According to the European Commission ("EC"), an increasing number of competitively significant transactions have evaded merger notification because one or both of the transacting parties (but typically a small, high value target) did not meet EC or any Member State filing thresholds. Filing thresholds typically are based on sales in a country. To address this perceived concern, the EC issued new guidelines ("EC Guidelines") that expand the types of transactions subject to its "upward referral mechanism," which permits EU Member State National Competition Authorities ("NCAs") to refer transactions to the EC for antitrust review. Effective immediately, the EC Guidelines encourage NCAs to refer for EC antitrust review acquisitions involving companies with little or no sales in the EC or any Member State if the acquisition target might be competitively significant in the future.

Unlike EC and NCA merger control thresholds, the new referral rules are subjective. As a result, it may be more difficult to predict whether the EC will review certain deals, even after closing. Although the referral rules apply equally to all industries, the EC warns that the greatest impact will be felt in the tech, biotechnology, and pharmaceutical sectors where acquisitions of small targets are common and the EC has focused its attention in recent years.