The governing legislation
The Anti-Monopoly Law of the People's Republic of China (the “AML”), enacted in 2007 and first implemented on August 1, 2008, serves as the foundation of China’s merger control regime.
The follow-up regulations released by the PRC State Council (the so-called cabinet of China) and MOFCOM have clarified the enforcement structure of China’s merger control regime (the “Merger Control Regulations”). Such regulations include but are not limited to the following: Interim Provisions on Standards Used for Simple Cases of Concentrations of Business Operators (February 2014), Guiding Opinions on the Application for Concentration of Business Operators (June 2014), and Provisions on Imposing Restrictive Conditions on the Concentration of Business Operators (for Trial Implementation) (December 2014).
The relevant enforcement authority or authorities.
The merger review authority in China is the Ministry of Commerce of the People’s Republic of China (“MOFCOM”). MOFCOM, via its Anti-monopoly Bureau (“AMB”), is responsible for reviewing the concentration filings of business operators. MOFCOM may, at its own discretion, approve or reject a concentration transaction, either with or without remedy conditions.
Some important aspects and specific features of the merger control regime
Timeline for merger review
In general, Merger review in China can be divided into two stages, the pre-acceptance stage and the formal review stage. The pre-acceptance stage is the time between when a merger filing is made and its formal acceptance by MOFCOM. The time taken in this period is quite unpredictable, and can last several weeks or span several months. On the contrary, statutory deadlines have been set for the formal review process, which shall be strictly abided by MOFCOM. Generally speaking, MOFCOM has up to 180 calendar days for its formal review. For more information about the timeline for merger review, please refer to Section 5 of this Guide.
Unusually long review periods
In China, the length of time for reviews under the normal process is usually longer than in other jurisdictions. This is particularly true for conditional approval cases and prohibition cases. To our knowledge, in some conditional approval cases, the concerned parties whose reviews approach the 180-day limit even have been suggested by MOFCOM to withdraw and refile the transaction, causing the long timeline to be further extended, which was observed in the Glencore/Xstrata deal and the MediaTek/Mstar deal, in which the total review period for both of these cases exceeded 12 months.
MOFCOM may favour behavioural remedies to address potential competition concerns
In practice, MOFCOM utilizes both structural and behavioural remedies to address monopoly concerns, including divestiture of assets, mandatory licensing and “hold separate” provision which requires parties to the concentration to remain as market competitors for a certain period of time. Based on the publicized conditional approval cases, it seems that MOFCOM favours a heavier use of behavioural remedies to address potential competition concerns than their counterparts in most other jurisdictions.
Consideration of non-competition factors in the substantive assessment
MOFCOM usually considers both competition and non-competition factors (e.g. influence on national economic development) in its merger review process. For more details in this regard, please refer to Section 4.2 of this Guide.
National security review is also required for foreign investors' acquisition of actual control over domestic enterprises active in certain sectors.
As detailed in Article 31 of the AML, for foreign investors' acquisition of actual control over a domestic enterprise where national security is involved, a national security review shall be conducted in addition to a merger review.
The Danish merger control regime is governed by the Danish Competition Act, which is to a large extent based on the principles of EU merger regulation. The rules on merger control are administered by the Danish Competition and Consumer Authority (the DCCA) and the Danish Competition Council (the Council). The DCCA is the primary enforcer of the Competition Act in Denmark and decides most cases on behalf of the Council, whereas more complex phase II-cases are decided by the Council.
Under Danish merger rules, filing of a merger is mandatory if the jurisdictional thresh-olds are met. A merger which meets the Danish thresholds and is thus subject to scrutiny may not be implemented prior to clearance by the Danish competition authorities.
Particular to the Danish merger regime is the use of so-called pre-notification discus-sions. Though not mandatory, parties to a potential merger in Denmark are strongly en-couraged to contact the DCCA before filing the notification in order to initiate pre-notification discussions on an informal basis. In practice, a pre-notification period may often last at least two to three weeks in simple cases, and four or more weeks in more complex cases.
However, while the discussions can also be quite extensive and may last several months, in particular in complex merger cases, pre-notification discussions sig-nificantly increase the likelihood of the merger being cleared in Phase I.
