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Select Topics
Relevant legislation and authorities
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  1. Is a merger control regulation in force?
  1. Which authorities enforce the merger control regulation?
  1. Relevant regulations and guidelines with links:
  1. Does general competition regulation apply to mergers or ancillary restrictions?
  1. May an authority order a split-up of a business irrespective of a merger?
  1. Other authorities that also require merger filing or may prohibit transaction
    (Note that this may not be an exhaustive list and that industry-specific legislation should always be considered. Furthermore, a merger will often require change of registrations with – but not approval from – the companies register, land register and authorities that have issued permits for the activities of the merging parties.)
  1. Are any parts of the territory exempted or covered by particular regulation?
Voluntary or mandatory filing
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  1. Is merger filing mandatory or voluntary?
Types of transactions to file – what constitutes a merger
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  1. Is there a general definition of transactions subject to merger control?
  1. Is "change of control" of a business required?
  1. How is "control" defined?
  1. Acquisition of a minority interest
  1. Joint ventures/joint control – which transactions constitute mergers?
Thresholds that decide whether a merger notification must be filed
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  1. Which thresholds decide whether a merger notification must be filed?
  1. Special thresholds for particular businesses
  1. Rules on calculation and geographical allocation of turnover
  1. Special rules on calculation of turnover for particular businesses
  1. Series of transactions that must be treated as one transaction
Exempted transactions and industries (no merger control even if thresholds ARE met)
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  1. Temporary change of control
  1. Special industries, owners or types of transactions
  1. Transactions involving only foreign businesses (foreign-to-foreign)
  1. No overlap of activities of the parties
  1. Other exemptions from notification duty even if thresholds ARE met?
Merger control even if thresholds are NOT met
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  1. May a merging party file voluntarily even if the thresholds are not exceeded?
  1. May the competition authority request a merger notification or oppose a transaction even if thresholds are not met?
Referral to and from other authorities
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  1. Referral within the jurisdiction
  1. Referral from another jurisdiction
  1. Referral to another jurisdiction
  1. May the merging parties request or oppose a referral decision?
Filing requirements and fees
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  1. Stage of transaction when notification must be filed
  1. Pre-notification consultations
  1. Special rules for acquisitions on stock exchanges and public takeover bids
  1. Forms available for completing a notification
  1. Languages that may be applied in notifications and communication
  1. Documents that must be supplied with notification
  1. Filing fees
Implementation of merger before approval – "gun jumping" and "carve out"
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  1. Is implementation of the merger before approval prohibited?
  1. May the parties get permission to implement before approval?
  1. Due diligence and other preparatory steps
  1. Veto rights before closing and “Ordinary course of business” clauses
  1. Implementation outside the jurisdiction before approval – "Carve out"
  1. Consequences of implementing without approval/permission
The process – phases and deadlines
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  1. Phases and deadlines
Assessment and remedies/decisions
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  1. Tests or criteria applied when a merger is assessed
  1. May any non-competition issues be considered?
  1. Special tests or criteria applicable for joint ventures
  1. Decisions and remedies/commitments available
Publicity and access to the file
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  1. How and when will details about the merger be published?
  1. Access to the file for the merging parties and third parties
Judicial review
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  1. Who can appeal and what may be appealed?

 
CZECH REPUBLIC

Robert Neruda
Partner

robert.neruda@havelpartners.cz

Tel: +420 545 423 455

Mob: +420 724 929 134

Lenka Gachová
Counsel

lenka.gachova@havelpartners.cz

Tel: +420 545 423 454

Mob: +420 725 736 296

Roman Svetnický
Associate

roman.svetnicky@havelpartners.cz

Tel: +420 545 423 464

Mob: +420 734 170 582

Ivo Šimecek
Counsel

ivo.simecek@havelholasek.cz

Tel: +420 255 000 842

Mob: +420 734 692 473

No new regulation adopted or proposed

Note that relevant regulations may be changed before your contemplated transaction is completed. Mergerfilers.com and our national experts keep information on regulations up to date and even provide alerts on adopted or proposed changes that have not come into force yet but may come into effect before the transaction is completed. When this field is green, we have no knowledge of such imminent changes to the relevant regulations.

Relevant legislation and authorities

1) Is a merger control regulation in force?

Yes. Merger control is governed by the Czech Act on the Protection of Competition, in its Sections 12 to 19.

2) Which authorities enforce the merger control regulation?

The Czech Office for the Protection of Competition (Úřad pro ochranu hospodářské soutěžein Czech) is the only state authority which enforces the Czech Act on the Protection of Competition including the merger regulation contained therein. 

