Cyprus: Merger Control

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

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-3rd-edition

  1. Overview

    The Control of Concentrations Between Undertakings, Law 83(I) of 2014 (the Law), is the legislative instrument governing the control of concentrations between undertakings in Cyprus.

    Enforcement of the legislation rests with the Commission for the Protection of Competition (CPC). The CPC has overall responsibility for implementing the Law and is the competent independent authority for the control of concentrations. The Commission, after examining the report of the service of the CPC (the Service), declares that a concentration is compatible or incompatible with the functioning of competition in the market. The assessment, investigation and procedural aspects of the notification of concentrations are implemented by the Service.

    The Law is applicable to transactions resulting in a permanent change of control. Such transactions include mergers of two previously independent undertakings or parts thereof, and acquisitions by one or more persons already controlling at least one undertaking, or by one or more undertakings, directly or indirectly, whether by purchase of securities or assets, by agreement or otherwise, of control of one or more other undertakings. Joint ventures performing all functions of an autonomous economic entity in a permanent manner are caught under the Law.

    For the purposes of the Law, a concentration of undertakings is deemed to be of major importance and therefore meets the jurisdictional thresholds if:

    • the aggregate turnover achieved by at least two of the undertakings concerned exceeds, in relation to each one of them, €3.5 million;
    • at least two of the undertakings concerned achieve a turnover in Cyprus; and
    • at least €3.5 million of the aggregate turnover of all undertakings concerned is achieved in Cyprus.

    Foreign-to-foreign mergers are caught under the Law. The test as to whether a foreign-to-foreign merger constitutes a concentration of major importance is satisfied where the jurisdictional thresholds are met, with the local effects dimension being the achievement of a turnover of at least two undertakings concerned in Cyprus and the Cyprus-achieved turnover of all undertakings concerned is at least €3.5 million.

  2. Is mandatory notification compulsory or voluntary?

    The implementation of concentrations of major importance can only take place following their clearance by the CPC. As such, their notification to the CPC is mandatory.

    However, notification is not required in the following cases, where a concentration between undertakings is not deemed to arise:

    • a credit or financial institution or an insurance company, the normal activities of which include transactions and dealing in securities on its own account or for the account of third parties, holds on a temporary basis securities that it has acquired in an undertaking with a view to reselling them, provided that the institution does not exercise voting rights in respect of those securities with a view to determining the competitive behaviour of that undertaking or provided that it exercises such voting rights only with a view to facilitating the disposal of all or part of that undertaking or of its assets or the disposal of those securities, and that any such disposal takes place within one year of the date of acquisition – a period which can be extended by the CPC on request, where it can be shown that the disposal was not reasonably possible within the period set;
    • control is exercised by a person authorised under the legislation relating to liquidation, bankruptcy or any other similar procedure;
    • the concentration of undertakings between one or more persons already controlling at least one or more undertakings is carried out by investment companies;
    • property is transferred due to death by a will or by intestate devolution;
    • it is a concentration between two or more undertakings, each of which is a subsidiary undertaking of the same entity.
  3. Is there a prohibition on completion or closing prior to clearance by the relevant authority? Are there possibilities for derogation or carve out?

    The Law expressly prohibits the partial or entire implementation of the concentration prior to clearance, infringement of which prohibition entails administrative fines.

    Nevertheless, a temporary approval of a concentration is possible, in the case where a full (Phase II) investigation is decided by the CPC, where the undertakings concerned can establish, upon application to the CPC, that they shall suffer substantial damage as a result of any additional delay to the concentration.

    Such temporary approval may be accompanied by conditions decided at the CPC’s discretion and it does not affect the final decision of the CPC.

  4. What types of transaction are notifiable or reviewable and what is the test for control?

    The Law is applicable to transactions resulting in a permanent change of control. Such transactions include mergers of two previously independent undertakings or parts thereof, and acquisitions by one or more persons already controlling at least one undertaking, or by one or more undertakings, directly or indirectly, whether by purchase of securities or assets, by agreement or otherwise, of control of one or more other undertakings. Joint ventures performing all functions of an autonomous economic entity in a permanent manner are caught under the Law.

    ‘Control’ is defined as control stemming from any rights, agreements or other means which, either severally or jointly, confer the possibility of exercising decisive influence over an undertaking through:

    • ownership or enjoyment rights over the whole or part of the assets of the undertaking; or
    • rights or contracts that confer the possibility of decisive influence on the composition, meetings or decisions of the bodies of an undertaking.

