The Barnier method, from the Berlaymont to Matignon
But also — Agricultural policy, Illumina/GRAIL
Hello! Today is September 9, and here is your EU news summary for the week. Feel free to share this newsletter with friends and colleagues, and follow us on Twitter and LinkedIn.
What to watch this week
The Draghi report was released this morning! You can read it here. We’ll provide you with an analysis of the report in our next edition.
On Wednesday (September 11), Ursula von der Leyen is expected to present the list of new Commissioners, along with their respective portfolios, to the Conference of Presidents of the European Parliament. This is not the end of the process: the Parliament still needs to vet the new College of commissioners after individual parliamentary hearings.
The Briefing
After endless rounds of talks, Emmanuel Macron has appointed Michel Barnier as Prime Minister. This is the first time a French politician moves to Matignon (the official residence of the French Prime Minister) after having spent time in the Berlaymont (the European Commission’s main building, located in Brussels) as a Commissioner beforehand.
BUDGETING • This will not be a walk in the park. Barnier’s first priority is to find a majority within the French Parliament in order to pass next year's budget.
The government must present a Finance Bill to Parliament before October 1st.
At the European level, the European Commission opened an excessive deficit procedure (EDP) against France this summer. Under the EDP, the next French government will have to present to the European Commission a ‘plausible downward trajectory’ to reach 60% of public debt and a public deficit of no more than 3%. Currently, the public deficit stands at 5.6% of GDP.
The French government must present a draft medium-term budget plan that takes into account the Commission's recommendations by 20 September at the latest. On September 7, the Ministry of the Economy asked the Commission for an extension.
BARNIER, THE EUROPEAN • In Brussels, Michel Barnier is known for his ability to talk to everyone and find compromise. Described as ‘the most European of French politicians’, he has devoted much of his career to the European Union.
He was Minister for European Affairs (1995-1997). He has negotiated in numerous configurations of the Council of the European Union as French Minister for the Environment (1993-1995), Foreign Affairs (2004-2005) and Agriculture (2007-2009).
He was a Member of the European Parliament (MEP). In 2010, following a brief six-month term as an MEP, he became Commissioner. At the time, he was chairman of the French delegation of the European People's Party (EPP).
He was twice European Commissioner: for Regional Policy (1999 to 2004) under the presidency of Romano Prodi; and then for the Internal Market and Financial Services (2010 to 2014) at the height of the Eurozone crisis, under the presidency of José Manuel Barroso. He recruited Olivier Guersent as cabinet director, who is now Director-General for Competition.
Finally, Barnier was chief Brexit negotiator between 2016 and 2021. He then held the rank of Director-General and reported directly to Presidents Juncker and Von der Leyen. He was surrounded by a task force of around sixty senior European officials.
THE ART OF THE DEAL • The ‘Barnier method’ in negotiations with the UK has been hailed by European leaders.
With Michel Barnier, the red lines were public, which strengthened discipline within the European bloc in the face of British attempts to start bilateral negotiations. His consultations with the capitals of the 27 Member States were appreciated throughout Europe.
“The cohesion and strategic coordination between EU Member States, as well as the leverage of the Single Market, were on full display. These assets should be exploited on other fronts”, wrote Elvire Fabry in a note for the Jacques Delors Institute in 2021.
WHICH KIND OF EUROPEAN? • Describing himself as ‘patriotic and European’, Michel Barnier has built his career on a resolutely pro-European line. For a time, he was in the running to become President of the European Commission in 2014.
Since the right-wing primaries for the French 2022 presidential election, however, he has adopted a more critical stance towards the European Union. For instance, he proposed that France should free itself from the rulings of the ECHR and the CJEU on migration by means of a ‘constitutional shield’, in order to suspend non-European immigration for three to five years. Such a move would call into question the primacy of European law over national law, a cardinal principle of European integration.
In Case You Missed It
AGRICULTURE • On September 4, the report of the strategic dialogue on the future of European agriculture was published and presented to European Commission president Ursula von der Leyen. This initiative had been announced in September 2023 by Von der Leyen, with the aim of overcoming the polarization of debates on agriculture.
After 8 months of discussions behind closed doors with stakeholders from across the agri-food chain, a report was submitted to Ursula von der Leyen by the chair of the strategic dialogue, Professor Peter Strohschneider.
The proposals contained in this hundred-page report are only recommendations. However, at a press conference, Ursula von der Leyen described the report as a real ‘guide’ that will serve as a basis for future reforms — the former German minister is due to propose some of these reforms in the first 100 days of her second term (between now and March).
In particular, the authors of the report call for structural reforms of the Common Agricultural Policy (CAP) and the way in which its €387 billion budget — which represents a third of the EU's long-term budget — is spent.
One of the key measures concerns the reform of subsidies for farmers: the authors are calling for these subsidies to be based on the economic viability of farms rather than their surface area — a criterion that has been present in the CAP since 1962. The aim is for the money to go primarily to “active farmers” who need it the most.
