Pre-Merger Notification Survey. LATVIA Klavins & Slaidins LAWIN

Transcription

1 Pre-Merger Notification Survey LATVIA Klavins & Slaidins LAWIN CONTACT INFORMATION Martins Gailis and Liga Hartmane Klavins & Slaidins LAWIN Latvia Telephone: and 1. Is there a regulatory regime applicable to mergers and similar transactions? Yes. Latvian merger control is regulated by the Competition Law (Konkurences likums) of 4 October 2001 (as amended) and Cabinet of Ministers Regulations No.800 on Procedures for the Submission and Examination of Full Form and Short Form Notifications regarding a Merger of Market Participants of 29 September 2008 (hereafter, Regulations). 2. Identify Applicable National Regulatory Agency/Agencies. The merger control provisions are enforced by the Competition Council of the Republic of Latvia (Latvijas Republikas Konkurences padome), a governmental agency which is supervised by the Ministry of Economics. 3. Is there a supranational regulatory agency (e. g., the European Commission) that has, or may have exclusive competence? If so, indicate. Yes. European Commission exercises exclusive jurisdiction over mergers with Community dimension, i.e. mergers meeting the criteria established by the Council Regulation No.139/2004 of 20 January 2004 on the control of concentrations between undertakings (the European Merger Control Regulation). 4. Are there pre-merger filing requirements; if so, where are they published?

2 According to Section 15 of the Competition Law market participants have to submit a notification of a merger to the Competition Council prior to the merger if merger notification thresholds are triggered. The detailed rules on the content of the notification are provided in the Regulations. 5. What kinds of transactions are "caught" by the national rules? (Identify any notable exceptions) According to the Competition Law, the notification requirement is applicable to mergers of market participants which are defined as: 1) the merging of two or more independent market participants in order to become one market participant (consolidation); 2) the joining of one market participant to another market participant (accession); or 3) such 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 utilise such, 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; or 4) such 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. The obligation to notify does not apply to mergers of market participants in the following circumstances: 1) credit institutions or insurance companies whose activities include transactions with securities on their account or the account of other persons, have limited in time title to securities of market participants which they have acquired for further sale, if these credit institutions or insurance companies do not exercise voting rights created by these securities to influence competing activity of the relevant market participants or exercise the voting rights created by these securities only to prepare for investment of the market participant, its shares, assets or relevant securities and such investment is made within one year after creation of the voting rights. This term can be extended by the Competition Council based on application of the relevant credit institution or insurance company, if it proves that the relevant investment was impossible during the one year s term. 2) in case of insolvency or liquidation of the market participant, the liquidator or administrator obtains the decisive influence in accordance with the procedure established by the rules and regulations. While joint ventures are not specifically mentioned in the Competition Law, the definition of a merger in the Law is broad enough to cover joint ventures (acquisition of joint decisive influence over a market participant).

3 6. Is there a "size of transaction" threshold? No. 7. Is there a "size or turnover of the parties" test; if so, what is it and how are size and turnover to be calculated? The merger has to be notified both of the following apply: 1) the combined turnover of merger participants in the previous financial year in the territory of Latvia has exceeded 25 million Lats (~35.5 million EUR); and 2) Each of two merger participants has a turnover in the previous financial year in excess of 1.5 million Lats (~2.13 million EUR). Turnover of a market participant is calculated by summing up the profits of the previous financial year from the activity of the market participant, sale of goods, and supply of services in the territory of Latvia, and deducting from this sum the sales discount, other discounts, and value added tax and other taxes which are directly related to the sales. A more detailed procedure for the calculation of turnover can be found in the Regulations. 8. Is geographic scope/national market effect of transaction an issue with respect to filing or approval requirements? If so, specify. In accordance with the Regulations, the net turnover of each market participant and accordingly the cumulative turnover of the merger participants which intend to merge is calculated within the Latvian territorial jurisdiction only. Thus, the above turnover thresholds are limited to Latvian territorial jurisdiction. 9. Is the filing voluntary or mandatory? What are the penalties for noncompliance? Provided that the above mentioned notification criteria are met the filing is mandatory. A merger that has taken place without a merger notification having been submitted, and which is at any time discovered to have been subject to the requirement of notification pursuant to the Competition Law, is illegal. If a notification has not been submitted prior to the merger, the Competition Council may take a decision regarding the imposition of a fine of up to 1,000 Lats (~1430 EUR) per day, counting from the day when the notification should have been submitted, on the new market participant or the acquirer of a decisive influence. Furthermore, the payment of the fine does not release the market participants concerned from the obligation to notify the Competition Council and comply with the decisions of the Competition Council. 10. Time in which a filing must be made. The Competition Law states that direct participants of the merger must submit the merger notification prior to the merger, if such merger qualifies under the notification

