Merger control constitutes the analysis carried out by the Office for Competition (the ‘Office’) in its assessment of those corporate transactions notifiable to it. The aim behind such an assessment is for the Office to consider whether that transaction – taking the form of the creation of a ‘concentration’ – is likely to impede effective competition.
The Control of Concentration Regulations1 identify three types of concentrations:
- mergers, when two or more undertakings previously independent of one another fuse together resulting in an amalgamated new entity.
- acquisition of control, which consists of the acquisition of (in)direct control in an undertaking either solely by an undertaking or jointly by two or more undertakings.
- joint ventures. Only full-function joint ventures that perform on a lasting basis the functions of an autonomous entity are notifiable to the Office.
While the obligation of notification is only placed on the creation of full-function joint ventures, this does not mean that non-full-function joint ventures escape competition rules. On the contrary, these types of joint ventures will be assessed in terms of normal competition rules. Thus, the parties to the agreement establishing a non-full-function joint venture must ensure that the said agreement does not have as its object or effect the prevention, restriction, or distortion of competition within Malta.2 If such an agreement is found to breach competition rules, the parties to it could be liable to a fine of up to 10% of their worldwide turnover. Unfortunately, there is no mechanism whereby the Office gives its rubberstamp of approval to such an agreement – this is an assessment to be made by the parties involved in the transaction.
Two cumulative turnover thresholds must be met for a merger or an acquisition to be notified to the Office:
- each undertaking’s group turnover in Malta must exceed €2,329,373.40 in the previous financial year, and
- each undertaking’s group turnover in Malta is equivalent to at least 10% of the combined aggregate turnover of the undertakings concerned.
What happens in the case of a full-function joint venture? The approach taken by the Office is that all full-function joint ventures are notifiable – there are, thus, no turnover thresholds that are considered in such circumstances.
Once it is established that the turnover thresholds are met by all the parties to the transaction (when applicable), the concentration notification form – known as the Form CN – is filed with the Office within 15 working days from the signing of the agreement regulating the transaction.3 Following which, once notification is complete, the Office will take up to 6 weeks to issue its Phase I decision. There are three possible outcomes to such an assessment:
- a decision from the Office concluding that the concentration does not fall within the scope of merger control rules,
- a declaration issued by the Office stating that the concentration does not raise serious doubts as to its lawfulness. The concentration will, thus, not be opposed, or
- that the concentration raises serious doubts as to its lawfulness.
For those transactions considered more “problematic”, the Office will open Phase II proceedings to analyse the same in more depth. A decision in this case will be issued within 4 months of the initiation of Phase II proceedings. While such proceedings are taking place, the parties to the concentration are free to approach the Office with commitments to alleviate the doubts as to the concentration’s lawfulness that the Office may have. If the Office accepts the commitments, the concentration will be declared lawful.
Parties to an agreement resulting in a merger, acquisition, or the creation of a full-function joint venture must keep in mind that notifying the same to the Office is a standstill obligation. The implementation of a concentration on the market either prior to its notification or, if notified, without waiting for clearance from the Office constitutes gun-jumping which can result in the parties to the transaction being slapped with a penalty between €1,000 and €10,000.
While the penalties that will be imposed in the event of an implementation of a concentration without obtaining clearance from the Office might not be of a deterrent, the undertakings involved would run the risk of tarnishing their reputation if an investigation for gun-jumping is commenced against them. This begs the question: is it worth jumping the gun?
1 Legal Notice 294 of 2002
2 Competition Act (Chapter 370 of the laws of Malta), article 5. Treaty on the Functioning of the European Union, article 101
3 A number of supporting documentation and a notification fee must be filed with/paid to the Office together with the Form CN for notification to be deemed complete. Failure to file any one of the supporting documents or the failure to pay the notification fee will result in the concentration not been notified.