Week Ahead (2 September)

W/C Monday, 2 September – AfD comes first in Thuringia, second in Saxony; government parties perform abysmally  

On Sunday, the eastern German states of Saxony and Thuringia held elections.  The results are particularly troubling for Scholz’s coalition government, as the SPD, Greens, and FDP all performed poorly. The SPD, Scholz's party, won only around 8% of the vote in Thuringia, further diminishing its relevance in the eastern part of the country. In Thuringia, the Greens and FDP failed to meet the 5% threshold needed to secure seats in the state parliament. 

The most recent vote count suggests that in Thuringia, the far-right AfD has secured 32.8% of the vote, making it the leading party in the state with the centre-right Christian Democratic Union (CDU) trailing behind. Conversely, in Saxony, AfD is trailing closely behind the CDU with 30.8% of the vote.  This marks a historic achievement for the far-right party, marking the first time since World War II that a far-right party emerged as the largest in a German state parliament. The BSW, a leftish Eurosceptic party recently-formed by Sahra Wagenknecht, is set to finish third in both states, drawing support away from the far-left (Die Linke) Left Party, particularly in Thuringia. The BSW’s rise represents a new challenge for the Left, which has traditionally been strong in the East but has now faced significant losses to this splinter group. 

Both Thuringia and Saxony, states in the former East Germany, have traditionally exhibited different voting patterns compared to the rest of the country. Discontent with the federal government and growing anti-migration sentiment has fuelled the rise of populist and far-right parties in these regions. The AfD's gains were particularly pronounced among young voters, indicating a growing base of support for the party. 

Despite the AfD's strong polling numbers, it is unlikely that they will be able to form a government without a coalition partner, and all other parties have so far refused to work with them. On the contrary, the BSW could emerge as a kingmaker in both state parliaments. Given its blend of right-wing stances on immigration and left-wing economic policies, BSW might be viewed as a more preferred coalition partner compared to the AfD. 

Looking ahead, the AfD is also leading in the polls for Brandenburg, where state elections will be held on 22 September. The SPD-Greens-FDP federal government coalition continues to be marred by internal discord over inter alia climate legislation and spending cuts. Assuming power three years ago, German Chancellor Olaf Scholz’s coalition had to deal with the consequences of Russia’s invasion of Ukraine, an ensuing energy crisis, and last year’s temporary slip into recession for Europe’s biggest economy.  These results are likely to increase tensions within the governing coalition and increase calls for snap federal elections.  

Tuesday, 3 September – CJEU to rule on whether the EU could review the Illumina-Grail deal under Article 22 of EUMR 

On Tuesday, the European Court of Justice (CJEU), the EU’s top court, will rule on whether the EU could review the Illumina-Grail deal under the Article 22 of the EU Merger Regulation (EUMR). 

The former, a US-based biotech company, had previously attempted to acquire Grail, a cancer-test start-up, under a $7 billion deal.  However, in 2022, the EU antitrust watchdog blocked the deal on concerns that Illumina, after acquiring Grail, would be motivated to impede the latter’s competitors from accessing its early cancer detection tests technology. The proposed transaction did not meet the turnover thresholds of the EU Merger Regulation, and was not notified in any Member State, but met the criteria for referral under Article 22. 

Subsequently, Illumina sued the Commission, arguing that the EU regulator lacks jurisdiction to block the acquisition since Grail has not conducted any business on the continent. In September 2022, Illumina filed an appeal to the CJEU against the ruling of the General Court confirming the EU’s jurisdiction over the deal and has filed another appeal against the Commission’s decision to block the deal. 

In its hearing before the court last year, Illumina defended its appeals (joined cases C-611/22 P and C-625/22 P), claiming that the Commission overstepped its jurisdiction by examining a deal that involved a target (Grail) with no presence or sales in the EU. Illumina’s legal representative told the EU’s highest court that the lower court’s ruling ‘’unjustifiably extends the Commission’s powers’’, resulting in a ‘’disproportionate burden on parties with below threshold mergers’’.  Nicholas Khan, representing the Commission, argued that Illumina was essentially challenging the powers granted to the EU watchdog under Article 22 and seeking a rewrite of the regulation. The Commission defended its decision to block the Illumina-Grail deal, asserting that it aimed to prevent potential "killer acquisitions" where companies acquire innovative rivals with low or zero revenue. Subsequently, in March, the EU's top court’s Advocate General Nicholas Emiliou opined that the EU executive should not have utilised it to review Illumina’s acquisition of Grail which was ultimately vetoed, questioning the legitimacy of using Article 22. 

