Pre-Merger Notification Survey EUROPEAN UNION Uría Menéndez (Lex Mundi member firm for Spain) CONTACT INFORMATION Edurne Navarro Varona and Luis Moscoso del Prado Uría Menéndez European Union Telephone: 32.2.639.6464 Email: env@uria.com and lmp@uria.com www.uria.com 1. Is there a regulatory regime applicable to mergers and similar transactions? Yes. The regulatory regime applicable to mergers of Community dimension is set out in the following texts: Council Regulation (EC) n 139/2004 on the control of concentrations between undertakings (the Merger Regulation ); and Commission Regulation (EC) n 802/2004 implementing the Merger Regulation (the Implementing Regulation ). In addition, in order to better explain how these rules apply, the European Commission (the Commission ) has published a set of interpretative notices and best practice guidelines regarding both substantial and procedural merger control issues. Of particular relevance is the Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings. The above legal texts are available on the Commission s website: http://ec.europa.eu/competition/mergers/legislation/legislation.html
The EU merger control regime is applicable in the European Economic Area, which comprises the territory of the 27 EU Member States and of 3 EFTA Members States (Iceland, Liechtenstein and Norway). 2. Identify Applicable National Regulatory Agency/Agencies. National regulatory agencies are not competent for the application of EU merger control rules. When a merger is of Community dimension, the competence to review that transaction lies exclusively with the Commission ( one stop shop principle ). It should be noted however, that the Commission usually carries out its analysis in close and constant liaison with national competition authority. Moreover, national authorities may, in case of a referral of a merger of Community dimension by the Commission, apply their own national merger control rules to review the whole or part of such transaction (see below). 3. Is there a supranational regulatory agency (e. g., the European Commission) that has, or may have exclusive competence? If so, indicate. Yes. The Merger Regulation is enforced by the Directorate-General for Competition of the Commission, located in Brussels. As indicated, the Commission has exclusive competence over the application of the Merger Regulation. The Commission and the national competition authorities form together a network of public authorities, the European Competition Network, applying their respective competences in close cooperation and using arrangements for information sharing and consultation with a view to ensuring that a case is dealt with by the most appropriate authority. 4. Are there pre-merger filing requirements; if so, where are they published? Concentrations with a Community dimension shall be notified to the Commission prior to their implementation. The Commission may impose fines up to 10% of the aggregate turnover of the undertaking concerned where they, intentionally of negligently fail to notify a concentration and/or implement it before clearance.
Pre-notification contacts between the notifying parties and the Commission are highly recommended in order to facilitate the subsequent review process. These contacts serve to discuss issues such as jurisdictional and legal aspects, the scope of the information to be provided, the potential competition concerns identified, the remedies proposed by the parties to eliminate such concerns, etc. 5. What kinds of transactions are "caught" by the national rules? (Identify any notable exceptions) Transactions amounting to a concentration within the meaning of the Merger Regulation are caught by EU merger control rules. In accordance with the latter, a concentration shall be deemed to arise where a change of control on a lasting basis results from: the merger of two or more previously independent undertakings or parts of undertakings; or the acquisition of direct or indirect control of the whole or parts of one or more other undertakings. The creation of a joint venture performing on a lasting basis all the functions of an autonomous economic entity also constitutes a concentration. The notion of control, as interpreted by the Commission, refers to the possibility of exercising decisive influence over an undertaking. 6. Is there a "size of transaction" threshold? No. 7. Is there a "size or turnover of the parties" test; if so, what is it and how are size and turnover to be calculated? Yes. A concentration has a Community dimension and must be notified to the Commission where: the combined aggregate worldwide turnover of all the undertakings concerned is more than EUR 5 billion; and the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than EUR 250 million, unless each of the undertakings concerned achieves more than two thirds of its aggregate Community-wide turnover within one and the same Member State. A concentration that does not meet the above thresholds has nevertheless a Community dimension where: the combined aggregate worldwide turnover of all the undertakings concerned is more than EUR 2.5 billion; and in each of at least three Member States, the combined aggregate turnover of all the undertakings concerned is more than EUR 100 million; and
in each of these three Member States, the aggregate turnover of each of at least two of the undertakings concerned is more than EUR 25 million; and the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than EUR 100 million, unless each of the undertakings concerned achieves more than two thirds of its aggregate Community-wide turnover in one and the same Member State. The turnover to be taken into account to calculate the above mentioned thresholds comprises the amounts derived by the undertakings concerned (including, in certain cases, the whole of the corporate groups to which they belong) in the preceding financial year from the sale of products and the provision of services to third parties after deduction of sales rebates and of value added tax and taxes directly related to turnover. Intra-group turnover (i.e. turnover generated between the companies of the same group) is excluded from that calculation. Specific calculation rules are foreseen in the case of credit and financial institutions and insurance companies. The Merger Regulation is based on the principle of one-stop shop whereby, once a concentration is of Community dimension and therefore falls within the scope of the Merger Regulation and under the Commission s review, national authorities are precluded from applying their own national competition laws to the said transaction. It is nevertheless possible under certain conditions: for the Commission to refer to a Member State concentrations with a Community dimension which i) significantly threaten to affect competition in a distinct market within that Member State, or ii) affect competition in a distinct market within the said Member State which does not constitute a substantial part of the common market. for a Member State to refer to the Commission a concentration which does not have a Community dimension but which affects trade between Member States and threatens to significantly affect trade within its territory. for the undertakings concerned to request referrals from or to 8. Is geographic scope/national market effect of transaction an issue with respect to filing or approval requirements? If so, specify. The scope of application of the Merger Regulation is defined according to the geographical area of activity of the undertakings concerned and is limited by quantitative thresholds in order to cover concentrations with a Community dimension. 9. Is the filing voluntary or mandatory? What are the penalties for noncompliance?
