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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
show/hide chapter
  1. Is merger filing mandatory or voluntary?
Types of transactions to file – what constitutes a merger
show/hide chapter
  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
show/hide chapter
  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?

 
European Union (EU)

Dr. Björn Herbers, MBL
Partner
 

bjoern.herbers@cms-hs.com

Tel: +32.2.6500.423

Dr. Michael Bauer
Partner and Global Head of
CMS Competition & EU Group

michael.bauer@cms-hs.com

Tel: +32.2.6500.421

Kai Neuhaus, LL.M.
Partner
 

kai.neuhaus@cms-hs.com

Tel: +32.2.6500.431

New regulation adopted

As of 1 October: Commission will have the authority to support of Member States in foreign direct investment screening on the grounds of security and public order, in line with Regulation 2019/452.

(Content available free of charge at Mergerfilers.com - sponsored by CMS)

Relevant legislation and authorities

1) Is a merger control regulation in force?

Yes. The European Union merger control regime is regulated in the Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the "EU Merger Regulation").

The EU merger control rules apply to the so-called European Economic Area (EEA), which consists of the EU member states (currently: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, than others, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden) plus the EFTA countries Iceland, Liechtenstein, Norway. 

During the Brexit transition period, which runs until 31 December 2020, the EU Merger Regulation applies in the UK, as if the UK were still an EU Member State.

2) Which authorities enforce the merger control regulation?

The European Commission (the "Commission") is the only authority responsible for the enforcement of the Merger Regulation. Within the Commission, the Directorate-General for Competition ("DG Competition" or "DG Comp") is mainly responsible for the application of the merger control rules. 

Decisions of the Commission may be appealed to the General Court of the European Union. The decisions of the General Court may be appealed to the Court of Justice of the European Union.

3) Relevant regulations and guidelines with links:

Aside from the Merger Regulation which sets out the substantive rules, more detailed rules, and especially procedural rules, are found in the Implementing Regulation. The Commission's notices and guidelines give further insight on how these rules are to be implemented in practice. Links to the most relevant legislation, guidelines and forms are listed below:

Regulations

Merger Regulation - Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings.

Implementing Regulation, including the forms to be used for notifications (Form CO, Short Form CO and Form RS) - Commission Regulation (EC) No 802/2004 of 21 April 2004 implementing Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings

Notices on procedural issues 

Consolidated Jurisdictional Notice - Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings

Simplified procedure - Commission Notice of 5 December 2013 on a simplified procedure for treatment of certain concentrations under Council Regulation (EC) No 139/2004.

Case referral - Commission Notice on Case Referral in respect of concentrations

Guidelines on substance 

Horizontal Merger Guidelines: Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings

Non-Horizontal Merger Guidelines: Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of concentrations between undertakings

Relevant Markets Notice: Commission notice on the definition of the Relevant Market for the purposes of Community competition law

Remedies Notice: Commission Notice on remedies acceptable under the Council Regulation (EC) No 139/2004 and under Commission Regulation (EC) No 802/2004

Ancillary Restraints Notice: Commission Notice on restrictions directly related and necessary to concentrations

 

The Commission has also published several "best practices", which are available on the DG Competition website

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

In principle Art 101 Treaty on the Functioning of the European Union (TFEU), which contains the prohibition of anticompetitive agreements etc., does not apply to concentrations within the meaning of the EU Merger Regulation. However, if the creation of a joint venture constituting a concentration creates the risk of coordination of the competitive behavior of the parent companies (so-called spillover), then that coordination will be appraised under Article 101 TFEU.

A merger clearance decision is also deemed to cover the restrictions directly related to and necessary to the implementation of the merger – the so-called ancillary restraints. The Commission will not assess these restrictions in each individual case but companies are required to perform self-assessment using guidance provided by the Commission in the Ancillary Restraints Notice and its decisional practice.

Cases surrounded by exceptional circumstances not covered by the Ancillary Restraints Notice may justify a departure from the principles set therein. If a case presents a novel and unresolved question giving rise to genuine uncertainty and is not covered by the Ancillary Restraints Notice or the Commission's decisional practice, the parties may request that the Commission expressly assesses the restriction in question.

If a restriction cannot be regarded as directly related and necessary to the implementation of a merger, general competition provisions apply.

