Merger control in acquisitions: ACM notification duty subject to a penalty

We have addressed this issue in an earlier newsletter already: acquisitions, mergers of two or more independent companies and the establishment of a full-fledged joint venture are subject to merger control by the Netherlands Authority for Consumers and Markets (ACM). In sum, all these situations involve a lasting change of control. The Competition Act provides that the intention to form a concentration must be notified to the ACM. This is not required in all situations, but it is if two conditions are met:

      1. the merging companies have a combined annual worldwide turnover of EUR 150 million or more; and
      2. at least two of the merging companies each have an annual turnover of EUR 30 million or more in the Netherlands.

A transaction that is subject to merger control may not be implemented until the ACM’s approval is obtained. Although the rules are fairly clear, they are subject to some interpretation in practice. It is not always clear, for instance, whether an undertaking is involved: the merger may also relate to a dependent part of an undertaking. Another question is whether a fully-fledged joint venture is involved or “merely” cooperation between undertakings. In practice, the notification is sometimes also simply forgotten. It recently became apparent that this can give rise to substantial fines.

On 11 May 2022, the ACM imposed a €1.85 million fine on Modulaire (ACM/21/167867). Modulaire operates in the Netherlands in the rental and sale of modular construction and storage units. In 2019, Algeco, a subsidiary of Modulaire, acquired its competitor BUKO without first seeking the ACM’s approval. Although the ACM was notified after the acquisition had taken place in 2021, it ruled that this constituted violation of the Competition Act, since the objective of the Competition Act is preventive merger control. The ACM must be able to assess before the acquisition, the merger or the setting up of the joint venture whether the proposed transaction will not lead to a disruption of the market structure. Timely notification before the proposed transaction therefore remains necessary if the turnover thresholds referred to above are met.

Do you have any questions about this subject? Please contact Lusine Shahbazyan (+316 128 715 76) or Helger Kamerman (+316 510 801 97).

This article was published in the Newsletter Vestius of June 2022