Merger control in Ireland is governed by the Competition Act 2002, which has been amended a number of times (the “Competition Act”), most recently by the Competition and Consumer Protection Act 2014 (“2014 Act”). The 2014 Act substantially reformed the merger process in Ireland, introducing new jurisdictional thresholds, updated the specific regime for media mergers and establishing a new national competition authority, the Competition and Consumer Commission (“CCPC”).
The CCPC amalgamated the functions of and replaced the Competition Authority and the National Consumer Council from 31 October 2014. In relation to merger control, it has extensive legal powers and a broad mandate to examine mergers and acquisitions that fall under the Competition Act. The CCPC has maintained a busy workload since its establishment, reviewing 88 merger notifications in the period from 31 October 2014 to 31 December 2015, according to its most recent Annual Report.
Irish merger control practice and procedure follows closely the approach of the European Commission, and the processes laid down in the EU Merger Regulation and the Consolidated Jurisdictional Notice. In particular, jurisdiction (other than for media mergers) is established on the basis of turnover-based thresholds. The concepts of control and full-function joint ventures are highly similar under both regimes. Substantive assessments are based on whether or not the relevant merger or acquisition results in a substantial lessening of competition on markets for goods and services in Ireland, which is similar to the test under the EU Merger Regulation. The process can run into a second phase where the CCPC is not able to reach a decision during the first phase period of 30 working days. Economic analysis plays an important role in the assessment of cases. The design and implementation of remedies is largely based on the EU model.
While the updated merger control regime follows in many important respects the approach of the European Commission, there are points of divergence:
- New jurisdictional thresholds were introduced on 31 October 2014 consisting of two financial thresholds relating solely to turnover in Ireland (previously one of the thresholds related to global turnover). In addition, the second threshold is triggered when at least two of the undertakings involved generated turnover in Ireland of €3 million or more.
- Acquisitions of assets that constitute a business to which turnover can be attributed can also fall under the regime if the financial thresholds are met. This concept has been interpreted widely by the CCPC and includes the acquisitions of buildings that generated a rent roll.
- Media mergers in Ireland, as defined by the Competition Act, are subject to review irrespective of turnover.
The sections that follow set out the key features of the Irish merger control regime, highlighting these points of similarity and difference.
The government authorities in charge of merger control in Israel are the Israeli Antitrust Commissioner and the Israeli Antitrust Authority. The Israeli Antitrust Commissioner must approve a merger, reject it or stipulate conditions to the merger, after consulting with the Advisory Committee for Mergers and Exemptions.
To fall within the boundaries of the merger control regime, a transaction must meet the definition of a "merger of companies" as well as the relevant filing thresholds.
The definition of a "merger" (see section 3.1 below) is relatively wide and, in the Israeli Antitrust Authority's view, includes any transaction which grants one company a structural foothold in the management of another company's business. As detailed below, any acquisition of the main assets of a business, or acquisition of over 25% of certain rights in a company is presumed to be a "merger".
"Merger of companies" will exist only if at least two "companies" are involved therein. The definition of a "company" includes cooperatives and partnerships, and entails a test of nexus to Israel (see section 3.2 below).
Thresholds (described more fully in section 3.2 below) refer to the merging parties' turnovers but also to market shares. Where a transaction will make the parties cross a threshold of 50% market share or where one of the parties already has over 50% in any market – filing is necessary. Turnovers and market shares refer only to Israel, but they refer to the entire group of companies under the same control. Thus, if two groups of companies which meet the thresholds perform a transaction outside Israel, they may still have to file in Israel. Thresholds do not contain transaction size or assets tests.
A merger transaction which falls below the thresholds is legal per se, and cannot be challenged in court. Ancillary restraints require a clearance procedure, unless they meet the standards for a specific statutory exemption or block exemption.
If a transaction is deemed a "merger transaction" and meets the relevant filing thresholds, filing is mandatory. The Commissioner will object a merger if found to pose "reasonable concern of significant harm" to competition or the public.
