Malta: Merger Control

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This country-specific Q&A provides an overview to merger control laws and regulations that may occur in Malta.

It will cover jurisdictional thresholds, the substantive test, process, remedies, penalties, appeals as well as the author’s view on planned future reforms of the merger control regime.

This Q&A is part of the global guide to Merger Control. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/merger-control

  1. Overview

    Mergers and acquisitions are regulated by the Control of Concentrations Regulations 2003 (S.L. 379.08) (the “Regulations”), a subsidiary legislation issued in terms of the Competition Act 1994 (Chapter 379 Laws of Malta) (the “Act”).

    The Regulations establish the Office for Competition (the “OFC”), an entity falling within the Malta Competition and Consumer Affairs Authority and headed by the Director General (Competition) (“DG”), as the authority entrusted to review and, where applicable, authorise concentrations falling within the remit of the Regulations. Appeals from any decisions made by the OFC may be appealed before the Competition and Consumer Appeals Tribunal.

    Firstly, one needs to establish if a notification to the OFC is necessary. A notification is required when the following criteria exist:

    • Two or more previously independent undertakings merge or one or more undertakings (directly or indirectly) acquire control of all or part of one or more other undertakings; and
    • The combined aggregate turnover in Malta in the preceding financial year of the undertakings concerned exceeds €2,329,273.40 and each of the undertakings concerned had a turnover in Malta equivalent to at least 10% of this combined aggregate turnover.

    The creation of a ‘full functioning’ joint venture performing on a lasting basis all the functions of an autonomous economic entity may also be considered a concentration for the purposes of the Regulations.

    If a notification is necessary, this must be made prior to implementation, and within 15 working days of the:

    • Conclusion of the agreement; or
    • Announcement of the public bid; or
    • Acquisition of controlling interest.

    The DG may allow notification to occur after implementation if justified. Moreover, a short form notification is allowed in the case of an acquisition of joint control by two or more undertakings where the turnover of the joint venture and/or the turnover of the contributed activities, is less than €698,812.02 in the Maltese territory and the total value of assets transferred to the joint venture is less than €698,812.02 in the Maltese territory.

    Once notified, the OFC shall review the concentration to establish if it will lead to a substantial lessening of competition in Malta.

    The mandatory notification turnover thresholds are remarkably low when considering current economic trends and market realities in Malta. The same applies to the short form notification thresholds.

    The DG must issue a decision within 6 weeks of notification, extended to 8 weeks if the DG reverts by the fifth week with suggested modifications to render an otherwise unlawful concentration, lawful. These timeframes may be deemed too long and may frustrate the parties involved in the concentration.

  2. Is mandatory notification compulsory or voluntary?

    Where the thresholds discussed in the overview are exceeded, a concentration is deemed to exist and notification is mandatory. Notification must be made prior to implementation and within 15 working days of conclusion of the agreement, announcement of the public bid or acquisition of a controlling interest.

    A simplified, yet still mandatory, notification procedure is available in the following cases:

    • Where the turnover thresholds mentioned in Point 1.1 in relation to the short form notification exist;
    • In case of mergers or acquisitions that do not involve horizontal overlap or vertical links between the parties to the concentration;
    • In case of mergers or acquisitions that involve horizontal overlaps or vertical links but their combined market share does not exceed 15% or 25% respectively.
  3. Is there a prohibition on completion or closing prior to clearance by the relevant authority? Are there possibilities for derogation or carve out?

    A concentration may not be implemented before its notification or, where applicable, until it has been declared lawful pursuant to a decision taken by the DG. However, the DG may grant a derogation upon a reasoned request made before notification or after the transaction, after taking into account inter alia the effects of the suspension on one or more undertakings concerned by a concentration or on a third party and the threat to competition posed by the concentration. Such derogation may be granted subject to conditions and obligations established by the DG to ensure conditions of effective competition.

    The above general prohibition shall not prevent the implementation of a public bid which has been notified to the DG provided that the acquirer does not exercise the voting rights attached to the securities in question or does so only to maintain the full value of those investments and on the basis of a derogation granted by the DG.

