The Competitive Effects of Minority Shareholdings: Legal and Economic Issues

by Panagiotis Fotis, Nikolaos Zevgolis

Overview

The objective of this book is twofold. First, it presents the economics of minority shareholdings, under both merger and antitrust law. In particular, economic analysis provides both an overall assessment of minority shareholdings in the context of concentrations, and Articles 101 and 102 TFEU and the examination of the link between non-controlling minority shareholdings, merger control and antitrust law.

Second, the book also provides a legal assessment and an analysis of selected case law. According to settled European case law, minority shareholdings are analysed not only under Regulation 139/2004, but also under Articles 101 and 102 TFEU. Nevertheless, according to current enforcement practice at European and international levels, several national competition authorities have adopted different approaches. The million dollar question is whether the existing regulatory framework is sufficient to cover all possible cases.

In summary, the book will be a useful tool for students, practitioners, researchers, economic and legal experts and competition authorities. It provides a comprehensive survey of the subject, which has been missing until now and answers many questions that have been raised in the literature in the last decades.

Product Details

ISBN-13:	9781849465342
Publisher:	Bloomsbury Academic
Publication date:	04/07/2016
Series:	Hart Studies in Competition Law , #13
Pages:	400
Product dimensions:	6.69(w) x 9.61(h) x 0.88(d)

About the Author

Panagiotis Fotis and Nikolaos Zevgolis are both Commissioners of the Hellenic Competition Commission.

Table of Contents

List of Tables v

List of Figures xvii

Table of Cases xix

Table of Legislation xxvii

1 The Evolution of Merger Control Regime in EU and Minority Interests 1

I Current State of EU Merger Control and Provisions for the Future 1

A Regulation (EEC) 4064/89 as the Starting Point 1

B Reform Under Regulation 139/2004 3

C Substantive Evaluation 4

i Assessment Under the SIEC Test 4

ii The Significance of Quantitative and Qualitative Evidence 6

iii Indicative Example 7

D Theories of Harm and Investigation by the Commission in Horizontal, Vertical and Conglomerate Mergers 7

E Efficiencies (Static and Dynamic) and Innovation 8

i UPS/TNT Express as an Example for the Significance of Efficiencies 9

F Merger Control During the Financial and Economic Crisis 10

i COMP/M.6360 Nynas/Harburg Case as an Example 11

G Remedies in Case of Competition Concerns 11

i The Example of COMP/M.5658 Unilever/Sara Lee 12

H The Acceptable Risk of Complex Remedies 12

I Forecast: Promoting the Level Playing Field, Cooperation and Convergence 13

II Minority Interests in the Merger Control Regime: A Retrospective View to the Future 16

A Commission's Green Paper 16

B Commissions Tender Offer COMP/2011/029 on 27 October 2011 17

C Commission Staff Working Document 'Towards More Effective EU Merger Control' 17

2 Concepts and Types of Minority Interests 20

I Useful Preliminaries Regarding Minority Interests 20

A Theoretical Approach 20

B Financial Issues 21

II Minority Shareholdings 22

A The Concept of Minority Shareholdings 22

B The Nature of Minority Shareholdings 23

i Active and Passive Minority Shareholdings 23

ii Horizontal, Vertical and Conglomerate Minority Shareholdings 24

iii Direct and Indirect Minority Shareholdings 25

C Other Forms of Minority Interests 29

i Interlocking Directorships 29

ii Shareholdings with Access to Crucial Information 30

D Minority Interests in Mixed Oligopoly Markets 31

i The Concept of Mixed Oligopoly Markets 31

ii Public Firms as the Usual 'Victims' 31

E Domestic versus Foreign Minority Interests 33

i Useful Definitions and Principles 33

ii Examples 33

F Other Financial Forms of Minority Interests 34

i General Remarks 34

ii Loans 34

iii Derivatives 35

iv The Commission's Approach 35

III Final Remarks 36

3 Minority Interests Under Merger and Antitrust Law 37

I Minority Interests Under Merger Law 37

A The Treatment of Minority Interests Under the Scope of the EU Merger Regulation 38

