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Why the introduction of a new transaction-value jurisdictional threshold for the EUMR has been postponed, at least for now

Image Credit: geralt via Pixabay.

Martin Gassler

28th June 2019

On 4 April 2019, the Commission published the long-awaited report with the title “Competition policy for the digital area” (‘Report’) written by the three special advisers to the European Commission (‘Commission’), Heike Schweitzer, Jacques Crémer and Yves-Alexandre de Montjoye.1  The Report discusses how competition policy should evolve in order to tackle the challenges faced by the digital economy. One aspect the Report touches upon is the jurisdictional scope of the EU Merger Regulation (‘EUMR’) 2.3  The current jurisdictional scope of the EUMR is solely based on turnovers.4  The Report forms part of a long-lasting discussion about the need for an additional transaction value-based threshold to catch transactions in the digital economy. The Report advises the Commission not to introduce such a threshold in the EUMR.

The perceived enforcement gap

The idea of a transaction value-based threshold is to catch those transactions that currently fall outside the jurisdictional scope of the EUMR because the start-up (the target company) does not generate sufficient revenue to exceed at least the EUR 25 million threshold.5  A start-up in the digital economy typically offers its services for free in the early stage of its existence in order to attract customers and thus generate network externalities. Once the platform has gained a sufficiently large customer base, it can monetise its services through advertising.6  If the start-up is bought by an incumbent, the concern has been raised that this may eliminate a significant potential competitor.7

However, only those transactions that currently fall outside the jurisdictional scope of the EUMR raise competitive concern where the revenue of the target differs disproportionately from the transaction price. The argument is that in such situations the revenue does not reflect the competitive market potential of the target.8  When Facebook bought WhatsApp for USD 19 billion in 2014, the transaction escaped the jurisdictional scope of the EUMR because WhatsApp achieved a turnover of less than EUR 10 million. Obviously, the revenue generated by WhatsApp was not a good proxy for the competitive market potential of WhatsApp with its 600 million users. However, the transaction was still reviewed by the Commission9  because of the pre-referral request by Facebook, since the concertation would have been notified in three member states.10

What has happened so far on a policy level

Following the Facebook/WhatsApp decision, the Commission quickly identified the enforcement gap. In March 2016, Commissioner Vestager said in a speech that “by looking only at turnover, we might be missing some important deals we ought to review”.11 Although Commissioner Vestager did not make the case for a change of rules,12  the speech clearly indicated the reflective stage of the Commission. Shortly afterwards, in October 2016, the Commission officially launched a public consultation on the effectiveness of the turnover-based jurisdictional thresholds of the EUMR. The aim was to test the public acceptance of a potentially new transaction value threshold. A summary of the replies was published a year later, in July 2017.13  The results were sobering for the Commission’s Expansionism.14  Only a small minority supported the idea of a transaction value threshold. The vast majority of private and public stakeholders was sceptical that such threshold was needed.15

In parallel to the discussions at the EU level, discussions also took place at a national level, particularly in Germany. Already in 2015, the German Monopoly Commission published a paper in which it proposed to amend German and EU merger control rules and introduce an additional transaction value jurisdictional test.16 Subsequently, Germany did introduce such a test (with effect of June 2017);17  so did Austria shortly afterwards (with effect of November 2017).18  The novelty of some of the elements of this new test – particularly the notion of the ‘value of consideration’ and local nexus test – created uncertainty among practitioners.19  However, the German Federal Cartel Office and the Austrian Federal Competition Authority responded with the publication of a Joint Guidance in July 2018, which has clarified many of those issues.20

One would think that these national developments laid the foundation for a subsequent expansion at EU level. After all, one of the common themes in the recent conference about “Shaping competition policy in the era of digitisation” that was organized by the Commission21  was the perceived issue of ‘killer acquisitions’ by tech giants.22  However, despite these national developments the Report advises the Commission not to pursue the introduction of such new threshold (yet).23

The main arguments against the transaction value threshold

One of the main concerns raised by stakeholders in the public consultation was that a transaction value threshold would create disproportionate and unnecessary administrative burden for firms and the Commission. This would entail chilling effects on innovation and investment, because start-ups would then spend too much time assessing jurisdictional aspects.24 However, the number of additional filings notified in Austria under the new test is quite manageable. Within the first year, less than 15 filings (out of over 400 filings in total) were notified to the Austrian Federal Competition Authority based on the new test.25 This is less than 5% of all filings notified in Austria. Interestingly, those transactions did not just relate to the digital economy, but also to the healthcare, pharmaceutical, and real estate sectors.26

