’s confidential information. In this respect, the IA [investment agreement] has been drafted
in such a way that BT does not have the possibility to seek to control or influence the company.”58
Olivetti/Digital concerned a co-operation agreement (inter alia involving licensing of technology), as well
as a share purchase agreement and a shareholders’ agreement. According to the latter two, Digital was to
acquire an 8 per cent shareholding in Olivetti and have the right to nominate one board representative.
The Commission considered the representation in light of the tasks allocated to the board, both with regard
to influence and exchange of information. In the case, the board had delegated all of its operative functions
to Olivetti’s chairman and general manager. It met only four times per year, to review financial matters,
and was not involved in the commercial management of the company. On this background, the Commission
concluded that “it is unlikely that Digital’s representation on Olivetti’s board of directors would have led
to a coordination of competitive behaviour or to an exchange of competitive information”.59
Phoenix/GlobalOne adds an interesting perspective, namely the relevance of specific legislation aimed
at preventing exchange of sensitive information.60 More precisely, the Commission took into account that
the parties would be bound by the prohibition on interlocks between competitors as laid down in Clayton
Act s.8.61 The transaction consisted of several agreements; the establishment of a joint venture between
France Télécom and Deutsche Telekom (Atlas),62 FT and DT each acquired an equity stake of approximately
10 per cent in the US based company Sprint, and Atlas and Sprint established the joint venture Phoenix.
The Commission considered the elements of the transaction (namely the creation of the Phoenix joint
venture, several contractual arrangements and the minority shareholdings in Sprint) separately. As regards
the minority shareholding:
“FT and DT have the right to elect directors to the Sprint board in proportion to their shareholding,
provided that each has the right to elect at least one director. Neither FT nor DT have access to
confidential, competitive information on Sprint’s activities in the EEA through their representation
on Sprint’s board. Nor may these representatives provide Sprint with confidential information that
FT or DT may have obtained from United States competitors through correspondent relationships.”63
In assessing the compatibility with art.101, the Commission,
“analysed whether the appointment of DT and FT representatives to Sprint’s board and subsequent
access to confidential business data could give rise to co-ordination of the competitive behaviour of
all three undertakings. The Commission found that
(i)
the investment agreement signed on 31 July 1995 does not afford DT and FT the possibility
of exercising a controlling influence over Sprint and
58
BT/MCI Decision 94/579 [1994] OJ L223/36 at [44].
Olivetti/Digital Decision 94/771 [1994] OJ L309/24 at [26].
60
Phoenix/GlobalOne Decision 96/547 [1996] OJ L239/57.
61
15 USC §19.
62
Cleared separately in Decision 546/96 [1996] OJ L239/23.
63
Decision 96/547 [1996] OJ L239/57 at [27].
59
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Minority Share Ownership and Interlocking Directorships 851
(ii)
United States corporate and antitrust laws are designed to prevent access to and misuse of
Sprint’s confidential information by DT and FT.
Sprint and DT, and Sprint and FT, respectively, set out an additional prohibition to misuse such
information in two investor confidentiality agreements signed on 31 January 1996.”64
In this context, DT and FT’s investment were regarded as outside the scope of art.101.
The Commission practice demonstrates that the Philip Morris doctrine may indeed serve as a tool for
dealing with acquisitions of minority shareholdings falling short of the control threshold. The cases
reviewed clearly demonstrate the need for a case-by-case analysis, where the size of the shareholding, the
right to nominate board members and the overall commercial relationship between the parties are important
factors.65 Further, it is necessary to consider the concrete scope and nature of the tasks allocated to the
board in order to assess potential anti-competitive impact.
Assessment of the doctrine
The Philip Morris doctrine recognises the economic effects set out above. It does, however, focus primarily
on active investments and more precisely on the ability to exercise decisive influence over a competitor.
These problems are dealt with under the ECMR as well as national merger control. However, for
shareholdings falling short of control, the doctrine does recognise both unilateral and co-ordinated effects
created by incentives on the basis of passive investments, as well as information exchange and influence
over a competitor. In accordance with the findings of economic theory, the Philip Morris doctrine adopts
a case-by-case analysis.
There seems to be general agreement that the current substantive test of a restriction of competition
under art.101 is suitable for handling the potential negative effects.66 However, the Philip Morris doctrine
seems too limited in scope to provide a fully satisfactory solution to the potential anti-competitive effects
stemming from minority shareholdings. First and foremost, this relates to the concept of an “undertaking”
and the concept of an “agreement/concerted practice”.