The merger transaction cannot be consummated before it is cleared by the Commissioner. The commissioner must grant his decision by 30 days. The 30-day period may be extended voluntarily by the parties or by the specialist Antitrust Tribunal in Jerusalem according to the Commissioner's request.
Illegally consummated mergers are subject to administrative fines, and possibly even criminal charges. In addition, the Commissioner may approach the Antitrust Tribunal and request divestiture. Illegal mergers are also subject to civil actions, including class actions.
In Japan, the Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade (Antimonopoly Act) is the legislation that provides the general merger control regime. The Antimonopoly Act requires transactions that meet the thresholds to be notified prior to the closing and prohibits transactions that will substantially restrain competition in any relevant market. The Japan Fair Trade Commission (JFTC) has sole jurisdiction over the enforcement of merger control under the Antimonopoly Act.
Pre-closing notification is mandatory for any transaction that meets the thresholds. A transaction that is subject to the mandatory prior notification cannot be implemented during the 30-day waiting period (Phase I), though the period may be shortened. The JFTC clears most transactions at Phase I. If the JFTC decides that it will need to review further, the transaction goes to Phase II. The JFTC must reach the final conclusion within either (i) 120 calendar days from the initial notification or (ii) 90 calendar days from the date when the JFTC receives from the parties all the information requested at the beginning of Phase II, whichever is longer.
Although it is not mandatory, it is a common practice that parties seek pre-notification consultation with the JFTC before formal filing to clarify the contents of the notification (e.g., definition of relevant market). Also, the pre-notification consultation is often used to learn the JFTC’s preliminary view on the case. While the parties can quit the pre-notification consultation at any time, it usually takes a few weeks. If the parties spend a longer period for pre-notification consultation, such as several months, it may reduce the possibility of going into Phase II.
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.
The governing legislation on merger control is Law No.4054 on Protection of Competition and Communique No.2010/4 on Mergers and Acquisitions Requiring the Approval of the Competition Board (as amended by Communique No.2012/3). In particular, Article 7 of the Competition Law governs mergers and acquisitions, and authorises the Board to regulate, through communiqués, which mergers and acquisitions require notification to the Authority to become legally valid.
The national competition authority for enforcing the Law on the Protection of Competition No. 4054 in Turkey is the Turkish Competition Authority, a legal entity with administrative and financial autonomy. The Authority consists of the Competition Board, the Presidency and service departments. As the competent decision making body of the Authority, the Competition Board is responsible for, inter alia, reviewing and resolving merger control filings.
Communiqué No.2010/4 defines the scope of the notifiable transactions as follows:
- a merger of two or more undertakings;
- the acquisition of or direct or indirect control over all or part of one or more undertakings by one or more undertakings or persons, who currently control at least one undertaking, through: (i) the purchase of assets or a part or all of its shares, (ii) an agreement, or (iii) other instruments.
As explained more fully below, Communique No.2010/4 provides turnover thresholds that a given merger or acquisition must exceed before becoming subject to notification. Within these turnover thresholds, there are also specific methods of turnover calculation for certain sectors. Furthermore, Communique No.2010/4 does not seek the existence of an ‘affected market’ in assessing whether a transaction triggers a notification requirement; foreign-to-foreign transactions (cases where the relevant undertakings do not any physical presence in Turkey) are also caught if they exceed the turnover thresholds.
The notification process is mandatory. If the turnover thresholds are met and there is a change of control on a lasting basis, the transaction is subject to approval by the Competition Board. For the sake of completeness, if the turnover thresholds are met, foreign-to-foreign transactions would trigger notification requirement so long as the joint venture is a full-function joint venture.
There is no specific deadline for making a notification in Turkey. There is however a mandatory waiting period: a notifiable transaction is invalid unless the Competition Authority approves it.
The principal law governing the Ukrainian merger control regime is the Law of Ukraine “On the Protection of the Economic Competition” (2001). Other relevant laws and regulations are as follows: the Law of Ukraine “On the Antimonopoly Committee of Ukraine” (1993); Regulation on Filing with the Antimonopoly Committee of Ukraine Applications Seeking a Prior Approval of the Concentration of Business Entities (2002); Methodology Applied to Determine Monopoly (Dominant) Market Position (2002); Rules Applicable to Proceedings on Applications and Cases on Violations of Competition Law (1994); and Guidelines on the Calculation of Fines for Violations of Competition Law (2016).
