Balancing Powers: How is Luxembourg shaping its merger control regime?

The wave of legislative modernization which has been unfolding in the Grand Duchy of Luxembourg cannot escape notice. Amongst others, competition law has not been spared from the sweep of reforms. Having already materialized into a number of amendments to the existing competition legislation, the reforms are set to culminate in the enactment of a national merger control regime, a significant development that promises to fortify the oversight of mergers and acquisitions in Luxembourg. This article explores Luxembourg’s evolving approach to merger control, highlighting its shift towards a more robust regulatory framework. We will delve into the current competition law landscape, the key features of the upcoming merger control regime and the practical implications of these regulatory changes.

Introduction

Embedded in the wider body of competition law, the primary objective of merger control is to assess on an ex-ante basis whether a proposed merger or acquisition could harm market competition.

Luxembourg is the last Member State of the European Union (EU) without an ex-ante national merger control regime. Despite recent developments, the establishment of a merger control regime has not always resulted in consensus in terms of its feasibility and efficiency. The approach adopted by Luxembourg for its upcoming merger control regime results from the gradual effort to align with the EU’s legal framework, whilst considering the specific needs of its domestic market.

The current antitrust and merger control landscape in Luxembourg

The foundation of modern competition law in Luxembourg can be traced back to the law of 17 May 2004. This legislation created the first national competition authority, the Conseil de la Concurrence tasked with overseeing the application of both national and EU competition rules, particularly those enshrined in the Treaty on the Functioning of the European Union (TFEU). The 2004 law was an important step in Luxembourg’s compliance with EU competition law, particularly Articles 101 and 102 TFEU, which prohibit anti-competitive agreements and the abuse of dominant positions.

The law of 23 October 2011 further reformed Luxembourg’s competition regime, significantly enhancing the powers of the Conseil de la Concurrence. Most recently, the law of 30 November 2022 on competition, as amended, marked a new phase in the modernization of Luxembourg's competition law. The scope of the law was mostly organizational and procedural. Notably, it strengthened the investigation and enforcement powers of the newly named Autorité de la Concurrence (the “Competition Authority”).

The current Luxembourg legal framework is orphan of merger control provisions and does not impose any ex-ante notification requirement for mergers and acquisitions. The Competition Authority may only initiate a posteriori proceedings where a transaction, following its implementation, caused a distortion to competition or resulted in an abuse of dominant position. Nevertheless, despite the absence of ex-ante oversight, it is recommended that mergers or acquisitions likely to impede competition be voluntarily submitted to the Competition Authority. Any opinions or decisions rendered by the Competition Authority in such cases, however, do not carry legally binding force.

Further on, mergers that pose a threat to competition in Luxembourg may currently be referred to the European Commission (“EC”) for review at the request of the Competition Authority, according to the procedure defined under the EU merger control framework and to the extent the stringent EU’s jurisdictional thresholds are met.

The EU merger control regime

Within the EU and the wider European Economic Area, the main legal framework for regulating mergers and acquisitions between companies (referred to as “undertakings”) is Council Regulation (EC) N° 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the “EC Merger Regulation”). The EC Merger Regulation creates a “one-stop-shop” approach, whereby the EC is granted jurisdiction to scrutinize transactions qualifying as concentrations subject to certain jurisdictional thresholds. 

The concept of concentration, as defined by the EC Merger Regulation, encompasses transactions bringing about a lasting change in an undertaking’s control, such as acquisitions, mergers and the creation of a joint venture performing on a lasting basis all the functions of an autonomous economic entity. In addition, the concentration must have a so-called community dimension, meaning that certain turnover thresholds set out under the EC Merger Regulation must be reached. Said concentrations must be notified to the EC ex-ante (before implementation), and implementation may not occur prior to obtaining clearance. 

The clearance procedure potentially has two stages. During the first stage (Phase I), the EC disposes of 25 business days after the receipt of the formal notification to analyze the transaction and either grant clearance on the transaction or open a Phase II investigation if it deems that the concentration raises concerns in respect of its compatibility with the common market. The Phase II investigation must be completed by the EC within 90 business days, with the possibility to extent this period by up to 20 business days. At the end of Phase II, the EC may either, unconditionally clear the transaction, approve the transaction subject to remedies, or prohibit the transaction if no adequate remedies have been proposed by the parties.  

Key features of Luxembourg's upcoming merger control regime

On 23 August 2023, the Luxembourg Ministry of  Economy submitted the draft bill of law n°8296 introducing a mandatory merger control regime  (the “Bill”). The Bill covers transactions qualifying as concentrations within similar terms as the EC Merger Regulation, and where said concentrations have a national dimension. 

Concentrations not falling within the scope of the EC Merger Regulation shall be notified ex-ante to the Competition Authority if they trigger cumulatively the following two thresholds: 

(i) the combined annual turnover (i.e., the sum of products sold and/or services provided to undertakings or consumers in Luxembourg) of all the parties involved in the transaction exceeds EUR 60 million (exclusive of taxes); and

(ii) at least two of the parties involved in the transaction have an individual annual turnover generated in Luxembourg which exceeds EUR 15 million (exclusive of taxes)

Special rules will apply to the calculation of the turnover of credit and other financial institutions and insurance and reinsurance companies.  

With the exception of private equity transactions, acquisitions carried out by investment funds, securitization funds, securitization vehicles or pension funds are excluded from the scope of the merger control regime. 

Implementation of a transaction notified to the Competition Authority may not occur prior to obtaining clearance. In general terms, the clearance procedure is similar to the procedure provided by the EC Merger Regulation.

Concentrations unlikely to have restrictive effects on competition may be submitted through a simplified notification procedure. 

Practical implications of the Luxembourg merger control regime

To avoid being caught off guard by the changes introduced by the Bill, the following points should be factored for upcoming transactions. 

Firstly, even if a clear timeline for the adoption of the Bill cannot be provided at this stage, companies should begin incorporating Luxembourg merger control considerations into their transaction schedules for 2025. The merger control regime will apply to transaction agreements executed as from the 1st day of the 4th month following the publication of the law in the Luxembourg Official Journal (e.g., if the law is published during August 2025, it will apply as from 1 December 2025). 

Secondly, conditions precedent (conditions suspensives) relating to merger control should be included in the transaction agreements. They will provide protection to the parties by:

(i) ensuring that neither party is obligated to close the transaction before receipt of clearance by the Competition Authority;

(ii) in case of opening of a Phase II investigation, allowing either party to walk-out of the transaction; and 

(iii) safeguarding the purchaser from being forced to close the transaction under unsatisfactory terms, such as a requirement by the Competition Authority to divest a business of the target company or of the purchaser group

Thirdly, if the purchaser is a competitor of the target company, the seller should take into account the impact of competition law and merger control on certain provisions of the transaction documents relating to the period between signing and closing. This concerns, for example, access and information obligations and the conduct of the business of the target company. In such cases, it is crucial to carefully manage the exchange of commercially sensitive information to avoid breaching Article 4 of the law of 30 November 2022 on competition, as amended. To the extent possible, sensitive information should be limited to historical rather than projected information and be of general nature rather than customer specific. 

Lastly, companies should be prepared to hold pre-notification and post-notification talks with the Competition Authority and potentially offer remedies to address any anti-competitive effects. 

Conclusion

The merger control regime in Luxembourg marks a notable step forward in the Nation's commitment to preserving competitive markets and fostering a healthy economic environment. By introducing a structured and transparent process for the review of concentrations, Luxembourg aligns with international best practices and provides clarity and predictability for businesses operating within its borders.