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Trends and climate

Trends
How would you describe the current merger control climate, including any trends in particular industry sectors?

The national competition authority has a good track record in merger reviews. However, the merger regulations have now been in force for nearly 12 years and there is a feeling that they should be updated to reflect the experience gained in the meantime. The existing financial threshold is perceived as too low and should be revised to capture those transactions which have a practical impact in Malta. Greater flexibility should also be introduced with regard to the timing of merger notifications; under the current regime, notification cannot be made until a binding agreement has been entered into or a public bid has been made.

The number of transactions notified annually remains relatively consistent. However, while previously most transactions authorised were notified under the simplified procedure, the recent trend towards consolidation in the local motor vehicle, insurance, manufacturing and hotel sectors has led to more in-depth analysis of key economic sectors.

Reform
Are there are any proposals to reform or amend the existing merger control regime?

No.

Legislation, triggers and thresholds

Legislation and authority
What legislation applies to the control of mergers?

Mergers and acquisitions are governed by the Regulations on Control of Concentrations 2002, issued under the Competition Act 1994 (Cap 379 of the Laws of Malta).

What is the relevant authority?

The Office for Competition, headed by the director general (competition) within the Malta Competition and Consumer Affairs Authority, is competent to examine and control concentrations between undertakings in terms of their effect on the market. The director general’s decisions are subject to appeal before the Competition and Consumer Appeals Tribunal.

Transactions caught and thresholds
Under what circumstances is a transaction caught by the legislation?

According to the regulations, the term ‘concentration’ encompasses the following transactions:

  • mergers between two or more previously independent undertakings;
  • the acquisition by one or more undertakings of direct or indirect control of the whole or part of one or more other undertakings; and
  • full-function joint ventures.

Such concentrations must lead to:

  • a lasting change of control, with reference to the possibility of exercising a decisive influence on an undertaking through the ownership of or the right to use all or part of the assets of that undertaking; or
  • rights or contracts that confer decisive influence on the composition, voting or decisions of the organs of an undertaking.

Do thresholds apply to determine when a transaction is caught by the legislation?

Yes – in addition to the control criterion, the application of the regulations is determined based on the turnover of the parties concerned. A concentration is deemed to arise where, in the preceding financial year:

  • the aggregate turnover in Malta of the undertakings concerned exceeded €2,329,373.40; and
  • each of the undertakings concerned had a turnover in Malta equivalent to at least 10% of the combined aggregate turnover.

Informed guidance
Is it possible to seek informal guidance from the authority on a possible merger from either a jurisdictional or a substantive perspective?

Yes – according to the Office for Competition Guidance on Mergers and Acquisitions, the office encourages pre-notification meetings, as they are extremely valuable to both the notifying parties and the office. Pre-notification meetings are considered useful because they facilitate open discussion of both jurisdictional and substantive issues.

Foreign-to-foreign
Are foreign-to-foreign mergers caught by the regime? Is a ‘local impact’ test applicable under the legislation?

Yes – foreign-to-foreign mergers are caught by the regime, provided that each party has a turnover in Malta which satisfies the thresholds set out in the legislation. 

Joint ventures
What types of joint venture are caught by the legislation?

Joint ventures which perform on a lasting basis all functions of an autonomous economic entity – referred to under the legislation as ‘full-function joint ventures’ – constitute concentrations for the purposes of the legislation. 

Notification

Process and timing
Is the notification process voluntary or mandatory?

The notification process is mandatory. Transactions that give rise to a concentration must be notified to the director general before implementation. 

What timing requirements apply when filing a notification?

A concentration must be notified within 15 working days of conclusion of the agreement, announcement of the public bid or acquisition of a controlling interest.

What form should the notification take? What content is required?

Form CN, which largely corresponds to European Commission Form CO, is a schedule attached to the legislation which specifies the information and the documentation that must be provided by an undertaking when notifying the director general.

Form CN specifies that the notifying party is encouraged to consult the director general regarding the possibility of dispensing with the obligation to provide certain information (eg, information that is not reasonably available to the notifying party). A notification in short form may also be made in the case of a joint venture where the turnover of the joint venture and/or the turnover of the contributed activities is less than €698,812.02 in Malta and the total value of assets transferred to the joint venture is less than €698,812.02 in Malta.

Is there a pre-notification process before formal notification, and if so, what does this involve?

There is no mandatory pre-notification process before formal notification; however, in practice, pre-notification is often sought by both the Office for Competition and the notifying party through informal meetings in order to discuss the nature and the quality of the data required by the director general.

Pre-clearance implimentation
Can a merger be implemented before clearance is obtained?

A concentration cannot be put into effect either before notification or until it has been declared lawful by the director general. However, the director general may – either before notification or after the transaction has closed – grant a derogation from this provision after considering, among other things, the effects of the suspension on the undertakings concerned or on third parties, and the threat to competition posed by the concentration.

In the case of a public bid which has been notified to the director general, where such derogation is granted the acquirer must not exercise the voting rights attached to the securities in question or must exercise the voting rights only insofar as they are intended to maintain the full value of those investments.

Guidance from authorities
What guidance is available from the authorities?

The Office for Competition has issued general guidance on the legislation, which can be found at http://mccaa.org.mt. 

Fees
What fees are payable to the authority for filing a notification?

The notifying party must pay a notification fee of €163.06 on submission of the duly completed notification form.

Publicity and confidentiality
What provisions apply regarding publicity and confidentiality?

Upon notification, the director general must publish in the Government Gazette and a daily newspaper the notification, the names of the parties, the nature of the concentration and the economic sectors involved.