Generally, decisions of the Office for the Protection of Competition may be appealed to the Chairman of the Office for the Protection of Competition and decisions of the Chairman may be reviewed by administrative courts. But in merger cases, this is highly uncommon since only the party to the administrative proceedings (usually the acquirer) has the right to appeal against the decision (see topic 50).

3) Relevant regulations and guidelines with links:

Original Czech version

Unofficial English translation

Zákon č. 143/2001 Sb., o ochraně hospodářské soutěže a o změně některých zákonů (zákon o ochraně hospodářské soutěže)

Act No. 143/2001 Coll., on the Protection of Competition and Amending Certain Acts (Act on the Protection of Competition)

Oznámení k náležitostem návrhu na povolení spojení soutěžitelů

Notice on the Requirements for Concentration Notifications

Oznámení o přednotifikačních kontaktech

Notice of the Office for the Protection of Competition on the pre-notification contacts with merging parties 

Oznámení o výpočtu obratu

Notice of the Office for the Protection of Competition on Calculation of Turnover for the Purpose of the Control of Concentrations between Undertakings

Oznámení o konceptu spojení soutěžitelů

Notice on the concept of concentration

English version N/A

Oznámení o pojmu spojujících se soutěžitelů 

Notice on the Notion of "Undertakings Concerned" under the Act on the Protection of Competition

Oznámení o zákazu uskutečňování spojení před jeho povolením a výjimkách z něj

Notice on the prohibition of implementation of concentrations prior to the approval and exemptions thereof

Oznámení o aplikaci konceptu obrany společnosti v hospodářských potížích při posuzování spojení soutěžitelů

Notice on the Application of the Failing Firm Defence Concept in the Assessment of Concentrations of Undertakings

Oznámení o zjednodušeném řízení pro posuzování některých případů spojení soutěžitelů

Notice on simplified proceedings in some cases of concentrations of undertakings

English version N/A

Vyhláška 294/2016 Sb., kterou se stanoví podrobnosti odůvodnění návrhu na povolení spojení soutěžitelů a dokladů osvědčující skutečnosti rozhodné pro spojení.

Decree No. 294/2016 Coll., stipulating details of the justification of a concentration notification and documents certifying facts decisive for a concentration

 

4) Does general competition regulation apply to mergers or ancillary restrictions?

Czech competition law is interpreted in accordance with EU competition law in this respect (as in any other competition regulation matters).

Generally, restrictions of competition that are ancillary to the merger, for instance a standard non-competition obligation on the seller, are considered inherent parts of the merger and are not subject to separate scrutiny under the general competition regulation. However, restrictions that go beyond what may be considered ancillary may fall under the general prohibition on anti-competitive agreements.

The general competition regulation may in special circumstances be used to oppose a transaction as such (not merely a specific restriction in the transaction documents). For instance, the general prohibition on anti-competitive agreements may be applied to full-function joint ventures that have coordination of the market behaviour of the parent companies as their object or effect.

5) May an authority order a split-up of a business irrespective of a merger?

No. The Office for the Protection of Competition may only order a split-up in case of implementation of a merger without notification (see topic 42).

6) Other authorities that also require merger filing or may prohibit transaction
(Note that this may not be an exhaustive list and that industry-specific legislation should always be considered. Furthermore, a merger will often require change of registrations with – but not approval from – the companies register, land register and authorities that have issued permits for the activities of the merging parties.)

While there are sector-specific regulators in the Czech Republic, the Office for the Protection of Competition is generally the only authority that requires merger filing (subject to fulfilment of turnover thresholds – see below) or that may prohibit the transaction

A special regime applies to banks. Under Section 16(1)c of Act No. 21/1992 Coll., on banks, the Czech National Bank gives prior consent to the merger or division of a bank or the transfer of assets to a bank as a shareholder. A merger carried out without the required prior consent of the Czech National Bank is invalid. Irrespective of an approval by the Czech National Bank, the transaction must still be notified to and be approved by the Office for the Protection of Competition (if the turnover thresholds are met). 

7) Are any parts of the territory exempted or covered by particular regulation?

No.

Voluntary or mandatory filing

8) Is merger filing mandatory or voluntary?

Merger filing is mandatory, provided the thresholds are met.

Types of transactions to file – what constitutes a merger

9) Is there a general definition of transactions subject to merger control?

Yes, according to the Czech Act on the Protection of Competition, a transaction subject to merger control is defined as a transaction whereby:

  1. two or more previously independent undertakings merge into one undertaking;
  2. one or more persons who already control at least one undertaking, or one or more undertakings – by an agreement to purchase shares or assets or by any other means – acquire direct or indirect control of the entirety of or parts of one or more other undertakings; or
  3. a joint venture that will perform on a lasting basis all the functions of an independent business entity is established.

