The European Court of Justice (ECJ) ruled in Austria Asphalt v Bundeskartellanwalt (Case C-248/16) that when there is a change in the type of control over an existing undertaking from sole to joint control, the criterion of a concentration within the meaning of the EU Merger Regulation (EUMR) is only fulfilled when the arising joint venture performs on a lasting basis all the functions of an autonomous economic entity.
A joint venture is fully functional if it performs on a lasting basis all the functions of an autonomous economic entity. We discuss the characteristics of a fully functional joint venture in our relevant Insight ‘Joint Ventures under Cyprus law’. Inter alia, to satisfy full functionality, a joint venture must have sufficient assets, personnel and financial resources to perform its business independently of its parents, on a lasting basis.
The ECJ held that it follows from the aims of the ECMR that a transaction is subject to the EUMR only where it has a lasting effect on the market structure. A joint venture that is not fully functional cannot have an impact on the market structure and is therefore not subject to merger control.
In Austria Asphalt the ECJ clarified that the EUMR only applies if the joint venture resulting from the change in control is full-function. A change in control of a company which creates a non-full-function JV will therefore fall outside the EUMR.
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