Filing is mandatory. As indicated, the Commission may impose fines of up to 10% of the aggregate turnover of the undertakings concerned where they, intentionally of negligently, fail to notify a concentration and/or implement it before clearance. 10. Time in which a filing must be made. There are no specific deadlines within which filing a notification. However, concentrations with a Community dimension must be notified to the Commission prior to their implementation and following the conclusion of the agreement between the parties, the announcement of a public bid or the acquisition of a controlling interest in a company or business. Notifications may also be made where the undertakings concerned demonstrate to the Commission a good faith intention to conclude an agreement or, in the case of a public bid, where they have publicly announced their intention to make such bid, provided that the intended agreement or bid would result in a concentration with a Community dimension. As indicated above, pre-notification contacts between the notifying parties and the Commission are highly recommended in order to facilitate the subsequent review process. 11. Form and Content of Initial Filing. Notifications must be made in any of the EU official languages in accordance with the Form which is annexed to the Implementing Regulation ( Form CO ). However, concentrations which do not entail any competition concerns can be notified under a simplified review procedure ( Short Form CO ). The filing requirement can be onerous and, depending on the number of issues raised by the transaction, time consuming. In addition to detailed information concerning the parties and the groups to which they belong and the transaction, the notification may require a detailed analysis of: the relevant horizontal markets where the acquirer and the target company have a combined market share of 15% or more; the relevant vertical markets, both upstream and downstream, where at least one of the parties has a market share of 25% or more; other markets in which any of the parties has a market share larger than 25% (without any vertical relationships) and the other party is a potential competitor, holds important intellectual property rights for that markets or is present in a neighboring market.
It should be noted that the Commission is increasingly prepared to reject notifications for incompleteness and to stop the clock pending receipt of more complete information. In that case, the term during which the Commission must review the notified concentration shall only begin after the receipt of the complete information. The Commission may impose fines not exceeding 1% of the aggregate turnover of the undertakings concerned when they supply, intentionally or negligently, incorrect of misleading information to the Commission. 12. Are filing fees required? No filing fees are required. 13. Is There An Automatic Waiting Period? If so, specify. Yes. Notified concentrations cannot be implemented until a final clearance decision has been adopted ( suspension obligation ). However, the Commission may, on reasoned request, grant a derogation from that suspension obligation. Such a derogations is nevertheless difficult to obtain. In deciding whether to grant that derogation, the Commission takes into account, inter alia, the effects of the suspension on one or more undertakings concerned by the concentration or on a third party and the threat posed by the concentration to competition. Such a derogation may be made subject to conditions and obligations in order to ensure conditions of effective competition. A derogation may be applied for and granted at any time in the review process. 14. Are There Time Limits Within Which The Regulatory Agency Must Act? Can they be shortened by the parties or be extended by the regulatory agency? The review process can comprise one or, as the case may be, two phases (i.e. Phase I and Phase II). During Phase I, the Commission must clear the transaction within 25 working days following the receipt of the notification. That period shall be increased to 35 working days where the undertakings concerned offer commitments with a view to rendering the concentration compatible with the common market. If, after this initial review, the Commission considers that the concentration raises serious doubts as to its compatibility with the common market, it shall initiate Phase II proceedings, during which an in-depth investigation of the effects of the transaction in the affected markets shall be carried out. The Commission must take a final decision as to the approval (with or without conditions) or the prohibition of the transaction within no more than 90 working days of the date on which Phase II proceedings are initiated. This time limit can be extended in the following cases:
