The Towercast Case — Abuse of Dominance in Acquisitions that Do Not Trigger Notification Obligations

Authors: Philip Thorell and Sarah Ek 

Through the recent Towercast decision, the European Court of Justice has held that the EU Merger Control Regulation does not preclude national competition authorities from finding that a transaction constitutes an abuse of a dominant position, even when the transaction in question falls below merger notification thresholds and has not been referred to the European Commission under Article 22 of the EU Merger Control Regulation.

1. Summary

• National competition authorities may find that an acquisition of another company amounts to an abuse of dominance, as set out in Article 102 TFEU or national law, even when the transaction in question falls below merger notification thresholds.
• Such a transaction may constitute an abuse of dominance, for example if a dominant company acquires a competitor in a concentrated market.
• In light of this decision and alongside other recent developments in merger control, companies will have to adopt a more forward-thinking approach for transactions, bearing in mind that considerations beyond notification thresholds might trigger scrutiny by authorities.

2. Background

In 2016, a provider of digital terrestrial television (“DTT”) broadcasting services in France, Télédiffusion de France (“TDF”), acquired its competitor Itas SAS ("Itas"). The transaction did not exceed national or EU notification thresholds, nor did it give rise to a procedure for referral to the Commission under Article 22 the EU Merger Control Regulation (the “EUMR”).

Following the transaction, the market was left with only two service providers, TDF and Towercast S.A.S.U. ("Towercast"). In 2017, Towercast lodged a complaint with the French Competition Authority alleging that the acquisition constituted an abuse of dominance through hindering competition on the upstream and downstream wholesale markets for DTT broadcasting by significantly strengthening the dominant position of TDF.

After national proceedings, the Court of Appeal in Paris decided to stay the proceedings and request a preliminary ruling by the European Court of Justice (the “ECJ”).

3.The Question Before the Court

The question referred to the ECJ was whether the EUMR is to be interpreted as precluding a national competition authority from regarding a transaction that does not trigger notification thresholds and has not been referred to the European Commission under Article 22 of the EUMR as constituting an abuse of a dominant position under Article 102 of the Treaty on the Functioning of the European Union (“TFEU”).

4. Findings of the Court

The EJC established already in Continental Can from 1973 that a dominant company could abuse its market position by impeding competition through acquisition of other companies. However, it has been a common notion that the Continental Can doctrine has been superseded by the introduction of merger control rules in EUMR and national law in almost all member states.

In Towercast, the ECJ confirms that the Continental Can doctrine still applies, i.e. the fact that a dominant company’s acquisition of another company falls below the EUMR and national thresholds does not preclude that the acquisition can amount to an abuse of a dominant position.

The mere finding that a company strengthens its dominant position on a market by acquiring a rival is not sufficient for a finding of an abuse. The post-acquisition degree of dominance must be such that it substantially impedes competition on the market in question.

5. Consequences for Merger Control Moving Forward

While the ECJ’s answer to the referred question might, to some, seem quite radical, the scope of transactions which could possibly trigger similar considerations is likely to be quite small as the ECJ sets a high bar for finding an acquisition abusive.

However, the Belgian Competition Authority issued a press release on the 22 March 2023 announcing the opening of an investigation into a possible abuse of dominance relating to a recent acquisition in the market of broadband communications services. The acquisition was not subject to prior notification and authorisation under national competition law. In their press release, the Belgian Competition Authority specifically refers to the Towercast decision noting that the ECJ has unambiguously confirmed the competence of national competition authorities to analyse ex post non-notifiable concentrations under merger control on the basis of Article 102 TFEU.

Seen within the context of other recent developments, such as the Illumina/Grail case, the Towercast decision is another steppingstone in the ongoing shift towards more stringent merger control. From a business perspective, investigations of transactions that fall below notifications thresholds reduces predictability for transactions, both in terms of transaction timelines, but also bearing in mind the risk that transactions may be investigated by competition authorities even after the transaction has been completed. Companies will have to adopt a more forward-thinking approach for future transactions given that considerations beyond notification thresholds might trigger scrutiny by competition authorities.

6. Further Reading

For more information on recent competition law and regulatory developments that may affect future transactions, please see:

• Trends Towards Stricter Merger Control — The Towercast Decision as the Latest Turn of Events (Available in Finnish)
• The Proposed Swedish FDI Regime – What You Should Know