    The Law provides for an exemption concerning investment companies, defined as those having as their exclusive object the acquisition of participation in other undertakings and the management and exploitation of this participation, without direct or indirect involvement in the management of these undertakings.

  5. In which circumstances is an acquisition of a minority interest notifiable or reviewable?

    Minority interests are caught by Cyprus merger control where they confer, either severally or jointly with other rights, the possibility of exercising decisive influence over an undertaking. The contractual arrangements arising from the transaction documents and envisaged by-laws of the target are of tantamount importance in determining whether any rights resulting in a permanent change of control are in place.

    De facto control can satisfy the control test, while the ability to veto certain types of decision relating to the target can indeed fall under such rights conferring the possibility of exercising decisive influence over an undertaking.

  6. What are the jurisdictional thresholds (turnover, assets, market share and/or local presence)? Are there different thresholds that apply to particular sectors?

    A concentration of undertakings is deemed to be of major importance and therefore meet the jurisdictional thresholds where:

    • the aggregate turnover achieved by at least two of the undertakings concerned exceeds, in relation to each one of them, €3.5 million;
    • at least two of the undertakings concerned achieve a turnover in Cyprus; and
    • at least €3.5 million of the aggregate turnover of all undertakings concerned is achieved in Cyprus.

    In cases of acquisition of sole control, the turnovers of the acquiring undertaking and the target are respectively taken into account in determining whether the jurisdictional thresholds are met. The turnover of undertakings acquiring joint control over a target undertaking (together with the target) are taken into account in cases of acquisition of joint control.

    One party could satisfy the thresholds by itself, provided that at least two of the undertakings concerned achieve a turnover in Cyprus.

    Other than the special turnover calculation rules for credit institutions and insurance undertakings, there are no sector-specific rules.

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

    Turnovers comprise the amounts derived from the sale of products and the provision of services by the undertakings concerned during the preceding financial year and corresponding to the ordinary activities of the undertakings, after deduction of sales rebates, of value added tax and other taxes directly related to turnover.

    Turnovers are calculated for groups of undertakings and are derived from the last audited financial statements of each of the undertakings concerned (or consolidated financial statements at a group level).

    In calculating turnover in relation to banks and insurance companies, the following calculation methodology shall respectively apply:

    • for a bank or other credit institution, the one tenth of the balance sheet of the last financial year
    • for an insurance company the value of the gross premiums during the last financial year which shall comprise all amounts received or receivable in respect of insurance contracts concluded by it or on its behalf, including outgoing reinsurance premiums and after deduction of taxes and parafiscal contributions or levies charged by reference to the amounts of individual premiums or the total volume of premiums.

    The value of assets also derives from the last audited financial statements of each of the undertakings concerned. (or consolidated financial statements at a group level).

    The market share percentage of each of the undertakings concerned is calculated by accountants after defining the relevant product and geographic market.

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

    All turnovers and asset valuations are represented in the context of a notification of a concentration under Cyprus law must be in euro. Figures are derived from the last audited financial statements. The applicable exchange rate for turnovers and asset valuations in currencies other than the euro is deemed to be the one applicable at the time of calculation of the thresholds.

  9. In which circumstances are joint ventures notifiable or reviewable (both new joint ventures and acquisitions of joint control over an existing business)?

    Fully functional joint ventures are subject to notification to the competent authority. The decisional practice of the CPC has demonstrated that the European Court of Justice’s judgment in Austria Asphalt is fully adhered to. As such, when there is a change from sole to joint control in the over an existing undertaking, the criterion of a concentration is only fulfilled when the arising joint venture performs on a lasting basis all the functions of an autonomous economic entity.

    A joint venture that is genuinely fully functional must be able to operate independently of its parents on an identifiable market. In order to do so the joint venture must have a management dedicated to its day-to-day operations and access to sufficient resources including finance, staff, and assets (tangible and intangible) in order to conduct its business activities on a lasting basis.

    The strong presence of the parent companies in upstream / downstream plays a crucial role in assessing the full functionality of a joint venture, where this presence results in substantial sales or purchases between the parents and the joint venture. Given that the basic function of an outsourcing joint venture is normally to supply the outsourcing parent, the essential question is whether, regardless of these sales, the joint venture is able to play an active role on the market.

    The joint venture's full functionality will not normally be affected by an initial period of sales exclusively to its parents. Indeed, such a start-up period may be necessary in order to establish the joint venture on a market. The joint venture should inevitably have sufficient resources to build up such market presence within a reasonable time frame.

