The year 2022 brought a number of fundamental changes regarding the application of competition legislation. In addition to the revision of the Vertical Block Exemption Regulation (VBER), which applies to most business entities, the entry into force of Digital Markets Act (DMA) and a Digital Services Act (DSA), as well as establishing new powers of the Competition Council, in accordance with national legislation.[1]

In the context of the Competition Council’s application of both European and national legislation, we expect 2023 to be even more dynamic, making it much more difficult for companies to comply with competition rules and the foreign investment regime.

Extension of the rules regarding standard contracts no poaching in the labor market

At the beginning of last year, the Competition Council launched the first investigation into the specialized/skilled labor market into the possible sharing of labor (through standard agreements no poaching) and establishing the minimum level of rights to remuneration.[2] The national body is not the only one active in this field, as a number of investigations are ongoing in the USA, Great Britain, France, Hungary, Lithuania, Poland or Portugal. The Member States’ initiatives are in line with the European Commission’s new policy, announced in Commissioner Vestager’s speech on October 22, 2021, regarding the “new era” of the application of competition rules in the field of cartels.[3]

We expect the Competition Council’s interest in this type of breach to continue to grow in 2023, forcing companies to devote significant resources to identifying potential problems that already exist, updating recruitment or employment policies and minimizing the risks associated with previous problematic behavior . It is worth noting that anyone can report a possible violation anonymously on the Whistleblower Platform of the Competition Council. Last but not least, potential risks in this aspect will also affect due diligence in M&A transactions, including in the process rating companies.

A paradigm shift: applying Article 22 EUMR to non-notifiable transactions at national level

To everyone’s surprise, the European Commission announced in 2021 a paradigm shift with significant consequences in the area of ​​economic concentration analysis.[4] In short, Article 22 of the European Merger Regulation[5] allows the Commission to review transactions[6] which do not meet the national notification thresholds of the EU Member State. Such a referral requires the fulfillment of only two rather vaguely formulated legal requirements – the economic concentration in question must (1) affect trade between member states; and (2) threaten to significantly affect competition in the territory of the transferring Member State or Member States.

The new political justification of this instrument is to allow, on the one hand, the verification of the so-called killer acquisitions, that is, deals in which companies eliminate potential competitors by buying them, often with the goal of shutting down the acquired target companies without continuing to sell their products. An example is FitBit’s acquisition of Vector Watch. On the other hand, it is also desirable to analyze other transactions that pose risks to intra-EU trade that cannot be analyzed according to the national regime of a particular Member State because they do not meet the national notification thresholds.

Furthermore, Article 22 applies to all economic sectors, but it will significantly affect already sensitive sectors in terms of competition rules: pharmaceutical (it is recommended to pay attention to license agreements) or digital (innovative startups that benefit from few barriers to entry).

What is important is that the new interpretation allows for an examination ex post transactions. In other words, even if the transaction is completed (Closed) from a contractual point of view in or outside the EU, a Member State may initiate such notification within 15 days from the moment it became aware of the transaction.[7] Far from a theoretical possibility, Article 22 has already been invoked in this case Illumina/Grail regarding an acquisition between two American companies. In this case, following a request from several Member States, the Commission opened an investigation jumping from a cannon (implementation of the transaction before receiving approval) – recently, in July 2022, the General Court confirmed the power of the Commission to consider the transaction.

Updating the rules on determining the relevant market

One of the most anticipated events this year is the entry into force of the new rules for determining the relevant market in the form of a new Commission notice.[8] The concept of the relevant market is one of the most important aspects of competition law used to identify the competitive constraints faced by companies. In this sense, the way to define the relevant market is decisive, for example, when establishing the presence of a cartel-type anti-competitive act or when analyzing M&A deals that may cause competition problems.

The new rules are designed to respond to changes in the digital environment, due to competition that manifests itself outside of price fixing (for example, when products or services are offered for free), the relevance of potential competition, or in specific situations such as digital ecosystems (for example , Apple products and services), after-sales service, etc.

In a context in which the Competition Council has already paid increased attention to the digital environment in recent years, having carried out a wide-ranging study in the online trade sector (in four sectors of general economic interest, namely: online delivery intermediation services; online accommodation intermediation) . services, online marketing services of travel packages and online advertising services), as well as in the context of the application of the P2B Regulation[9]new rules on determining the relevant market will increase the degree of complexity of investigations / examinations of economic concentration in these sectors.

New rules for checking investments and controlling foreign subsidies

At this time, a new mode of verification of foreign investments is in effect[10] (designed to implement European regulations in this field) is no longer a novelty for companies present in Romania. However, there is still uncertainty about the scope of reportable transactions, as the concept is much broader than in the case of economic concentration – for example, even expansion of production capacity, commercial chains or a fundamental change in the production process are considered reportable. , to the extent that the investment is supported by an investor from outside the EU. In addition, the current regulation has created a legal vacuum for European investments, which creates uncertainty regarding notification and non-compliance obligations. We expect that this vacuum will be settled by the bill that is currently being discussed in the Chamber of Deputies.[11]

Regarding the content of the analysis, although at the national level there have not yet been situations of rejection of the request for permission, the experience of other states shows concern about foreign investment from countries such as China[12] or Russia (especially companies or individuals under international sanctions), with an advantage in the technology sector. This concern also comes against the background of the semiconductor supply crisis that Europe already faces in 2020.[13]

At the same time, the interest shown in the regulation of foreign investments is not limited to the verification of investors. In particular, on January 12, 2023, a new European regulation on subsidies granted by non-EU countries in the context of mergers and acquisitions, public procurement or other situations came into force, applicable to agreements from July 12, 2023.[14] This new angle of analysis has a role to play in combating possible distortions of competition in the domestic market due to foreign subsidies, allowing the European Commission to open ex officio investigations. Read the whole article and comment on Contributors.ro