4 criteria. Neither the Competition Law, nor the Regulations provide for any deadlines of filing apart from the requirement that the notification of a merger is made to the Competition Council before the merger takes place. 11. Form and Content of Initial Filing. The necessary form and content of the full form and short form notifications is provided in the Regulations, which includes the information to be provided and documents to be submitted by the merger participants. Please note that less extensive information has to be provided in the short form notification as compared to the full form notification. According to Competition Law, provided that the merger notification thresholds are triggered, the parties may submit a short form notification if one of the following conditions is satisfied: 1) none of the merger participants operates in a single relevant market or in a market that is vertically related thereto; or 2) the combined market share of the market participants involved in the merger does not exceed 15 per cent. In all other cases a full form merger notification will have to be submitted. 12. Are filing fees required? Currently there are no filing fees. 13. Is There An Automatic Waiting Period? If so, specify. There is no mandatory waiting period enforced by the Competition Council with regard to mergers. Once a complete notification has been submitted the merger may be finalized before a decision has been made by the Competition Council. However, if the Competition Council adopts a decision to prohibit the merger or permit it with binding obligations on the notifying parties, and the merger has already taken place, such merger will be considered as performed contrary to the decision of the Competition Council. In such a situation the Competition Council may impose a fine on the new market participant or on the acquirer of a decisive influence of up to 1,000 Lats (~1430 EUR) for each day counting from the day when the merger took place. The payment of a fine does not release the market participants from the obligation to fulfill the provisions of the Competition Law and decisions of the Competition Council. Therefore, the merging parties must be very confident that the merger will be approved to complete the merger before the Competition Council has adopted a decision. 14. Are There Time Limits Within Which The Regulatory Agency Must Act? Can they be shortened by the parties or be extended by the regulatory agency?

5 Different time limits apply depending on whether a full form or short form notification is submitted. In the case of a full form merger notification the relevant time limits are as follows: After receipt of a complete notification (according to the requirements set by the Regulations) the Competition Council will within one month adopt one of the following decisions: 1) prohibit the merger; 2) permit the merger on certain conditions; 3) permit the merger; or 4) commence in-depth investigation. If the Competition Council has decided to commence an in-depth investigation, its final decision shall be adopted within four months from the date of submission of the complete notification. If within four months after receipt of a complete notification the Competition Council has not adopted a decision on permission, prohibition, or permission with conditions, then the relevant merger is deemed to be permitted. In the case of a short form merger notification the relevant time limits are as follows: After receipt of a complete short form merger notification (according to the requirements set by the Regulations) the Competition Council will within one month adopt one of the following decisions: 1) prohibit the merger; 2) permit the merger on certain conditions; 3) permit the merger; or 4) commence in-depth investigation. If the Competition Council has decided to commence an in-depth investigation, its final decision shall be adopted within three months from the date of submission of the complete short form notification. If within three months after receipt of a complete notification the Competition Council has not adopted a decision on permission, prohibition, or permission with conditions, then the relevant merger is deemed to be permitted. Please note that the Comeptition Law does not offer any legal instruments for the parties to shorten the above stated time limits. The Competition Council cannot extend the above noted time limits, except in case a short form notification has been submitted and the Competition Council in its sole discretion decides than a full form notification is necessary in which case the four months deadline will apply (instead of three months). 15. What is the substantive test for clearance? The objective of the provisions on merger control in the Competition Law is to prevent the creation or strengthening of a dominant position or the reducing of competition in any relevant market in order to ensure competition in the Latvian economy. The Competition Council prohibits mergers as a result of which a dominant

