(L-R) Franz Fayot, Luxembourg's Minister of the Economy; Agnès Germain, Luxembourg's Ministry of the Economy; Credit: MECO

Luxembourg's Minister of the Economy, Franz Fayot, recently presented a new draft law introducing a regime for controlling concentrations between companies, such as mergers, acquisitions or the creation of certain joint ventures, with a link to the Grand Duchy.

In accordance with the draft law which was approved at the last meeting of the Government Council, compulsory prior notification was retained as the basis of this merger control regime. Luxembourg is the last EU member state to introduce such a system.

According to the Ministry of the Economy, prior notification must be made to the Luxembourg Competition Authority, which will have the power to control on a case-by-case basis the proposed business combinations for which the turnover achieved in Luxembourg by the companies concerned exceeds certain thresholds.

Transactions for which the total turnover achieved in Luxembourg by all the companies concerned is greater than €60 million and that achieved individually by at least two of the companies concerned is greater than €15 million are thus subject to compulsory prior notification and such controls.

The ministry explained that the amounts of these thresholds reflect a calibration allowing the Competition Authority to be able to control the concentrations most likely to raise competition problems, by means of thresholds set at a level consistent with the regimes of other EU Member States, while avoiding unnecessary overloading.

Concretely, in the case of an acquisition, for example, the company which plans to acquire another company must file a notification informing the Competition Authority of the operation and its context. Then, the Competition Authority will verify that the takeover will not create, for example, a dominant position on a market, which would threaten competition. It is only after the agreement of the Competition Authority, subject to certain commitments or conditions where applicable, that the merger of the companies concerned is valid and can go ahead.

While most of these mergers are beneficial for the economy, according to the ministry, some operations can affect competition. The objective of a merger control is to prevent such negative effects on competition. It is also aimed at offering predictability and legal certainty to companies taking part in the concentration operation and allows third parties to put forward their points of view during the analysis of the case by the Competition Authority.

The ministry noted that the proposed system is the result of a broad consultation process launched in early 2021 and characterised by the organisation of a public consultation, regular exchanges with companies and other interested parties, including consumers, as well as the coordination of work within an interministerial working group. The purpose of this work was to adapt the parameters of the bill to the specificities of the Luxembourg economy, particularly its small size and its openness. The draft law thus specifies, among other things, that the cross-border activities of companies must be taken into account by the Competition Authority in its analysis.

Minister Fayot commented: "Contrary to the law on anti-competitive practices, merger control, another pillar of competition law, is intended to be preventive and not punitive. Offering predictability and legal certainty to the companies concerned, this instrument aims to protect competition, for the benefit of consumers and the competitiveness of businesses."