A merger between movie theatres cleared by the Luxembourg Competition Authority applying the failing firm doctrine

In the Utopia case (Decision of 17 June no. 2016-FO-04) the Luxembourg Competition Authority (LCA) considered whether the largest movie theatre chain of the country, Utopia, abused its dominant position by acquiring its next competitor, Ciné Belval. As the Luxembourg Competition Law does not provide for a merger control regime, the competition impact of mergers is assessed on the basis of Article 102 TFEU or the corresponding national provisions. Consistently with the Continental Can judgment of the CJEU (C-6/72), the LCA held that a merger may result in abusive conduct when post-merger the dominant position of the merged entity is of such magnitude to substantially restrain competition. That appears to be the case with Utopia that would have a quasi-monopoly position with the acquisition of Ciné Belval. However, relying on the failing firm doctrine, the LCA ruled out that Utopia had abused its dominance purchasing Ciné Belval. In the LCA view the doctrine also applied to Article 102 TFEU investigations targeting mergers and that Utopia/Ciné Belval merger satisfied the three-limb test for the application of the doctrine. Absent the merger, the loss-making Ciné Belval would have exit the market. In conclusion, though the Utopia/Ciné Belval merger may be considered as an abusive conduct, no negative effects on competition could be established and the LCA closed the proceedings with a non-infringement decision. 

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