In most of the cases cited above, the minority shareholdings have been considered as parts of a bigger
transaction, involving the establishment of joint ventures and extending to commercial co-operation
agreements. In these cases, there is no doubt that the anti-competitive effects are caused by agreements
between undertakings. However, this may not always be the case; share purchase agreements are not
necessarily entered into between “undertakings”, nor are shareholders’ agreements. The mere holding of
shares would not in itself qualify as an economic activity, and would thus not suffice to characterise the
owner as an undertaking.67 If shares are acquired over a stock exchange, the identity of the seller may not
even be known. Consequently, an important obstacle to an effective application of art.101 to the acquisition
of a minority position is the requirement of an agreement between undertakings.68
64
Decision 96/547 [1996] OJ L239/57 at [51].
See Hawk and Huser, “‘Controlling’ the Shifting Sands: Minority Shareholdings under EEC Competition Law”
(1993–94) 17 Fordham Int’l L.J. 294, 304, stating that an acquisition of less than 25% would not trigger the Philip
Morris doctrine provided that there are no veto rights, no right to appoint board members, no post-closing co-operation
and barriers designed to minimise the risk of information sharing.
66
See, e.g. Caronna, “Article 81 as a Tool for Controlling Minority Cross Shareholdings between Competitors”
(2004) 29 E.L. Rev. 485, 494.
67
Although, under certain circumstances, physical persons holding shares have been regarded as undertakings; see,
e.g. Decision 76/743 Reuter/BASF [1976] OJ L254/40 and 79/86 Vaessen/Moris [1979] OJ L19/32. As well,
undertakings may be related through a physical person in such way that they are deemed to be within the same
economic entity; see HFB Holding v Commission (T-9/99) [2002] E.C.R. II-1487 at [52]–[53]. This does not, however,
depend on the person being regarded as an undertaking.
68
For a similar view, see Caronna, “Article 81 as a Tool for Controlling Minority Cross Shareholdings between
Competitors” (2004) 29 E.L. Rev. 485, 494–495.
65
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Furthermore, the agreement subject to art.101 would not necessarily have been entered into by the
undertakings between which the anti-competitive effects actually occur. There is no necessary relationship
between the undertakings between which the agreement is concluded (seller-buyer) and the undertakings
between which the competitive problem arises (buyer-competitor). The application of art.101 to one-off
transactions with third parties outside the horizontal or vertical relationship giving rise to the
anti-competitive effects is problematic from the perspective of legal certainty.69 Such application will
mean that a party to an ordinary agreement on the selling of shares will infringe art.101. Although the risk
of being fined must be regarded as negligible, the agreement will be rendered null and void according to
art.101(2).70 Consequently, the application of art.101 to “pure” share-purchase agreements with third
parties is problematic.
The idea of establishing a form of concerted practice by looking at the involvement of the undertakings
in the transaction of shares has been advanced.71 However, even if concertation between the purchaser
and the target company pertaining to the share acquisition may be established, such an approach would
not solve the problem in its entirety and would at the same time be coincidental with a view to the real
competitive problem.72 The concept of concerted practice may, however, prove to be a powerful tool for
controlling post-acquisition conduct, as will be shown below.
In this context, several shortcomings associated with the Philip Morris doctrine can be identified:
•
•
•
intervention is only possible against an agreement between undertakings;
the restrictive agreement is not necessarily entered into between the parties between which
the anti-competitive effects occur;
it may prove difficult to predict the effects of the acquisition.
The question is whether these shortcomings may be overcome by intervention ex post, i.e. after the minority
position has been established and regardless of how it was initially established. These aspects are considered
in a following section.
Article 102: Continental Can
In the pre-ECMR era, the potential application of art.102 to concentrations was established as early as in
1973. As the Court of Justice put it:
“Abuse may … occur if an undertaking in a dominant position strengthens such position in such a
way that the degree of dominance reached substantially fetters competition, i.e. that only undertakings
remain in the market whose behaviour depends on the dominant one.
…
69
Unless, of course, the third party is engaged in facilitating practices as in AC Treuhand v Commission (T-99/04)
[2008] E.C.R. II-1501; [2009] Bus. L.R. 677.