    The Regulations and Act make no reference or allowances for carve outs.

  4. What are the conditions of the test for control?

    The Regulations define control as having the possibility of exercising decisive influence on an undertaking, in particular:

    • through ownership or the right to use all or part of the assets of an undertaking; or
    • through rights or contracts which confer decisive influence on the composition, voting or decisions of the organs of an undertaking; provided that even persons or undertakings not holding such rights or entitled to such rights under the contract concerned are deemed to have acquired control if they have the power to exercise the rights deriving therefrom.

    The assessment of control is qualitative, not quantitative. Thus the DG will evaluate the potential existence of control on a case-by-case basis.

  5. What are the conditions on minority interest in your jurisdiction?

    Minority interests are not expressly caught by the merger control regime applicable in Malta.

  6. What are the jurisdictional thresholds (turnover, assets, market share and/or local presence)?

    The undertakings considered for the purposes of calculating aggregate thresholds are those participating directly in the transaction, i.e. the acquiring entity and target, or each of the merging companies or those involved in the joint venture. The Regulations also require the turnover of the following undertakings to be taken into account:

    - Undertakings in which the participating undertaking concerned, directly or indirectly:

    • owns more than half the capital or business assets, or
    • has the power to exercise more than half the voting rights, or
    • has the power to appoint more than half the members of the board of directors or other body or bodies legally representing the undertakings; or
    • has the right to manage the undertakings’ affairs;
    • - Parent undertakings of the participating undertaking which exercise any of the rights or powers mentioned above;

      - Subsidiary undertakings which share a parent undertaking with the participating undertaking (i.e. ‘sister companies’), and which parent undertaking exercises over said subsidiary any of the rights or powers mentioned above;

      - Undertakings in which any two or more of the abovementioned undertakings exercise any of the rights or powers mentioned above;

      The thresholds affect all parties concerned, as evidenced by the fact that each of the undertakings concerned must have a turnover in Malta of at least 10% of the combined aggregate turnover. If such turnover threshold is not reached, the transaction would fall outside the scope of the Regulations.

      These threshold requirements apply irrespective of the product/service markets which they relate to. It can thus be assumed that all turnover is taken into account for notification purposes, although the DG will then consider the relevant product/service market when determining if the concentration substantially lessens competition in Malta. If the companies, although meeting the thresholds, are deemed to operate in different markets and thus do not substantially lessen competition in Malta, then the concentration will be accepted.

      Aggregate turnover comprises the amount derived by each of the undertakings concerned in the financial year preceding the transaction, taking into account the sale of products and the provision of services to any other undertaking not being a group entity. The turnover of each undertaking is then added to establish the combined aggregate turnover.

      The Regulations do not provide for periodical updating of the thresholds. Nor do they stipulate different thresholds according to industry or sector.

  7. How are turnover, assets and/or market shares valued or determined for the purposes of jurisdictional thresholds?

    Thresholds are determined by reference to ‘aggregate turnover’, which is defined as the amount derived by each of the undertakings concerned in the preceding financial year from the sale of products and the provision of services to other undertakings or consumers falling under the undertakings’ ordinary activities after deduction of sales rebates and of value added tax and other taxes directly related to turnover. Sale of products and provision of services to group entities is however exempted.

    The Regulations stipulate that the figures to be taken into account for the calculation of turnover shall be those arising in the financial year immediately preceding the transaction. The Regulations exclude asset values from being considered for threshold purposes.

    In determining the geographical allocation of turnover, the OFC adopts the principles established in the Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (2008/C 95/01), which establishes the general principle that turnover should be attributed to the place where the customer is located.

    Asset-based thresholds are not provided for in the Regulations.

    Thresholds are not based on market share.