Similarly, critics also argue that a new transaction value threshold would create legal uncertainty. It would introduce radically new concepts in a well-established system of turnover-based jurisdictional system.27 However, such criticism has become less pronounced since the publication of the Joint Guidance. Although the Joint Guidance does not clarify every aspect of the new test in Austria and Germany,28  its guidance over 32 pages is still quite detailed.29 The Austrian experience so far is that most of the questions related to the issue of whether the transaction has ‘substantial domestic effects’ (local nexus test), and less to the question of the ‘value of transaction’.30

The main argument of the Report against the introduction of a transaction value threshold in the EUMR is that the current referral system works sufficiently effectively, particularly since Austria and Germany have introduced such test.31  Under Art 4(5) EUMR pre-notification referral requests are possible if the concertation is notifiable in at least three other member states. However, the referral system is meant as an exception to the primary delineation between national and EU merger control regimes based on turnovers.32  Its primary rationale is not the indirect expansion of the jurisdiction of the Commission. The system of referrals is also complex and administratively burdensome.33  The argument of the Report also partly relies on those national merger control regimes that are based on market share thresholds (such as Spain as shown by Facebook/WhatsApp).34 The problem with market share thresholds is that it requires an analysis of the relevant markets. However, defining the relevant markets in the digital economy, which typically concern two-sided markets, is not just difficult but also a bit artificial.35  Thus, the referral regime might actually reduce legal certainty with the notification of those types of transactions that a transaction value-based threshold would aim to catch.

Has the introduction merely been postponed? (Probably!)

One could argue that the Report does not explicitly reject the introduction of a new transaction value-based threshold as such; it merely rejects the immediate introduction. It advises the Commission to wait and assess (i) the experience gathered in Austria and Germany with the new transaction value test and (ii) the workability of the current referral system. This seems to suggest that the Report has an ‘evaluation roadmap’ in mind. One source of inspiration could be Section 43a of the German Act Against Restraints of Competition which states that the Federal Ministry for Economic Affairs and Energy has to evaluate the new (German) transaction value test after three years of its enactment. This would be in June 2020. Although Austria lacks such explicit legal provision in its Cartel Act, the Director General of the Austrian Federal Competition Authority has already announced a similar evaluation.36

Thus, the discussion at EU level might get more serious once those evaluations are published sometime in late 2020. Before that date though, it is unlikely that the Commission will actively pursue the expansion of the EUMR. The Commission may wait for the right ‘momentum’ to get the political support needed for the legislative change because, as shown by the public consultation, stakeholders are mostly opposed to its introduction.

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Martin Gassler is an aspiring competition lawyer based in Austria. He has obtained a postgraduate degree from the University of Oxford (M.Jur.) and is currently writing his doctoral thesis in competition law at the University of Vienna. The views expressed herein are those of the author. 


1. Available here (accessed on 26 April 2019).

2. Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings, OJ 2004 L 24/1.

3. The other ‘pending‘ jurisdictional issue is about the expansion of the EUMR to non-controlling minority shareholdings (see e.g. Werner P, Clerckx S and de la Barre H (2018), “Commission Expansionism in EU Merger Control – Fact and Fiction”, Journal of European Competition Law & Practice Vol 9(3), pp 133-145, at pp 136-138).

4. See Art 1(2) and 1(3) EUMR (the ‘Community dimension’ of a concertation).

5. See Art 1(3)(c) EUMR.

6. See Ocello E, Sjödin C and Subočs A (2015), “What's Up with Merger Control in the Digital Sector? Lessons from the Facebook/WhatsApp EU merger case”, Competition merger brief 1/2015, pp 1-7, at p 2 and Jin F (2019), “The challenges of applying turnover threshold to the sharing economy for control of concentrations between undertakings in China”, Computer Law & Security Review Vol 35, pp 59-68, at pp 62 and 67

7. See Report, supra 1, at pp 110-111.

 8. See Eckhard T, Hartl A and Ruech S (2019), “Digitisation, Transaction Value Thresholds in Merger Control and Associated Challenges”, Österreichische Zeitschrift für Kartellrecht Vol 12, pp 3-8, at p 4.

9. See Commission decision of 3 October 2014, Case COMP/M.7217, Facebook/WhatsApp.

10. It would have been notified to three member states (United Kingdom, Spain and Cyprus) and thus fulfilled the conditions set out in Art 4(5) EUMR. See Ocello, Sjödin and Subočs (2015), supra 6, at pp 1-3 for a case discussion.