Note that certain transactions of a temporary nature are not considered to be mergers subject to merger control (see topics 19 and 20).

10) Is "change of control" of a business required?

Yes, generally a merger will only be considered to take place if the transaction results in a change of control over a business.

However, transactions that result in the establishment of a new business (a joint venture) controlled by two or more businesses or persons already controlling one or more businesses will also constitute a merger.

11) How is “control” defined?

The Czech Act on the Protection of Competition defines “control” as a possibility to perform a decisive influence on the activity of another undertaking or a part thereof on the basis of a matter of law or fact, in particular on the basis of:

  1. the ownership of a business of the controlled undertaking, or a part thereof; or
  2. the right, which provides decisive influence on the composition, voting and decision-making of the bodies of the controlled undertaking.

The Czech Act on the Protection of Competition does not explicitly state what particular shareholding threshold establishes the existence of control. The Office for the Protection of Competition assesses the existence of control on a case-by-case basis. In assessing whether an undertaking acquires a possibility to exercise “decisive influence” over another undertaking, the Office for the Protection of Competition generally verifies whether the influence may be exercised in relation to the adoption of strategically important decisions, in particular those regarding:

  1. The appointment of the executive bodies of the target undertaking;
  2. Financial, commercial and investment plans of the target undertaking; or
  3. Strategic choices of new technologies or development of new products and/or services.

Control may be held by one or more persons or businesses jointly. Establishment of joint control as well as changes in the group of owners with a controlling interest constitute change of control. Consequently, there is a change of control when a business goes from 50/50 ownership to being solely controlled by only one of the existing owners, and when one of the existing owners sells its share to a third party.

Joint control may be established between a majority and a minority shareholder on the basis of veto rights regarding decisions that are essential for the strategic operation of the business. A merger will occur both when the joint control is established and again when it is dissolved; for instance, if a minority shareholder gives up certain essential veto rights so that the majority shareholder gains sole control.

"Control" and "Change of control" is interpreted according to EU competition law, including the EU Commission’s Consolidated Jurisdictional Notice.

12) Acquisition of a minority interest

Acquisition of a minority interest that does not result in anyone gaining sole or joint control over a business is not subject to merger control.

However, a merger may consist even in the acquisition of a minority shareholding. This is the case where the acquisition confers the possibility to exercise a decisive influence over the target undertaking either on a de jure or de facto basis. A de jure decisive influence may be acquired by a minority shareholder by virtue of acquiring preferential shares which confer the majority of voting rights or the power to determine the strategic commercial behaviour of the target undertaking upon this shareholder. A de facto decisive influence may be acquired by the minority shareholder typically in a situation where the remaining voting rights are dispersed among a vast number of other shareholders not normally attending the general meeting.

13) Joint ventures/joint control – which transactions constitute mergers?

The following transactions regarding businesses subject to joint control may be subject to merger control if the joint venture is "full function":

  1. Establishment of a joint venture
  2. Change from joint to sole control
  3. Dissolution – provided (part of) the business of the joint venture is transferred to one or more of the businesses controlling the joint venture or a third party
  4. Change in or extension of the activities of a joint venture – provided that further assets, contracts, know-how, rights etc. are transferred from parent companies to the joint venture to form the basis for the new activities that extend the business activities of the joint venture into other product or geographic markets that were not in the scope of the former business activities of the joint venture provided these activities are performed by the joint venture as full function.
  5. Change in participants/owners – for instance if one of the controlling businesses sells its share in a joint venture to another business, or if one of the controlling businesses is acquired by another business. 

A creation of a joint venture that is not “full function”, because it does not, on a lasting basis, perform all the functions of an autonomous economic entity, is not subject to merger control but may be scrutinized under the general rule on prohibition on anti-competitive agreements. Whether a joint venture is considered “full function” or merely “cooperative” depends on the level of the joint venture’s dependence on its parents and to what extent the joint venture operates in a market and performs the functions normally carried out by other undertakings operating in the same market.

Even if a joint venture is “full function” and therefore subject to merger control (provided the thresholds are met), the general prohibition on anti-competitive agreements may also be applied if the joint venture has coordination of the market behaviour of the parent companies as an object or effect.

