The national competition authority is the National Competition and Markets Commission (CNMC). The CNMC was created in 2013, bringing together under a single roof the pre-existing National Competition Commission and various national sector regulatory authorities (energy, telecommunications and media, railways, postal and airports). This impacted mergers in regulated sectors, hitherto subject to the need for a cross-report from the relevant regulatory authority. The creation of the CNMC eliminated the need for cross-reports from regulators in industry sectors that are now dealt with by the CNMC. Hence, the CNMC modified its Notice on Short Form Merger Filings in October 2015, to eliminate the rule that short-form merger filings were not available when a cross-report from the competent regulatory authority was required. Reduced form filings are now also possible in industry sectors where the CNMC has authority (although standard merger filing forms will still be required in industry sectors where the CNMC has no regulatory authority, such as banking mergers).4
The CNMC has a dual structure, which is reflected in its regulatory and competition enforcement rules. A collegiate body, the Council, is the decision-making organ of the CNMC. The Council has 10 members divided into two chambers of five members each, one chamber dealing with competition matters and presided over by the president of the CNMC; the other dealing with regulatory supervision and led by the vice president. The chambers may meet separately or jointly in a plenary session. The president has the deciding vote in the case of a tied vote at the Council.
In the area of merger control, the Council of Ministers (Cabinet) has a role in problematic mergers where the CNMC considers either prohibition or submission to conditions. This role of the Council of Ministers is further described below.
Appointment of the CNMC Council members, including the president and vice president, is entrusted to the government upon proposal of the Ministry of Economy. CNMC Council members are appointed for non-renewable terms of six years.
The bulk of the CNMC is made up of the various directorates, which deal with the investigations and provide the substantial back-office research and knowledge required for the day-to-day work of the CNMC. The Competition Directorate deals with the enforcement of competition law and is, in turn, divided into various sub-directorates of economic intelligence, industry and energy, information society, services, leniency and cartels, and, finally, a monitoring sub-directorate. There is no specific merger task force, which means that mergers are allocated internally. The Competition Directorate is a professional office with career civil servants who act impartially and with a businesslike attitude when addressing companies' issues.iii Pre-merger notification and approvalWhich transactions qualify as a merger?
A concentration takes place when there is a stable change of control of an undertaking as a result of a merger of two previously independent undertakings; an acquisition of control of an undertaking or a part thereof by another undertaking; or the creation of a joint venture (JV) or the acquisition of joint control of an undertaking, provided that the JV is full function and performs its economic activity on a long-term basis.
An acquisition of control results from contracts, rights or any other means that, taking into account the circumstances of fact and law, confer the possibility of exercising decisive influence over the acquired undertaking. The concept of 'control' encompasses ownership of shares or assets, contracts, rights, or other means that provide decisive influence over the composition, deliberations or decisions of the governing organs of the company.
Purely internal restructuring within a company group does not constitute a change of control. Likewise, the acquisition of control must involve a business having access to the market and therefore a business to which a market share or market turnover can be assigned. Hence, an acquisition of a business previously providing an internal service solely to the selling group will not amount to a merger, provided that no sales from the acquired business take place to third parties within a start-up period from the acquisition (start-up period of generally three years). Temporary shareholdings by financial entities, holding companies and receiverships are excluded in the circumstances described by the Competition Act.Thresholds triggering merger control in Spain
The Competition Act provides that concentrations that meet either one of the following thresholds must be notified to the CNMC for merger control purposes:
- that, as a result of the concentration, a market share of 30 per cent or more of the relevant product market in Spain, or a relevant geographical market within Spain, is acquired or increased. A de minimis exemption applies if:
- the turnover of the acquired undertaking in Spain does not exceed €10 million; and
- the concentration does not lead to acquiring or increasing a market share of 50 per cent or higher in the relevant product or service market or in any other market affected by the concentration; or
- that the aggregated turnover in Spain of the parties to the concentration exceeds €240 million in the previous accounting year, if at least two of the parties to the concentration each have an individual turnover exceeding €60 million in Spain.
If either one of the above thresholds is met, filing is mandatory and the concentration cannot be implemented prior to having been authorised. The Competition Act provides for a derogation system that enables total or partial closing of a merger prior to having gained merger control clearance. This is discussed further in Section III.
In our experience, the market share threshold poses some practical questions; for instance, the market share threshold can be met if the target company alone has a 30 per cent (or 50 per cent, as the case may be) share in a relevant market, even if the acquirer has a zero per cent market share, although this would be a candidate for a short-form merger filing and quick review. Market definition must be carried out on the basis of existing merger control practice and precedents persuasive in Spain, including those of the CNMC. Generally, the market share threshold need not be problematic; it can be dealt with expediently and in a constructive fashion.