It shall be extended to 105 days where the undertakings concerned offer commitments with a view to rendering their concentration compatible with the common market, unless these commitments have been offered less than 55 working days after the initiation of Phase II proceedings. It can also be extended i) provided that the notifying parties make a request to that effect not later than 15 working days after the initiation of the Phase II proceedings, or ( ii) by the Commission with the agreement of the notifying parties at any time following the initiation of Phase II proceedings. The total duration of any extension or extensions shall not exceed 20 working days. The time limits set out for Phase and Phase II can exceptionally be suspended where, owing to circumstances for which one of the undertakings involved in the concentration is responsible, the Commission has to request additional information by decision or order an inspection at the premises of a company (please see below). 15. What is the substantive test for clearance? The test for clearance is based on the principle that a concentration which does not significantly impede effective competition in the common market or in a substantial part of it, in particular as a result of the creation or the strengthening of a dominant position, shall be declared compatible with the common market. 16. What are the common Post-Filing Procedures: Requests for further information, etc? In order to carry out the duties assigned to by the Merger Regulation, the Commission can require the undertakings concerned by the transaction, as well as other companies and associations of undertakings, to provide all necessary information in relation to the notified concentration. The Commission may also interview any natural or legal person who consents to be interviewed for the purpose of collecting information relating to the subject matter of an investigation. Finally, the Commission or the competent authorities of the Member State, at the request of the Commission, may conduct all necessary inspections of undertakings and associations of undertakings and have the power: to enter any premises, land and means of transport of undertakings and associations of undertakings; to examine the books and other records related to the business, irrespective of the medium on which they are stored; to take or obtain in any form copies of or extracts from such books or records; to seal any business premises and books or records for the period and to the extent necessary for the inspection;
to ask any representative or member of staff of the undertaking or association of undertakings for explanations on facts or documents relating to the subject matter and purpose of the inspection and to record the answers. During Phase I proceedings, the Commission will normally contact third parties such as competitors, suppliers or customers in order to obtain their views on market definition and on the overall effect of the transaction. Phase II proceedings are in principle much more onerous with regard to the amount of information to be provided to the Commission. The parties must for instance respond to a Commission s statement of objections and to numerous requests for information. In order to defend their case, the parties may ask to have access to the Commission s file and require to express their views at the occasion of an oral hearing. Before taking a final decision, the Commission shall consult the Advisory Committee, a body composed by representatives of the competent authorities of the Member States. The Commission publishes a summary of all notifications received in the Official Journal of the EU, which provides the opportunity for third parties to express their opinions and views on the likely impact of the transaction. Third parties, in particular competitors of the merging parties, often play a significant role in the merger review process. 17. Describe the sanctions for not filing or filing and incorrect/incomplete notification. As indicated above, the Commission may impose fines not exceeding 10% of the aggregate turnover of the undertakings where, either intentionally or negligently, they fail to notify a concentration. The Commission may also impose fines not exceeding 1% of the aggregate turnover of the undertaking where, either intentionally or negligently, they supply incorrect or misleading information in the notification. In addition, the Commission may impose periodic penalty payments not exceeding 5% of the average daily aggregate turnover of the undertakings for each working day of delay in order to compel them to supply the requested information in a complete and correct manner. 18. Describe the procedures if the agency wants to challenge the transaction? Please see above reply to question on Phase II proceedings.
Final decisions adopted by the Commission may be challenged by the parties to the concentration before the Court of First Instance of the European Communities and, ultimately, before the Court of Justice of the European Communities. Third parties may also challenge the Commission final decisions provided that they prove that they are directly and individually concerned by such acts. 19. Describe the penalties applicable to the implementation of a merger before clearance or of a prohibited merger? The Commission may impose fines up to 10 % of the aggregate turnover of the undertakings where, either intentionally or negligently, they implement a concentration before clearance or implement a concentration declared incompatible with the common market. 20. Describe, briefly, your assessment of the regulatory agency's current attitudes/activities. Most proposed concentrations notified to the Commission are cleared within five weeks (during Phase I investigation). A small proportion of notified concentrations are subjected to an in-depth Phase II investigation, whereas outright prohibitions are very rare. 21. Other Important Information: