Notifications regarding mergers of market participants
DATE OF RECEIPT OF A NOTIFICATION
PARTIES TO THE MERGER
AS United Chemical Company Uralchem plans to acquire decisive influence over AS Uralkali
TIME PERIOD FOR THE TAKING OF THE DECISION
Up to 3 months
Provisions regarding mergers between market participants have been defined in Section 15 of the Competition Law.
State control of corporate mergers is necessary
in order to prevent a significant diminishing of competition as a result of such mergers, because in the absence of the driving forces of competition, prices may rise while selection and quality may deteriorate – and the overall prospects of economic growth may decrease.
What is a merger within the meaning of the Competition Law?
Within the meaning of the Competition Law, a merger (and thus a transaction that requires authorisation from the Competition Council) is considered to be not only consolidation and takeovers among companies but, under specific circumstances, also transactions that result in the acquisition of influence in another undertaking, or even only the assets of a company or the right of their use.
- Consolidation: the merging of two or more independent market participants in order to become one market participant
- Acquisition: the joining of one market participant to another market participant
- A situation where one or more natural persons who already have a decisive influence over another market participant or other market participants, or one or more market participants acquire part or all of the fixed assets of another market participant or other market participants or the right to use such assets, or a direct or indirect decisive influence over another market participant or other market participants. An acquisition of assets or of the right to use such assets is considered to be a merger if the acquisition of the assets or of the right to use such assets increases the market share of the acquirer of the aforementioned assets and the usage rights in any relevant market
- A situation where two or several natural persons jointly or a single natural person simultaneously acquire a part or all of the assets of two or several market participants or obtain the right to use such assets, or a direct or indirect decisive influence over two or several market participants
Who requires a permission to merge and when
A notification of a merger prior its implementation is required, if:
- the total turnover of merger participants in the previous financial year in the territory of Latvia has constituted at least 30 000 000 euros
- turnover of at least 2 merger participants in the previous financial year in the territory of Latvia has constituted at least 1 500 000 euros each.
As an exception to a general rule, the Competition Council is also entitled to request the merger participants to submit a notification on already implemented merger, not later than 12 months from the date of merger implementation, if:
- the merging parties are direct competitors and their total market share on the relevant market exceeds 40% as a result of merger and
- the Competition Council has reasonable suspicion, that dominant position in the market can be created or strengthened, or competition on the relevant market can be significantly decreased as a result of merger
Even in the case, when a merger falls under the notification criteria, the undertaking is entitled to:
- request a written confirmation, that the Competition Council will not use its right to request a merger notification
- on its own initiative to submit a full or abridged merger notification to the Competition Council
Possible decisions of the Competition Council
- Approval. If the prospective merger does not significantly affect competition, the Competition Council takes a decision permitting the merger
- Conditional approval. In order to prevent adverse consequences with respect to competition in the market, the Competition Council may permit a merger by laying down conditions binding on the participants in such a merger. The burden to propose binding rules is on the participants in the merger with regard to the adverse consequences of such a merger as established by the Competition Council
- Prohibition. The Competition Council may issue a decision to prohibit a merger if it results or reinforces a dominant position. A merger may also be prohibited if it may significantly diminish competition in any specific market, and the adverse impact on competition cannot be prevented by the imposition of binding rules.
Timeframe of merger approval by the Competition Council
- Within one month from the receipt of a full-form merger notification report or a short-form merger notification, the Competition Council takes a decision regarding the approval, prohibition or conditional approval of the merger or the commencement of an additional investigation.
- If the Competition Council has taken a decision regarding the commencement of an additional investigation, within four months from the receipt of a full-form merger notification report or within three months from the receipt of a short-form merger notification, it will adopt a decision regarding the approval, prohibition or conditional approval of the merger.
Taking into account request of merger participants or on its own initiative the Competition Council can decide to extend the term of a final decision for 15 working days, in order to assess conditions if proposed by merger participants.
Liability for illegal mergers
If a notification report of a merger has not been submitted, the Competition Council is entitled to take a decision regarding the imposition of a fine of up to 3% of the net turnover of the new market participant or the acquirer of a decisive influence.
Fee for examination of merger notification
Similar as in most of Member States of the European Union, also the Latvian legal framework on mergers stipulates a fee for examination of merger notification. When paying the fee, the merger participants, who are direct beneficiaries of the merger transaction, partially cover the expenses that arise in relation to the merger notification examination process and further supervision of potential conditions imposed by the Competition Council.
Merger participants pay the fee into the state budget before submission of merger notification or, if the merger is assessed without a submitted merger notification, within ten days from the date of receiving the authority's decision on examined merger.
The amount of the fee and payment procedure is stipulated by the Cabinet of Ministers Regulations No. 362 of 14 June 2016. According to the Regulations, the following amount of fee is applied:
- 2 000 euros, if an abridged merger notification is submitted;
- 2 000 euros, if a merger notification, which does not comply with requirements, is submitted upon request of the Competition Council or at the initiative of the merger participants;
- 4 000 euros, if the total turnover of merger participants in the previous reporting (financial) year in the territory of Latvia constituted 30 million euros or more, but less than 80 million euros;
- 8 000 euros, if the total turnover of merger participants in the previous reporting (financial) year in the territory of Latvia constituted 80 million euros or more.
In case the merger notification is incomplete and the merger participants fail to submit the information requested by the Competition Council within one month from the date, when the notifying party has been informed about incompleteness, the merger notification shall be considered revoked and the fee is not revertto the payer.
The account for payment of fee for examination of merger notification:
Receiver: State Treasury Registration number: 90000050138 Code: TRELLV22 Account number: LV96TREL1060120939900 (starting from 1 January 2017)
The payer shall indicate as the payment purpose for examination of which merger notification the fee is paid.
In case any questions or uncertainties about merger notification arise the Competition Council invites market participants to use free pre-merger consultations by calling 67282865 or sending a message to the e-mail address email@example.com.
How to notify the Competition Council of a proposed merger?
A detailed description of the information to be included in the full-form or short-form merger notification has been defined in Cabinet Regulations “Procedures for the Submission and Examination of a Full-form and Short-form Notification Regarding a Merger of Market Participants” No. 800 (Word document)