70
See Caronna, “Article 81 as a Tool for Controlling Minority Cross Shareholdings between Competitors” (2004)
29 E.L. Rev. 485, 495, arguing that this would amount to an illegitimate interference with third-party property rights,
and that it would impose on third parties the “sanction of an infringement”. It should be added that a divestiture order
from the Commission would not interfere directly with the interests of the contracting party.
71
See Caronna, “Article 81 as a Tool for Controlling Minority Cross Shareholdings between Competitors” (2004)
29 E.L. Rev. 485, fn.49.
72
Caronna, “Article 81 as a Tool for Controlling Minority Cross Shareholdings between Competitors” (2004) 29
E.L. Rev. 485, fn.49 concludes that “In the absence of any involvement in the agreement for the sale and purchase
of shares of the company whose shares are being acquired it is difficult to see how the requirement for ‘concertation’
might be fulfilled with a view to block the very acquisition of a minority stake”.
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Minority Share Ownership and Interlocking Directorships 853
[T]he strengthening of the position of an undertaking may be an abuse and prohibited under article
[102] of the Treaty, regardless of the means and procedure by which it is achieved, if it has the effects
mentioned above.”73
The alleged abuse in that case was the takeover by Continental Can through its European subsidiary
Europemballage of approximately 80 per cent of a competitor. This transaction would clearly satisfy the
control-threshold of the ECMR.74
Philip Morris confirmed that art.102 may apply to acquisitions even below the threshold of control.
The Court held:
“An abuse of such a position can only arise where the shareholding in question results in effective
control of the other company or at least in some influence on its commercial policy.”75
The Court referred to its assessment under art.101, where it had established that such control or influence
was not present.
The application of art.102 to acquisitions of MSOs may fill a gap left by art.101, as the former is not
dependent on the finding of an agreement between undertakings, something which represents one of the
shortcomings with the art.101 limb of the Philip Morris doctrine. The application of art.102 to situations
where the purchaser is dominant has the advantage that the focus is on the acquisition as such. It is not
necessary that the seller is an undertaking—he need not even be identified, as the acquisition may be seen
as a unilateral act attributable to the dominant company. The obvious drawback is that a dominant position
pre-acquisition will have to be established.
In Gillette, the Commission applied art.102 to a complex transaction including, i.a. the acquisition by
Gillette of 22 per cent of the equity of its main competitor (Eemland, controlling the brand Wilkinson),
including parts of the company’s debts as well as “important pre-emption and conversion rights and
options”.76 According to the Commission, “the structure of the wet-shaving market in the Community has
been changed by the creation of a link between Gillette and its leading competitor”.77 In light of the passage
from Philip Morris, cited above, the Commission pointed to the fact that its shareholding would “influence
the commercial conduct of Eemland”.78 In this regard, the Commission held that the acquisition of 22 per
cent could not “be disregarded simply because of the absence of voting rights and other usual shareholders’
rights or because of Gillette’s covenant not to exert or attempt to exert any influence over the Board or
any member of the Board of Eemland”.79 In the view of the Commission, Gillette’s position was “a matter
which the management of Eemland will be obliged to take into account”.
In essence, the reasoning under the art.102 limb of the Philip Morris doctrine is parallel to the reasoning
applied under art.101. The core issue is exercise of control or some degree of influence, and the Court of
Justice even says that an abuse “can only arise” under such circumstances.80 Consequently, active
investments involving single firm dominance are clearly a potential target for art.102, while it seems more
73
Europemballage and Continental Can v Commission (6/72) [1973] E.C.R. 215; [1973] C.M.L.R. 199 at [26]–[27].
Prior to the adoption of Regulation 4064/89, the Commission made extensive use of the Continental Can doctrine
in scrutinising mergers and acquisitions; see, e.g. Xth Report on Competition Policy (1980), points 150–157. The
doctrine has also been used to challenge takeovers before national courts; see Argyll Group Plc v Distillers Co Plc
1987 S.L.T. 514; [1986] 1 C.M.L.R. 764 CS (OH).
75
BAT/Reynolds (142 and 156/84) [1987] E.C.R. 4487 at [65].
76
Decision 93/252 [1993] OJ L116/21.
77
Decision 93/252 [1993] OJ L116/21 at [23].
78
Decision 93/252 [1993] OJ L116/21 at [24].