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

No, the Commission has no such powers.  However, if companies implement a merger, which has to be notified under the EU Merger Regulation, before merger clearance or despite a prohibition by the Commission, the Commission may order the dissolution of the merger. The same applies in case the Commission has revoked a merger clearance decision. 

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.)

There are no other authorities at the European Union level with competence to review mergers. Sector-specific rules and rules on foreign direct investment are regulated at the Member State level. 

From October 2020, the Commission will have the authority to support the Member States in the screening of foreign direct investment on the grounds of security and public order, in line with the newly adopted Regulation 2019/452. The Commission will have an advisory role by delivering its opinion to the Member State where the investment is planned, but the final decision will lie with the Member State. Investments completed after 11 April 2019 will be caught by the new regime.

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

The European Union merger control regime is based on a one-stop-shop principle, meaning that a notification to the Commission covers the entire territory of the European Union (and until 31.12.2020 of the UK) and renders notifications to national competition authorities of the Member States unnecessary. The regime covers the entire European Economic Area as well, meaning that it includes the EFTA countries Iceland, Liechtenstein and Norway, too.

Voluntary or mandatory filing

8) Is merger filing mandatory or voluntary?

Merger filing is mandatory if the turnover thresholds are met (see topic 14).

Types of transactions to file – what constitutes a merger

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

The Merger Regulation applies to all concentrations (in this guide generally referred to as “mergers”), subject to them having a Union dimension by meeting the prescribed turnover thresholds (see topic 14).

A concentration (merger) exists where a change of control on a lasting basis results from: 

  1. a merger of two or more previously independent undertakings or parts of undertakings, or 
  2. the acquisition by one or more undertakings of direct or indirect control of the whole or parts of one or more other undertakings.

The establishing of a joint venture which performs all functions of an autonomous economic entity on a lasting basis constitutes a merger as well (see topic 13).

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

Yes, a merger will only be deemed to take place if the transaction results in a change of direct control which occurs on a lasting basis (see topic 19).

11) How is “control” defined?

Control means the possibility to exercise a decisive influence on a company, i.e. have the power to determine the strategic commercial decisions of that company. Control can stem from rights (shares or assets), contracts or any other means which, separately or in combination, by law or by fact, give the possibility of exercising such influence.  

In case of multiple shareholders, veto rights of a minority shareholder regarding decisions that are essential for the strategic operation of the business – in particular the appointment of the management, the adoption of business plan and budget and major investment - can grant a minority shareholder control.

Depending on the number of undertakings exercising control over a target undertaking, control may be sole or joint. Changes from sole to joint control and vice versa as well as an increase in the number of controlling undertakings in case of joint control, are also caught by the Merger Regulation.

The Commission provides detailed guidance on the definition of control and change of control in its Consolidated Jurisdictional Notice.

12) Acquisition of a minority interest

The acquisition of a minority interest will normally not result in a change of control over the target undertaking and is therefore not caught by the EU Merger Regulation (see topic 10).

However, the acquisition of a minority interest will be subject to merger control if it de facto leads to an acquisition of control, for example, considering the distribution of the remaining shares and/or the attendance/voting patterns at the shareholders' meetings which show that the acquirer would, even with a minority shareholding, be able to exercise the decisive influence over the target undertaking.  

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

Establishment of a so-called full function joint venture, i.e. a joint venture which performs all functions of an autonomous economic entity on a lasting basis, also constitutes a merger and needs to be filed to the Commission if it has a Union dimension by meeting the prescribed turnover thresholds (see topic 14). 

When assessing the full-functionality of a joint venture, the Commission will consider to which extent the joint venture depends on its parent companies and whether it has all necessary resources for an independent presence on the market. The joint venture also must operate on a lasting basis. The Commission has in its practice considered a period of eight, ten and more years to be enough in this respect. The Commission provides guidance on the assessment of these elements in its Consolidated Jurisdictional Notice.

Joint ventures which are not full-function, such as cooperative joint ventures, are not within the scope of the Merger Regulation but are governed by general competition rules). Note that a non-full-function joint venture can be subject to national merger control in some of the Member States, in particular Germany and Austria (see Member States individual chapters).

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 has a Union dimension and hence must be filed to the Commission if: 

  1. the aggregate worldwide turnover of all the parties exceeds EUR 5 billion, and
  2. the aggregate Union-wide turnover of each of at least two parties is more than EUR 250 million, unless
  3. each of the parties achieves more than two-thirds of its aggregate Union-wide turnover within one and the same Member State.