    Where sales from a joint venture to the parent companies are intended to be made on a lasting basis, the essential question is whether, regardless of these sales, the joint venture is geared to play an active role on the market and can be considered economically autonomous from an operational viewpoint. In this respect the relative proportion of sales made to its parents compared with the total production of the joint venture is an important factor.

  10. Are there any circumstances in which different stages of the same, overall transaction are separately notifiable or reviewable?

    The Law provides that a concentration carried out in stages in the course of a period not exceeding 4 years is effected on completion of the last stage resulting in a permanent change in control. That is also the date by which the transaction must be cleared. A concentration carried out in stages is thus notifiable as a single concentration.

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

    ‘Foreign-to-foreign’ mergers are caught by the Cypriot merger control regime, where these are concentrations of major importance, namely where they satisfy the jurisdictional thresholds.

    Cyprus law does not distinguish between concentrations which have an impact on the market locally and those which do not, nor are the thresholds satisfied in a different manner. From a local nexus perspective, it suffices that the undertakings concerned achieve a turnover in Cyprus (provided the turnover thresholds are met). It is thus often the case that transactions that are not directly related to the competitive market in Cyprus, are caught by Cypriot merger control.

    As is the case with all concentrations caught under Cyprus merger control, where a “foreign-to-foreign” is either partially or entirely implemented prior to the clearance of the CPC, administrative sanctions may be imposed by the CPC.

    An administrative fine of up to ten per cent (10%) of the aggregate turnover achieved by the notifying undertaking during the immediately preceding financial year may be imposed on the notifying undertaking for the discussed infringement, which may be followed by additional administrative fines of €8,000 for each day the infringement persists.

  12. 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.

  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? Are there different tests that apply to particular sectors?

    The substantive test for compatibility of a concentration with competition in the market is whether such concentration does or does not significantly impede effective competition in Cyprus or in a substantial part of it, in particular as a result of the creation or strengthening of a dominant position.

    In assessing the compatibility of a concentration, the CPC takes into consideration the following criteria:

    • the need to maintain and develop conditions of effective competition in the relevant markets, taking into account, inter alia, the structure of the affected markets, other markets upon which the concentration may have significant effects and the potential competition on behalf of undertakings within or outside Cyprus;
    • the position in the market of the undertakings concerned and undertakings connected to them;
    • the financial power of such undertakings;
    • the alternative sources of supply of products or services in the affected markets and/or other markets upon which the concentration may have significant effects;
    • any barriers of entry to the affected markets and/or other markets upon which the concentration may have significant effects;
    • the interests of the intermediate and end consumers of the relevant products and services;
    • the contribution to technical and economic progress and the possibility of such contribution being in the interest of consumers and not obstructing competition; and
    • the supply and demand trends for the relevant markets.

    To the extent a joint venture that constitutes a concentration has as its object or effect the coordination of competitive conduct of undertakings that remain independent, the Service shall particularly 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 that directly emanates from the creation of the joint venture provides the undertakings concerned the ability to eliminate competition for a substantial part of the relevant products or services.

    While the Law is silent in this regard, the CPC’s approach and analysis of harm is substantially aligned with the respective approach of the European Commission. Besides high market shares, the assessment usually takes into account the anti-competitive effects that could potentially arise out of a concentration, such as coordinated effects as well as unilateral effects.

    The test and factors considered by the competent authority in the course of assessing whether a concentration should be cleared is consistent for all sectors.

  14. Are factors unrelated to competition relevant?

    The CPC only takes competition issues into account when considering the Service’s report and issuing its decision.

    However, the Minister of Energy, Commerce, Industry and Tourism can, by issuing a justified order, declare a concentration as being of major public interest with regard to the effects it might have on public security, pluralism of the mass media and the principles of sound administration.

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

    Ancillary restraints can be covered by the CPC’s clearance decision. Ancillary restraints are notified to the CPC within the context of a Phase II investigation in the manner and within the timeframe prescribed by the Law. Any such restraints should evidence the removal of any significant impediment of effective competition, as identified by the CPC in the context of a Phase I assessment.

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

    Although there is no express deadline within which concentrations should be filed, they must be both notified to and cleared by the CPC prior to their implementation and following the relevant conclusion of the agreement, publication of the takeover bid or the acquisition of the controlling interest.

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

    The earliest point in time at which a notification can take place is when the undertakings concerned are able to evidence to the CPC their bona fide intention to conclude an agreement (such as, for example, on the basis of a term sheet), or, in the case of a takeover offer, following a public announcement of an intention or final decision to make such offer.