79
Decision 93/252 [1993] OJ L116/21 at [25].
80
BAT/Reynolds (142 and 156/84) [1987] E.C.R. 4487 at [65] (emphasis added).
74
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doubtful whether passive investments leading to unilateral effects may be covered. As regards IDs, it is
difficult to identify unilateral effects from IDs involving information exchange, cf. above.81
The picture is different when considering co-ordinated effects. Increased transparency due to information
exchange (IDs) might promote a collusive outcome and is therefore relevant to situations involving
collective dominance. The same is true for passive investments—as explained above, even passive MSO
may promote a collusive outcome. Philip Morris does not shed light on these aspects of art.102.
The issue of collective dominance remains among the more obscure topics of EU competition law. The
application of art.102 to joint dominance was explicitly confirmed in Italian Flatglas, and has been
developed in subsequent case law.82 In CEWAL, the Court gave the following definition:
“A dominant position may be held by two or more economic entities legally independent of each
other, provided that from an economic point of view they present themselves or act together on a
particular market as a collective entity.”83
The finding of a joint dominant position requires both an examination of the relationship between the
undertakings and an assessment of their market position.84 As regards the relationship between the
undertakings, “it must be ascertained whether economic links exist between the undertakings concerned”.85
Although the existence of such links cannot be regarded as a condition for the finding of collective
dominance, both economic and structural links may be decisive for the assessment of whether the
undertakings are capable of acting together as a collective entity.86 Clearly, structural links in the form of
interlocks may serve as an instrument for the co-ordination of behaviour, thus qualifying as such “economic
links” which may establish a collective dominant position.87 In Irish Sugar, collective dominance (in a
vertical setting) was established on the basis of a combination of equity holding, board representation and
the structure of policy-making of the companies and the communication process established to facilitate
it.88
As a collective dominant position may be based on structural links, for example in the form of MSOs,
the creation of additional links may be seen as an unlawful strengthening of that position. Furthermore,
81
However, there is a possibility that asymmetric information between a dominant undertaking and its smaller
competitors may enhance predatory behaviour. This is not discussed further here.
82
Società Italiana Vetro SpA v Commission (T-68/89) [1992] E.C.R. II-1403; [1992] 5 C.M.L.R. 302 at [358]. The
issue had been treated by the Court on several earlier occasions; see L. Ritter and W.D. Braun, European Competition
Law: A Practitioner’s Guide, 3rd edn (2004), p.409.
83
Compagnie Maritime Belge Transports SA v Commission (C-395 and 396/96 P) [2000] E.C.R. I-1365; [2000] 4
C.M.L.R. 1076 at [36]; and Piau v Commission (T-193/02) [2005] E.C.R. II-209; [2005] 5 C.M.L.R. 2 at [110]. There
have been certain nuances in the formulation of the criteria: compare, e.g., Almelo v NV Energiebedrijf Ijsselmij
(C-393/92) [1994] E.C.R. I-1477; [1994] 2 C.E.C. 281 at [42]. It is, however, outside the scope of this article to
discuss the criteria in detail.
84
See Compagnie Maritime Belge Transports (C-395 and 396/96 P) [2000] E.C.R. I-1365 at [41] and [42].
85
See Compagnie Maritime Belge Transports (C-395 and 396/96 P) [2000] E.C.R. I-1365 at [41] and [42].
86
See, e.g. Wouters (C-309/99) [2002] E.C.R. I-1577; [2002] 4 C.M.L.R. 27 at [114].
87
See the Opinion of A.G. Fennelly in Compagnie Maritime Belge Transports (C-395 and 396/96 P) [2000] E.C.R.
I-1365 at [28]: “It is not necessary to specify exhaustively or at all the nature of the relationships or economic links.
They might be the use of model conditions of supply drawn up by a common trade association … cross-shareholdings,
common directorships or even family links with economic consequences.” For an early treatment, see Opinion of
A.G. Mayras in Coöperatieve Vereniging “Suiker Unie” UA v Commission (40/73) [1975] E.C.R. 1663 at 2111;
[1976] 1 C.M.L.R. 295. Mayras mentions first “connexions of a permanent nature” like “subsidiaries, holding companies
and financial stakes”, and secondly “personal links (interlocking directorships)”. See also R. Whish, Competition
Law, 6th edn (Oxford University Press, 2008), p.560; F.E. Mezzanotte, “Tacit collusion as economic links in Article
82 EC revisited” (2009) 30 E.C.L.R. 137.
88
Decision 97/624 [1997] OJ L258/1 at [112], upheld in Irish Sugar Plc v Commission (T-228/97) [1999] E.C.R.