Thresholds that decide whether a merger notification must be filed

14) Which thresholds decide whether a merger notification must be filed?

a) Turnover thresholds

A merger notification must be filed if:

  1. the combined total annual turnover in the Czech Republic of all undertakings involved is at least CZK 1.5 billion and the total annual turnover in the Czech Republic of each of at least two of the undertakings involved is at least CZK 250 million; or
  2. the net turnover of a) at least one undertaking being a party to the merger (consolidation); b) an undertaking or a part thereof over whom the control is being acquired (target); or c) at least one of the undertakings creating a concentrative joint venture in the Czech Republic exceeds CZK 1.5 billion and the worldwide net turnover of another party to the transaction exceeds CZK 1.5 billion.

b) Market share thresholds

N/A

c) Value of transaction thresholds

N/A

d) Assets requirements

N/A

e) Other

N/A

15) Special thresholds for particular businesses

The thresholds stated in topic 14 apply to all transactions; there are no sector-specific thresholds. 

16) Rules on calculation and geographical allocation of turnover

Rules on calculation and geographical allocation of turnover are contained in § 13 and § 14 of the Act on the Protection of Competition as well as in the Notice on the calculation of turnover for the purpose of concentration control. It is interpreted in accordance with the European Commission’s Consolidated Jurisdictional Notice.

Turnover is calculated on the basis of the most recent audited accounts of a financial year of the participating undertakings as well as any undertakings associated with each participating undertaking, including any direct or indirect parent companies, subsidiaries, joint ventures and subsidiaries of parent companies. The turnover a joint venture has with third parties must be divided equally between the controlling owners irrespective of their share in the capital and the actual distribution of profit; i.e., if the shares in a joint venture are divided 60/40 between two participants who exert joint control, half of the turnover of the joint venture must be attributed to each participant. 

"Turnover" is the net turnover derived from sale of products and services generated by the individual undertakings within the undertaking’s ordinary activities after deduction of (i) value added tax and other taxes directly related to the sales and (ii) any turnover between associated undertakings.

Turnover must be adjusted to take account of any divestments or acquisitions of businesses after the end of the financial year that the turnover calculation is based on.

Generally, turnover from products and services sold to customers located in the Czech Republic at the time of entering into the relevant agreement is considered Czech turnover. The European Commission’s Consolidated Jurisdictional Notice contains special guidelines that also apply in this respect.

17) Special rules on calculation of turnover for particular businesses

Businesses controlled by the State 
For businesses controlled by the State the calculation of turnover is principally the same as in the case of undertakings not controlled by the state. However, the turnover does not include all companies which are directly or indirectly controlled by the state, but only those which form part of the same business entity. Therefore, if the company controlled by the state is not part of a wider holding structure and is not subject to coordination with other state-controlled companies, it shall be regarded for the purpose of turnover calculation as an independent entity. In such case the turnovers of other state-controlled companies are not taken into account. 

Insurance undertakings
For an insurance undertaking the value of the gross premiums written of all insurance contracts concluded applies. This does not only include the insurance contracts concluded in the particular accounting period, but all ongoing contracts concluded in the past.

Banks
Turnover is calculated as the sum of revenues, including in particular:

  1. Interest income 
  2. Income from securities and participating interests
  3. Fees and commissions 
  4. Net profit on financial operations

Sales of services through other providers

In some sectors (e.g. tourism or advertising), it is possible to sell the service through other providers. In such cases, even if the intermediary charges the final customer for the full price for the service, his turnover is made up of commissions he receives from the primary provider for the mediation of the service.

18) Series of transactions that must be treated as one transaction

Transactions that are interdependent because they are linked by conditions must be treated as one if control in each transaction is acquired ultimately by the same undertaking(s). Identification of the economic purpose of the transaction is decisive for the assessment of this question.

Furthermore, if the same parties enter into various transactions that are not interdependent regarding the sale of different businesses or different parts of a business, all such transactions within a two-year period must be treated as one and the same merger.

See also topic 19 regarding temporary change of control.

Exempted transactions and industries (no merger control even if thresholds ARE met)

19) Temporary change of control

Under the Czech competition law a transaction must be long-lasting in order to be regarded as a concentration within the meaning of the Act on the Protection of Competition. Therefore, only transactions which result in permanent or long-lasting changes in the structure of a market are concentrations. A period of five years is usually regarded as long-lasting, but it needs to be assessed on a case-by-case basis. Additionally, a lease for a longer period of time can also be regarded as a long-lasting change of the market structure that needs to be approved by the Office for the Protection of Competition. 

In accordance with the European Commission’s Consolidated Jurisdictional Notice change of control may be considered temporary – and therefore not require merger filing – in the case of a transaction divided into steps.

An example is where several undertakings jointly acquire control of another undertaking but according to a pre-existing plan, immediately after completion split the assets of the undertaking between themselves. In that situation, the temporary joint control will not be subject to merger filing, but the split-up of the assets may require one or several merger filings.