Even if the above threshold is not met, a merger will still have a Union dimension if:

  1. the aggregate worldwide turnover of all the parties exceeds EUR 25 billion, and
  2. in each of at least three Member States, the aggregate turnover of all the parties exceeds EUR 100 million, and
  3. in each of at least three of these Member States, the aggregate turnover of each of at least two parties exceeds EUR 25 million, and
  4. the aggregate Union-wide turnover of each of at least two parties exceeds EUR 100 million, unless
  5. each of the parties achieves more than two-thirds of its aggregate Union-wide turnover within one and the same Member State.

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

N/A

16) Rules on calculation and geographical allocation of turnover

The rules on calculation and geographical allocation of turnover are set out in the Merger Regulation and further guidance on their interpretation is contained in the Consolidated Jurisdictional Notice

Relevant turnover is the sale of products and the provision of services falling within the undertakings' ordinary activities after deduction of sales rebates and value added tax and other taxes directly related to turnover. Any turnover generated between undertakings that belong to the same group should be excluded (intra-group/internal sales).

Turnover is calculated based on the most recent audited accounts of the parties. It includes the turnover of any direct or indirect parent companies, subsidiaries, joint ventures and subsidiaries of parent companies. Detailed rules on which turnover must be considered and to which extent are set out in the EU Merger Regulation and are explained in the Consolidated Jurisdictional Notice. However, turnover must be adjusted to take account of any permanent changes to the businesses of the parties, such as divestments or acquisitions of businesses after the end of the financial year that are not fully reflected in the audited accounts. 

The general rule for geographical allocation of turnover is that it should be attributed to the place where the customer is located, based on the underlying principle that turnover is to be allocated to the place where competition for the customer in question takes place.

17) Special rules on calculation of turnover for particular businesses

Credit institutions and other financial institutions

Items relevant for the calculation of turnover of credit institutions and other financial institutions are: 

  1. interest income and similar income; 
  2. income from securities: income from shares or other variable yield securities, income from participating interests, income from shares in affiliated undertakings  
  3. commissions receivables; 
  4. net profit on financial operations; and 
  5. other operating income. 

The Union-wide turnover or a Member State turnover of a credit or financial institution comprises the above income items received by the branch or division of that institution established in the Union or a Member State. 

Insurance undertakings

For insurance undertakings the value of written gross premiums is used in place of turnover. This consist of all amounts received and receivable in respect of insurance contracts issued by or in behalf of the insurance undertakings, including also outgoing reinsurance premiums, after a deduction of taxes and parafiscal contributions or levies charged by reference to the amounts of individual premiums or the total value of premiums. 

State-owned undertakings

For the purpose of calculating turnover of State-owned undertakings, account is only taken of those undertakings which belong to the same economic unit, having the same independent power of decision.

Investment funds

In a situation where an investment company sets up several investment funds via which it acquires indirect control over portfolio companies, the turnover of all portfolio companies held by different funds is taken into account for the purpose of assessing whether the turnover thresholds set out in topic 14 are met.

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

If two or more transactions take place between the same persons or undertakings within a two-year period, they will be treated as one and the same merger arising on the date of the last transaction.

Additionally, more than one transaction will be deemed interrelated if they are unitary in nature and serve the same economic goal, in which case they will represent one and the same merger. The Commission provides guidance on the assessment of interrelated transactions in its Consolidated Jurisdictional Notice.

See also topic 19 regarding temporary control and successive transactions.

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

19) Temporary change of control

A merger within the meaning of the Merger Regulation exists only if the change of control occurs on a lasting basis (see topic 9). Therefore, in case of a transitory change of control, a merger would not exist and a merger filing would not be required. 

The Commission provides guidance on how this criterion is assessed in case of successive transactions in its Consolidated Jurisdictional Notice. An example of a temporary change of control is a situation in which one or more parties acquire control over a target undertaking but have a binding pre-existing plan to subsequently, within a short period of time usually not longer than one year, split the assets among themselves. In that case, the initial transaction would not lead to a change of control on a lasting basis and would hence not need to be notified to the Commission.

