Merger Control

1. Overview

The Belgian rules on merger control are included in Book IV "Protection of competition" of the Belgian Code of Economic Law and the Royal Decree of 30 August 2013 relative to notifications of company mergers. The Belgian rules are highly similar to the EU merger control rules, which are often applied by analogy (including notices and guidelines).

The Belgian Competition Authority, an independent administrative authority, is responsible for merger control enforcement. It is composed of:

(i) the President;
• (ii) the Competition College, which is presided by the President;
• (iii) the Managing Board,
• (iv) the Investigation and Prosecution Service, led by the Competition Prosecutor General.

The Investigation and Prosecution Service is responsible for investigating mergers, whereas the Competition College decides whether to clear the transactions.

A merger filing is mandatory if the transaction meets the jurisdictional thresholds. It is standard practice to engage in pre-notification discussions with the Belgian Competition Authority.

The Belgian jurisdictional thresholds are relatively high. On average, the Belgian Competition Authority reviews around 30 concentrations a year. The Authority reviews most mergers under the simplified procedure.

If the jurisdictional thresholds are met, the merging parties are subject to a notification obligation and stand-still obligation (i.e., they must refrain from implementing the transaction prior to clearance).

A specific feature of the Belgian merger control regime concerns the exclusion of locoregional clinical hospital networks. In particular, the establishment of locoregional clinical hospital networks and any subsequent changes in its composition are excluded from the application of Belgian merger control rules. However, the European merger control rules still apply.

On the basis of the one-stop-shop principle, concentrations with a Community dimension will be subject to review by the European Commission and not by the Belgian Competition Authority. However, the European Commission can refer transactions with a Community dimension to the Belgian Competition Authority for review. Furthermore, in line with the recent European Commission's Guidance on the application of the referral mechanism set out in Article 22 of the Merger Regulation to certain categories of cases (2021), the Belgian Competition Authority can also refer transactions to the European Commission, even if the Belgian or EU jurisdictional thresholds are not met.

2. Is notification compulsory or voluntary?

Concentrations that meet the jurisdictional thresholds are subject to compulsory notification. There is no voluntary merger filing regime.

3. Is there a prohibition on completion or closing prior to clearance by the relevant authority? Are there possibilities for derogation or carve out?

The Belgian merger control rules impose a stand-still obligation on the undertakings concerned. This implies that the undertakings concerned cannot implement the concentration prior to clearance by the Belgian Competition Authority.

However, the stand-still obligation does not prevent the implementation of public bids or series of transactions in financial instruments, subject to conditions. In this case, (i) the concentration must be notified to the Competition Prosecutor General without delay and (ii) the acquirer cannot exercise the voting rights attached to the financial instruments or can only do so to maintain the full value of its investment and on the basis of a derogation granted by the President.

Furthermore, the President can grant derogations from the stand-still obligation at any time and at the request of a party. The President can grant a derogation subject to conditions and obligations.

4. What types of transaction are notifiable or reviewable and what is the test for control?

The Belgian merger control rules apply to 'concentrations', i.e., transactions resulting in a lasting change in the quality of control over an undertaking. Three types of transactions can qualify as a 'concentration':

1. Mergers, e., the merger of two or more previously independent undertakings or parts of undertakings;
2. Acquisitions, e., the acquisition, by one or more persons already controlling at least one undertaking, or by one or more undertakings, whether by purchase of securities or assets, by contract or by any other means, of direct or indirect control of the whole or parts of one or more other undertakings;
3. Full-function joint ventures, e., the creation of a joint venture performing on a lasting basis all the functions of an autonomous economic entity.

The transaction must result in a lasting change of control. This entails a possibility to exercise decisive influence over an undertaking. Intra-group transactions do not qualify as a concentration, as these transactions do not result in a lasting change of control.

5. In which circumstances is an acquisition of a minority interest notifiable or reviewable?

An acquisition of a minority interest would be notifiable in case such acquisition would result in a lasting change in the quality of control resulting in joint or sole control. For example, if special rights are attached to the shareholding which enable the minority shareholder to determine the strategic commercial behavior of the acquired undertaking.