The legislation also specifies that any information furnished at the request of the director general is protected under the confines of professional secrecy and must be used solely for the purposes of the relevant request. The legislation further provides that the director general and public officers employed by or attached to the office – including consultants contracted by the office – are prohibited from disclosing information that they acquire through the application of the legislation.

Further, the right of access to the file in a Phase II investigation does not extend to confidential information or to internal documents of the director general, the European Commission or the competition authorities of other member states. Equally, this right does not extend to correspondence between or among the director general, the European Commission and the competition authorities of other member states.

Finally, before publishing its decision, the office will give the parties the opportunity to identify confidential information and business secrets that should be redacted from the public documents.

Penalties
Are there any penalties for failing to notify a merger?

Failure to notify a merger may result in the imposition by the director general of an administrative fine of between €1,000 and €10,000.

Where a concentration has already been implemented, the director general may also require the undertakings or assets brought together to be separated, the cessation of joint control or any other action that may be appropriate in order to restore effective competition.

Procedure and test

Procedure and timetable
What procedures are followed by the authority? What is the timetable for the merger investigation?

Once notification has been received, the director general examines the notification and accompanying documentation. This serves as the first stage of the review process and is usually referred to as Phase I. In its Phase I review the director general will typically send questionnaires to the notifying parties and/or third parties in order to help it to understand the market and the structure of competition, and assess the likely effects of the concentration and the accuracy of the notifying parties’ assertions. At the end of Phase I, the director general must:

  • declare the transaction not subject to notification;
  • approve the concentration unconditionally;
  • approve the concentration subject to conditions; or
  • initiate a Phase II investigation.

The decision must be issued within a maximum of six weeks. This period may be extended by two months if, after the notification and no later than five weeks following receipt of notification, the undertakings concerned submit commitments agreed with the director general indicating that the concentration no longer raises serious doubts as to its legality.

If, during the six-week period, the director general considers that the concentration raises serious doubts as to its lawfulness, he can initiate a Phase II investigation. A Phase II investigation typically consists of further questionnaires and contact with the parties and third parties, as well as state-of-play meetings. In order for the director general to issue a decision other than unconditional clearance at the end of Phase II, he must first provide the parties with a statement of objections identifying his preliminary conclusions and concerns. The director general must issue his Phase II decision within four months of the initiation of investigatory proceedings. This decision may either authorise the transaction with or without conditions or prohibit the transaction on the grounds that it will substantially lessen competition on the Maltese market. 

What obligations are imposed on the parties during the process?

During the process the parties are prohibited from consummating the concentration unless they have requested and obtained a derogation from this rule of suspension. Broadly speaking, the parties must provide any information that the director general may require for the purposes of the investigation and must provide any evidence necessary to substantiate their written submissions. Once a notification is deemed complete and the clock starts to run, the parties are not generally involved in the office’s process. In all cases to date the director general has issued Phase I decisions indicating that sufficient information has been exchanged and/or remedies offered before the process is formally begun, thereby allowing him to continue with a seamless investigative process until a final decision is issued.

What role can third parties play in the process?

The views of third parties are solicited by the director general from the outset. On publication of the notification by the director general, third parties can submit any objections to the transaction. During the investigation, third parties may also be requested to provide information to the director general for the purpose of his investigation and to put forward their views (orally or in writing) in a Phase II investigation. Such third parties may also appeal the director general’s final decision.

Substantive test
What is the substantive test applied by the authority?

The legislation applies the substantial lessening of competition test. In effect, when considering a merger, the director general must consider:

  • the need to maintain and develop effective competition in the Maltese market in view of, among other things, the structure of the markets concerned and the actual or potential competition from undertakings located within or outside Malta;
  • whether the concentration has failed or is likely to fail;
  • the nature and extent of development and innovation in a relevant market; and
  • other factors such as:
    • the market position of the undertakings concerned and their economic and financial power;
    • the alternatives available to suppliers and users and their access to supplies or markets;
    • any legal or other barriers to entry;
    • supply and demand trends for the relevant goods and services;
    • the interests of intermediate and end consumers; and
    • the development of technical and economic progress, provided that this is to consumers’ advantage and does not present an obstacle to competition.

Carve-outs
Does the legislation allow carve-out agreements in order to avoid delaying the global closing?

No specific carve-out provisions allow the parties to close a notifiable concentration and there is no precedent for enforcing such agreements. 

Test for joint ventures
Is a special substantive test applied for joint ventures?

No – the test remains the substantial lessening of competition test.

Remedies

Potential outcomes
What are the potential outcomes of the merger investigation? Please include reference to potential remedies, conditions and undertakings.

Parties may propose remedies during Phase I and/or Phase II. Remedies proposed in Phase I will not prevent the initiation of a Phase II investigation, unless the competition problems are sufficiently straightforward and the remedies sufficiently clear cut that the director general can conclude that the remedies clearly eliminate all serious doubts.

There is no enforcement experience in this area. The office closely follows European Commission practice in applying the merger regulation and it is assumed that the office will be amenable to remedies, conditions and undertakings that are available at EU level, provided that these are sufficient to eliminate the competition concerns at issue. 

Appeals

Right of appeal
Is there a right of appeal?

The persons, undertakings or association of undertakings concerned may appeal to the Competition and Consumer Affairs Tribunal within 20 days of notification of the director general’s final decision.

Do third parties have a right of appeal?

Any third party entitled to a hearing may appeal to the Competition and Consumer Affairs Tribunal within 20 days of notification of the director general’s final decision.

Time limit
What is the time limit for any appeal?

The persons, undertakings or association of undertakings concerned, or any third party entitled to a hearing, may appeal to the Competition and Consumer Affairs Tribunal within 20 days of notification of the director general’s final decision.

Law stated date

Correct as of
Please state the date as of which the law stated here is accurate.

May 14 2015.