20) Special industries, owners or types of transactions

The Merger Regulation specifies that the following transactions are not mergers and hence need not to be notified to the Commission:

  1. where credit institutions, other financial institutions or insurance companies whose normal activities includetransactions and dealing in securities for their own account or for the account of others, hold on a temporary basis securities which they have acquired  in an undertaking with the intention to resell them, provided that they do not exercise the voting rights in respect of those securities for the purpose of determining the competitive behavior of that undertaking or exercise such voting rights exclusively with the aim of preparing the disposal of all or part of that undertaking or its assets or the disposal of those securities and  that such disposal takes place within one year of the date of acquisition; this period may be extended by the Commission if the parties show that the disposal was not reasonably possible within one year;
  2. where control is acquired by an office-holder according to the national law of a Member State relating to liquidation, winding up, insolvency, cessation of payments, compositions or analogous proceedings; or
  3. where the transactions are carried out by holding companies (as defined in the European Union's Annual Accounts Directive), provided, however, that the voting rights in respect of the holding are exercised with the purpose to retain the full value of the the investment and not to determine the competitive behavior of that undertaking.

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

There is no exemption for foreign-to-foreign transactions. All mergers with a Union dimension need to be notified to the Commission regardless of where the merging parties are registered, operate or own assets. 

22) No overlap of activities of the parties

There is no exemption for transactions with no overlapping activities, however, the notification can in those cases be submitted in a short form and a simplified procedure applies (see topic 33). 

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

A merger with a Union dimension may be referred to the authorities of one or more Member States if these authorities are better placed to carry out the investigation (see topic 28).

Merger control even if thresholds are NOT met

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

No. A merger without a Union dimension can, however, be reviewed by the Commission in case of a referral (see topics 27 and 29).

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

The Commission cannot request a notification of a merger without a Union dimension. It can, however, substantively decide on a merger in case of referral from one or more Member States (see topic 27) or in case of a successful referral request of the notifying parties (see topic 29).

Referral to and from other authorities

26) Referral within the jurisdiction

The EU Merger Regulation contains rules to allow the reattribution of cases between the Commission and Member States, consistent with the principle of subsidiarity, so that the more appropriate authority or authorities for carrying out an investigation should in principle deal with the case (see topics 27 and 28).

The principles for this reattribution of cases are laid out in the Commission Notice on Case Referral in respect of concentrations.

27) Referral from another jurisdiction

One or more Member States may request that the Commission evaluates a merger without a Union dimension (meaning it does not meet the turnover thresholds) if it has relevance for the EU and certain conditions are met. The Commission can also itself invite the Member State(s) to make the referral request if it considers that a merger meets these criteria.

If the Commission decides to accept the request to examine the merger, national legislation does no longer apply.

28) Referral to another jurisdiction

The Commission can refer a merger with a Union dimension, in whole or in part, to a Member State under certain conditions if the merger (or the part of the merger) has primarily relevance for this Member State. 

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

Instead of notifying a merger with a Union dimension, the merging parties can request that is referred to a Member State if the conditions mentioned above (topic 28) are met.  The merging parties can also request that a merger without a Union dimension, that triggers a notification duty in at least three Member States may be reviewed by the Commission (One-stop-shop idea). 

A referral decision can be challenged under the general regime of judicial review of the Commission's decisions described in topic 50.

Filing requirements and fees

30) Stage of transaction when notification must be filed

A merger notification must be filed after a binding agreement has been concluded, a takeover bid has been published or a controlling interest has been acquired.  However, there is no deadline for the notification. 

The merging parties may also notify a merger earlier, if they demonstrate a good faith intention to conclude an agreement (by, for example, executing a letter of intent, memorandum of understanding etc.) or, in the case of a public bid, where they have publicly announced an intention to make such a bid.

Importantly, the notification must be filed in any case before the transaction is implemented and the transaction must not be implemented before clearance. The Commission has imposed hefty fines for breaches of the standstill obligation (so-called gun jumping) in recent years (see below topics 37 and 42). 

31) Pre-notification consultations

It is customary to engage in pre-notifications discussions with the Commission, which considers the pre-notification phase to be an important part of the whole review process.  As a general rule, the Commission wishes to have pre-notification contacts with notifying parties in all cases, even if they are seemingly non-problematic.  In practice it is extremely rare that a case is notified without prior pre-notification contacts.

In the pre-notification phase the merging parties will submit a draft notification and discuss it with the case team assigned to the merger until the Commission informs the parties that the notification is ready to be formally submitted.

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

Mergers that are a consequence of acquisition of securities on a stock exchange or a public takeover bid must be notified after the acquisition/publication of the takeover bid. 