In 2013, the Belgian Competition Authority considered a minority interest of 27.6% to amount to control (Picanol NV / Tessenderlo Chemie NV). In this case, Picanol purchased 27.6% of the shares of Tessenderlo Chemie, whereas the remaining shares were dispersed among a large number of shareholders. As a result, the Authority found that Picanol acquired de facto control over Tessenderlo Chemie.

If the acquisition of a minority interest does not result in a lasting change of control, the acquisition would not be notifiable or reviewable.

6. What are the jurisdictional thresholds (turnover, assets, market share and/or local presence)? Are there different thresholds that apply to particular sectors?

A concentration must be notified to the Belgian Competition Authority if the following turnover threshold is met:

The combined turnover of the undertakings concerned in Belgium exceeds EUR 100 million, and
• At least two of the undertakings concerned each generate a turnover in Belgium of at least EUR 40 million.

The above threshold applies to all sectors. However, it should be noted that the establishment of locoregional clinical hospital networks and any subsequent changes in its composition are excluded from the application of Belgian merger control rules.

The turnover thresholds refer to the amounts derived from the sale of products by the undertakings concerned in the ordinary course of business, after deduction of sales rebates, value added tax and other taxes directly related to turnover.

Furthermore, turnover should be considered at group level and includes the turnover of subsidiaries, parent companies and their subsidiaries, as well as affiliated companies.

Turnover generated by the seller group is generally not included, except if the seller retains control over the target post-transaction.

No form of local presence is required in order for the Belgian Competition Authority to have competence over the transaction.

Every three years, the Belgian Competition Authority should carry out a review of the jurisdictional thresholds (see Question 36 - Are there any future developments or planned reforms of the merger control regime in your jurisdiction?).

7. How are turnover, assets and/or market shares valued or determined for the purposes of jurisdictional thresholds?

For the purposes of the jurisdictional thresholds, the turnover generated during the last financial year should be taken into account. Turnover generated from intra-group transactions is excluded from the calculation.

Instead of turnover, the following metrics should be used for credit and other financial institutions, and insurance companies:

Credit institutions and other financial institutions: the sum of (i) interest income and similar income, (ii) income from securities, (iii) commissions receivable, (iv) net profit on financial operations and (v) operating income.
• Insurance companies: value of gross premiums written.

The Belgian merger control rules do not specify how to allocate turnover geographically. However, the European Commission's Consolidated Jurisdictional Notice can be applied by analogy. As a general rule, turnover should be attributed to the place where the customer is located.

8. Is there a particular exchange rate required to be used to convert turnover and asset values?

In the absence of specific guidance on this point, the EU approach can be followed. The annual turnover of an undertaking should be converted at the average rate for the twelve months concerned, as published by the European Central Bank.

9. In which circumstances are joint ventures notifiable or reviewable (both new joint ventures and acquisitions of joint control over an existing business)?

According to the Belgian merger control rules, only joint ventures performing on a lasting basis all the functions of an autonomous economic entity qualify as a concentration and are notifiable if the turnover thresholds are met. In other words, only full-function joint ventures need to be notified. This is true for the creation of joint ventures and for acquisitions of joint control.

In line with the EU approach, this implies that the joint venture must:

have sufficient resources to operate independently on the market;
• carry out activities beyond one specific function for the parents;
• play an active role on the market;
• be intended to operate on a lasting basis.

If the joint venture is not full-function, the Belgian Competition Authority can only analyze the joint venture under the rules for anti-competitive agreements.

There are no separate thresholds for joint ventures.

10. Are there any circumstances in which different stages of the same, overall transaction are separately notifiable or reviewable?

The Belgian merger control rules provide that two or more transactions, which take place within a two-year period between the same persons or undertakings, shall be treated as one and the same concentration arising on the date of the last transaction. Therefore, the last transaction will be notifiable.

If a transaction occurs in several stages, and at each stage where a change in the quality of control occurs the merger filing thresholds are met, that particular stage of the transaction will have to be notified, provided there is a time lapse exceeding 2 years.

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Originally published by The Legal 500

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mr Hendrik Viaene
McDermott Will & Emery
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