On 23 August 2023, the Luxembourg Minister of the Economy proposed a legislative bill (n°8296) for the future merger control regime in Luxembourg (the “Bill”). Luxembourg is the last EU Member State to put such a national merger control regime in place. The proposed regime is to a large extent modelled on existing merger control regimes such as those in France, and Belgium, as well as that applied by the European Commission. It provides for a prior notification process and screening procedure for concentrations involving companies with an annual turnover exceeding certain thresholds. At the same time, the Bill comprises rules that are specific to Luxembourg, in the light of the country’s economic, financial and industrial context.
The regime will require the Luxembourg competition authority (l’Autorité de la concurrence) to be notified in advance of mergers, acquisitions or the creation of joint ventures that do not fall within the remit of EU Regulation 139/2004 on the control of concentrations between undertakings, and if
- the undertakings involved in the concentration have a combined total turnover generated in Luxembourg of more than EUR 60 million; and
- at least two of the companies involved in the concentration have an individual total turnover generated in Luxembourg of more than EUR 15 million.
The Minister believes that these thresholds will give rise to some ten notifications each year. However, he reserves the right to review the thresholds at the latest three years after the entry into force of the legislation if they prove unsuitable for the Luxembourg market.
A simplified notification procedure will be available, subject to certain conditions, in cases that are unlikely to raise competition issues.
A two-phase screening process
The proposed control by the Autorité de la concurrence will potentially involve two separate phases, but the second phase will only apply in the case of operations that present significant competition risks.
In phase I, all notified mergers will be analysed in order to determine whether the intended transaction would threaten competition (for example by creating a dominant position within the market). The authority will render its decision within 25 working days, i.e. will authorise the operation or, if doubts remain, will initiate Phase II. In this context, the relevant market (product-related and geographic) will be defined on a case-by-case basis depending on the facts of the case, and in accordance with the principles established by the European Commission and relevant case law.
Phase II will concern only transactions likely to result in a significant impediment to effective competition. By way of comparison: this represents less than 4% of the transactions notified to the European Commission. In this phase, the Luxembourg competition authority has 90 working days to arrive at a decision. It can either approve the transaction – with or without imposing conditions – or prohibit it.
Specific rules tailored to Luxembourg’s financial and insurance sector
The Bill provides for a derogation procedure for concentrations involving at least one entity as specified in Article 2(1) of the Law of 18 December 2015 on the failure of credit institutions and certain investment firms, or an insurance or reinsurance undertaking as defined in the Law of 7 December 2015 on the insurance sector. If – as part of an early intervention, recovery or resolution measure, or certain other emergency situations – a concentration would be required, the CSSF or the CAA can release the competition authority from its jurisdiction and powers in terms of merger control in this context.
Furthermore, special rules apply to calculation of the turnover of financial institutions as well as insurance and reinsurance undertakings. Subject to certain conditions, temporary ownership of participations that financial institutions and insurance undertakings have acquired in an undertaking with a view to their resale will not fall within the definition of a 'concentration'.
Exclusion of acquisitions by investment funds and securitisation vehicles
Acquisitions by investment funds, securitisation vehicles or funds, or pension funds are explicitly excluded from the remit of the new law, unless such acquisitions are risk-capital investments.
Supervision and enforcement in Luxembourg
The Luxembourg competition authority (l’Autorité de la concurrence) has been designated as the competent control authority.
The Bill will empower the competition authority to carry out controls at its own initiative if it considers that a particular concentration operation that falls below the annual turnover thresholds could still significantly affect competition on the Luxembourg market or a part thereof.
Finally, the Bill envisages granting the Luxembourg government power to invoke certain matters for reasons of public interest even after a decision has already been rendered by the competition authority. Such reasons of public interest may concern industrial, economic or financial development, the competitiveness of the undertakings involved with regard to international competition, or job creation. In such cases, the government will be required to adopt a decision within 35 working days after the competition authority has rendered its decision.
The regime introduced by the Bill will not have retroactive effect. Consequently, it will not apply to transactions that have already been agreed/published or carried out before it enters into force. The Bill currently provides that the law will only enter into force four months after its official publication, which should give undertakings time to adapt to the new obligations.
The Bill may still be amended in the course of the legislative process, so stay tuned for further developments.
Feel free to reach out to our Competition & Corporate Law team if you have any questions.