  8. Is there a particular exchange rate required to be used for turnover thresholds and asset values?

    Maltese law is silent on the exchange rates to be used when calculating turnover arising in Malta which is not denominated in Euro. The OFC’s policy is to invite the notifying undertaking to submit its calculations and explanations as to the rate adopted, which is generally the historic rate issued by the European Central Bank as at the date of the preceding financial year. The OFC will then cross-check this rate and confirm if acceptable or not.

  9. Do merger control rules apply to joint ventures (both new joint ventures and acquisitions of joint control over an existing business?

    The Regulations stipulate that the creation of a ‘full functioning joint venture’, that is a joint venture performing on a lasting basis all the functions of an autonomous economic entity, shall be considered a concentration for the purposes of the Regulations. In such situations the turnover threshold test does not apply, as the determining criterion is the creation of the joint venture itself.

    With regard to that the acquisition of joint control of an entity, whether direct or indirect, such transaction would form a concentration only if the turnover thresholds as discussed in Point 1.1 above are met. Moreover, where there is an acquisition of joint control by two or more undertakings and the turnover of the joint venture and/or the turnover of the contributed activities arising in Malta is less than €698,812.02, and the total value of assets transferred to the joint venture in Malta is less than €698,812.02, a short form notification and simplified procedure in terms of the Regulations is allowed.

    The undertakings to be taken into account for considering the thresholds shall be the same as those identified above, that is the entities participating directly in the transaction and any group entities which are related under the conditions outlined above.

    The turnover thresholds can be satisfied by any undertaking involved in the transaction, including either of the participating parent companies. This applies even where the joint venture is not in itself active in Malta. The consequences of not filing a notification in such instances shall be the same as those identified in the Penalties section discussed below.

    A newly created joint venture is automatically considered a concentration if it performs on a lasting basis all the functions of an autonomous economic entity. The default rule in such cases is that it is subject to the notification requirements established in the Regulations.

    By exception to the above, where the joint venture has as its object or effect the coordination of the competitive behaviour of undertakings that remain independent, such concentration shall be appraised in terms of the prohibited agreements and concerted practices provisions that are found in the Act, so as to establish whether the operation is lawful. In making this appraisal, the DG shall take into account:

    • whether two or more parent companies retain to a significant extent activities in the same market as the joint venture or in a market which is downstream or upstream from that of the joint venture or in a neighbouring market closely related to this market; and
    • whether the coordination which is the direct consequence of the creation of the joint venture affords the undertakings concerned the possibility of eliminating competition in respect of a substantial part of the products or services in question.

    As discussed, the acquisition of control by one or more undertakings of the whole or part of another undertaking (i.e. an existing business) would only qualify as a concentration if the turnover thresholds are met by any involved entity. Where a new JV is created, this is automatically a concentration and would need to be assessed in terms of the above to establish if it is notifiable and if it should be assessed in terms of the prohibited agreements and concerted practices provisions of the Act.

  10. In relation to “foreign-to-foreign” mergers, do the jurisdictional thresholds vary?

    Under Maltese law, there is no distinction between local and foreign-to-foreign transactions. The latter are caught by Maltese law if the minimum threshold requirements of turnover arising in Malta are met.

  11. For voluntary filing regimes (only), are there any factors not related to competition that might influence the decision as to whether or not notify?

    Not applicable.

  12. Additional information: Jurisdictional Test

    Not applicable.

  13. What is the substantive test applied by the relevant authority to assess whether or not to clear the merger, or to clear it subject to remedies?

    The DG will determine if the concentration might lead to a substantial lessening of competition in Malta by taking into account, inter alia:

    • the need to maintain and develop effective competition in Malta in view of, among other things, the structure of the markets concerned and the actual or potential competition from undertakings located either within or outside Malta;
    • whether the business of a party to the concentration has failed or is likely to fail;
    • the nature and extent of development and innovation in a relevant market;
    • the market position of the undertakings concerned and their economic power, the alternatives available to suppliers and users, their access to markets, any legal or other barriers to entry;
    • supply and demand trends for the relevant goods and services, the interests of the intermediate and ultimate consumers, and the development of technical and economic progress.

