In brief: the key features of merger control legislation in Luxembourg

Legislation and jurisdiction

Relevant legislation and regulators

What is the relevant legislation and who enforces it?

Luxembourg does not have legislation enabling the Luxembourg Competition Authority (the Authority) to carry out ex ante merger control today.

However, in August 2023, Bill of Law No. 8296 on the control of concentrations between undertakings (the Bill) was submitted to Parliament. Since a new government entered into office at the end of 2023, the adoption process has not much progressed so it is highly unlikely that the final text will be adopted before the end of 2024. Hence, a merger control regime will enter into force at the earliest in 2025.

Questions are answered based on text of the Bill as available in September 2024.

Furthermore, the Authority has reviewed mergers in the past on the basis of the provisions prohibiting the abuse of dominant positions currently enshrined in the amended Law of 30 November 2022 on competition (the Competition Law).

Scope of legislation

What kinds of mergers are caught?

The definition of a concentration in the Bill reflects the coming of the European Union Merger Regulation. A concentration occurs where:

• two or more independent undertakings merge;
• an undertaking or a person already controlling an undertaking acquires control over the whole or part of another undertaking; or
• two or more undertakings form a full-function joint venture.

What types of joint ventures are caught?

Joint ventures that are of a purely cooperative nature are out of the Bill but they can be investigated on the basis of article 4 of the Competition Law, which prohibits all agreements between undertakings, decisions by associations of undertakings and concerted practices, which have as their object or effect the prevention, restriction or distortion of competition on a market.

Concentrative joint ventures (ie, joint ventures performing on a lasting basis all the functions of an autonomous economic entity) constitute a concentration within the meaning of the Bill.

Is there a definition of ‘control’ and are minority and other interests less than control caught?

According to the Bill, control arises from rights, contracts or other means that, separately or in combination and with regard to the circumstances of fact or law, provide the possibility of exercising decisive influence on the business of an undertaking, in particular through rights of ownership or enjoyment over all or part of the assets of an undertaking or rights or contracts that confer a decisive influence over an undertaking.

On the basis of this definition, the acquisition of a minority shareholding could be caught in certain circumstances.

The Bill also specifies that internal restructurings are not caught insofar as they do not lead to changes in the structure of control.

Thresholds, triggers and approvals

What are the jurisdictional thresholds for notification and are there circumstances in which transactions falling below these thresholds may be investigated?

Article 1 of the Bill lays down two cumulative thresholds:

• the total turnover, excluding taxes, realised in Luxembourg by all the undertakings or the groups of natural or legal persons concerned, exceeds €60 million; and
• the total individual turnover, excluding taxes, in Luxembourg of at least two of the undertakings or groups of natural or legal persons concerned exceeds €15 million.

The Bill provides for specific rules regarding the calculation of turnover for credit institutions and other financial institutions.

Furthermore, pursuant to article 6 of the Bill, the Authority may examine on its own initiative a concentration that does not meet the above thresholds if the transaction is likely to have a restrictive effect on competition in Luxembourg.

In March 2024, the Competition Authority referred a concentration to the European Commission based on article 22 of the European Union Merger Regulation, considering in particular the absence of a merger control regime in Luxembourg (see referral decision of 14 March 2024 in case M.11485).

Is the filing mandatory or voluntary? If mandatory, do any exceptions exist?

Pursuant to article 3 of the Bill, if the thresholds are met, the filing of a notification is mandatory.

Article 1 of the Bill states that acquisitions carried out by investment funds, securitisation funds, securitisations vehicles or by pensions funds are excluded from the scope of the Bill with the exception of private equity transactions.

Do foreign-to-foreign mergers have to be notified and is there a local effects or nexus test?

The Bill foresees no exclusions for foreign-to-foreign mergers. Foreign-to-foreign mergers will have to be notified when the turnover thresholds are met regardless of the location or nationality of the parties so even in the absence of Luxembourg-based assets.

Are there also rules on foreign investment, special sectors or other relevant approvals?

The Bill takes into account the specific nature of Luxembourg in terms of the size of its financial sector. The Bill specifically excludes from its scope transactions carried out by investment funds, securitisation funds, securitisations vehicles or pensions funds, with the exception of private equity transactions but these apply independently of the nationality of the parties concerned.

The same is true for the exemption of certain concentrations involving certain companies in the banking and insurance sector, notably in the context of an early intervention, reorganisation or resolution measure or in other cases of urgency defined by the Bill, such as situations where there is a need to: (1) preserve the financial stability of Luxembourg; (2) avoid a serious threat to the stability of the Luxembourg financial system if the merger or acquisition did not take place; or (3) protect the interests of depositors or investors (articles 47 and 48 of the Bill). In such cases, exclusive competence to review the merger is given to the sectoral supervisory authorities.

Furthermore, since 1 September 2023, the Luxembourg Law establishing a mechanism for the national screening of foreign direct investments likely to undermine security or public order (the FDI Law) is fully applicable. The FDI Law implements Regulation (EU) 2019/452.

The screening mechanism applies to foreign direct investments, excluding portfolio investments (ie, acquisitions of securities with the intention of making a financial investment and not allowing for the exercise of control), which could undermine security or public order, in a Luxembourg entity carrying out in Luxembourg ‘critical activities’ as defined by the FDI Law.

A foreign investor is defined as a natural person or an undertaking of a country outside the EEA, aiming to establish or maintain lasting and direct links with a Luxembourg entity, thus allowing the foreign investor to participate, acting alone, in concert or through an intermediary, in the control of this entity, with a view to exercising a critical activity in Luxembourg.

Transactions in the scope of the FDI Law are subject to a mandatory notification requirement.

This article was written by Partner Katrien Veranneman and Associate Jean-Pierre Roemen and was reproduced with permission from Law Business Research Ltd. This content was first published in Lexology Panoramic: Merger Control. For further information, please visit [Panoramic - Lexology].