April 14, 2023
In the French market for terrestrial television broadcasting, where only three companies were active, TDF Infrastructure Holding S.A.S (“TDF”) acquired control of Itas S.A.S. (“Itas”) on 13 October 2016. The acquisition was below the merger control thresholds set out by the EU Merger Regulation (nr. 139/2004) (“EUMR”) and the French merger control law (Article L. 430‑2 of the Commercial Code). It was therefore not subject to ex ante control by the Commission or the French Competition Authority (“FCA”), nor was a referral made to the Commission under Article 22 of the Merger Regulation.
The third company in the market was Towercast S.A.S.U. (“Towercast”). Prior to the acquisition, TDF already had by far the largest market share and Towercast lodged a complaint with the FCA alleging that the acquisition constituted abuse of a dominant position by TDF contrary to Article 102 TFEU. Towercast relied inter alia on the Continental Can (6/72) case law, which pre-dated the adoption of merger control regulations in the EU. In that case, the CJEU held that where a dominant undertaking strengthens its position through concentration in such a way that the degree of dominance reached substantially fetters competition, it constitutes an abuse of dominance pursuant to Article 102 TFEU.
In its decision of 16 January 2020, the FCA accepted that TDF held a dominant position but rejected the complaint that they had abused their position. The competition authority held that concentrations within the scope of the Merger Regulation are exclusively and solely governed by the Merger Regulation and hence the Continental Can case law is obsolete. Following the appeal of the FCA’s decision by Towercast, the Paris Court of Appeal referred that question to the CJEU for a preliminary ruling.
So far national competition authorities (“NCA”) have adopted diverging views in relation to whether Article 102 TFEU could be applied to below threshold concentrations. As mentioned above, the FCA rejected that proposition, but others have applied Article 102 TFEU in this context:
It is notable that Belgium has notoriously high thresholds (meaning that many transactions escape the BCA’s review) whereas Luxembourg still hasn’t enacted merger control rules. This context may explain their more activist approach in the application of Article 102 TFEU. Nevertheless, both invoked the direct applicability of EU primary law and primacy over national competition rules, which has now been confirmed by the CJEU.
In its judgment of 16 March 2023 (Case C-449/21, Towercast), the CJEU clarified that a concentration which has not been the subject of ex ante merger control, either at EU or at national level, can still be subject to ex post control under Article 102 TFEU by a NCA or national court, applying national procedural rules, and be found to constitute an abuse of a dominant position.
The CJEU judgment clarifies the scope of application of Article 102 TFEU and sets the following conditions for a transaction to infringe it:
The threshold to bring a successful abuse of dominance case will remain high. Conditions for finding an abuse are much more stringent than the ‘significant impediment on effective competition’ test used in most national ex ante merger control reviews. It is likely the only mergers to be caught will be “2 to 1” or “3 to 2” mergers, or so-called “killer acquisitions” of innovative start-ups by established undertakings, for example in the fields of internet services, pharmaceuticals or medical technology.
Even so, the judgment creates significant legal uncertainty for dominant companies:
A few days after the CJEU’s blessing, the BCA opened an investigation into a possible abuse of dominance in relation to the acquisition by Proximus—the Belgian telecommunication incumbent operator—of its rival Edpnet. Following this transaction, Proximus remained the only market player for the wholesale and retail supply of fixed telecoms services on its own network. A spokesperson for the BCA commented that it could order Proximus to unwind its acquisition (a position that will still need to be tested in court).
Overall, however, the scope of application remains limited, especially considering that NCAs have the opportunity to refer cases (even after closing) to the EC for its review pursuant to the Article 22 upward referral mechanisms. Nevertheless, dominant companies—including relatively small companies active in niche markets or companies active in more “classic” sectors not primarily targeted by the EC’s change of policy on referral—should carefully assess the risk of abuse of a dominant position. This risk will need to be factored into transaction documents, such as with the type of remedies to be offered if the transaction is contested. To mitigate the chances of enforcement post-closing, dominant companies may want to seek comfort from relevant NCAs. Even then, as the Towercast case shows, dominant companies may not be safe from a complaint by a third party in front of a NCA or court.
 See e.g., Article L.462-7 of the French Commercial Code providing for a five year limitation period.
 Case T-827/14, Deutsche Telekom v Commission, EU:T:2018:930.
 Opinion of Advocate General Kokott, Case C-440/21, Towercast, EU:C:2022:777, para. 60.
 Case C-440/21, Towercast, EU:C:2023:207, para. 44.