Another example of temporary control is when joint control is established for a limited period before the acquirer obtains sole control, for instance because the seller has agreed on an earn-out payment and the seller retains important veto rights for a limited period. Generally, if the period does not exceed 1 year, only the acquisition of sole control may be subject to merger filing.

In general, the Office for the Protection of Competition in practice takes into account guidance provided in the European Commission’s Consolidated Jurisdictional Notice.

Control may also be considered temporary in the situations mentioned under 1) and 2) in topic 20.

20) Special industries, owners or types of transactions

A merger resulting from the acquisition of control must be of a permanent (structural) nature. An acquisition of control is not subject to the notification obligation under the Act on the Protection of Competition in the following cases:

  1. Control over an undertaking acquired by a bank as a result of the payment of the issue price of the shares by way of a set-off of the bank’s receivables from such legal entity, provided this ownership interest is possessed during a rescue operation or financial restructuring of the controlled undertaking; or 
  2. A provider of investment services acquires control by way of an acquisition of shares of an undertaking, provided the shares are acquired for the purpose of their subsequent sale and the related voting rights are not exercised for the purpose of determining or influencing the market behaviour of the controlled undertaking.

21) Transactions involving only foreign businesses (foreign-to-foreign)

There is no exemption for foreign-to-foreign transactions. All transactions that meet the thresholds are subject to merger control regardless of where the undertakings concerned are registered, or where they operate or own assets.

22) No overlap of activities of the parties

There is no exemption for transactions with no overlap of activities, but there is a simplified procedure available if there is no overlap (see topic 33).

23) Other exemptions from notification duty even if thresholds ARE met?

As a consequence of the EU "one-stop shop" principle, the Czech merger control rules do not apply if the thresholds for EU merger control are exceeded and the European Commission has not referred the merger to the Office for the Protection of Competition. There are no other exemptions.

Merger control even if thresholds are NOT met

24) May a merging party file voluntarily even if the thresholds are not exceeded?

No, the Office for the Protection of Competition will only handle a merger notification if the thresholds are met or if a referral from the European Commission allows it to handle the notification.

25) May the competition authority request a merger notification or oppose a transaction even if thresholds are not met?

No.

Referral to and from other authorities

26) Referral within the jurisdiction

No, the Office for the Protection of Competition is the only state authority which enforces the Czech Act on the Protection of Competition including the merger regulation contained therein.

27) Referral from another jurisdiction

The Office for the Protection of Competition cannot handle mergers based on referrals from other jurisdictions, except referrals from the European Commission.

The European Commission may refer a merger or a part of a merger to the Office for the Protection of Competition. In that case, the Office for the Protection of Competition may handle the merger even if the thresholds for merger notification in the Czech Republic are not exceeded. In the case of a partial referral, the European Commission will handle certain (international) aspects of the merger, whereas the Office for the Protection of Competition will handle the strictly Czech aspects.

A referral of a merger from the European Commission may be requested either by the Office for the Protection of Competition or by the merging parties.

28) Referral to another jurisdiction

If the thresholds for merger notification are met in at least three EU member states, the parties may request that a single merger notification be made to the European Commission in place of notifications to each of the relevant national authorities (see topic 29).

The Office for the Protection of Competition may also request the European Commission to examine a merger that does not have an EU dimension within the meaning of Article 1 of the EU merger regulation (No. 139/2004) but affects trade between Member States and threatens to significantly affect competition within the territory of the Czech Republic. Such a request shall be made within 15 working days of the date on which the merger was notified to the Office for the Protection of Competition. The European Commission shall immediately notify the other EU member states of the request and will decide whether to examine the merger within 25 days after this notification.

Besides referral to the European Commission, a merger cannot be referred to competition authorities in other jurisdictions.

29) May the merging parties request or oppose a referral decision?

Referral to the Office for the Protection of Competition 
If a merger is subject to EU merger control, the parties may – prior to an EU merger notification – request that the merger be referred to the Office for the Protection of Competition, provided that the merger may significantly affect competition in a distinct market in the Czech Republic. If the Office for the Protection of Competition does not oppose such referral, the European Commission may decide to refer the merger in whole or in part.

The European Commission must decide whether to refer a merger within 25 working days of receipt of the request (reasoned submission).

The European Commission may also, on its own initiative or upon request from the Office for the Protection of Competition, decide to refer a merger that has already been notified to the European Commission to the Office for the Protection of Competition. Such a referral decision must be taken within 65 working days after the merger notification has been filed. The merging parties cannot oppose such a referral decision.

