Pre-Merger Notification Latvia 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.897 on Procedures for the Submission and Examination of a Notification regarding a Merger of Market Participants of 26 October 2004 (hereafter, Regulations). Additional Comments: In principle Latvian merger notification rules are based on the same principles as the EC Merger Regulation. English translation of the Competition Law may be found at http://www.competition.lv/?object_id=605 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. 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). Are there pre-merger filing requirements; if so, where are they published? 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 there exist certain conditions. The detailed rules on the content of the notification are provided in the Cabinet of Ministers Regulations. 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. The obligation to notify does not apply to mergers of market participants in the following circumstances: 1) credit institutions, other financial 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. Additional comments: 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). The Regulations include coverage of the situation where, following a merger, an undertaking will be subject to joint decisive influence and the object or effect of the creation of this undertaking may be the coordination of competing activities of the parent companies. According to the Competition Law, the notion of decisive influence means the capability, directly or indirectly, to: (a) control (regularly or irregularly) the decision-making in market participant supervisory bodies, with or without active participation thereof, and (b) appoint such number of members in the market participant supervisory body, which ensures for the wielder of the decisive influence the majority of votes in the respective body. Is there a size of transaction threshold? No. 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 if one of the following applies: 1) the combined turnover of merger participants in the previous financial year has exceeded 25 million Lats (~35.5 million EUR); or 2) the combined market share in the relevant market of the market participants involved in the merger exceeds 40 percent. 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, 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.
In order to meet market share threshold both merger participants must operate in a relevant product market (there should be an overlap of activities) and the joint market share of both merger participants in the respective market shall exceed 40 per cent. 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 test is satisfied and notification of the merger is mandatory if the combined turnover of merger participants in Latvia exceeds 25 million Lats. Is the filing voluntary or mandatory? What are the penalties for non-compliance? 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. 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 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. Form and Content of Initial Filing The necessary form and content of the notification is provided in the Annex to the Regulations, which includes the information to be provided and documents to be submitted by the merger participants. Are filing fees required? Currently there are no filing fees. 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 resolution to prohibit the merger or authorise it partially, 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. 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? After receipt of a complete notification (according to the requirements set by the Regulations) the Competition Council will within 30 days 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. Additional Comments: It should be kept in mind that the review periods described above start only when a complete notification has been submitted. 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 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 position is created or strengthened or where competition in any relevant market can be considerably reduced. What are the common Post-Filing Procedures: Request for further information, etc? After the merger notification has been submitted by the merger participants, 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. As noted above, after the examination of the notification the Competition Council adopts a decision as to whether to approve, partially approve or reject the merger. Describe the sanctions for not filing or filing an 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 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 10 000 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 (which is 90 Lats since January 1, 2006). 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. Additional Comments: Please note that in case the Competition Council will consider the information contained in the notification incomplete then the date on which submitter of notification will submit the required additional information will be deemed to be the date of submission of a complete notification. Describe the procedures if the agency wants to challenge the transaction? 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 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. 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. Describe, briefly, your assessment of the regulatory agency s current attitudes/activities Considering that competition legislation is a rather new legal disciple in Latvia, as is 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 timing of the decisions, the Competition Council even in rather straight-forward merger cases tends to extend the initial one month period for taking the final decision whether to approve, partly approve or reject the merger to the four month period after a full notification has been submitted for taking the decision. Finally, it should be noted that in its practice the Competition Council has yet rejected any merger.
Other Important Information Not applicable. * * * * * The Lex Mundi member in this jurisdiction is Klavins & Slaidins LAWIN Antitrust, Competition and Trade Practice Group Klavins & Slaidins LAWIN, Latvia (Contacts: Liga Hartmane- Liga.Hartmane@klavinsslaidins.lv).