The Finnish Competition and Consumer Authority (“FCCA”) published on 5 November 2024 a study on the veterinary pet services’ increased prices in Finland and how the FCCA cannot intervene without a call-in option. According to the study, the veterinary services market has become highly concentrated due to buy-and-build strategies employed by private equity investors, where the market is concentrated by first acquiring a platform service provider and later expanding it by acquiring smaller operators. The two biggest players on the market, Evidensia and Vireä, which hold the majority of the market, have been able to acquire smaller operators that fall outside of merger control regime due to turnover thresholds. Based on the FCCA’s findings in the study, the veterinary service markets for pets are defined on a municipal level and for private specialized veterinary clinics on a national level. The FCCA has been unable to investigate those acquisitions under the current thresholds.
The issue, however, is not merely the veterinary pet services market but according to the study, the FCCA lacks tools to intervene in potentially harmful concentrations in sectors such as private healthcare and digital services as well. The FCCA’s Director Sanna Syrjälä states that there are many markets in Finland that are already below the EU average on competitiveness, which is due to Finland’s geographical location, small population and long distances. According to Syrjälä, Finland should implement call-in option for the competition authority as soon as possible.
The FCCA does not currently have call-in powers, even though all other Nordic national competition authorities (“NCAs”) have adopted call-in powers, Denmark being the latest with the legislative having taken force in July 2024. Within recent years many NCAs have expanded their toolkits through rules that permit the regulators to call in transactions that fall below the turnover thresholds in order to deal with potentially problematic transactions. These measures significantly widen the scope for ex ante merger scrutiny by the NCAs. So far competition authorities in Denmark, Ireland, Italy, Sweden, Slovenia, Lithuania, Latvia and Hungary have adopted call-in provisions while talks on the adoption of such powers have taken place in e.g. Finland, The Netherlands and the Czech Republic.
The FCCA has been long advocating for call-in powers. Its aspirations were most recently discussed when the national merger control jurisdictional thresholds were lowered in 2023, though at the time the legislator decided not to confer such powers on the FCCA.
The effect of the Illumina/GRAIL decision
Post- Illumina/GRAIL judgment, the spotlight seems to fall more squarely on national merger call-in powers, and the possibilities for the latter to refer a concentration to the European Commission (“EC”).
The European Court of Justice (“ECJ”) ruled on 3 of September 2024 against the EC’s landmark decision to exercise jurisdiction over the below-threshold acquisition of GRAIL by Illumina (Cases C-611/22 P and C-625/22). The ruling reversed the previous confirmation from the General Court, which endorsed the EC’s approach on the latter’s competence to review such below-threshold mergers upon referral by the NCAs. The ECJ concluded that since the national competition authorities did not have competence to review the transaction based on their national regimes, they lacked the jurisdiction to refer the transaction to the EC for review.
Through the introduction of call-in powers, the NCAs could bring clarity on the possible enforcement gap created by the Illumina/GRAIL judgment. The Director-General for Directorate General for Competition, Mr. Olivier Guersent, commented earlier this year that the “use-case” of Article 22 has “become smaller” since many NCAs have adopted call-in powers. By using their call-in powers Member States can have problematic below-threshold acquisitions appraised without relying on Article 22 referral mechanism. On the other hand, the ECJ pointed in its Illumina/GRAIL -judgment that Member States could move to lower their national turnover-based thresholds should they detect a need to review “innovative undertakings which play or are capable of playing an important competitive role despite the fact that they generate little to no turnover” where their current national merger regime is not sufficient to tackle the issue.
What can be expected next from the EC?
The Executive Vice-President of the EC, Ms. Margrethe Vestager, gave a statement on Illumina/GRAIL on the day of the ECJ’s judgment and noted that there still is a need for tackling anti-competitive killer acquisitions, as nascent companies with limited turnover may nevertheless have relevant innovative potential to play on the market. “Killer acquisitions” may eliminate potential competition by larger companies seeking to acquire below-turnover companies therefore escaping competition regulatory scrutiny.
According to Ms. Vestager, the EC will continue to accept referrals made by Member States under Article 22 EUMR where the applicable legal requirement is met. In fact, the EC has quickly made use of the newly debunked approach to Article 22 and its recommendation for NCAs to make use of their call-in powers. The EC stated on 31 of October 2024 that it will scrutinise Nvidia’s proposed acquisition of Israeli AI start-up Run:ai after accepting the referral request from the Italian Competition Authority under Article 22. The Italian Competition Authority exercised its competence through call-in powers granted under national law.