The Antimonopoly Committee of Ukraine (AMC) is the primary state authority, which is responsible for the protection of the economic competition.
The merger control notification is mandatory, if the financial thresholds are met. The transaction cannot be completed prior to its approval by the AMC.
All thresholds are calculated on a group-level basis. The thresholds test is applied for the acquirer group and the target group including the seller group. The value of assets and turnover refer to the whole turnover and assets of the parties (not only those related to the relevant product/service market).
Ukrainian competition law contemplates standard (45 calendar days) and simplified (25 calendar days) procedures for the consideration of the merger control notification. If the transaction may lead to a monopolisation and a detailed analysis of the transaction is required, the AMC may initiate a merger investigation (Phase II). Phase II may not exceed 135 calendar days.
The merger control regime in the United States is governed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act), as well as implementing regulations contained in 16 C.F.R. parts 801-803. Both the Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Department of Justice (DOJ) perform substantive antitrust review of covered transactions. However, the FTC, through its Premerger Notification Office, is the principal enforcement agency for the HSR Act.
Filing under the HSR Act is mandatory for transactions that meet the Act’s filing thresholds. The HSR Act does not require the parties to a transaction to obtain the affirmative approval of the FTC or DOJ. Rather, it imposes reporting and waiting period obligations on the parties to give the enforcement agencies time to review a transaction and make a determination whether challenge it in court. The HSR Act requires parties to covered transactions to submit Notification and Report Forms to the FTC and DOJ, and to observe a 30-calendar-day waiting period prior to closing the transaction. The waiting period may be “early terminated” if the parties have requested such treatment and the transaction does not present competition issues. The waiting period may also be extended through issuance of a “Second Request” for information by the FTC or DOJ. A Second Request extends the waiting period for 30 calendar days following the parties’ substantial compliance with the request.
The HSR Act employs two principal thresholds to determine which transactions are covered by its notification and waiting period requirements: the size-of-person test and the size-of-transaction test. Both are adjusted annually (typically in February) to reflect changes in the U.S. gross national product. The HSR Act also has exemptions for acquisitions that do not have a sufficient nexus with US commerce.
The HSR filing itself is relatively straightforward compared to other jurisdictions. It requires each party to complete a form with a short transaction description and basic information about the filing party, as well as the submission of certain documents that may have been prepared by the party analysing the transaction with respect to competition-related topics.
Merger control in Russia is exercised by the Federal Antimonopoly Service of the Russian Federation (the “FAS” or the “authority”) and is governed by the Federal Law “On Protection of Competition” and a number of internal FAS regulations covering the procedure, application and also requirements for certain documents.
Filing is mandatory in Russia and, in most cases, clearance should be obtained before closing a deal. In certain cases (a number of intragroup transactions only), the law provides for the possibility of sending the authority a notification within 45 calendar days of closing (instead of filing before closing). Yet the latter method is very rarely used in Russia since such a procedure provides for public disclosure of the group on the FAS website a month prior to closing.
The following transactions are covered by the Russian merger control regime (taking into the account that turnover/asset value thresholds are also met):
- mergers between Russian companies and incorporation of a new company in Russia, if the authorised capital of such company is paid by shares or production or intangible assets of another company;
- establishment of a JV in Russia by competitors;
- acquisition of more than a 33% or 50% or 66% share in a Russian limited liability company;
- acquisition of more than a 25% or 50% or 75% share in a Russian joint stock company;
- acquisition of a 50% share in or control over a foreign entity that has supplied to Russia, over the last year, goods or services worth more than RUB 1 bn;
- acquisition of control over a Russian company;
- acquisition of more than 20% of the company`s production and/or intangible assets located in Russia (for intangible assets, this means that they should be protected in Russia).
Russian law provides for two types of threshold: turnover and asset value. In general, both of them are calculated on a worldwide basis; in certain cases, however, the Russian turnover/asset value should also be taken into the account (for more detail, please see item 3.1, 3.3).