Referral from the Office for the Protection of Competition 
If a merger is not subject to EU merger control but is subject to merger control in the Czech Republic and at least two other EU member states, the parties may request that a single merger notification be made to the European Commission in place of notifications to each of the relevant national authorities. If none of the relevant authorities oppose the referral, the European Commission will handle the merger notification, and no notifications are needed in the Czech Republic or any other EU member state. If any of the national authorities in question oppose the referral within 15 working days, the merger must be notified to each of the relevant national authorities.

Filing requirements and fees

30) Stage of transaction when notification must be filed

There is no specific deadline for the notification of a transaction (the parties may ultimately decide not to implement the deal at all). As a general rule, a merger notification should be filed when a binding agreement has been concluded, a takeover bid has been published or a controlling interest has been acquired. 

The Office for the Protection of Competition will agree to handle a notification before a binding agreement has been concluded or a public takeover bid has been announced if the parties can demonstrate a good faith intention to conclude an agreement or – in case of a public takeover bid – if the parties have publicly announced an intention to make such a bid. In practice, the Office for the Protection of Competition may accept a signed letter of intent or even a pre-final draft of the SPA. 

Either way, the transaction may not be implemented before the merger has been approved by the Office for the Protection of Competition.

31) Pre-notification consultations

The Office for the Protection of Competition encourages pre-notification consultations. The subject of the consultations is mainly procedural issues, particularly whether the transaction is subject to merger control. The consultations also often cover the completeness of the merger notification, especially of the notification questionnaire, and formal requirements such as the scope of certified translations that need to be provided. 

The pre-notification consultation is not an obligatory stage of merger-review proceedings and may even be unnecessary in straightforward cases. On the other hand, in a majority of cases pre-notification is recommended in order to ensure the smooth course of the proceedings. The deadlines for the Office for the Protection of Competition will only apply after the formal submission. 

32) Special rules on timing of notification in case of public takeover bids and acquisitions on stock exchanges

The Czech Act on the Protection of Competition explicitly provides for a specific exception from the stand-still obligation in case of mergers which are to be implemented on the basis of a public takeover bid or on the basis of a sequence of operations with securities accepted for trading in a European regulated market as a result of which control is acquired from different subjects, provided that the merger notification is immediately filed and the voting rights attached to the securities are not exercised. 

33) Forms available for completing a notification

There are two forms available: one for simplified notification and one for full notification. The forms are only available in the Czech language. 

Simplified notification is possible in the following cases:

  1. Change of quality of control: the undertaking acquires sole control over another undertaking or part thereof, in which it has participated in a joint control so far.
  2. Market share thresholds: none of the undertakings concerned operate in the same relevant market, or their combined share in such market does not exceed 15% (horizontal merger), and at the same time none of the undertakings concerned is operating in a market vertically connected to the relevant market in which another undertaking concerned operates, or their share in every such market does not exceed 25% (vertical merger).

Note, however, that the Office for the Protection of Competition may always request a full notification, even if the conditions for simplified notification are present, and even after having accepted and declared a simplified notification complete. In particular, the Office for the Protection of Competition may conduct the full assessment in the following cases: 

  1. the definition of the relevant markets and/or calculation of the market shares poses unusual difficulties;
  2. assessment of the effects of the merger raises new legal issues, not previously analysed by the Office for the Protection of Competition;
  3. the markets concerned are characterized by very high barriers to entry, a high level of concentration or existence of other potential problems;
  4. the merging undertakings operate in close/neighbouring markets (i.e. complementary products / purchases by the same set of customers); 
  5. a company acquires sole control over a joint venture in which it has so far participated in joint control, provided that the previous acquisition of joint control was not subject to the approval of the Office for the Protection of Competition; and
  6. the merger consists of acquisition of joint control over a joint venture which may lead to the coordination of the commercial behaviour of the parties. 

34) Languages that may be applied in notifications and communication

Notification and communications are in Czech only. 

35) Documents that must be supplied with notification

The following documents should always be supplied with a merger notification whether simplified or full:

  1. The notification questionnaire;
  2. Extract from the Commercial Register or other similar register (not older than three months) of the parties to the transaction – in case the extracts are not issued in the Czech Republic an apostilled version with certified translations has to be provided;.
  3. Documents which established or will establish the transaction or documents certifying the existence of the transaction;
  4. Annual reports including the audit of yearly financial statements for the last finished accounting period, provided that the notifying party is under an obligation to conduct the audit pursuant to special legal regulations;
  5. Consolidated financial statements for the last finished accounting period provided that the parties are under an obligation to compile consolidated financial statements pursuant to special legal regulations;
  6. Analyses, reports, studies, surveys, and any comparable documents (if any) prepared for any member(s) of the board of directors, or the supervisory board, or any other person(s) for the purpose of assessing or analysing the transaction with respect to competitive conditions, undertakings (actual and potential), the rationale of the transaction, potential for sales growth or expansion into other product or geographic markets, and/or general market conditions;
  7. Turnover calculation scheme, the amount of which justifies submission of the notification, and which clearly states the turnover of the parties in the relevant accounting period; and
  8. Non-confidential version of the notification questionnaire.