6 position is created or strengthened or where competition in any relevant market can be considerably reduced. 16. What are the common Post-Filing Procedures: Requests for further information, etc? First of all, after the filing of a complete merger notification, the Competition Council will publish the fact of such merger notification being submitted and the involved parties in its webpage Afterwards, the Competition Council usually contacts the competitors, customers, certain state authorities and merger participants themselves to inquire about the intended merger. The Competition Council may require additional information to be provided by the merger participants. If after the first stage the Competition Council has adopted a decision to commence an in-depth investigation, it may also publish in its webpage an invitation for market participants to state their opinion on the effect of the notified merger on competition. 17. Describe the sanctions for not filing or filing and incorrect/incomplete notification. Please see the answer as provided above to the question Is the filing voluntary or mandatory? What are the penalties for non-compliance? as regards the sanctions for not filing notification prior to the merger. As regards filing an incorrect/incomplete notification, according to with the Regulations, the Competition Council informs the applicant that the information contained in the notification is not complete and states the missing information that should be provided by the applicant. In this regard incorrect or misleading information is deemed to be incomplete information. The above noted time limits within which the Competition Council must act apply only after a complete notification has been submitted. The filer of an incorrect or misleading notification may however incur administrative and/or criminal liability. According to the Administrative Violations Code of Latvia, for the failure to provide when requested or the provision of false information to the Competition Council a natural person may be fined in the amount of up to 500 Lats while a legal entity may be fined in the amount from 50 to Lats. According to Criminal Law, the failure to provide the requested information in a timely manner to a State Institution (including the Competition Council) repeatedly during one calendar year may be penalized with a custodial arrest, or community service, or a fine not exceeding thirty times the minimum monthly wage. The deliberate provision of false information to a State institution (including the Competition Council) authorized to request information may be penalized with a prison sentence not exceeding two years, or community service, or a fine not exceeding fifty times the minimum monthly wage. 18. Describe the procedures if the agency wants to challenge the transaction?

7 After a complete notification has been submitted to the Competition Council, it has one month to examine the notification and decide whether to approve, partially approve or reject the merger. Should the Competition Council feel that it needs to undertake additional investigations, it may decide so. After the commencement of additional investigations, the Competition Council, within a period of four months from the day of receipt of the full form notification (or within a period of three months from the day of receipt of the short form notification), should decide whether to approve, partially approve or reject the merger. Should the decision be unfavourable to the applicants for a merger, the Competition Council has a duty under the Administrative Procedure Law to clarify and assess the opinions and arguments of the applicants. The same right to be heard applies to third parties whose rights and lawful interests are affected by the decision (i.e., administrative act), if the third party is granted the status of participant to the procedure by the relevant authority (Competition Council) based on application of this party. 19. Describe the penalties applicable to the implementation of a merger before clearance or of a prohibited merger? Please see answers to the above questions Is the filing voluntary or mandatory? What are the penalties for non-compliance? and Is There An Automatic Waiting Period? If so, specify. for the applicable penalties. As noted above, the payment of the fine does not release the market participants concerned from the obligation to fulfil the provisions of the Competition Law and the decisions of the Competition Council. 20. Describe, briefly, your assessment of the regulatory agency's current attitudes/activities. The Competition Council, its current attitudes can be best described as vastly relying on the experience and practice of the European Commission and the Community Courts. Thus, whenever faced with a new unresolved situation, the Competition Council tends to look for interpretations in the practice of the European Commission and the Community Courts. As regards the current activities of the Latvian Competition Council, there was an ovewhelming number of merger notifications filed during year 2007 which caused the Competition Council at the end of the first phase of investigation (one month) to adopt a decision to commence and in-depth investigation even in rather straight forward cases. This might be one of the reasons why the Latvian Merger Control thresholds have been amended twice during year 2008 as a result of which it is no longer necessary to submit mergers based on the rather subjective market share threshold. Currently, as a result of changes to the merger notification thresholds as well as the global financial and economic crisis there has been a sharp drop in merger notifications filed. This has also resulted in the notifications being reviewed in a more expedient way.

8 21. Other Important Information: Currently there is a legislative initiative to re-introduce the market share (40%) threshold in the merger control.