  18. Is it usual practice to engage in pre-notification discussions with the authority? If so, how long do these typically take?

    The Law does not provide for any pre-notification discussions, nor are any such discussions binding on the CPC. It is generally not typical to engage in such discussions with the CPC.

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

    Within one calendar month from the date of receipt of the notification and the filing fees or the date of receipt of additional information necessary towards achieving conformity of the notification to the requirements of the Law, the Service is required to inform the notifying undertakings of whether the concentration is cleared or whether it will proceed to a full investigation of the concentration.

    If, owing to the volume of work or the complexity of the information contained in the notification, the Service is unable to comply with this time frame, it shall, within seven calendar days prior to the lapse of the one-month notice period, inform the notifying undertaking of an extension of fourteen calendar days.

    In a Phase II investigation, the Service is required to prepare a report of findings to the CPC within three months as of the date of receipt the notification, provided that the fees payable towards a full investigation are settled.

    In the case of full investigation, the notifying party or parties must be informed of the CPC’s decision no later than four months from the date of receipt by the Service of the original notification application. Where additional information is requested by the Service, the period is extended to four months from receipt of the additional information.

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

    The Service is entitled to inform the notifying undertaking of an extension of 14 calendar days over the one month period within which the notifying undertaking must be informed of a decision of the CPC. Such extension must be communicated to the notifying undertaking seven calendar days prior to the lapse of the one-month notice period.

    A request for further information, whether in the context of a Phase I assessment or a Phase II full investigation, has the effect of stopping the clock. In the said context, the CPC may, if it considers it expedient to do so, carry out negotiations, hearings or discussions with any of the interested parties or other persons, which would also have the effect of stopping the clock, depending on the circumstances.

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

    There is no mechanism envisaged for the expedition of the assessment timetable. The completeness level of the notification is the only catalyst towards facilitating a smooth assessment, subject always to the Service’s workload and the statutory timeframe.

  22. Which party is responsible for submitting the filing?

    Concentrations of major importance must be notified to the Service in writing, either jointly or separately by the undertakings participating in a merger, in the joint acquisition of control of another undertaking or the establishment of a joint venture.

    In all other cases, the party responsible for notification is the undertaking acquiring control.

  23. What information is required in the filing form?

    The notification of a concentration of major importance should include the information prescribed in Appendix III to the Law. The notification must be made in Greek and must be accompanied by various supporting documents.

    There is no “short form” filing prescribed under the Law. The Service is entitled to request additional information where it deems the notification does not satisfy the statutory requirements.

  24. Which supporting documents, if any, must be filed with the authority?

    The notification must be accompanied by various supporting documents and other information which may be in Greek or English, including but not limited to the following:

    • a copy of all final or most recent documents that brought about the concentration either by agreement or following a public bid;
    • in the case of a public bid, a copy of the public bid document;
    • copies of the most recent annual reports and audited financial statements of all the undertakings participating in the concentration;
    • copies of reports or analyses prepared for the purposes of the concentration;
    • a list and short description of the contents of all analyses, reports, studies and surveys that were prepared by or for any of persons responsible for notification for the purpose of evaluating or analysing the proposed concentration in relation to the market and competition conditions;
    • details of the concentration (including the nature and scope of the concentration, the financial and structural details of the concentration, and details regarding the turnover in Cyprus and worldwide of each undertaking);
    • details of relationships of ownership and control as between each participant in the concentration and the undertakings connected with it;
    • personal and economic ties as between each group of undertakings and any other undertaking operating within the affected market in which such group holds, inter alia, at least 10 per cent of the voting rights or shares;
    • a description and analysis of the relevant markets; and
    • a description and analysis of the affected relevant markets.
  25. Is there a filing fee?

    Filing fees are fixed by the Law at €1,000. Where a concentration becomes subject to a full investigation (Phase II), the undertakings concerned are bound to pay a fee of €6,000 to the CPC.

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

    The CPC publishes a description of the notification in the Official Gazette of the Republic and on its website, indicating the names of the participants, the nature of the concentration and the economic sectors involved. The CPC takes into account, as far as possible, the legitimate interest of the affected undertakings in the protection of their business secrets.

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

    Third parties having a legitimate interest may be invited to comment, but only in the event of a full investigation. Parties having a legitimate interest may on a voluntary basis submit views at any phase of the evaluation of a concentration or they may be asked to supply information by the Service of the CPC. In the case of a full investigation, the Service is required to provide any person having a legitimate interest, but which is not a participant in the concentration, with an appropriate opportunity to submit their views.

