The European Commission welcomes today's judgment by the General Court (case T-175/12) which fully upholds the Commission's 2012 decision under the EU Merger Regulation to prohibit the proposed merger between Deutsche Börse and NYSE Euronext.
The judgment is important because it confirms that the merger would have eliminated healthy competition between trading and clearing platforms in Europe and that the Commission acted properly by prohibiting it. The merger would have caused significant harm to worldwide users of European financial derivatives and to the European economy as a whole.
In February 2012, the Commission prohibited the proposed merger between Deutsche Börse and NYSE Euronext. The Commission assessed the transaction's effects on competition on the markets for exchange traded derivatives based on European financial underlyings, namely European interest rate, single stock equity and equity index derivatives. Deutsche Börse and NYSE Euronext competed in these markets through their derivatives exchanges Eurex and Liffe, respectively.
On the basis of a broad range of evidence, the Commission found that so-called Over-the-Counter (OTC) derivatives based on the same financial underlyings were not a competitive constraint, contrary to what the merging companies argued. The Commission concluded that Eurex and Liffe compete head-to-head and are each other's closest competitors for European financial derivatives. The merger would therefore have resulted in a near-monopoly on these markets. Moreover, the Commission highlighted the difficulties for new competitors to enter the market, since these derivatives contracts can only be cleared by Deutsche Börse's or NYSE Euronext's integrated clearing houses (a vertical silo system). The merger would also have eliminated the closest source of potential competition. The efficiencies resulting from the proposed merger were not considered sufficient to outweigh the harm stemming from the monopoly that would have been created. The remedies proposed by the companies were insufficient to dispel these concerns.
The General Court has today fully confirmed the Commission's findings. The GC held, in particular, that: The Commission had correctly concluded that OTC derivatives were not in the same market as exchange-traded derivatives, and hence that the merger would have led to a near-monopoly.
- The Commission had correctly assessed the efficiencies and concluded that these were not sufficient to outweigh the harm stemming from the transaction.
- The Commission had correctly demonstrated that the remedies submitted were inadequate.
Today's judgment thereby confirms the Commission's general approach in analysing the markets concerned and vindicates the Commission's commitment to ensuring that financial markets in Europe operate in an open and competitive space.