The confirmation of the payment of the administrative fee is no longer an obligatory annex, but it is preferable to include it as well. 

It is also necessary to provide (certified) translations of documents that were not prepared in the Czech language (especially if they are not available in English or German). 

The Office for the Protection of Competition may request additional documents, for the purposes of both simplified and full notifications. In particular, the organigrams of the ownership structure of the undertakings concerned or any documents relating to market analysis and market share calculations are welcome.

36) Filing fees

The filing fee for any notification (regardless whether full or simplified) is CZK 100,000. The filing fee should be paid on the date of the filing at the latest. 

Implementation of merger before approval – “gun jumping” and “carve out”

37) Is implementation of the merger before approval prohibited?

Yes. The merging businesses must be run separately and independently until the merger has been approved. However, normal preparatory reversible steps are not prohibited (see topic 39). Please also see topic 32 regarding public takeover bids.

38) May the parties get permission to implement before approval?

Yes, under the Act on the Protection of Competition, the Office for the Protection of Competition may exempt the parties from the prohibition on implementation before approval.

The notifying party may apply for an individual exemption from the stand-still obligation. The application must include sufficient and concrete reasoning with evidence that a delay in the implementation would result in major damage or other significant detriment to the parties to the transaction. The notifying party also has to specify to which extent the exemption is sought. In practice, the Office for the Protection of Competition does not grant a general exemption and is even reluctant to grant any exemptions. 

39) Due diligence and other preparatory steps

Due diligence must be conducted in a way that prevents sensitive market information from being used for purposes other than assessing the viability of the merger.

An explicit exemption is not required for standard due diligence or other preparation measures without effect on the market.

According to the Office for the Protection of Competition’s guidelines, due diligence has to be limited to historic data, and the information exchange must only include general, not specific, information. Moreover, sharing of sensitive information must be stipulated in a non-disclosure agreement, which defines the persons who may receive the information and the aim of the provision of information as well as sets out that the scope of its use is limited to the preparation and implementation of a merger. Preparing the integration of internal functions such as IT and HR is generally acceptable.

40) Veto rights before closing and "Ordinary course of business" clauses

An "ordinary cause of business" clause that prevents the target company from taking decisions outside the cause of its ordinary business until the closing date is generally considered acceptable.

However, it must be assessed on a case-by-case basis to what extent the parties may discuss – or provide each other with veto rights concerning – any decisions in their respective businesses.

The Office for the Protection of Competition does not provide any explicit guidance on this matter.

41) Implementation outside the jurisdiction before approval – "Carve out"

The Act on the Protection of Competition does not provide for the possibility of a carve-out.

42) Consequences of implementing without approval/permission

The parties may be fined. The amount of the fine will be fixed based on the nature, gravity and duration of the infringement; and the fine cannot exceed 10% of the parties’ worldwide turnover.

Furthermore, the Office for the Protection of Competition may impose an order to divest the assets acquired by the merger. However, such option is ultima ratio and would only be applicable in cases where the merger would lead to a significant impediment of competition and would be prohibited by the Office for the Protection of Competition if notified. 

The process – phases and deadlines

43) Phases and deadlines

Phase

Duration/deadline

Pre-notification phase:

The Office for the Protection of Competition has issued a Notice on pre-notification contacts providing guidance on this initial phase of the merger control. It is advisable to inform the Office for the Protection of Competition of the intended transaction at an early stage and to enter into pre-notification consultations that will include submitting one or more draft notifications. 

No set duration or deadline.

Phase I:

During the first days after the filing the Office for the Protection of Competition assesses the completeness of the filing and sends a notice of initiation of the proceedings to the notifying party. The Office for the Protection of Competition also publishes the information on the notification on its website and in the commercial journal.

The merger is either approved (with commitments if relevant) or it is decided to initiate a phase II investigation of the merger, or it is decided that the merger is not subject to the Office for the Protection of Competition’s approval or that it is not a merger within the meaning of Section 12 of the Czech Act on the Protection of Competition.

In practice the Office for the Protection of Competition may undertake the same types of investigations under phase I and II, and the authority may also negotiate commitments in both phases. However, complex and/or problematic mergers will often require the longer deadlines applicable in phase II.

30 calendar days, 20 calendar days in case of simplified procedure.