II-2969; [1999] 5 C.M.L.R. 1300.
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Minority Share Ownership and Interlocking Directorships 855
a collective dominant position may be strengthened if the acquisition of an MSO increases transparency
in the market. There is no requirement in art.102 that the abuse necessarily has to be exercised by all or
even some of the undertakings “sharing” a collective dominant position.89 For these reasons, art.102 may
apply to the creation of MSOs in the context of collective dominance, provided that there is already a
collective dominant position in the market.
The potential for application of art.102 to the situations discussed in this section is important, because
art.102—unlike the ECMR or national merger control regimes applicable below the control threshold—is
not limited to an ex ante assessment, in the sense that the provision also apply to existing shareholdings
established in the past.
Conclusion—intervention at the stage of acquisition
EU competition law does not address the question of establishment of minority shareholdings or specific
rights associated with such positions in a coherent way. Major shortcomings are associated with the ECMR
(requirement of control), art.101 (requirement of an agreement between undertakings) and art.102
(requirement of a pre-transaction dominant position). In addition, neither art.101 nor art.102 is adapted
to ex ante control of structural transactions. For these reasons, minority shareholdings, cross-shareholdings
and interlocking directorships have been allowed to develop in a wide range of markets. The following
sections will discuss the potential ex post application of arts 101 and 102 to such situations.
Intervention against post-acquisition conduct
As demonstrated above, the risk of the exchange of sensitive information constitutes one of the most
important competition concerns associated with minority shareholdings. In the context of the enforcement
gaps identified above, the question is whether there may be room for intervention against the exercise of
the rights in cases where the acquisition for some reason is out of reach of competition law (e.g. where a
minority shareholding is acquired from large number of persons). In particular, the question is whether
art.101 or art.102 may prevent the flow of information through a board member and in case, whether
remedies in the form of discontinuing the representation might be applicable.
Article 101 TFEU
In this section, we focus on board representation, first the appointment of board members, secondly the
direct application of art.101 to information exchange made possible by the representation.
It may be useful to relate the reasoning in this section to Figure 1, where A is the minority shareholder,
B is the other shareholder or shareholders, and where C is A’s competitor.
89
See Irish Sugar (T-228/97) [1999] E.C.R. II-2969 at [66]: “[U]ndertakings occupying a joint dominant position
may engage in joint or individual abusive conduct. It is enough for that abusive conduct to relate to the exploitation
of the joint dominant position which the undertakings hold in the market.”
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856 European Law Review
As regards the appointment or nomination of a board member, this constitutes a unilateral act on the
part of the appointing company. When the general assembly nominates the board members, the mere
decision of the assembly can hardly be said to constitute an agreement or concerted practice between A
and C above, or between A and B. However, if a right to nominate board members has been conferred by
a shareholders’ agreement, that agreement may be covered by art.101 according to the Philip Morris
doctrine, as set out above, provided that both A and B are undertakings.
A separate issue is whether A’s representation in the board of C may lead to the establishment of a
concerted practice between A and C. As explained above, unilateral or co-ordinated effects between A
and C as competitors may follow from disclosure of sensitive information, or by A exercising influence
on decisions of the board.
The focus here is exchange of information. Such information may either flow from the board to A by
way of the board representative (if the board representative belongs to A’s senior management one will
not distinguish between A and the board representative), or the other way around, if A’s representative
discloses information on A to the board. Such an exchange of information must be assessed in light of the
basic principles governing the concept of a concerted practice under art.101 in the relationship between
A and C.
In Suiker Unie, the Court of Justice held that art.101 does,
“strictly preclude any direct or indirect contact between such operators, the object or effect whereof
is either to influence the conduct on the market of an actual or potential competitor or to disclose to
such a competitor the course of conduct which they themselves have decided to adopt or contemplate
adopting on the market.”90
As regards exchange of information, it is clear that art.101 is infringed once the information has been
exchanged, provided that the information is of a certain nature. In Hüls, the Court held that,
“the presumption must be that the undertakings taking part in the concerted action and remaining
active on the market take account of the information exchanged with their competitors for the purposes
of determining their conduct on that market. That is all the more true where the undertakings concert
together on a regular basis over a long period.”91
90
Suiker Unie (40/73) [1975] E.C.R. 1663 at [174] (emphasis added).
