Cyprus: Merger Control (4th edition)

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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-4th-edition

  1. Overview

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

    Enforcement of the Law rests with the Commission for the Protection of Competition (CPC). The CPC has overall responsibility for implementing the Law and is the competent authority for the control of concentrations. The CPC is empowered under the Law to declare a concentration as compatible or incompatible with the functioning of competition in the market. The investigation and procedural aspects relating to notifications of concentrations are performed by the CPC’s civil service (the Service).

    The Law is applicable to concentrations between undertakings resulting in a change of control on a lasting basis. Such concentrations 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 on a lasting basis are caught under the Law.

    For the purposes of the Law, a concentration of undertakings is deemed to be of major importance and therefore meet 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, without any additional local effects requirement.

  2. Is notification compulsory or voluntary?

    The notification of concentrations of major importance 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.

    The exemption relating to investment companies, refers to those companies the sole objective of which is to acquire holdings in other undertakings, and to manage such holdings and turn them to profit, without involving themselves directly or indirectly in the management of those undertakings.

  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 full implementation of the concentration prior to a clearance by the CPC, infringement of which prohibition entails administrative fines.

    A temporary approval of a concentration might be possible in the event where the CPC is carrying out a full investigation (Phase II), should the undertakings concerned be able to establish to the CPC, that they shall suffer substantial damage as a result of any additional delay in the implementation of the concentration.

    Any such temporary approval does not affect the final decision of the CPC and may be accompanied by conditions decided at the discretion of the CPC.

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

    The Law is applicable to concentrations between undertakings resulting in a change of control on a lasting basis. Such concentrations 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 ion a lasting basis 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.
  5. What are the conditions on minority interest in your jurisdiction?

    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 constitutional documents of the target undertaking or joint venture are of tantamount importance in determining whether any rights resulting in a change of control are in place.

    De facto control could satisfy the control test, while the ability to veto certain types of decision could also be deemed 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)?

    The jurisdictional thresholds are met 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 after defining the relevant product and geographic market, against the total of such market

  8. Is there a particular exchange rate required to be used for turnover thresholds 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 the average conversion rate of the financial year concerned.

  9. Do merger control rules apply to joint ventures (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 c that the European Court of Justice’s judgment in Austria Asphalt is adhered to by the CPC. 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.

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

    The jurisdictional thresholds do not change in relation to ‘foreign-to-foreign’ mergers.

    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 require notification and clearance by the CPC.

    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.

  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. 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 substantive test for compatibility of a concentration with competition in the market is whether such concentration significantly impedes 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.

  13. Are non-competitive factors 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 and Industry can declare a concentration as being of major public interest with regard to the effects it might have on public security, media pluralism or the principles of sound administration.

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

    The Law is silent on ancillary restraints.

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

    Although there is no express deadline within which a concentration should be filed, they must be both notified to and cleared by the CPC prior to their implementation.

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

    While the Law provides that notifications take place following conclusion of the relevant agreement, publication of public offer or acquisition of control, as the case may be, the earliest 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.

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

    Within one calendar month from the date of submission of the notification or such additional information necessary for the notification to be considered complete and payment of the filing fee, , the Service is required to inform the notifying undertaking 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 the one month timeframe, it shall, within seven calendar days prior to the lapse of the one-month 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 submission of the notification or such additional information necessary for the notification to be considered complete , provided that the relevant filing fee is settled.

    In the case of a full investigation, the notifying party or parties must be informed of the CPC’s decision no later than four months from the date of submission of the notification or such additional information necessary for the notification to be considered complete.

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

    The Service is entitled to inform the notifying undertaking of an extension by 14 calendar days, of 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. The CPC may at its discretion extent the timetable in the context of a phase II investigation, where any omission on behalf of one or more of the undertakings concerned causes any delay in the discharge by the Service or the CPC of their respective obligations under the Law.

    A request for additional information necessary for the notification to be considered complete, whether in the context of a phase I assessment or a phase II full investigation, has the effect of stopping the clock. When the Service sends such a request, the date on which a response is provided is deemed to reset the timetable (to the extend such request concerned dditional information necessary for the notification to be considered complete). 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.

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

    There is no mechanism envisaged for the expedition of the assessment timetable.

  20. 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?

    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.

  21. What information is required in the filing form?

    The notification of a concentration 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

  22. 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.
  23. Is there a filing fee? If so, please specify the amount in local currency.

    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.

  24. 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.

  25. 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 assessment of a concentration or they may be asked by the Service of the CPC to provide information.

    The undertakings concerned or any third parties that may be affected directly by the decision of the CPC may request to be head before the CPC in the context of a hearing during which they will develop their arguments.

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

    The notifying party should identify documents, statements and any material it considers contain confidential information or business secrets, justifying such view.

    A notice that the CPC has received a notification is published soon after filing, which sets out the date of the filing, the names of the undertakings concerned, the nature of the act of concentration and the relevant economic sectors.

    The CPC publishes non-confidential versions of its decisions 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 be redacted from the final version published by the CPC.

    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.

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

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

  28. 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?

    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.

  29. 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.

    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. 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.

    Appendix IV of the Law prescribes the form that undertakings concerned should submit in relation to remedies. The CPC accepts both structural and behavioural 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 will commence negotiations with the undertakings concentrations in respect of any modifications which may result in the removal of such doubts..

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

    Where a concentration is either partially or fully implemented prior to clearance by 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 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 complete dissolution of a concentration that has been implemented prior to obtaining clearance by the CPC.

  31. 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 for providing misleading or inaccurate information.

  32. 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?

    The decisions of the CPC are administrative executive acts issued by a public authority. An aggrieved party having legitimate interest and seeking to annul a CPC decision has the right to pursue an administrative recourse.

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

    Information exchange has been a recent trend, with the CPC demonstrating a heightened awareness regarding the ability of undertakings controlling a joint venture to acquire business secrets through the joint venture in a manner which could distort competition in the markets in which the controlling undertakings operate.

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

    No planned reforms are on the horizon.