B The Treatment of Minority Interests across Member States 43

i Germany 43

ii UK 45

iii Austria 47

iv Lithuania 48

v Other Member States 49

C The Treatment of Minority Shareholdings Around the World 54

i Ecuador 55

ii EI Salvador 56

iii Egypt 57

iv Brazil 57

v India 58

vi Japan 60

vii Korea 62

viii Taiwan 66

ix Israel 67

x South Africa 67

xi Indonesia 68

xii Norway 70

xiii Russian Federation 70

xiv Chinese Taipei 71

xv Ukraine 72

xvi Canada 73

xvii Republic of Armenia 75

xviii Hong Kong 75

xix Australia 76

xx Argentina 76

xxi Namibia, Nigeria, Swaziland, Zambia and New Zealand 77

xxii Chile 77

D The Treatment of Minority Shareholdings in the US 80

II Minority Shareholdings in the Context of Articles 101 and 102 TFEU 84

A Are Articles 101 and 102 TFEU Suitable for Dealing Effectively with Anticompetitive Minority Shareholdings? General Remarks 87

B The Link Between Minority Interests and Antitrust Rules 89

i There Exists an Agreement which by Object or Effect Restricts the Effective Competition and Violates Article 101 TFEU 89

ii The Establishment of Coordinated Effects which Enhance the Coordinated Behaviour of the Competitors and Violates Article 101 TFEU 90

iii The Abuse of a Pre-existing Dominant Position either by the Acquiring or the Target Firm which Violates Article 102 TFEU 93

C Interlocking Directorships as Facilitator of Tacit or Explicit Collusion 94

D The Differences Between Ex Ante and Ex Post Analyses in the Context of Minority Shareholdings 95

4 The Economics of Minority Interests 97

I Theoretical Literature Review of Minority Shareholdings 97

A Horizontal Unilateral Effects 97

B Coordinated Effects 98

C Non-Horizontal Unilateral Effects 99

D Entry Effects 100

E Arguments in Favour of Minority Interests 100

II Unilateral Effects of Minority Shareholdings 101

A Horizontal Unilateral Effects 101

B Vertical Unilateral Effects 120

i Controlling Partially Vertical Minority Interests 122

ii Non-Controlling Partially Vertical Minority Interests 124

C Coordinated Effects of Minority Shareholdings 127

D Entry Effects of Minority Shareholdings 135

5 Case Law Regarding Minority Interests 137

I Merger Case Law Regarding Minority Shareholdings 137

A Active and Pre-Existing Minority Shareholdings Under the Scope of the EC Merger Regulation 137

i Active Minority Shareholdings 138

ii Cases Involving Veto Rights 146

iii Pre-Existing Minority Shareholdings 149

iv Other Pre-Existing Minority Shareholdings Except for the Ryanair/Aer Lingus Case 165

B Treatment of Minority Shareholdings Across Member States 193

i UK 193

ii Germany 206

iii Austria 214

iv Lithuania 216

v Further Evidence 216

vi The Zephyr Database 221

C Cases Regarding Minority Shareholdings Around the World 225

i Japan 225

ii Korea 226

iii Indonesia 228

iv Brazil 228

v Israel 229

vi South Africa 230

vii Chile 231

viii Canada 232

D Cases Regarding Minority Shareholdings in the US 233

i Univision Communications Inc/Hispanic Broadcasting Corp (2003) 237

ii United States v Dairy Farmers of America (2006) 237

iii Kinder Morgan, Inc/Carlyle Group/Riverstone Holdings LLC (2007) 238

II Antitrust and Abuse of Dominant Position Case Law Regarding Minority Shareholdings 240

A Selected Cases of Minority Shareholdings Under the Scope of Antitrust and Abuse of Dominant Position Law in the EU 240

i The Treatment of Minority Shareholdings Under Article 101 TFEU 240

ii The Treatment of Minority Shareholdings Under Article 102 TFEU 253

iii A Comparison Between the Judgments in Philip Morris and Gillette 255

B Application of Council Regulation 1/2003 Regarding Profit-Sharing Joint Ventures in the Air Transport Sector 255

i COMP/39.595 Continental/United/Lufthansa/ Air Canada 256

ii COMP/39.596 BA/AA/IB 258

6 Greek Coastal Navigation Case 260

I Greek Coastal Navigation Sector: The Facts 260

A The Basic Merits of the Case 260

i Introductory Remarks 260

ii Crucial Announcements by the Firms Involved 261

B The Companies Involved 262

i Sea Star Capital plc 262

ii ANEK 263

iii Hellenic Seaways plc 264

C Definition of Relevant Markets (Product and Geographic) 264

D Economic Assessment 265

i Market Size 265

ii Market Shares on Domestic Routes 268

iii Market Shares in Foreign Routes 269

E The Effects of the Acquired Minority Shareholdings on the Markets Under Scrutiny 269