Hüls AG v Commission (C-199/92 P) [1999] E.C.R. I-4287; [1999] 5 C.M.L.R. 1016 at [162]; and T-Mobile
Netherlands BV (C-8/08) [2009] E.C.R. I-4529; [2009] 5 C.M.L.R. 11 at [58]–[59].
91
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It follows that, where the information exchanged is capable of influencing competitive behaviour, it is
not necessary to demonstrate an actual negative impact on competition. Although the presumption is
stronger where information is exchanged regularly over a long period of time, exchange of sensitive
information on single occasions may also fall within the scope of art.101 TFEU.92 The point here is that
art.101 prohibits the contact as such between competitors, as long as this contact may have an
anti-competitive impact. The nature of the contact is not relevant.93
It could, however, be argued that, whenever an undertaking obtains sensitive information from other
undertakings by way of a board member, the situation lacks the “mental consensus” or “meeting of minds”
element of concerted practice.94 Such argument may be advanced on at least two grounds. First, the contact
is established by a unilateral act—the appointment of the board member—and consequently a joint
understanding between two separate undertakings has not been established. Secondly, members of the
board form part of one of the corporate bodies of the company, and must as such be regarded as “internal”
for the purposes of receiving information.
It is true that the concept of a concerted practice presupposes the existence of reciprocal contact between
undertakings. However, it is settled that even passive recipients of information may be regarded as taking
part in a concerted practice.95 Disclosure of sensitive information is caught as a concerted practice even
if the information only flows in one direction, that is, from one competitor to another.96
Indeed, the representation on the board amounts to a direct and close contact between undertakings.
Undertakings connected by minority or cross-shareholdings are treated as separate undertakings. For the
purposes of art.101 TFEU, undertakings are either regarded as independent undertakings, or they are
undertakings within the same economic entity. There is no intermediate form which may justify preferential
treatment of information exchange through interlocks. The existence of minority shareholdings does not
bring the undertakings concerned within the same economic entity. It is submitted that the scope of art.101
should not be more limited as between interrelated or interlocked undertakings, and consequently that the
acquisition of an MSO cannot shield the exchange or disclosure of sensitive information from art.101
TFEU.
Another argument would be that board representation constitutes nothing more than exercise of statutory
rights conferred under company law. However, it is settled case law that it may amount to an infringement
to make use of rights conferred by national legislation, because the existence of such rights will not provide
a shield under the state compulsion doctrine.97 The undertakings are not compelled to be represented at
the board, and art.101 would thus prevail in any case.
Therefore the conclusion is that exchange of sensitive information by way of board members constitutes
unlawful concerted practice, provided that the information is of such nature that it may influence competitive
behaviour in the market.98 This means that competition authorities may use art.101 to intervene against
92
See T-Mobile Netherlands BV (C-8/08) [2009] E.C.R. I-4529 at [61].
See Opinion of A.G. Darmon in A. Ahlström Osakeyhtiö v Commission (Woodpulp) (C-89/85) [1993] E.C.R.
I-1307; [1993] 4 C.M.L.R. 407 at [170].
94
This element of a concerted practice is particularly visible in Imperial Chemical Industries Ltd v Commission
(48/69) [1972] E.C.R. 619; [1972] C.M.L.R. 557 at [64].
95
Hüls (C-199/92 P) [1999] E.C.R. I-4287; Cimenteries CBR v Commission (T-25/95) [2000] E.C.R. II-491; [2005]
5 C.M.L.R. 204 at [1849].
96
See also O. Odudu, The Boundaries of EC Competition Law (Oxford: 2006), p.86: “All that would then seem to
be required to evidence a concerted practice is the disclosure of information by a single market participant; there need
be no commitment as to how such information will be used by the recipient.”
97
Commission and France v Ladbroke Racing Ltd (C-359 and 379/95 P) [1997] E.C.R. I-6265; [1998] 4 C.M.L.R.
27 at [33–[35], and more specifically Irish Sugar (T-228/97) [1999] E.C.R. II-2969 at [131].
