Merger Control and the Public Interest: Balancing EU and National Law in the Protectionist Debate

Abstract

In many jurisdictions across the world concern about foreign control of key national businesses appears to be mounting. This article examines the policies displayed towards foreign direct investment and cross-border mergers in the EU, focusing on the question of when public policy factors may impact on merger control within the EU and override competition law assessments. The article notes that not only do EU cases in this area raise the potential for differences in opinion as to how the benefits and costs of merger transactions should be assessed and weighed, and a clash between proponents of the principle of an open market economy and proponents of greater protectionism, but they raise delicate issues relating to the balance of competence between the EU and the Member States. Consequently, it analyses (i) how EU law, especially the free movement rules and the EUMR limit the ability of the Member States either to impose obstacles in the path of foreign mergers (whether from inside or outside of the EU/EEA) or to authorise the creation of national champions, on public interest grounds and (ii) how EU law seeks to balance EU goals against the acutely felt and sensitive national interests at stake. Given concerns expressed about a rising tide of protectionism within the EU, it also examines EU enforcement mechanisms. ​

The article concludes that although EU law clearly prohibits national laws that impose unjustified obstacles in the path of investment from other EU Member States, it may not always be able to prevent the authorisation of national champions which may damage competition within the EU and that changes to the EU merger rules would be required to deal with this latter problem. Further, the extent to which Member States are able to control investments from third countries (outside of the EU/EEA) is extremely sensitive, controversial and requires clarification. It also notes that although some problems do lie in preventing Member States from taking protectionist steps and violating fundamental provisions of EU law, enforcement mechanisms are in place which can help to ensure the effectiveness of EU law.

Keywords: Merger control, freedom of establishment, free movement of capital, foreign direct investment, public policy

JEL Classification: K21, G34