ILLUMINA/GRAIL • On September 3, the Court of justice ruled that the European Commission's prohibition of the acquisition of GRAIL by Illumina (both are US companies in the field of cancer detection tests) was unlawful. European competition policy will be significantly affected by this decision.
The Court ruled that the Commission is not authorized to “encourage or accept referrals of proposed concentrations without a European dimension from national competition authorities where those authorities do not have jurisdiction to examine those proposed concentrations under their own national law”.
The Commission will therefore no longer be able to review mergers that have a significant impact on competition but do not meet the threshold for review at national and EU level.
Some background: the Commission only has jurisdiction (i.e. the ability) to review mergers — and potentially prohibit them — when these mergers have an ‘EU dimension’. This EU dimension is established when certain thresholds linked to the turnover of the companies involved in a deal are reached (these thresholds are defined in the EU Merger Regulation, EUMR).
All EU Member States (except Luxembourg) also have rules defining which types of merger their national competition authority may review. However, mergers with an EU dimension — the largest ones — are examined by the Commission alone, in accordance with the one-stop shop principle.
Below these thresholds, the Commission is generally not empowered to review mergers. However, in specific cases, a proposed merger may still be examined by the Commission — this is what Illumina/GRAIL is all about.
One of these cases, defined in Article 22 of the EUMR, allows one or more national competition authorities to ask the Commission to review a proposed merger which does not have a European dimension but “affects trade between Member States and threatens to significantly affect competition within the territory of the Member State or States making the request”.
This possibility was introduced in 1989 — when the EU adopted its first merger control regulation — to enable competition authorities in EU countries that did not have merger control rules (and therefore did not have jurisdiction to examine mergers at national level) to ask the Commission to examine certain mergers.
Over the years, all Member States — except Luxembourg — have adopted national merger control rules. The Commission therefore started to discourage national competition authorities from making requests for referrals to the Commission when they did not have jurisdiction over a merger.
In 2021, the European Commission changed its interpretation of article 22 and declared that it would accept certain referrals from authorities that did not have jurisdiction to examine a merger.
This change was the outcome of years of reflection on potential enforcement gaps in merger rules. In other words, the Commission was concerned that mergers with a significant effect on the internal market were slipping through the cracks of EU and national merger review rules.
These mergers, known as killer acquisitions, occur when a company that is well established in a market acquires another, much smaller, company — which is why the turnover thresholds are sometimes not met — but highly innovative. In the pharmaceutical and digital sectors, such acquisitions can strengthen the market power of very large companies without being captured by national and European law.
Illumina/GRAIL is the first case in which the Commission has implemented this practice. None of the six competition authorities that requested the Commission to review the merger had jurisdiction to review the merger under their national law. GRAIL had no turnover in the EU (or elsewhere).
The Commission nevertheless agreed to review the merger, prohibited it (in September 2022) and even fined the two companies (in July 2023) for closing the acquisition without the Commission's green light (this is known as “gun-jumping”): Illumina had to pay €432 million (and GRAIL only €1,000, “as this is the first time [the Commission] imposes a fine for gun-jumping on a target company”).
The companies brought a case against the Commission before the General Court of the EU, which upheld the Commission's decision to agree to review the merger — and hence validated the Commission’s new interpretation of Article 22 EUMR. The companies appealed, and this time the Court annulled the Court's decision as well as the fine, the Commission's decision to agree to examine the merger, and the decision to prohibit the merger.
The fines will be reimbursed by the Commission, and it can be expected that an action for damages will be brought before the General Court, which will probably result in the Commission having to pay damages to the companies.
The significance of this decision should not be understated:
In its judgment, the Court stresses the importance of legal certainty. According to the Court, it is the existence of clear thresholds that gives merger law its necessary predictability.
This is a major setback for the Commission, which will have to find another way of examining killer acquisitions: “(...) we will consider the next steps to ensure that the Commission is able to review those few cases where a deal would have an impact in Europe but does not otherwise meet the EU notification thresholds”, Commissioner for competition Margrethe Vestager commented. In its judgment, the Court suggests several solutions, such as asking Member States to lower their thresholds, or initiating a review of thresholds at EU level.
What We’ve Been Reading
Bruegel has released the new edition of its Memos which spell out the think tank’s policy proposals for the new EU leadership. Entitled ‘Unite, defend, grow’, it is edited by Maria Demertzis, André Sapir and Jeromin Zettelmeyer.
The FT’s Sam Fleming and Jean Pisani-Ferry discuss the challenges of the green transition, the threat of American protectionism and France’s fragile public finances.
This edition was prepared by Augustin Bourleaud, Antoine Ognibene, Nathan Münch, Maxence de La Rochère, Paul Healy and Hana Rajabally. See you next week!