When a concentration falls within the scope of the Control of Concentrations Between Undertakings Law, L.83(I)/2014 (the “Law”), such concentration must be notified to the competent authority, which in Cyprus is the Commission for the Protection of Competition (the “CPC”) in order to get the “green” light. In essence, approval must be secured confirming that the concentration does not raise serious doubts as to its compatibility with the effective functioning of competition in the market and can therefore be declared compatible.
The merger control notification procedure before the CPC is of significant importance. Businesses should always seek appropriate advice to determine whether a proposed transaction is subject to mandatory notification, as it is prohibited to implement a concentration falling within the scope of the Law prior to obtaining approval from the CPC. In cases where a concentration of major importance is implemented without prior approval, the CPC has the authority to impose sanctions on the undertaking responsible for the notification, such as an administrative fine of up to 10% of its total turnover, as well as an additional administrative fine up to €8,000 for every day during which the infringement continues.
The regulatory aspect of mergers is a complex matter that involves a detailed analysis of the effects that a concentration may have on competition in the relevant markets. The evaluation procedure before the CPC is divided into two phases: Phase I Proceeding and Phase II Proceeding.
Phase I Proceeding
The preliminary examination of a concentration focuses on establishing primarily whether the concentration would significantly impede effective competition in Cyprus or in a substantial part of it, particularly as a result of the creation or strengthening of a dominant position.
For such evaluation to be carried out, it is essential to define the relevant product markets and geographic markets. Affected markets consist of all the relevant product markets and geographic markets as well as the plausible interchangeable relevant product markets and geographic markets in the territory of the Republic, where:
Further to the affected markets, the notified concentration may have significant implications in other markets as well, for example when:
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Any of the participating parties has a market share of more than 25% and any other participating party is a potential competitor in the said market. An undertaking may be considered as a potential competitor, particularly, if it plans to enter the market or if it has developed or pursued such plans during the last 3 years;
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any of the participating parties is active in a neighbouring product market that is closely related to a product market in which another participating party is active, and the individual or combined market shares of the parties in any of the said markets is at least 25%. The product markets are closely related neighbouring markets, if the products are complementary to each other or if they belong to a spectrum of products which are generally purchased by the same group of clients for the same end use.
When a horizontal relationship arises, the concentration is evaluated following the relevant Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings (2004/C 31/03).
When a non-horizontal relationship arises, the concentration is evaluated following the relevant Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of concentrations between undertakings (2008/C 265/07).
In assessing a concentration, it is considered that the likelihood of a significant impediment to effective competition is generally lower in non-horizontal relationships compared to horizontal ones because:
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The activities involved in vertical concentrations are complementary to each other. Therefore, a concentration between such undertakings may have pro-competitive effects, such as improving efficiency.
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Integration may also reduce transaction costs and enable better coordination with regard to product design, the organization of the production process, and the way products are sold. Similarly, concentrations involving products that belong to a range or portfolio of products and are generally sold to common customers (whether or not they are complementary products) may result in benefits for customers, such as “one-stop shopping”.
When assessing the impact of a concentration on competition, the analytical framework involves comparing the competitive conditions that would result from the notified transaction and those that would have prevailed in its absence. This counterfactual analysis may also take into account reasonably foreseeable future developments in the market, including the likelihood of entry or exit of undertakings and changes driven by upcoming regulatory measures. Within this framework, both the potential anti-competitive effects and the possible pro-competitive benefits are examined, particularly where these arise from substantiated efficiency gains that ultimately benefit consumers. The overall assessment focuses on determining which set of effects is more likely to materialise.
Following the required assessment, the CPC will decide whether:
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Despite falling within the scope of the Law and the meaning of a concentration, the notified concentration does not raise serious doubts as to its compatibility with the functioning of competition in the market and is thus declared as compatible, or
Phase ΙΙ Proceeding
Phase II Proceeding is not required in all cases. A full examination procedure is only required when the CPC concludes that the notified concentration falls within the scope of the Law and definition of concentration but raises doubts as to its compatibility with the functioning of competition in the market. In that case, a full investigation is initiated. In such cases, a full analysis of the market is required in order to decide whether the doubts have been removed or can be removed through the adoption of commitments or modifications to the concentration by the parties.
Prior to reaching a decision, the CPC may, if it considers it expedient, carry out negotiations, hearings, or discussions with any person who, at the CPC’s discretion, may assist in the appraisal of the concentration.
At the conclusion of Phase II, the CPC will issue a final decision either to:
or
Typically, the final decision by the CPC is issued in a timeframe of 4 months from the date of the notification or the date on which all required information was submitted to the competent authority.
The information contained in this article is provided for general information purposes only and does not constitute legal or professional advice.
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