The application to the authority should be filed by the acquirer or parties participating in the merger or setting up a JV and, in most cases, only such parties may be held liable for violations of the merger control regime.
The ordinary review period for an application is one month. Formally, it could be extended for up to two months or even more; in practice, however, in most cases it does not exceed 1.5-2 month.
In the majority of cases, clearance decisions in Russia are positive and are issued without any remedies. Even so, the FAS may, along with a positive decision, issue an obligatory order if it decides that competition in Russia might be affected by the deal.
Violation of the merger control regime may entail imposition of fines, disqualification of officials (in certain cases) and also invalidation of the transaction.
Please note, that this overview relates to merger control regime only and does not cover foreign investments control regime (regulating foreign investments in Russian strategic entities) providing for specific regulation which should be analysed separately.
The UK merger control regime – which is contained in the Enterprise Act 2002 – is one of the few voluntary, non-suspensory filing regimes in the world. If a transaction meets the relevant jurisdictional thresholds, the UK competition authority – the Competition and Markets Authority (CMA) – will have jurisdiction to review the transaction and to impose remedies to address any substantial lessening of competition to which it considers the transaction may give rise. However, merging parties have no obligation to notify the CMA of a relevant transaction and are free to complete it unless and until the CMA decides to open a second-phase investigation, or imposes an ad-hoc prohibition on closing during first-phase (it has never done the latter, to date).
If a transaction is completed without the parties having first sought a clearance from the CMA by making a voluntary filing, then the purchaser of the relevant target business effectively assumes all antitrust risk in the transaction, including: (i) the risk that the CMA subsequently opens an investigation, concludes that the transaction is likely to lessen competition substantially and imposes remedies (which could include a requirement to divest the entire target business at no minimum price); and (ii) the financial cost of complying with strict hold-separate obligations that are invariably imposed by the CMA on both the target business and the purchaser's business for the entire duration of its investigation, through to implementation of any remedies that are required.
The Belgian merger control regime is governed by the Competition Act of 2013 (the Competition Act). All provisions concerning merger control entered into force on 6 September 2013. The Royal Decree of 30 August 2013 relating to the notification of mergers of undertakings is the main implementing decree, and it is supplemented by the rules adopted on 8 June 2007 concerning the simplified notification of mergers.
The relevant enforcement authority is the Belgian Competition Authority (Autorité Belge de la Concurrence / Belgische Mededingingsautoriteit), which is an independent administrative authority composed of the President, the Competition College, the College of Competition Prosecutors and a Management Committee. Notifications are submitted to the Competition Prosecutor General. Appeals against decisions approving or prohibiting a notified transaction can be lodged with the Brussels Court of Appeal.
Belgium enforces a system of mandatory notification for concentrations that meet the jurisdictional thresholds. The standard timetable for review is 40 working days in Phase One and 60 working days in Phase Two, subject to extensions. Certain transactions may be eligible for a simplified procedure which lasts 15 working days: in recent years, the majority of cases have been notified under the simplified procedure. Notifiable concentrations may not be implemented before approval, and fines can be imposed to sanction early implementation.
Merger filings in Belgium require extensive and detailed information and supporting materials. Businesses whose transaction triggers a Belgian notification should allow ample time to prepare the necessary documents. It should also be noted that the Belgian Competition Authority encourages parties to engage in informal “pre-notification” contacts before filing a notification and starting the clock on the formal review period. This, too, should be taken into account when planning the timeline of a deal.
The main statute regulating merger control in Austria is the Cartel Act 2005 (Kartellgesetz).
The Austria Supreme Court (in its capacity as Cartel Court of Appeals) describes the objective of merger control as “the preventive support of the general interest in maintaining an ‘Austrian’ market structure […], which ensures effective competition”.
The authorities competent for merger control are the same as those responsible for the (public) enforcement of competition law in general. Notifiable mergers have to be notified to the Federal Competition Authority (Bundeswettbewerbsbehörde – BWB); the BWB informs the Federal Cartel Prosecutor (Bundeskartellanwalt – FCP). These two institutions are commonly referred to as the Official Parties (Amtsparteien).