The standstill obligation (see topic 37) does not prevent the implementation of a public bid or of a series of transactions in securities (including those convertible into other securities admitted to trading on a market such as a stock exchange), by which control is acquired from various sellers, provided that the merger is notified to the Commission without delay and the acquirer does not exercise the voting rights attached to the securities in question or does so only to maintain the full value of its investments based on a derogation granted by the Commission (see topic 38).

33) Forms available for completing a notification

Notifications are submitted in line with the Form CO contained in Annex I of the Implementing Regulation

Notifications may be submitted in the simplified Short Form CO (Annex II of the Implementing Regulation) in each of the following cases:

  1. Joint venture having no, or negligible, actual or foreseen activities within the territory of the European Economic Area (turnover of the joint venture/contributing activities in the European Economic Area does not exceed EUR 100 million and the value of transferred assets in the European Economic Area does not exceed EUR 100 million);
  2. A party acquires sole control of an undertaking over which it already has joint control;
  3. The merging parties are not active on the same markets or vertically connected markets; or
  4. Limited market shares: The merging parties are active on same markets but do not have a combined market share exceeding 20%; and if the merging parties are active on vertically connected markets, none of the parties individually have market shares exceeding 30% on such connected markets.   

The Commission may also accept a Short Form CO where there are horizontal overlaps between the merging parties' activities but the Herfindahl-Hirschman Index increase resulting from the merger is below 150 and the merging parties’ combined market share is below 50%.

Even if the condition for applying the Short Form CO are fulfilled, the Commission may still require a Form CO if it determines that a full notification is necessary for an adequate investigation of possible competition concerns.

34) Languages that may be applied in notifications and communication

The notification may be submitted in any of the official languages of the European Union.

35) Documents that must be supplied with notification

Documents that must be submitted with the notification are indicated in the Annexes to the Implementing Regulation. The volume of required documents depends on whether the notification is filed in line with the Form CO or the Short Form CO (see topic 33). 

The parties are required to provide the Commission with detailed information on the merger, the concerned undertakings, the affected markets and possible efficiencies of the transaction as well as supporting documentation. 

The following documents generally need be supplied with a merger notification:

  1. original Power of Attorney, if the notification is submitted via an external representative,
  2. copy of the final or most recent version of the transaction documents,
  3. copies of the most recent annual reports and accounts of the parties,
  4. copies of all presentations prepared by or for or received by the relevant governing bodies of the parties in which the merger is analyzed (“internal documents”).

36) Filing fees

No filing fee applies for notification to the Commission. 

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. Completion of the merger prior to the merger approval is subject to fines (see topic 42).

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

Yes, the parties can get a permission from the Commission on a case-by-case basis. A request for derogation must be reasoned and can be submitted at any time, before or after a notification was filed. However, a derogation will be granted only in exceptional circumstances.

When deciding, the Commission will take into account, among other things, the effects of the suspension on the merging parties or on a third party and the threat to competition posed by the merger. A derogation may be granted subject to conditions and obligations in order to ensure effective competition.  

39) Due diligence and other preparatory steps

The merging parties do not only have to observe the standstill obligation but are also subject to regular competition rules prohibiting and restricting anti-competitive behavior, including exchange of sensitive information by competitors. The due diligence process therefore needs to be conducted in a way that safeguards that commercially sensitive information are used solely for the purpose of assessing the merger. 

Preparatory steps are allowed; however, caution should be exercised that such steps do not lead to even a partial implementation of the merger, in particular by enabling the acquirer to influence the strategic behavior of the target undertaking. Prior to clearance the merging parties must not coordinate market activities, transfer operational control (also partly) or engage in any physical or commercial integration.

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

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

The issue of veto rights would need to be assessed on a case-by-case basis depending on the type of decision the veto rights are being attached to. In general terms, any veto rights that would allow the acquirer to influence the strategic behavior of the target undertaking prior to the closing date, are not allowed (see topic 11).

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

Carve out is not possible - implementing the merger outside the European Union prior to the Commission's approval would represent a breach of the duty to suspend the implementation.

