Mergers Control

The main legislation in the area of mergers control in Cyprus is the Control of Concentrations between Enterprises Law 22(I) of 1999 ("the Control of Concentrations Law"). The Control of Concentrations Law provides for the scrutiny and control of proposed concentrations between enterprises in order to protect effective competition. It applies to all concentrations of major importance, as defined below.

The bodies involved in the notification and evaluation procedure are the Commission for the Protection of Competition ("CPC"), the Competition and Consumer Protection Service of the Ministry of Commerce, Industry and Tourism ("the Competition Service") and the Minister of Commerce, Industry and Tourism. However, the CPC may act whenever it receives information that it considers relevant.

A concentration of enterprises takes place:

• if two or more previously independent enterprises merge, or
• if one or more persons already controlling at least one enterprise or one or more enterprises acquire, directly or indirectly, whether by purchase of securities or assets, by agreement or otherwise, control of the whole or parts of one or more other enterprises, or
• if a joint venture is established which permanently carries out all the functions of an autonomous economic entity.

The Control of Concentrations Law does not apply to a concentration of enterprises that are subsidiaries of the same enterprise.

For a concentration of undertakings to be considered to be of major importance all the following conditions must be satisfied:

• at least two of the undertakings involved have an annual turnover in excess of CYP 2,000,000 (approximately €3.5 million) each; and
• at least one of the undertakings involved is commercially active in the Republic of Cyprus; and
• at least CYP 2,000,000 of the aggregate turnover of all the undertakings involved arises from the sale of goods or services in the Republic of Cyprus.

As a general rule, turnover is the amount derived from the sale of goods and services in the normal course of business during the last completed financial year, excluding VAT and other taxes related to turnover. There are special rules for calculating the turnover of banks and insurance companies. Even though the turnover thresholds are not exceeded in a particular case the Minister of Commerce, Industry and Tourism may nevertheless determine that a proposed concentration falls within the scope of the law if it is of major public interest (for example if it potentially affects public security, employment or social development).

Under section 13 of the Control of Concentrations Law the Competition Service must be informed in writing of proposed concentrations within one week of publication of the relevant offer of purchase or conclusion of the relevant agreement. Schedule III of the law sets out the detailed information to be provided with the notification. If the notification does not include all the requisite information the Competition Service will request the notifying party to provide it.

Within one month of receiving a valid and complete notification the Competition Service is required to inform the notifying party in writing whether:

• the proposed concentration may proceed, in which case the procedure ends; or
• that the proposed concentration is to be examined in detail; or
• that it has been referred to the Minister of Commerce, Industry and Tourism for further consideration.

If the Competition Service fails to respond within the one-month time limit the proposal is deemed to be accepted and may proceed. The Competition Service may obtain one fourteen-day extension by notifying the relevant parties seven days before the initial deadline expires (section 21).

In the event that the Competition Service determines that the proposal should be examined in detail, it must submit its report and recommendations on the proposal to the CPC within three months from the date of receiving the notification (section 28). The factors to be considered by the CPC in making its decision on the proposal include:

• the structure of the markets affected;
• the market position and economic power of the participating undertakings;
• supply and demand for the relevant products or services;
• the availability of alternative sources of supply;
• any barriers to entry into the affected markets; and
• the interests of the intermediate and final consumers of the goods or services.

In order to reach a decision the CPC may carry out negotiations, hearings or discussions with the parties involved or any other third party (section 27). The CPC must inform the notifying party of its decision within four months from the date on which the Competition Service received the prescribed information regarding the notification. If the CPC does not issue its decision within the prescribed time limits, the proposal is deemed to be accepted (section 32).

Under section 33 of the law the CPC may temporarily approve a proposed concentration, with or without conditions, if it is satisfied that continued delay would cause serious harm to the parties.

Decisions made under the Control of Concentrations Law are subject to judicial review under the procedure set out in Article 146 of the Constitution of the Republic of Cyprus. This is an administrative procedure and the administrative procedural law will therefore apply.

Failure to comply with the Control of Concentrations Law entails a range of administrative penalties, as follows:

• failure to notify – a fine of up to CYP 50,000 (approximately €87,000) plus CYP 5,000 (approximately €8,700) for each day the infringement continues
• provision of false or misleading information – a fine of up to CYP 50,000
• failure to provide the information required by the law - a fine of up to CYP 30,000 (approximately €52,000)
• putting a concentration into effect ahead of the decision of the Competition Service or the CPC, or without fulfilling the terms imposed by the Commission or commitments made by the participants – a fine of up to 10% of the combined turnover and an additional fine of up to CYP 5.000 for each day the infringement continues.

Furthermore, if approval of a proposed merger is given on the basis of information which is subsequently found to have been false or misleading, the approval may be revoked and an order made for the complete or partial dissolution of the combined enterprise. Failure to comply with such an order is punishable by a fine of up to 10% of the combined turnover and an additional fine of up to CYP 5.000 for each day the infringement continues

Decisions made under the Control of Concentrations Law are subject to judicial review under the procedure set out in Article 146 of the Constitution of the Republic of Cyprus. This is an administrative procedure and the administrative procedural law will therefore apply.

As administrative decisions of a public authority, decisions of the CPC are subject to review by the Supreme Court of Cyprus under Article 146 of the Constitution on application by any affected person made within 75 days of the date of notification of the decision.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.