If either of the official parties requests an in-depth examination (in principle, within four weeks of receiving the notification), the Higher Regional Court of Vienna (Oberlandesgericht Wien) sitting as the Cartel Court (Kartellgericht) opens Phase II proceedings. If the official parties do not see competition concerns, the notified merger is cleared upon expiration of the Phase I period or receipt of the official parties’ waivers of their right to request Phase II proceedings. Decisions by the Cartel Court can be appealed against to the Austrian Supreme Court sitting as the Cartel Court of Appeals (Kartellobergericht). The decisions by the Cartel Court of Appeals in Phase III are final.
The Cartel Act defines which transactions qualify as notifiable mergers. Only transactions that are to be regarded as concentrations (Zusammenschlüsse) and exceed certain turnover thresholds have to be notified prior to consumption. If, even though the thresholds are exceeded, there is either no (potential) effect on the Austrian market (effects doctrine) or the thresholds of the EU Merger Regulation (EUMR) are also exceed, Austrian merger control does, in principle, not apply but the transaction may be notifiable elsewhere or, according to the “one stop shop principle”, to the European Commission.
While for a transaction to qualify as concentration, there typically needs to be a change of control (similarly as under the EUMR), the scope of Austrian merger control goes beyond that: Also the acquisition of only a 25% stake in another undertaking qualifies as concentration; further, the bringing about of an identity of at least half of the executive or supervisory board members is regarded a concentration between the concerned undertakings.
The Competition Act, 1998 regulates mergers having an effect in South Africa. It applies to all economic activity within, or having an effect within, South Africa. Accordingly, transactions between parties in a foreign jurisdiction, which has an effect in South Africa (eg by way of sales into the country) is subject to the merger control provisions of the Act.
The Competition Commission (Commission) is the primary interface with the public. It is responsible for the investigation and evaluation of mergers. It has the power to approve, prohibit or impose conditions in the case of small and intermediate mergers and is obliged to make recommendations to the Competition Tribunal (Tribunal) in relation to large mergers.
The Tribunal is the primary adjudicative body. It is responsible for the approval of large mergers. It is the entity that adjudicates on conduct prohibited in terms of the Competition Act and is responsible for the imposition of penalties under the Act. Appeals and reviews in respect of decisions of the Commission are referred to the Tribunal.
The Competition Appeal Court consists of three High Court judges and shares exclusive appellate jurisdiction with the Tribunal in relation to most aspects of the Competition Act, although there is a right of appeal, with special leave, to the Constitutional Court.
No party may implement an intermediate or large merger without the prior approval of the competition authorities.
The South African authority is well regarded on the continent as an effective and sophisticated regulator. Its approach to substantive competition issues and formal notification requirements is generally in line with international best practice. From a timing perspective, mergers are generally approved within three months or less. However, complex, large mergers can take significantly longer.
On factor that distinguishes the South African regulator from many others is the specific requirement to consider public interest effects alongside competition effects. This has led to particular challenges where mergers are likely to result in job losses or other negative public interest outcomes.
The French merger control regime is governed by Articles L.430-1 to L.430-10 and R.430-2 to R.430-10 of the French Commercial Code (“FCC”). In addition, the revised Merger Control Guidelines (“Merger Control Guidelines”) issued by the Autorité de la concurrence, the French Competition Authority (“FCA”) on 10 July 2013 provide practical guidance to companies.
The relevant enforcement authority is the FCA, an independent administrative body. In addition, the French Minister of Economy (“Minister of Economy”) holds residual powers at two stages of the merger control process (Article L.430-7-1 of the FCC):
- He can request that the FCA open an in-depth review of a concentration (i.e., Phase 2), even if such concentration has already been cleared by the FCA (the FCA has discretion to decide whether to allow this request or not);
- He can decide to examine a concentration at the end of the period of in-depth review and either authorise or prohibit the merger on public interest grounds without taking into account the FCA’s decision.
Notification of mergers that meet certain jurisdictional thresholds (expressed in turnover) is mandatory in France. Concentrations that trigger an obligation to notify may not be implemented prior to clearance and fines can be imposed for failure to notify and/or gun-jumping.