Extension:
15 working days if commitments are offered by one of the parties within phase I.

Phase II:

The merger is either approved, approved with conditions/commitments or prohibited.

Normally, the Office for the Protection of Competition sends a letter expressing its concerns (the reasons why it is opening a phase II review) within 5 working days prior to initiating phase II.

The investigation is likely to involve detailed market surveys, economic analysis and possibly negotiation of commitments that may eliminate the concerns that the authority may have regarding anti-competitive effects of the merger.

 

5 months from the initiation of the proceedings (phase 1).

Extension:

15 working days if commitments are offered by one of the parties in phase II.

 

Assessment and remedies/decisions

44) Tests or criteria applied when a merger is assessed

Similarly to the EU Merger Regulation, the so-called SIEC test is used for this purpose, i.e. a merger which would not significantly impede effective competitionin the market, in particular (but not exclusively) as a result of the creation or strengthening of a dominant position, shall be declared compatible with the market. 

The Czech Act on the Protection of Competition further provides,‘When examining a notified concentration, the Office for the Protection of Competition shall primarily assess the necessity of preservation and further development of effective competition, the structure of all markets affected by the concentration, the shares of the parties to the concentration in such markets, their economic and financial power, legal and other barriers to enter relevant markets by other undertakings, the alternatives available to suppliers and customers of the parties to the concentration, the development of supply and demand in the affected markets, the needs and interests of consumers and research and development provided that it is to the consumers’ advantage and does not form an obstacle to effective competition.’

A range of factors may be taken into consideration, including efficiencies that may be gained from the merger (efficiency defence) and whether one of the parties is likely to fail as an independent business (failing firm defence).

45) May any non-competition issues be considered?

No.

46) Special tests or criteria applicable for joint ventures

The assessment for joint ventures is the same as for other mergers, but if the joint venture also has coordination between the owners as an object or effect, it will also be assessed whether such coordination is acceptable under the general prohibition against anti-competitive agreements.

47) Decisions and remedies/commitments available

A merger may be approved, approved with conditions/commitments or prohibited.

If the Office for the Protection of Competition expresses serious concerns about the merger, the parties may address them by offering commitments in favour of maintaining effective competition. The parties may offer commitments before initiating the merger approval proceedings or during its course,but no later than 15 days after the parties received a statement of objections.

Commitments may take any form, and they can be either structural or behavioural and with or without time limitations. In practice, most commitments are structural as they are the highly preferred alternative. 

The authority may revoke an approval if the parties do not comply with the conditions/commitments contained in the approval.

If a merger has been implemented without approval, the Office for the Protection of Competition may prohibit the merger and order a divestment of the businesses or any other measure capable of restoring competition.

Publicity and access to the file

48) How and when will details about the merger be published?

The Office for the Protection of Competition will generally make a public announcement when it has received a merger notification and again when a decision has been taken. The Office for the Protection of Competition also publishes a non-confidential version of the decision on its website, but this usually happens several weeks after the parties indicate trade secrets in the decision. The level of detail of decisions varies considerably.

The time and content of announcements are not usually coordinated with the parties. To protect trade secrets, the parties are requested to provide a non-confidential description of the transaction with the notification and to identify any confidential information in the notification and the final decision.

49) Access to the file for the merging parties and third parties

The merging parties:

The merging parties have a right to access the file, which includes correspondence with third parties that the Office for the Protection of Competition may have had, including market survey questionnaires as well as an overview of all documents/correspondence in the file. However, the authority may redact third parties’ confidential information. There is no right of access to the authority’s internal documents and correspondence.

Third parties:

Third parties do not have access to the file. In theory, there is a possibility for a third party to ask the Office for the Protection of Competition to access the file. In such a case, it must prove a legal interest in disclosure of the information contained therein. This does not happen in practice, and the Office for the Protection of Competition itself is reluctant to provide the access to third parties.

Judicial review

50) Who can appeal and what may be appealed?

The basic rule is that it is only the party to the proceedings (i.e. the acquirer or acquirers) who can appeal the Office for the Protection of Competition’s decision issued in the first instance. The appeal will be decided by the Chairman of the Office for the Protection of Competition (i.e. the second instance decision).

Subsequently, an action against the Chairman’s decision may be brought before the Regional Court in Brno.

In the past, the case law stated that even third parties were allowed to appeal against the Office for the Protection of Competition’s (merger approval) decision issued in the first instance provided the third party had already been proactive in the administrative proceedings (that is, raised reasonable and well-founded objections). This practice brought considerable legal uncertainty, so it was later abandoned following a judgement by the Supreme Administrative Court. However, possible future excesses in this matter cannot be completely ruled out.


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