i Horizontal Effects-Reduction of Existing Competition 269

ii Conglomerate Effects-Reduction of the Intensity of Potential Competition 269

II Research of the Directorate General of Competition 270

A Law 703/77 270

B Research Evaluation 273

i The Issue of Control in Sea Star 273

ii Control System of HSW-The Significance of Documents 276

iii Distribution of Votes at General Meetings of HSW 279

iv Control Regime of ANEK 280

III Legal Assessment 281

A Control of Sea Star Capital by its Largest Shareholder 281

i The Issue of Permanent Change of Control 281

ii Economic Dependence 282

iii Combined Assessment of Economic Dependence with the Expertise of the Same Natural Person: Exclusive Control 283

iv Control of HSW by Sea Star-Concept of Control 284

v Acquisition of Control 285

vi Negative Sole Control as a Form of Exclusive Control 285

vii De Facto or De lure Sole Control 286

viii Control of ANEK by Sea Star-Apparent Control 287

ix Indirect De Facto Control 288

x Concluding Remarks 289

B Proposal of the Directorate-General for Competition 290

7 Empirical Literature Review of Minority Interests 292

I Empirical Evidence of Minority Shareholdings 292

8 Commission's White Paper 310

I Analysis of the Commission's White Paper 310

A Non-controlling Minority Shareholdings Under Merger Control Rules: Main Reasons 311

B The Similarity of Theories of Harm Regarding Minority Shareholdings 312

C Proposed Options/Solutions for Controlling the Acquisition of Minority Shareholdings 313

D Potential Alternatives 314

E The Choice of a Targeted Transparency System 315

F Analysis of the Criteria for Transactions Creating a 'Competitively Significant Link' 319

G Considerations Applied to the Threshold Levels 320

H Legislative Application-Proposals for Appropriate Legislative Implementation 321

I Amendment of the Banking Clause as a Consequence of Legislative Implementation 322

J Procedural Issues 322

K Partial or 'Staggered' Acquisitions 325

L Substantive Analysis 325

i Relationship Between Article 101 TFEU and Assessment hinder Regulation 139/2004-The Link Between Agreements and Mergers 326

M Acquisition of Non-controlling Minority Shareholdings and Joint Ventures 327

N Creeping Transactions: Hidden, Step-by-Step Transactions and Relevant Framework of Analysis 328

O Concluding Remarks 328

9 Commission's White Paper in Practice 329

I The Commission's White Paper and its Practicability 329

A The Case Law cannot be Ignored 329

B The ECMR Regulations Following the Case Law 329

C The White Paper's Point-First Questions 330

D In Terms of De Lege Ferenda does the Practice of the Commission and the Relevant Case Law Justify this Change? 330

E The Success of the Merger Regulation 139/2004, the Role of the NCAs and the Minimum Legislative Convergence 332

F The Commission's Point of View 332

G Assessment of Minority Shareholdings' Effects-Financial Interests and Corporate Rights 333

H The Core of the Ryanair/Aer Lingus Case, According to the European Legal Framework 334

I Are Articles 101 and 102 TFEU Appropriate for Dealing Effectively with Anticompetitive Minority Shareholdings? 335

J Proposed Realistic Approach 337

K The Decentralization Tradition Created by Regulations 1/2003 and 651/2014 and the Paradox of the White Paper's Proposal 338

L The Safe Harbour of Exchanging Confidential Information Between Commission and Member States 340

II Minority Interests from an Economic Point of View 341

A Theoretical Insights 341

B Is there Enough Empirical Evidence for an Extension to the Merger Regulation? 343

C Concluding Remarks 344

10 Conclusion 345

I Legal and Economic Issues 345

II Cases Involving Minority Interests within EU and Worldwide 347

III The Commission's Argument Regarding Minority Interests 348

IV The Authors' Argument Regarding Minority Interests 349

Index 351

Editorial Reviews

This book offers a particularly deep analysis of the topic of the minority shareholdings, both under a legal and economic point of view. (Translated from the original French).” —Lamy droit de la concurrence

“The book, because of its thoroughness and fairness, should be of great value to specialists.” —Interdisciplinary Jourbanal of Economic and Business

“This book is a rich mine of information and a very valuable resource for all those practitioners, antitrust enforces, doctoral students and academics, who intend to explore the topic in-depth. It is therefore strongly recommended.” —World Competition Law and Economic Review

“This book is a valuable contribution in the current context of uncertainty regarding the future regime of minority shareholdings in the EU. (...) The book may easily be regarded as an important reference point in the future policy discussions the Commission may engage in with stakeholders.” —COMMON MARKET LAW REVIEW

From the Publisher