    Concentrations that bring about or are likely to bring about gains in efficiency that will be greater than and will offset the effects of any lessening of competition resulting from or likely to result from the concentration shall not be prohibited if the undertakings concerned prove that such efficiency gains cannot otherwise be attained, are verifiable and likely to be passed on to consumers in the form of lower prices, or greater innovation, choice or quality of products or services.

  14. Are non-competitive factors relevant?

    Maltese law and OFC practice do not contemplate any other factors which are considered when the DG is conducting the evaluation.

  15. Are there different tests that apply to particular sectors?

    There are no additional sector-specific tests which are applied.

  16. Are ancillary restraints covered by the authority’s clearance decision?

    While ancillary restraints are not directly contemplated in the Regulations or the Act, the Concentration Notification Form (CN Form) which is filed with the OFC does mention that if the parties to the concentration, and/or other involved parties (including the seller and minority shareholders), enter into ancillary restrictions directly related and necessary to the implementation of the concentration, these restrictions may be assessed in conjunction with the concentration itself. Moreover the notifying entity is requested to identify each ancillary restriction as found in the agreements submitted together with the notification, and to explain why these are directly related and necessary to the implementation of the concentration.

  17. What is the earliest time or stage in the transaction at which a notification can be made?

    The notification can be made immediately upon the occurrence of any of the events outlined in above. Moreover, the OFC encourages pre-notification meetings to ensure a smooth transaction process.

  18. For mandatory filing regimes, is there a statutory deadline for notification of the transaction?

    Concentrations shall be notified to the DG prior to their implementation and within 15 working days following the conclusion of the agreement, the announcement of the public bid, or the acquisition of a controlling interest.

  19. What is the basic timetable for the authority’s review?

    The OFC’s procedure is divided into 2 phases. During Phase I, the DG shall examine the notification and within 6 weeks either:

    • Conclude that the notified concentration falls outside the scope of the Regulations; or
    • Conclude that a concentration, although within the scope of the Regulations, does not raise serious doubts about its lawfulness, declare it lawful and include any restrictions which may be required for the implementation of the concentration; or
    • Conclude that a concentration is within the scope of the Regulations and initiate proceedings since it raises serious doubts as to its lawfulness.

    This period may be increased to 8 weeks where undertakings submit commitments (by the fifth week from date of notification) so as to provide comfort to avoid the concentration being classified as raising serious doubts. In such cases, undertakings may also request that the running of the periods mentioned above be suspended for a period of three weeks to discuss a new or substantially revised commitment proposal but it shall be at the discretion of the Director General whether or not to accede to this request.

    Phase II applies to those instances where a concentration is deemed to raise serious doubts as to its lawfulness. In such cases, the DG shall within 4 months:

    • Declare a concentration lawful subject to certain conditions;
    • Declare a concentration unlawful;
    • In the case of a premature implementation, order the dissolution of the merger or cessation of joint control;
    • If information provided to the DG is found to be incorrect or there is a breach of commitment, revoke a clearance decision previously issued.

    The Regulations also provide for a simplified procedure in the case of certain concentrations, as follows:

    • Acquisition of joint control by two or more undertakings and the turnover of the joint venture and/or the turnover of the contributed activities, is less than €698,812.02 in the Maltese territory and the total value of assets transferred to the joint venture is less than €698,812.02§ in the Maltese territory;
    • Mergers or acquisitions that do not involve horizontal overlap or vertical links between the parties to the concentration;
    • Mergers or acquisitions that involve horizontal overlaps or vertical links but their combined market share does not exceed 15% or 25% respectively.

    If the Office considers that the concentration qualifies for a simplified procedure it shall issue a decision within 4 weeks from notification.

  20. Under what circumstances the basic timetable may be extended, reset or frozen?

    The Regulations provide that, where information submitted with the notification is incomplete, the 6 week period mentioned in Point 5.3 shall commence upon receipt of the complete information.