42) Consequences of implementing without approval/permission

The Commission may – and in practice does – impose fines on the parties if a merger is (partly) implemented prior to clearance. The amount of the fine will be determined based on the nature, gravity and duration of the infringement, but is capped at 10% of the parties’ worldwide turnover. In 2018 the Commission for example fined Dutch telco Altice EUR 124.4 million for inter alia exchanging commercially sensitive information with a target company and taking influence on its commercial behavior prior to clearance of the transaction

If the implemented merger has been subsequently prohibited or was implemented in contravention of a condition attached to a clearance decision (in the absence of which, the merger would not have been cleared), the Commission may order the parties to dissolve the merger, i.e. split up the merged entity or take other measures necessary to restore effective competition.

The process – phases and deadlines

43) Phases and deadlines

Phase

Duration/deadline

Pre-notification phase:

It is standard practice to enter into pre-notification consultations even in non-problematic cases.

Pre-notification contacts should be initiated at the very least two weeks before the expected date of the notification. In more complex cases pre-notification contacts should be initiated significantly sooner.

During this phase the scope of information to be submitted is usually discussed and notification drafts can also be submitted. The aim is to ensure that, once the notification is submitted, it is complete from the outset and declarations of incompleteness are avoided. 

There has been a tendency in the last years to shift elements of the formal (phase I) notification process such as market investigations and possibly remedy discussions into the pre-notification phase. This allows under certain circumstances to avoid a phase II investigation and to achieve clearance, possibly with or without remedies, in phase I.

No fixedduration or deadline.

Assessment of completeness of notification:

The European Competition will usually be able to informally confirm the adequacy of a draft notification at the pre-notification stage. 

This does not, however, guarantee that it would not declare the notification incomplete if omissions in the Form CO are discovered after formal notification. In that case, the notifying parties may be given an opportunity to urgently (normally within 1 or 2 days) rectify such omissions before a declaration of incompleteness is adopted. This opportunity will not be granted, however, if omissions are such that they immediately hinder the proper investigation of the merger.

If the notification is incomplete, the Commission will communicate this fact without delay and request from the notifying party to provide the missing information (provided the omission does not immediately hinder the proper investigation of the merger). Due to the time constraints in merger procedures, the time allowed for such rectification is normally limited to 1 or 2 days. If the Commission formally declares the notification incomplete, the clock is reset and only starts once a complete notification is submitted. 

The Commission does not issue a formal statement of completeness and may declare a notification incomplete even in a late stage of the proceedings. However, the Commission is generally prepared to confirm informally the completeness of a draft notification at the pre-notification stage. 

If the notification is declared incomplete, the Commission shall issue a request for information and specify the time limit within which the information is to be provided.

Phase I:

The merger can be either approved without commitments or approved subject to commitments in phase I.

The relevant test for phase I decisions is whether the concentration raises “serious doubts” as to its compatibility with the EU Merger Regulation. This means that the Commission does not have to establish in phase I whether the transaction must be prohibited. Rather, the purpose of the “serious doubts” test is to assess whether the notified transaction clearly does not raise relevant competition concerns and consequently should be cleared or whether it requires an in-depth investigation.  

In a phase I investigation the Commission double-checks the facts and conclusions presented in the notification regarding the impact of the transaction on competition and investigates whether there are grounds for competition concerns which may give rise to “serious doubts” requiring the opening of a phase II investigation. 

For this purpose, the Commission in particular addresses informal requests for information to competitors and customers but possibly also to suppliers, industry associations or national authorities (so-called market test).  

25 working days from the receipt of a complete notification. 

Extension:

This period is extended to 35 working days if the merging parties offer commitments or if a member state request a referral.

Phase II:

The merger can be either approved without commitments, approved subject to commitments or prohibited in phase II.

The relevant test in phase II is whether the transaction is “incompatible with the Common Market”. This finding is the basis for clearing a transaction or prohibiting it (see below topic 44).

In phase II the EC conducts an in-depth investigation to substantiate or to rebut the serious doubts identified in phase I.

The investigation carried out by the Commission in phase II is far more thorough than the investigation in phase I. The Commission generally will send out many requests for information to the market and the parties and will analyze the replies. Further, it may conduct interviews, carry out site visits, commission internal and external studies etc. In many cases the Commission works with extensive (quantitative) economic studies. Moreover, there is a tendency to request large amounts of internal data from the parties to help the Commission build their case

Before the Commission takes any decision in Phase II it will consult an Advisory Committee consisting of representatives of the competition authorities of the Member States and present its draft decision. The Advisory Committee will issue an opinion on the Commission's draft decision, which the Commission will take into account but which is not binding. 

90 working days from the date when the phase II investigation was initiated.

