EurWORK European Observatory of Working Life

Merger Control

Merger control has become one of the most important areas of public intervention in the economy. The European Commission must approve every transnational concentration (i.e. merger or takeover) between companies meeting the thresholds laid down in the EC Merger Regulation (see Council Regulation No 139/2004 of 20 January 2004 on the control of concentrations between undertakings).

Although the Commission decides autonomously whether, or under which conditions, to allow a transnational concentration, it must ensure that its judgement conforms to the objectives of the merger regulation. This means that a concentration that would significantly impede effective competition in the common market shall be declared incompatible with the common market (Article 2 Merger Regulation). However, the Commission’s assessment must also take the fundamental objectives of the EU into account, which includes the objective of a ‘high level of employment’ (see Article 2 and 127 EC Treaty; Recital 23 in the Preamble to the Merger Regulation).

The merger regulation entitles not only the concerned companies, competitors and other interested third parties, but also the recognised employee representatives of the concerned companies, upon application, to be heard by the Commission during its merger control procedures (Article 18 Merger Regulation). This is of particular importance for the employee representatives, since company mergers and takeovers frequently entail major company restructuring and a reduction of the combined workforce.

The merger control procedure can provide trade unions and European Works Councils with useful information in terms of anticipating restructuring and ensuring that management informs and consults with the employee representatives in good time on any merger or acquisition plans. In turn, the Commission’s Directorate-General for Competition has also gained useful insights from the involvement of employee representatives. In some critical cases, DG Competition has received relevant information from the unions and works councils on the anti-competitive behaviour of the companies concerned, which has influenced the Commission’s decision on the operation under consideration. Nevertheless, the Commission does not automatically consult the employee representatives during its merger control procedure. However, it announces every notification of a concentration in the Official Journal of the European Commission (see and invites interested third parties to submit any observations on the proposed operation to the Commission.

Cross-border Merger Directive

Directive 2005/56/EC is aimed at facilitating the mergers of limited liability companies on a cross-border basis, which previously were impossible or entailed prohibitive costs. It sets up a simple framework drawing largely on national rules applicable to domestic mergers and avoiding the winding up of the acquired company. The Directive is the first measure adopted under the Commission’s Action Plan on company law and corporate governance in the European Union, published in May 2003.

The Directives is of particular interest to small and medium-sized companies that wish to operate in more than one Member State, but not throughout Europe, and are not able to seek incorporation under the European company Statute. The Directive covers all limited liability companies, with the exception of undertakings for collective investment in transferable securities (UCITS). In addition, there are special provisions for cooperative societies. The Directive is expected to lead to a reduction in costs, while guaranteeing legal certainty and enabling as many companies as possible to benefit. It is one of the key actions for growth and employment in the context of the Lisbon Strategy .

One of the main issues at stake during the adoption process was the provision on employee participation, given the widely divergent systems in operation in Member States, and the related question of how to deal with cross-border mergers in regard to employee participation rights. Under the Directive, employee participation schemes should apply to cross-border mergers where at least one of the merging companies already operates under such a scheme. In principle, the company resulting from the cross-border merger is subject to the rules in force concerning employee participation in the Member State where it has its registered office. However, if at least one of the companies taking part in the cross-border merger were governed by rules on employee participation in its home Member State and if the merged company were to be created under the rules of a Member State where such rules do not apply, then a negotiation procedure, as provided for under the European Company Statute, would apply.

See also: competition law and collective agreements; European company; restructuring.

Please note: the European industrial relations dictionary is updated annually. If errors are brought to our attention, we will try to correct them.
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