    In addition to the extensions and suspension which may be requested as discussed in Point 5.3, undertakings may, where asked to provide commitments, request by no later than 3 months from initiation of proceedings that the period be suspended for up to 1 month so as to allow the undertaking to duly consider the commitments.

    The DG also has to right to suspend the periods discussed above where:

    • Information requested by the DG from the notifying party has not been supplied in full within the time limit fixed by the DG;
    • Information requested by the DG from a third party has not been supplied in full within the time limit fixed by the DG due to some reason pertaining to the notifying party;
    • The notifying party or another involved party has refused to submit to an investigation deemed necessary by the DG or to cooperate in the carrying out of such an investigation;
    • the notifying parties have failed to inform the DG of material changes in the facts contained in the notification.

    Suspensions in terms of the above shall be made from the period of a request for information to the receipt of complete information, from the period between the unsuccessful attempt to carry out the investigation and the completion of the investigation ordered by decision, or the period between the occurrence of the change in the facts referred to therein and the receipt of the complete and correct information requested by decision, whichever applicable.

  21. Are there any circumstances in which the review timetable can be shortened?

    The standard review period is shortened in cases where the simplified procedure applies as discussed above.

  22. Which party is responsible for submitting the filing? Who is responsible for filing in cases of acquisitions of joint control and the creation of new joint ventures?

    A concentration shall be notified by the undertaking acquiring control. Where it consists of a merger or the acquisition of joint control it shall be notified jointly by the parties to the merger or by those acquiring joint control as the case may be.

  23. What information is required in the filing form?

    The information requested in the CN Form allows the DG to establish if the concentration shall have the effect of substantially lessening competition, by looking at the parties involved, nature of the concentration and the relevant affected markets.

    The Regulations empower the DG generally to obtain all the necessary information to allow him to perform his obligations in terms of the Regulations.

    A short form notification is allowed in the case of an acquisition of joint control by two or more undertakings where the turnover of the joint venture and/or the turnover of the contributed activities, is less than €698,812.02 in the Maltese territory and the total value of assets transferred to the joint venture is less than €698,812.02 in the Maltese territory.
    The following details are not required for short form notifications:

    • Certain details about the concentration;
    • Certain details relating to ownership and control;
    • Personal and financial links;
    • Information and general conditions on affected markets;
    • General market information;
    • Other general matters.
  24. Which supporting documents, if any, must be filed with the authority?

    The following supporting documentation must be filed with the OFC:

    • Transaction documents
    • In a public bid, copy of the offer document (if unavailable at time of notification, to be submitted as soon as possible and not later than when posted to shareholders)
    • Most recent annual reports and accounts of all parties to the concentration
    • Where at least 1 market is identified, copies of analyses, reports, studies and surveys submitted to or prepared for any member(s) of the board of directors, the supervisory board, or the shareholders’ meeting, for the purpose of assessing or analysing the concentration with respect to competitive conditions, competitors (actual and potential), and market conditions.

    The above must be submitted by the notifying undertaking, i.e. the undertaking acquiring control or either party to the merger or joint venture where applicable. The documents may be filed in English or Maltese, don’t need an apostille or other certification, and have no timing exceptions. The form may be signed by an attorney pursuant to a duly granted power of attorney.

  25. Is there a filing fee? If so, please specify the amount in local currency.

    Notification fee: €163.06.

  26. Is there a public announcement that a notification has been filed?

    The Director General shall on notification publish in the Government Gazette and a daily newspaper the fact of the notification, the names of the parties, the nature of the concentration and the economic sectors involved.

  27. Does the authority seek or invite the views of third parties?

    The Director General shall on notification publish in the Government Gazette and a daily newspaper the fact of the notification, the names of the parties, the nature of the concentration and the economic sectors involved.

  28. What information may be published by the authority or made available to third parties?

    The DG shall not publish the parties’ notification itself, but rather the details outlined in Point 6.5 above. No other documents are published, and moreover the DG has the obligation to take into account the legitimate interest of undertakings in the protection of their business secrets. At the end of the process, the DG’s decision is published.

