Merger Controls First Edition - J Sagar Associates

Cadwalader, Wickersham & Taft LLP European Union
Prysmian/Draka provoked controversy due to speculation that a rival bid for Draka by the Chinese firm Xinmao may
have been at least partly funded by the Chinese state. Even though Xinmao was prepared to pay substantially more for
Draka than Prysmian, it appeared to run out of time and ultimately withdrew its bid.
Commissioner Almunia has made clear that if State support is granted for the purposes of making acquisitions, then the
appropriate tools to address this issue are the EU state aid rules or WTO anti-subsidy instruments. In case of doubt, the
Commission can be expected to examine the ultimate ownership of third country acquirers, but it will do so to determine
the consequences of any state influence in the context of a traditional competition law analysis.
A number of recent acquisitions by Chinese state-owned companies triggered an analysis of whether the acquirer operated
independently of the state, and whether there was scope for the state to coordinate the behaviour of other state-owned
companies in the sectors concerned. If their behaviour were coordinated, then the state-owned companies would be viewed
as belonging to one economic entity, and their combined size on affected markets would be taken into account. The
question was ultimately left open since, even if the market shares of all Chinese state-owned firms in the sectors concerned
were taken together, the Commission concluded that the transactions would not materially change the competitive structure
of the markets concerned. In 2011 a string of mergers involving companies owned by the Chinese state were cleared
without conditions by the Commission: M.6082 China National Bluestar/Elkem; M.6113 DSM/Sinochem/JV; M.6151
Petrochina/Ineos/JV; and M.6111 Huaneng/OTPPB/Intergen.
The Merger Regulation allows Member States to intervene in transactions to which it applies to a very limited extent: they
can take appropriate measures to protect “legitimate interests” which are limited to public security, plurality of the media
and prudential rules. Any other “public interest” has to be approved by the Commission following a submission by a
Member State. At the EU level, there is no equivalent to CFIUS (Committee on Foreign Investments in the United States)
that conducts a separate review of the national security implications of foreign investments in US companies or operations.
Reform proposals
Since taking office in early 2010, Commissioner Almunia has not brought forward any concrete legislative proposals to
amend the Merger Regulation or its Implementing Regulation. There have also been no new merger control guidance
notices.
Global Legal Insights ­ Merger Control First Edition
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