11. See Commissioner Vestager, “Refining the EU merger control system”, speech at a conference of the Studienvereinigung Kartellrecht in Brussels, 10 March 2016, available here (accessed on 26 April 2019).

12. Ibid, under the section notification thresholds: “So at this stage, I don't believe this issue calls for a change to the rules. But to be sure we can intervene where it matters, we also need to know that our rules can cope with new ways of doing business.”

13. See Commission (2017), “Summary of replies to the Public Consultation on Evaluation of procedural and jurisdictional aspects of EU merger control”, July 2017, available here (accessed on 26 April 2019).

14. For this expression see Werner, Clerkx and de la Barre (2018), supra 3.

15. See Commission (2017), supra 13, at pp 4-7.

16. See Monopolkommission (2015), “Sondergutachten 68, Wettbewerbspolitik: Herausforderungen digitale Märkte”, June 2015, available here (accessed on 26 April 2019).

17. See Section 35(1a) of the Act Against Restraints of Competition (GWB), as amended by the 9th Amendment to the Act against Restraints of Competition. For a comment on this new test and its context see e.g. Scholl J (2017), “Why the New Merger Control Thresholds in Germany?”, Journal of European Competition Law & Practice Vol 8(4), pp 219-220.

18. See Section 9(4) of the Cartel Act (KartG), as amended by the KaWeRÄG 2017. For a comment on this new test and its context see e.g. Harsdorf N (2017), “Digital Economy: New Test in Austrian Merger Control”, Journal of European Competition Law & Practice Vol 8(7), pp 421-422 or Matousek P, Weiss V and Gassler M (2017), “Zusammenschlusskontrolle – Neuer Transaktionswerttest”, ecolex 2017, pp 388-392.

19. See e.g. Kühnert H (2018), “Joint Guidance on Transaction-Value Thresholds”, European Competition and Regulatory Law Review 3/2018, pp 216-220, at p 216 or Hauck D (2018), “Austrian Competition Law Reform and the Value of a Merger in the Digital World”, Journal of European Competition Law & Practice Vol 9(5), pp 323-327.

20. See Guidance on Transaction Value Thresholds for Mandatory Pre-merger Notification (Section 35 (1a) GWB and Section 9 (4) KartG), July 2018, English version available here (accessed on 26 April 2019). The Joint Guidance is discussed e.g. by Kühnert (2018), supra 19 or Feldner J and Cavada L (2018), “Der Leitfaden zur Transaktionswert-Schwelle”, Österreichische Zeitschrift für Kartellrecht Vol 11, pp 174-179. It was even awarded as the best soft law in 2019 (see the press release by the Austrian Federal Competition Authority available here (accessed on 26 April 2019)).

21. Conference was held on 17 January 2019 in Brussels, contributions available here (accessed on 26 April 2019).

22. See Murray G (2019), “European Commission conference on ‘Shaping competition policy in an era of digitisation’: 5 key points and practical implications”, Kluwer Competition Law Blog, 24 January 2019, available here (accessed on 26 April 2019).

23. See Report, supra 1, at pp 113-116.

24. See summary of replies, supra 13, at p 6.

25. To be exact, 13 filings from 1 November 2017 to end of September 2018 (see Eckhard, Hartl and Ruech (2019), supra 8, at p 5).

26. Ibid.

27. See summary of replies, supra 13, at pp 6-7.

28. See e.g. Kühnert (2018), supra 19.

29. See e.g. Feldner and Cavada (2018), supra 20 or Saumermann M (2018), “New merger control guidelines for transaction value thresholds in Austria and Germany”, Competition Policy International, July 2018, pp 1-5.

30. See Eckhard, Hartl and Ruech (2019), supra 8, at p 5.

31. See Report, supra 1, at p 115. See also Werner, Clerckx and de la Barre (2018), supra 3, at p 139.

32. See Bengtsson C, Maria Carpi Badia J and Kadar M (2014), “Chapter 5: Mergers“ in Faull N and Nikpay A (eds), The EU Law of Competition 3rd ed, Oxford: Oxford University Press.

33. This concern has been raised by the Commission when the referral request was implemented into the EUMR (see Green Paper on the Review of Council Regulation (EEC) No 4064/89, COM/2001/0745 final, para 96).

34. Noted by the Report, supra 1, at p 115.

35. See Jin (2019), supra 6, at pp 63-66 who is very sceptical about using market share thresholds for the digital economy.

36. See Eckhard, Hartl and Ruech (2019), supra 8, at p 5.