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Under what circumstances is a transaction caught by merger control legislation?

Section 6 of the Competition Act (25,156/1999) provides that merger control is exercised over any “economic concentration of enterprises”. This is defined as the acquisition of control over one or more companies, business units, going concerns or assets from which an independent turnover can be identified by means of:

  • a merger;
  • the transfer of a going concern;
  • the acquisition of property or share rights (where the acquisition gives the acquirer control of or substantial influence over an enterprise); or
  • any act or agreement that transfers to a party or economic group a decisive influence on the passage of resolutions that relate to the ordinary or extraordinary management of a particular enterprise.

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

Section 8 of the Competition Act (25,156/1999) provides that an economic concentration will be subject to merger control if the total business volume of the group of affected companies exceeds Ps200 million, unless a special exemption applies. For the purposes of this test, the Competition Act defines ‘affected companies’ as:

  • the company of which control is acquired (the target); and
  • the company that acquires this control.

‘Total business volume’ is defined as the sum that results from the sale of products and rendering of services by the affected companies during the last fiscal year related to their ordinary activities, after deducting any sales discounts, value added tax and other taxes directly related to the business.

Section 8 also identifies the group of companies for which local turnover must be taken into account for threshold purposes as follows:

  • the undertaking concerned;
  • undertakings in which the undertaking concerned directly or indirectly:
    • owns more than half of the capital or issued capital;
    • has the power to exercise more than half of the voting rights;
    • has the power to appoint more than half of the members of the supervisory board, the administrative board or bodies that legally represent the undertakings; or
    • has the right to manage their affairs – the right to manage their affairs is considered applicable to all situations where the relevant company exercises at least substantial influence over another undertaking (ie, the standard test to determine the existence of an economic concentration);
  • undertakings which have the rights or powers listed in the second point above in the undertaking concerned;
  • undertakings in which an undertaking as referred to in the third point above has the rights or powers listed in the second point above; and
  • undertakings in which several undertakings, as referred to in the first to fourth points above jointly have the rights or powers listed in the second point – this provision replicates the language of the EU’s Merger Regulation, but there are no specific exemptions regarding inter-group sales or joint undertakings.

However, the National Antitrust Commission has the power to review transactions that fall below the threshold and to investigate them as it would any potential anti-competitive conduct, given that the substantial test for clearance applies to all concentrations regardless of whether they must be mandatorily notified.