Earlier this year, the outgoing Competition Commissioner Margrethe Vestager argued once again in favour of the proactive use of merger rules, including revisiting deals that do not meet the traditional financial thresholds for review.  However, a new Competition Commissioner will take over in the coming months and it remains unclear whether Vestager’s replacement will espouse the same approach.  Therefore, Illumina’s case is particularly significant as it represents a legal challenge to the procedural changes introduced by the EU in its merger review process and could also impact the Commission’s approach towards this kind of merger deals in its next mandate. 

Tuesday, 3 September – UK Chancellor Rachel Reeves takes questions in the House of Commons 

This week, UK Chancellor Rachel Reeves will face questions in the House of Commons, two months before a challenging budget announcement where she plans to raise taxes, cut spending, and tighten welfare policies. Despite stronger-than-expected economic growth in the first half of 2024, with GDP growing by 0.6% between April and June, the UK's public finances remain in poor shape, with government borrowing significantly higher than anticipated. In July, government borrowing reached £3.1 billion, more than double the amount from the same month a year earlier, and the deficit was the highest for a July in three years. 

Reeves has already started announcing unpopular measures, including scrapping winter fuel payments for most pensioners and shelving infrastructure investments in roads, rail, and hospitals as part of a broader strategy to reduce borrowing. Even with the UK being the fastest-growing economy in the G7 in the first half of 2024, the Treasury has warned that this recovery merely offset the economic contraction in the latter half of 2023, where the economy technically fell into recession with two consecutive quarters of negative growth. 

Moreover, the Office for Budget Responsibility (OBR) is expected to revise its growth forecast upwards from 0.8% to potentially 1% for the year as a whole. However, Reeves will likely express cautiousness in her interaction with MPs on Tuesday and continue emphasising the dire financial situation to justify the need for the tough measures planned for the 30 October Budget, the first to be unveiled by a Labour government since 2010. 

Thursday, 5 September – CJEU General Advocate to publish legal opinion on case regarding Google’s Android market dominance in Italy 

On Thursday, the European Court of Justice Advocate General Laila Medina will publish her legal opinion on a case (C-233/23) regarding Google’s market dominance in Italy, following a request for a preliminary ruling lodged by the Consiglio di Stato (State Council). A request for a preliminary ruling is the procedure where national courts submit questions to the CJEU regarding the interpretation or validity of European law.  

The key questions revolve around whether Google's refusal to allow the Enel X Italia JuicePass app interoperability with Android Auto constitutes an abuse of Google's dominant market position under Article 102 of the Treaty on the Functioning of the European Union (TFEU). This request for a preliminary ruling is directly linked to an earlier 2021 case where the Italian Competition Authority imposed a fine of €100 million on Google. The authority argued that Google abused its dominant position by not permitting the JuicePass app, which facilitates a range of electric vehicle charging services, to function on Android Auto. According to the authority, this exclusion limited consumer choice and technological progress, favouring Google’s own mapping services, which could extend to include similar functionalities.  Although the CJEU advocate general’s opinion will be non-binding, the CJEU tends to follow the recommendations of the Advocate General.   

Thursday, 5 September – EU Telecoms Ministers to discuss their response to the Commission's White Paper on the bloc’s digital infrastructure needs 

EU Telecoms Ministers will meet on 5 September to discuss their response to the European Commission’s White Paper on “How to master Europe’s digital infrastructure needs”.  

In February the White Paper highlighted inter alia that the ‘’fragmented nature of the European telco market’’ with the existence of around 50 mobile operators over 100 fixed operators in the bloc, has been ‘’one reason for the smaller size of European investment opportunities’’.  Although the emphasis was mainly on cross-border consolidation, it is well understood that in-market consolidation would precede cross-border consolidation.  

The Hungarian Presidency has been tasked with finalising EU Member States’ response which forms the basis of the this week's discussion.  The Draft Council Conclusions address inter alia the issue of market consolidation amid growing industry calls for a more flexible regulatory approach to telecom mergers. More specifically, the text stresses the importance of considering the impact of pan-European operators on the competitiveness of markets across different Member States, particularly for operators unable or unwilling to operate on such a scale. It stresses that operators of all sizes should have opportunities within the single market and be able to contribute to competition. It also underlines that market consolidation should be driven by market forces and assessed by relevant authorities with consideration of its potential impact.  

Furthermore, the Hungarian Presidency is less supportive of the European Commission's push for greater coordination in spectrum management across Member States. In its White Paper, the Commission has called for a more coordinated spectrum management to enhance connectivity across the EU, whereas the Hungarian response suggests a more cautious approach. Member States are not particularly keen on the idea of a centralised spectrum market as selling off spectrum rights at a national level is an important source of income for many.  

EU Ministers will give their input to Hungary’s draft conclusions on Thursday. The direction of travel will also likely be influenced by Mario Draghi’s high-anticipated report on the EU competitiveness, likely to be published next week.