Mexican merger control regimen was recently changed as a result of recent amendments to article 28 of the Mexican Constitution published on 11 June 2013, which, among other many changes, created two new constitutionally autonomous enforcement agencies and provoked the enactment of a new competition act.
Currently, merger control in Mexico is mainly governed by recently enacted July 2014 the Federal Economic Competition Law (FECL). However, merger control legislation has been in effect since 1993.
In addition, the following statutes and regulations are also applicable in concordance with the FECL:
- The Federal Telecommunications and Broadcasting Law (Telecom Law);
- Regulatory Provisions of the FECL and the Regulatory Dispositions to the Telecom Law;
- Federal Telecommunications and Broadcasting Law (Telecom Law);
- Organic Statutes of both competition agencies;
- Federal Civil Proceedings Code; and additionally
- non-binding merger control guidelines (with certain recent amendments pending of approval).
The competition agencies in charge of enforcing current merger control policy, which are constitutionally autonomous bodies, are (i) the Federal Economic Competition Commission (generally known as Cofece) and the (ii) the Federal Telecommunications Institute (commonly known as the IFT). The IFT is the agency in charge of merger control exclusively in the telecom and broadcasting (including TV) arena and Cofece manages the rest of the industries, markets and sectors.
These new competition enforcers took office on 10 September 2013 and are composed of seven commissioners each, who need to be approved by the Senate and the Executive branch.
Cofece and the IFT have federal jurisdiction over all potential cases and merger control is exclusively limited to their authority. Consequently, although specific sectors such as financial and insurance might require other types of regulatory approvals and certain types of transactions might require authorization from foreign investment authorities, specific merger control review is exclusively under the jurisdiction of Cofece and the IFT.
As consequence of the aforementioned amendments, Mexican merger control system aimed to adapt world-wide best practices by reinforcing local experience. Therefore, local merger control regimen is mandatory when specific thresholds are reached with very limited exception cases, clearance is a compulsory requirement for closing and filing fees have been reinstated since 2016.
Similarly, merger control procedure in Mexico has acquired certain level of complexity as both authorities have increased scrutiny and analysis for local or transnational transactions and communication with other competition agencies around the world (especially in the US) is now a common standard practice as it will be addressed further on.
Merger control in Germany is governed by the Act Against Restraints of Competition (ARC) and enforced by the Federal Cartel Office (FCO) in Bonn. The FCO is very active and a high number of cases are notified each year, mostly because of the comparatively low filing thresholds and the fact that minority shareholdings and non-controlling interests are caught. In most cases the information required for submission is not excessively burdensome and the review straightforward and swift.
Germany has a mandatory filing regime so that transactions falling within the ambit of German merger control must be notified and cannot be closed prior to clearance. Sanctions apply in case of violations.
Italian merger control rules are set out by Law no. 287 of 10 October 1990 and its implementing regulations. The relevant enforcement authority is the Italian Competition Authority (ICA). The rules of procedure governing merger control cases before the ICA are set out in Presidential Decree no. 217 of 30 April 1998.
Under Italian merger control rules, the jurisdictional test consist in a set of cumulative turnover thresholds based on the parties’ turnover in Italy (see question 2.1). If a transaction meets both such turnover thresholds, it shall be notified to the ICA prior to its implementation (see question 3.2).
Notifying parties may close the transaction before the clearance decision of the ICA. However, very often, the parties agree that completion of a transaction subject to mandatory notification, shall be conditional upon the clearance decision of the ICA, for the reasons outlined in question 2.2 below.
The ICA shall decide whether to clear the transaction or start an in-depth investigation within 30 calendar days (15 calendar days in case of public takeovers) of receipt of the notification (phase I). If an in-depth investigation is started (phase II), the ICA shall issues its final decision within 45 calendar days. Such deadline can be extended of additional 30 calendar days, if the parties fail to provide the information requested by the ICA, which are in their disposal.
The final decision of the ICA can either (i) fully clear the transaction; (ii) clear it subject to remedies; or (iii) prohibit it. ICA’s decisions, are published on the ICA’s website (see question 6.5), omitting only confidential information (see question 6.7). ICA’s decisions can be appealed before the Regional Administrative Court of Rome (TAR Lazio-Roma). The judgments of the TAR Lazio-Roma can be appealed before the Italian Supreme Administrative Court (Council of State) (see question 9).