98
See also Ritter and Braun, European Competition Law, 2004, p.109 (using co-ordination of market conduct
through common board members as an example of concerted practice) and p.700 stating that information exchange
93
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anti-competitive exchange of information established by minority shareholdings.99 As pointed out above,
exchange of information constitutes a major concern associated with minority shareholdings, in addition
to the potential of influencing the competitive behaviour of the partially owned company. Although art.101
seems to fail to establish a satisfactory tool for the elimination of the minority shareholding in the first
place, it thus provides a useful tool for the ex post control of the exercise of minority rights.
Article 102 TFEU
This section examines the potential use of art.102 to post-acquisition conduct. Two issues are considered:
whether the mere appointment of persons to positions like board membership may amount to an abuse
and whether the creation of artificial transparency (information sharing) may do so. Particular issues on
market conduct which may arise in the context of collective dominance—e.g. pricing or unilateral practices
facilitating tacit co-ordination—will not be treated further, as they are not specific to situations involving
MSOs.
The first question is whether the unilateral appointment of board members or positions in the management
may be considered an abuse of that position, for example because it creates additional “links” between
companies holding a joint dominant position. It is, however, highly doubtful whether the exercise of rights
to appoint board members, or persons to other positions, would be regarded as an independent abuse of
dominant position. First, it is clear that not any measure which strengthens a dominant position will amount
to an abuse. Secondly, appointment of directors or board members cannot prima facie be regarded as an
act having anti-competitive object or effect. Although it will not exclude a finding of abuse that the
undertaking is making use of a right under national company law or in the bye-laws of a company,
appointments to the board etc. are legitimate, unilateral acts associated with proper management and
administration of investments. For those reasons, the idea of challenging the appointment of directors or
board members as independent abusive behaviour is not treated further. If the MSO gives rise to sharing
of information or influence over a competitor, it seems more appropriate to challenge the acquisition/holding
of the MSO as abusive behaviour.
Secondly, the question is whether information sharing in the context of board representation may
constitute an independent abuse of dominant position. As discussed above, artificial transparency may
bolster oligopolistic interdependence and may thus be regarded as a practice strengthening a collective
dominant position. For the same reasons as pointed out above in the context of art.101 TFEU, the creation
of such transparency may restrict competition. There are no good reasons why such information exchange
should not potentially be classified as an abuse. Again, however, the most appropriate course of action
seems to be to challenge the MSO as such, instead of classifying the subsequent acquisition of information
as abusive.
As explained above, if unilateral effects are considered, it is difficult to determine whether information
exchange has an anti- or a pro-competitive effect. It implies that under art.102 it is more relevant to consider
by way of board representation is “contrary to the ‘requirement of economic independence’ recognized by the Court
of Justice in Sugar”.
99
This is in line with the position under US law. As explained by the FTC in Perpetual Fed. Sav. & Loan Ass’n 90
F.T.C. 606, 621–622: “The director interlock between competitors may lead to trade restraints in violation of Section
1 of the Sherman Act. The relationship creates a means by which per se illegal agreements between competitors may
be reached involving price fixing and division of markets. Furthermore, the relationship creates an incentive for such
illegal agreements because the joint director is now interested in increasing the profits of both firms and one way to
do that is to eliminate competition between them. Even if competition is not reduced by formal agreement, such an
interlock will surely increase the exchange of competitive information between the interlocked competitors.” (Citing
United States v Container Corp. of America 393 U.S. 333 (1969.)
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Minority Share Ownership and Interlocking Directorships 859
the possible anti-competitive effects of information exchange under collective dominance than to consider
it under single-dominance situations.
Conclusion—post-acquisition conduct
This section has demonstrated that there is a potential to apply art.101 directly to information exchange
brought about by an MSO or ID. Case law starting from the seminal Suiker Unie judgment demonstrates
that any exchange of sensitive information—even by way of board representatives—constitutes an
infringement of that provision. Further, there is a potential of application of art.102 to the same situations,
primarily in markets involving collective dominance.
Remedies
The discussion has demonstrated that the problem of MSOs is both structural and behavioural, which is
in turn reflected in the nature of relevant remedies. The relevant legal basis is art.7 of Regulation 1100
(cease-and-desist orders), or commitment decisions under art.9. Under art.7, the remedy may be both
structural and behavioural in nature, but must be limited to what is necessary to bring an infringement to
an end. The potential scope of the remedy is wider in commitment decisions under art.9, because such
decision does not presuppose the finding of an infringement, and because the proportionality test is less
strict.101 The tendency in the decisional practice of the Commission is that commitment decisions are
designed to prevent anti-competitive effects in the future.