Extension:

This period will be extended to 105 working days if the merging parties offer commitments, unless the commitments were offered less than 55 working days after phase II was initiated.

The above periods may also be extended up to 20 working days if the notifying parties request (within 15 working days from the opening of phase II) or accept such extension on the Commission's initiative.

These periods can exceptionally be suspended if the Commission, due to circumstances caused by the merging parties, needs to issue requests for information or order inspections (“stop-the-clock”).

Assessment and remedies/decisions

44) Tests or criteria applied when a merger is assessed

The substantive test is whether the merger is “incompatible with the Common Market because it would significantly impede effective competition, in the common market or in a substantial part of it, in particular as a result of the creation or strengthening of a dominant position” (“SIEC”).

A range of factors may be taken into consideration when assessing whether a merger would create a SIEC. The Commission provides guidance on how the substantive assessment is conducted in its Horizontal Merger Guidelines and Non-Horizontal Merger Guidelines.

The notion of SIEC does not require dominance by one or more of the merging parties but extends to the anti-competitive effects of a merger resulting from the non-coordinated behavior of companies.

45) May any non-competition issues be considered?

No. Unlike some of the Member States' national legislation, the European Union merger control regime does not take into account policy considerations, security considerations etc., when assessing mergers.

46) Special tests or criteria applicable for joint ventures

The assessment of joint ventures is in principle the same as for other mergers. However, in case of joint ventures potential coordinated effects between the parent companies will be assessed in addition (so-called spillover, see topic 4).

47) Decisions and remedies/commitments available

The Commission may approve, approve with conditions (commitments) or prohibit a merger.

If a merger raises serious doubts as to its compatibility with the EU Merger Regulation, the parties can already in phase I propose commitments to address the concerns. The Commission will accept commitments in phase I only where the competition problem is straightforward, and the remedies are so clear-cut that it is not necessary to enter into an in-depth investigation. Considering the timing constraints, the commitments also need to be sufficiently clear that a single market test can confirm that they rule out the “serious doubts”. Complex remedy solutions are generally not suitable as phase I remedies.

If in phase II the Commission comes to the (preliminary) conclusion that the merger will lead to a significant impediment to effective competition (SIEC), the parties can avoid prohibition of the merger by proposing commitments. Phase II remedies do not need to go further than what is needed to remove the competition concerns established in the in-depth investigation. 

The type of commitments that can be offered is not predetermined, however, the Commission provides guidance on commitments that it is likely to deem acceptable in its Remedies Notice considering their capability to address the identified concerns and the manner they can be implemented and monitored. 

Generally speaking, the Commission takes the view that commitments that are structural in nature, such as the commitment to sell a business unit, are, preferable as they prevent, durably, the competition concerns and do not require medium or long-term monitoring measures. Moreover, the Commission has a clear preference for the divestment an existing stand-alone business. However, the Commission is also open to alternative commitments and has in recent years accepted also sophisticated and complex commitment proposals.

Publicity and access to the file

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

If a notified merger falls within the scope of the Merger Regulation, the Commission will publish the fact that it has received the notification in the Official Journal to enable interested third parties to submit their observations. The Commission will also publish updates on the process of each case on the DG Competition website.

The Commission also has a duty to publish a summary of all phase II decisions in the Official Journal. In line with the established practice, a non-confidential text of all decisions (phase I and phase II) will also be published on the Commission's website

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 following the issuance of a Statement of Objections and at every subsequent stage of the procedure up to the consultation of the Advisory Committee. In addition, the Commission will grant access to “key documents” at the beginning of a phase II investigation. Third party confidential information and the Commission's internal documents and correspondence cannot be accessed.

Third parties:

Third parties have no right to access the file under the EU Merger Regulation.

The Commission may provide a non-confidential version of the Statement of Objections to third parties that were recognized as interested third persons in the proceedings.

Judicial review

50) Who can appeal and what may be appealed?

Decisions of the Commission can be appealed by the merging parties and third parties that show direct and individual concern with the challenged decision before the General Court of the European Union. A third party active on the market concerned by the decision will usually be considered directly affected; and participation of the third party in the administrative proceedings before the Commission is generally required for standing before the European Union Courts. Member States are automatically awarded standing as privileged applicants.

The appeal needs to be filed within two months and ten days of notification of the decision to the notifying party or parties or - in the case of third parties - of publication of the Commission decision


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