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

    The CPC and the Service are under a statutory duty of confidentiality, infringement of which is a criminal offence punishable with imprisonment up to six months or a fine of up to €1,500 or both.

    The CPC publishes a non-confidential version of its decision in the Official Gazette of the Republic and on its website. The undertakings concerned may request that any part of the decision remains confidential and the CPC will decide whether such information should be treated as confidential. On successful application, the published version of the decision contains redactions of any such confidential parts.

    The party to which the CPC addresses a request for information should identify documents, statements and any material it considers contain confidential information or business secrets, justifying its opinion, and provide a separate, non-confidential version within the time limit set by the CPC for the notification of its opinion.

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

    The CPC cooperates with other national competition authorities in the EU and the European Commission on the basis of the system of parallel competences and the exchange of views and information between them via the European Competition Network.

  30. What kind of remedies are acceptable to the authority?

    There is no exhaustive list of remedies accepted by the competent authority. Both structural and behavioural remedies aimed at addressing competition concerns may be accepted upon assessing their adequacy on a case by case scenario.

  31. What procedure applies in the event that remedies are required in order to secure clearance?

    Before reaching its final decision and subject to the time limits provided by the Law, the CPC may, if it considers it expedient to do so, carry out negotiations, hearings or discussions with any of the interested parties or other persons. Furthermore, the CPC has wide investigative powers when assessing a concentration, including access to any premises, property, means of transport, books or records in the possession of the undertakings concerned or third parties.

    In declaring a concentration compatible with the operation of competition in the market, the CPC may impose conditions or remedies in relation to the implementation of the transaction, thus having the ability to interfere with the essence of the transaction.

    The CPC is required to provide written notification to the undertakings concerned of any remedies as part of its decision, which it is bound to issue within four months as of the date of receiving the notification of the concentration and payment of the filing fees. Should the merger be cross-border the CPC may liaise with the relevant foreign authority in relation to applicable remedies. Furthermore, any remedies have to be limited to those that are reasonably necessary for the protection of the competitive market.

    Where the CPC ascertains that the notified concentration falls within the scope of the Law and raises doubts as to its compatibility with the competitive market, it will inform the Service of the need to conduct a full investigation. In such an event, the Service will request further information from the participants as well as other entities involved in the specific sector for the purpose of completing its investigation. Moreover, the Service will notify the participants that it proposes remedies that will remove the doubts of the CPC regarding the compatibility of the transaction within the time-limit defined by the Service.

    Appendix IV of the Law provides the form that the undertakings concerned will be asked to submit when they are willing to undertake any remedies. The CPC accepts both divestiture and behaviour remedies. If, following its review of the additional information provided to it, the CPC’s doubts as to compatibility have not been removed, the Service if it finds any differentiations or modifications in the circumstances under which the concentration has been established which may result in the removal of the doubts, will commence negotiations with the participating undertakings.

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

    Where a concentration is either partially or entirely implemented prior to clearance by the CPC or prior to the lapse of the timeframe within which the Service ought to inform the notifying undertaking of whether the concentration is cleared or is to be fully investigated, administrative sanctions may be imposed by the CPC.

    An administrative fine of up to 10 per cent of the aggregate turnover achieved by the notifying undertaking during the immediately preceding financial year may be imposed on the notifying undertaking for the aforementioned infringement, which may be followed by additional administrative fines of €8,000 for each day the infringement persists.

    The CPC also has the power to order the partial or total dissolution of a concentration that has been implemented prior to obtaining clearance by the CPC.

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

    A fine of up to €50,000 may be imposed for a failure to provide requested information or clarifications, or for providing misleading or inaccurate information.

  34. Can the authority’s decision be appealed to a court?

    The decisions of the CPC are administrative executive acts issued by a public authority. As such, an aggrieved party having legitimate interest and seeking to annul a CPC decision has the right to file for administrative recourse to the Supreme Court of Cyprus.

    The time limit for commencing an administrative appeal is 75 days from receipt of notification of the CPC’s final decision or its publication in the Official Gazette.

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

    In a number of cases over the past year, the CPC has demonstrated a particular concern as regards the ability of undertakings controlling a joint venture to acquire business secrets held by the joint venture in a manner which could distort competition in the markets in which the controlling undertakings operate.

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

    No planned reforms are on the horizon.