The Cyprus Merger Control Regime is regulated by the Control of Concentrations between Undertakings Law 83(I)/2014 (the 'Law'), which is largely based on the EU Merger Regulation 139/2004 (the 'ECMR'). The Commission for the Protection of Competition (the 'CPC'), an independent, quasi-judicial body, has exclusive jurisdiction to review and rule as to the compatibility of a concentration with the Cyprus competitive market.
Definition of a Concentration
- The term 'concentration' covers a host of instances, including the acquisition of 'direct or indirect control' of the whole or part of another undertaking. It is also noted that two or more legal acts constitute one concentration if the effect of these is the acquisition of direct or indirect control of one or more undertakings.
- In particular, a concentration is effected if:
(a) two or more previously independent undertakings merge; or
(b) (i) one or more persons, who already control at least one undertaking; or (ii) one or more undertakings, 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 undertakings; or
(c) if a joint venture is established which permanently carries out all the functions of an autonomous economic entity.
- It is noted that were the objective/result of a concentration is the coordination of the competitive behavior of undertakings that remain independent (as opposed to concentration), then this is appraised under the antitrust criteria, i.e. section 3 and 4 of the Law for the Protection of Competition (the 'Antitrust Law').
Definition of Control
'Control' is defined by s.6(2) of the Law as 'rights, agreements or any other means which either separately or jointly ... confer the possibility of exercising decisive influence on an undertaking', whether this occurs through share ownership, voting or management agreements, or through any other form of rights operating on the undertaking.
- The CPC has jurisdiction to investigate a concentration if it is 'of major importance', i.e. if the following thresholds are met cumulatively:
(i) at least two of the undertakings concerned have a global turnover of at least €3.5 million each; and
(ii) at least two of the undertakings concerned achieve a turnover in Cyprus; and
(iii) at least €3.5 million from the aggregate turnover of all undertakings concerned is achieved in Cyprus.
If the thresholds above are satisfied, then the merger must be notified.
- Even if the above criteria are not met, the Minister of Energy, Commerce, Industry and Tourism can declare, by means of a reasoned order, that the notified concentration is a concentration of significant public interest due to its potential impact on public safety, plurality of the media or the rules of sound management.
Timing of Notification
- Concentrations must be notified before their implementation, following the conclusion of the relevant agreement or publication of the public offer or acquisition of the controlling interest.
- Notification can also occur before the conclusion of the act giving rise to the concentration, so long as the undertakings concerned demonstrate to the CPC a good faith intention:
- to conclude an agreement; or
- in the case of a public offer, where they have publicly announced their intention or final decision to make such a bid.
Framework of Investigation
The review timetable is broken in two phases:
Phase I: During the 1st phase the Service of the CPC has one month from the date of the filing of the notification to clear the concentration or decide that additional investigation is warranted. This phase may be extended to six weeks.
Phase II: If the CPC decides to carry out an in depth inquiry, the Service has a further two months within which to present its report to the Committee of the CPC. The Committee of the CPC must then decide within one month from the date the report of the Service was submitted.
Unlike the European Commission, the CPC does not issue clearances in the form of 'Comfort Letters', i.e. a one-page formal clearance letter. It is noted that the CPC usually consumes all or most of the period (including extensions) availed to it by the Law (mainly due to heavy workload).
The Task of Notification
- Notification is mandatory for all concentrations that satisfy the thresholds. Annex III of the Law is a multi-page list of information that must be included in the notification. This is a complex document which cannot be completed 'off-the-cuff' but requires considerable legal, financial and economic input.
- Under a merger, both (or all, as the case may be) parties are responsible for filing the notification (i.e. joint filing), whereas for acquisitions of sole control, the filing obligation rests on the acquirer only.
- The Law does not include an application form nor does it specify a format for notifications.
- An administrative filing fee of €1.000 is payable upon filing the notification.
- Phase II investigation carries a further administrative fee of €6.000 (payable prior to initiation of Phase II).
- The CPC may declare the concentration compatible with the Cyprus competitive market.
- The CPC may block a concentration completely at Phase II level.
- The CPC may impose conditions (following negotiations) either at Phase I or at Phase II.
Powers during the Inquiry Process
The CPC is given a number of other procedural powers, many of which match those found in the Antitrust Law. These include:
- The right to conduct 'dawn raids' (unannounced visits) to obtain documentation and to request information from third parties;
- the right to fine undertakings which fail to notify concentrations;
- the right to impose fines and penalties on undertakings which refuse to co-operate or provide incomplete information in a particular case;
- the CPC may give the opportunity to third parties, such as competitors, to express their views and make submissions on the merger proposals;
- Hearings may of course be conducted concerning the compatibility of a proposed concentration with the demands of the competitive market.
- If a transaction is partially or completely implemented ahead of clearance, the CPC may impose a fine up to 10% of the total turnover (of the previous financial year) of the participating undertakings plus up to €8,000 per day for each day the infringement continues.
- An administrative fine of up to €50,000 plus up to €17,000 per day for each day the infringement continues, for providing false or misleading information, or for failure to provide information.
- In relation to dawn raids, for failure to comply with or for the provision of false or misleading information, an administrative fine of up to €50,000 and up to €17,000 per day for each day the infringement continues, plus imprisonment of up to one year and/or a criminal penalty of up to €85,000.
- a fine of up to 10% of the total turnover (of the previous financial year) of the participating undertakings plus up to €8,000 per day for each day the infringement continues for not complying with a condition imposed by the CPC or with conditions for the dissolution of a concentration.
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.