Luxembourg set to introduce ex ante merger control regime
In a significant development, Luxembourg is on the verge of enacting a new ex ante merger control regime that will require mandatory notification of corporate concentrations meeting specified turnover thresholds, along with a standstill obligation. Draft Bill No. 8296 has been submitted to the Luxembourg parliament and is expected to be adopted in the coming weeks. However, the entry into force of the law is mandated to occur four months after its publication in the Luxembourg official journal, allowing businesses time to adjust to the new obligations. It is important to note that the law will not have retroactive effect and will not apply to mergers or joint ventures that have already been agreed, announced or completed before the law enters into force. It should be pointed out that the current version of the Bill is still subject to possible amendments during the legislative process.
The new legislation grants the Luxembourg Competition Authority pre-emptive powers to assess corporate concentrations for their impact on competition in Luxembourg. The new regime mirrors EU Regulation No. 139/2004 on the control of concentrations between undertakings, with certain exclusions and special cases. For further information on the implications of these developments, please contact your usual Baker McKenzie representative.
Thresholds and Exemptions
Transactions falling within the scope of the EU Merger Regulation are exempted from the new ex ante merger control regime, with a few exceptions. The legislation includes specific exclusions for internal restructurings and acquisitions by specific financial entities, with certain activities falling outside the scope of mandatory notification. The Bill also outlines a procedure for urgent rescue or reorganization of credit and investment institutions, where the authority may consult with other Luxembourg authorities. The law targets mergers, acquisitions or joint ventures that involve a lasting change in control, necessitating notification to the Luxembourg Competition Authority if set thresholds are met.
Notification Requirements and Procedure Overview
Under the current Bill, entities involved in mergers or joint ventures are required to notify the Luxembourg Competition Authority once they are able to present a sufficiently accomplished project, with pre-notification discussions encouraged for clarity. Notification results in a mandatory standstill of the transaction, which can only be resumed and completed after the authority has authorized the transaction. The authority adopts a phase I review process, followed by a phase II examination for transactions with a potential substantial hindrance to effective competition, with the potential for sanctions if non-compliance occurs.
Market Analysis, Authority’s Powers, and Sanctions
The Luxembourg Competition Authority will have the power to determine relevant markets on a case-by-case basis, without limiting its assessment to the national effects of the concentration. Furthermore, the authority will be entitled to employ extensive investigative powers under Luxembourg competition law and impose penalties, including fines of up to 10% of the total worldwide turnover of the companies. The Bill also provides for potential dissolution of a concentration in case of non-compliance with the law.