    The fact of notification and decision are both immediately published in the Government Gazette. The former is also published in a daily newspaper, while the latter is posted on the website of the Malta Competition and Consumer Affairs Authority.

    Parties are entitled to outline information which they deem is confidential, together with the reasons for such determination.

    Parties are not granted the opportunity to review documents prior to publication.

  29. Does the authority cooperate with antitrust authorities in other jurisdictions?

    The OFC co-operates with the European Commission and other Member States’ national competition authorities within the European Competition Network (ECN). Following Council Regulation (EC) No 1/2003 of 16 December on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, the national competition authorities became empowered to apply Articles 101 and 102 of the Treaty on the Functioning of the European Union and to apply these articles concurrently with the national substantive competition law provisions where the agreement, practice or conduct may have an effect on trade between Member States.

  30. What kind of remedies are acceptable to the authority? How often are behavioural remedies accepted in comparison with major merger control jurisdictions, such as the EU or US?

    For divestment remedies:

    • does the authority require an up-front buyer, i.e. a requirement that the parties refrain from closing their transaction until they have signed a binding agreement for the sale of the divestment to a third party? If so, how often?
    • does the authority require that third party purchasers of divestment businesses are approved by the authority as suitable? If so, what criteria does the authority apply when assessing whether a buyer is suitable?
  31. What procedure applies in the event that remedies are required in order to secure clearance?

    Remedies may be provided to the OFC during both phases. Remedies during Phase I shall not preclude the DG from proceeding with Phase II, although if the remedies sufficiently eliminate serious doubts, then the DG shall not proceed to Phase II.

    Since is no clear cut precedent as to remedies which are acceptable to the DG, the OFC generally adopts the views of the European Commission in this regard. The determining criterion remains the removal of any serious doubt regarding the lessening of competition.

  32. What are the penalties for failure to notify, late notification and breaches of a prohibition on closing?

    In the event of a failure to notify, late notification or the supplying of incorrect, insufficient or misleading information, the DG may impose on the undertaking an administrative fine of between €1,000 and €10,000. Where an undertaking intentionally or negligently puts into effect a suspended concentration or one which has been declared unlawful, an administrative fine of up to 10% of the total turnover of the undertaking in the preceding financial year, shall also be due.

    Where a concentration has already been implemented, the DG may also require the undertakings or assets brought together to be separated, the cessation of joint control or any other action that may be appropriate in order to restore effective competition.

  33. What are the penalties for incomplete or misleading information in the notification or in response to the authority’s questions?

    notification or in response to the authority’s questions?-
    In the event of a failure to notify, late notification or the supplying of incorrect, insufficient or misleading information, the DG may impose on the undertaking an administrative fine of between €1,000 and €10,000. Where an undertaking intentionally or negligently puts into effect a suspended concentration or one which has been declared unlawful, an administrative fine of up to 10% of the total turnover of the undertaking in the preceding financial year, shall also be due.

    Where a concentration has already been implemented, the DG may also require the undertakings or assets brought together to be separated, the cessation of joint control or any other action that may be appropriate in order to restore effective competition.

  34. Can the authority’s decision be appealed to a court? In particular, can third parties who are not involved in the transaction appeal the decision?

    An undertaking concerned or a third party entitled to a hearing may appeal the DG’s decision within 20 calendar days, by seeking recourse to the Competition and Consumer Appeals Tribunal. Once notified of the appeal, the DG shall have 20 calendar days to reply to the appeal. The Tribunal will then proceed to confirm, quash or amend the DG’s original decision.

  35. What are the recent trends in the approach of the relevant authority to enforcement, procedure and substantive assessment?

    Approach has remained consistent. It is determined on a case-by-case basis. The OFC encourages a transparent approach and is proactive in guiding undertakings towards positively achieving their desired outcomes, provided that the market is not distorted and competition not lessened.

  36. Are there any future developments or planned reforms of the merger control regime in your jurisdiction?

    No reforms to the regime are envisaged.