Currently, merging companies need to be aware of the “Dutch Clause” because mergers that affect trade between member states and pose a risk of adverse competitive effects may face a more detailed review by the European Commission. Merging companies facing a more scrutinized review of their mergers will likely face unpredictable transactional costs. The question, therefore, is how can practitioners advise their clients on their mergers when there are no set calculations that may allow you to conclude as to whether a client’s merger will be reviewed by the European Commission based on the “Dutch Clause”? First, we must explain to a greater detail the “Dutch Clause” and its application to merger reviews.
The European Community Merger Regulation (ECMR) was enacted in 1989, and within it, includes Article 22, known as “The Dutch Clause.” Werner Berg, Article: The New EC Merger Regulation: A First Assessment of its Practical Impact, 24 NWJ. Int’l L. & Bus. 683, 688 (2004). The word “Dutch” can be used when to describe people from the Netherlands, in fact, the “Dutch clause” was “instituted primarily at the request of the Netherlands, which lacked a merger control regime at the time of entry into force of the Merger Regulation.” Nicholas Levy; Mark Nelson; Derek Ridyard; etc., European Merger Control Law § 7.04 (2021).
The “Dutch Clause” is applicable to “the European Economic Area (EEA) – the 27 EU member states of Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden) and the three members of European Free Trade Association (EFTA) – Iceland, Liechtenstein and Norway.” Rafique Bachour, Tone Oeyen, Amaryllis Müller and Silvia Modet, 2022 GTDT: Merger Control European Union (2022). Therefore, the “Dutch Clause” benefits member states (countries) within the European Union that did not or currently do not have a national set of rules controlling mergers.
The “Dutch Clause” allows for referral of merger cases that “affect trade between member states” (the claim must state that the merger influences trade between member states) and “threatens to significantly affect competition” (the claim must state that there is a real risk of significant adverse impact on competition) within a member state(s) home or territory. “As of December 31, 2020, the Spanish agency has made the largest number of referrals (17), followed by the national agencies of Germany (16); the U.K. (12); France and Austria (11); Italy and Portugal (seven); Sweden (five); Belgium, Greece, and the Netherlands (four); Finland (four); Hungary and Poland (three); Cyprus, Ireland, Norway, and Slovakia (two); and the Czech Republic, Denmark and Iceland (one).” Nicholas Levy; Mark Nelson; Derek Ridyard; etc., European Merger Control Law § 7.04 (2021). Referrals of cases historically have been rare, up until May 1, 2004, there were only 33 referrals that had been made. Id.
Even when the “Dutch Clause” has not been often invoked by member states, the European Commission has recently encouraged member states to bring cases, explicitly in its guidance paper published on March 26, 2021, by stating that it will “encourage and accept referral requests.” Rafique Bachour, Tone Oeyen , Amaryllis Müller and Silvia Modet, 2022 GTDT: Merger Control European Union (2022). The European Commission’s goal is that “transactions that merit review under the Merger Regulation are examined by the European Commission.” Nicholas Levy; Mark Nelson; Derek Ridyard; etc., European Merger Control Law § 7.04 (2021).
The Commission seeks to investigate and scrutinize “potentially anti-competitive transactions” that would normally fail to be detected under other current merger review rules in the European Union. Id. Also, and perhaps more importantly, acquisition by companies “that generate little or no revenues in the EU and do not, therefore, meet any national merger control threshold” will now be accepted. Id. Since 2021, the “Dutch Clause” has now been brought forward by the European Commission as a legitimate avenue for enforcing competition laws in the European Union. When the European Commission is in the process of considering a referral of a case, it will inform the parties to the transaction “as soon as possible.” Therefore, businesses would at least be given some time to prepare for a greater review of their mergers even if there are no clear factors set that may allow a practitioner to advise its client on whether the European Commission will or will not assert jurisdiction over mergers based upon the “Dutch Clause.”Tweet
Author Biography: Johana Jhancarla Vargas Arias is a Moderator of the International Law Society’s International Law and Policy Brief (ILPB) and an LLM candidate at The George Washington University Law School. She has a Juris Doctor from The University of the District of Columbia David A. Clarke School of Law.