As regards the acquisition of MSOs, the consequence of the Philip Morris doctrine is that the agreement
on the purchase of shares will be contrary to art.101. In order to remove the anti-competitive effects, the
Commission may order the divestiture of the MSO. This is so even though the agreement has been executed;
it is settled that the powers of the Commission extend to the elimination of persistent anti-competitive
effects of an agreement.102 If an acquisition of an MSO constitutes an abuse of dominant position under
the Continental Can doctrine, the Commission may also order divestiture. Finally, agreements running
foul of the Philip Morris doctrine are null and void according to art.101(2).
As regards post-acquisition conduct, the question of remedies is less clear-cut. Under art.7, the
Commission may order exchange of information to be discontinued (and as the case may be, to impose a
fine). However behavioural remedies such as Chinese walls, etc., are less efficient than divestiture of the
MSO. Such remedy would, according to the principle of proportionality, not be available under art.7 unless
the acquisition of the MSO itself is contrary to arts 101 or 102. Furthermore, it is doubtful whether the
Commission may prohibit future board representation under art.7, because neither art.101 nor art.102
prevent board representation as such. However, where no realistic Chinese walls have been implemented,
discontinuing the representation (or restricting the disclosure of information) might, as a matter of fact,
prove to be the only way in which compliance can be ensured. In such cases, it is submitted that a negotiated
remedy in the form of a commitment decision to divest or to refrain from representation is the most
appropriate.
Overall conclusion
In this article, we have discussed the economic effects of minority share interests in competitors. Further,
we have confronted the anti-competitive effects we can derive from economic models with the potential
100
Regulation 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the
Treaty [2003] OJ L1/1.
101
See most recently Commission v Alrosa (C-441/07 P) [2010] 5 C.M.L.R. 11.
102
UFEX v Commission (C-119/97 P) [1999] E.C.R. I-1341; [2000] 4 C.M.L.R. 268 at [94]–[95].
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860 European Law Review
scope for intervention under the current Treaty provisions and the ECMR. It is argued that even passive
investment through minority share ownership (MSO) is expected to lead to unilateral anti-competitive
effects. In particular, we have shown that passive MSO investments, by controlling shareholders, can be
more anti-competitive than if the firm itself invests in its competitor. We have also shown that an active
MSO investment can be more anti-competitive than a full-scale merger. In some cases, in particular where
a small firm acquires shares in a large firm, MSO may have anti-competitive, co-ordinated effects.
Furthermore, interlocking directorships (ID) may have anti-competitive effects due to exchange of
information. However, one should be concerned about such effects mainly when there is a potential for
a collusive outcome (co-ordinated effects) or foreclosure (vertical relations).
The discussion has revealed both weaknesses and opportunities with regard to competition law
intervention against MSOs and ID. Currently, EU competition law struggles with a “dormant” Philip
Morris doctrine, which upon closer examination does not seem well suited for a coherent treatment of
MSOs. The main drawbacks relate to the establishment of an agreement/concerted practice as well as the
concept of an undertaking. On the other hand, the scope for intervention against subsequent conduct, and
in particular sharing of information, is little developed in case law. On this point, art.101 TFEU should
be enforced more vigorously. Further, the introduction of art.9 would most likely facilitate effective
remedies in the form of divestiture.
Furthermore, a company may abuse its dominant position by acquiring even minority shareholdings in
competitors. The application of the art.102 part of the Philip Morris doctrine offers advantages as compared
to art.101 TFEU, as it is not required to establish that the acquisition is based on an agreement between
undertakings. The drawback is that art.102 TFEU requires a finding of dominance pre-acquisition. However,
the use of art.102 TFEU may be particularly useful in cases involving collective dominance.
The ECMR addresses issues pertaining to MSOs only partly and incoherently. However, the discussion
has revealed that MSOs do not solely raise problems of a structural nature. An efficient enforcement of
arts 101 and 102 TFEU along with structural remedies would seem to be a more fruitful way of dealing
with competitive problems rather than, for example, the establishment of a system of notification and a
“merger style” approach to the phenomenon.
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