Australia's merger control regime is governed by the Competition and Consumer Act 2010 (Cth) (CCA) and is administered and enforced by the Australian Competition and Consumer Commission (ACCC), with a limited role undertaken by the Australian Competition Tribunal (Tribunal).
The regime prohibits a corporation or person from directly or indirectly acquiring shares or assets if it would have the effect, or be likely to have the effect, of substantially lessening competition in a market in Australia (see section 4).
It may also apply to mergers or acquisitions occurring outside Australia, which is a foreign-to-foreign merger (see section 3.5).
Merger notification or filing is not mandatory under the CCA (see section 2). However, parties involved in mergers which meet the following threshold (Notification Threshold) (or which may otherwise raise competition concerns) are encouraged by the ACCC to apply for clearance:
- the products of the merger parties are substitutes or complements; and
- the merged firm will have a post-merger market share of greater than 20 per cent of the relevant market.
There are three voluntary mechanisms for obtaining approval of a proposed transaction:
- informal clearance by the ACCC. This is an informal process in which the ACCC may pre-assess a transaction, or conduct a confidential and/or public review of a transaction. Where it has no objections, the ACCC issues a letter of comfort indicating it has no intention to intervene in the transaction. This amounts to an 'informal clearance' that is widely relied upon by Australian businesses. Informal clearance remains the most flexible and least costly option (particularly for non-controversial transactions);
- formal clearance from the ACCC. Formal clearance confers statutory immunity on the applicant. To date, this procedure has never been utilised; and
- authorisation by the Tribunal. A merger that raises competition concerns may be authorised by the Tribunal in circumstances where the applicant is able to demonstrate such public benefits that the transaction should be allowed to occur. Authorisation confers statutory immunity on the applicant and has occasionally been used successfully.
The processes are discussed further in sections 5 and 6.
This guide does not address Australia's foreign investment regime and any requirements to notify a merger to the Foreign Investment Review Board (FIRB), pursuant to the Foreign Acquisitions and Takeovers Act 1975 (Cth).
The Canadian merger control regime is governed by the federal Competition Act (‘the Act’). The Commissioner of Competition (‘the Commissioner’) is responsible for the administration and enforcement of the Act as head of an independent law enforcement agency, the Competition Bureau (‘the Bureau’). The Commissioner and the Bureau receive merger notifications and conduct merger reviews. They also have the power to launch investigations into mergers that do not require notification, and they decide whether to challenge mergers before the Competition Tribunal (‘the Tribunal’), a specialized court with legal, economics, and business expertise.
The Act contains two parts that apply to mergers – one that establishes the merger control regime (which governs when parties are legally required to notify the Commissioner before closing their transaction) and another that contains the substantive merger review provisions (which sets out the substantive test for challenging a merger and the factors that will be considered in determining whether a merger should be challenged). These parts of the statute apply independently of each other. Thus, even if a merger does not require notification, it is still subject to the substantive merger review provisions (i.e., it can still be challenged).
Pre-merger notification is mandatory if the parties exceed the applicable financial thresholds, in which case there is a statutory prohibition on closing until the applicable waiting period has expired, been waived, or terminated. The turnover of the seller as well as the exports of all parties to the transaction are relevant for determining whether the transaction triggers a notification requirement, as described in greater detail below.
Filing may be required where there is an acquisition of a minority interest, even if the interest does not confer control or decisive influence over the target, so long as the applicable financial thresholds are exceeded and an additional “size of equity” test is met (described in more detail in below).
The expiry of the statutory waiting period does not always mean that the Commissioner has completed his substantive review of a transaction. The substantive test applied by the Commissioner and Bureau in its review is whether the proposed transaction is likely to prevent or lessen competition substantially.
Importantly, the Act has a unique efficiencies defence that can “save” an otherwise anticompetitive merger if it can be shown that the efficiencies from the merger are likely to be greater than and offset any prevention or lessening of competition that is likely to result from the merger.
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 is caught as 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.