Finally, it is worth mentioning the impact that the EC Communication on the referral mechanism (the Communication)5 is likely to have on concentrations that do not meet national thresholds but that may be examined by the EC under the referral mechanism. The Communication foresees that national competition authorities may refer certain concentrations that significantly affect competition to the Commission, even though they do not meet applicable national merger control thresholds. Consequently, a concentration that is not reportable under the Spanish Competition Act may end up being examined by the Commission. This will probably cause uncertainty because the referral of the transaction can take place up to six months after the transaction has been closed.6Consequences of failing to notify a reportable transaction
Closing a transaction without having obtained the required merger control approval is a serious infringement under the Competition Act. The CNMC actively monitors gun-jumping, including that of transactions that had to be reported pursuant to the market share threshold, which the CNMC has shown it has will to enforce (with the majority of gun-jumping investigations being triggered by the market share threshold). Closing a reportable transaction without having gained merger control approval may carry fines of up to 5 per cent of the turnover of the acquiring group. Closing in contravention of the terms of a merger control decision may result in fines of up to 10 per cent of turnover. In April 2021, the Competition Act was amended to clarify, inter alia, that the relevant turnover for the purposes of the calculation of fines is the worldwide turnover of the infringing company. Fines are imposed following a separate administrative investigation into gun-jumping. Furthermore, companies condemned for gun-jumping may potentially be disqualified from supplying goods and services to public administrations under the public procurement laws. The CNMC has been very active in recent years in the prosecution of gun-jumping, particularly gun-jumping originating in the inobservance of the market share threshold, with 22 investigations having been initiated for gun-jumping in 2020 and 18 in 2021, according to the CNMC's own disclosed data.7Filing fee
A filing fee must be paid and proof of payment included as part of the merger filing. The amount of the fee is determined in an Annex to Law 3/2013 of 4 June 2013 on the creation of the CNMC. The amount of the fee may be updated annually and is currently as follows:
- €5,502.15 when the aggregate turnover of the merging parties is equal to or less than €240 million;
- €11,004.31 when the aggregate turnover of the merging parties is between €240 million and €480 million;
- €22,008.62 when the aggregate turnover of the merging parties is between €240 million and €3 billion; and
- a fixed amount of €43,944 when the aggregate turnover of the merging parties is above €3 billion, adding €11,004.31 to the fee for each additional €3 billion of aggregate turnover of the parties, up to a maximum fee amount of €109,906.
The filing fee for short-form filings is currently €1,576.51.
Year in review
The year 2021 was the first year of recovery after the pandemic. The CNMC, with the new presidency since autumn 2020, continued its trend towards reinvigorated merger control enforcement, with a substantial number of mergers and, notably, an increased number of in-depth merger reviews compared with prior years. This has included one merger to monopoly in a regulated market (port services) where merger defences were available, so approval was possible subject to an in-depth review and remedies (this merger is discussed further below).i Merger to monopoly in the port services sector (Barcelona port)
The CNMC approved on 27 July 2021 (with confirmation in August from the government, which has statutory power to alter conditional or negative merger decisions), in Phase II with commitments, a merger between Mooring & Port Services, SL and Cemesa Amarres Barcelona, SA. Cemesa is part of the international group DP World, based in Dubai, which provides port services in several Spanish ports. In the port of Barcelona, Cemesa held a licence for the provision of mooring services and also provides other port services. Mooring held the other licence.
The transaction involved the creation of a 50-50 JV between both parties for the provision of mooring and unmooring services in the port of Barcelona. The CNMC considered the port of Barcelona as the relevant geographical market. The critical aspect is the merger of the two existing operators into a single one.
After an extensive pre-notification period, the transaction was notified to the CNMC on 3 November 2020. Although the parties offered commitments in Phase I, the CNMC decided to open Phase II. After several information requests issued to the parties and to third parties, the Competition Directorate issued on 11 June 2021 its statement of objections (SO), where the main problem identified was the likelihood that the JV would reduce – and eventually eliminate – the discounts applied to the services. This was because, although the port service is subject to regulated cap pricing, average prices were in fact lower than the regulated cap prices, and there was effective price competition through discounts applied to the regulated maximum prices.
As is logical, the creation of a monopoly and subsequent price increases was of concern to the CNMC, which could have led it to prohibit the concentration. The potential of the JV reducing quality or carrying out exclusionary practices by bundling the mooring services provided by the JV in a monopoly regime post-merger with the remaining port services provided by Cemesa, or both, was also weighed. However, throughout the procedure, the CNMC ruled out the competition problems derived from possible quality reductions (as there are regulatory obligations to this effect derived from the ports law and from the operating licence itself) and from the bundling of services or exclusive discounts (as there is no market power of the JV in other port services and the JV would be subject to universal service obligations regarding the mooring services). The SO therefore focused on the issue of possible unilateral price increases by the JV.
The transaction was a merger to monopoly that required an in-depth Phase II investigation focusing on the potential detrimental effects and efficiencies with thorough market testing, etc. In conclusion, the CNMC was concerned about the transaction, which could potentially have been prohibited. To remedy the expressed concerns, the parties offered commitments, which (subsequent to negotiation) resulted in a five-year obligation not to worsen the commercial conditions or prices applied prior to the merger, with the exception of annual price updates reflecting the wage increases included in the national collective bargaining agreement for the mooring sector. The CNMC cleared the concentration on the basis of those commitments.ii Acquisition of Grupo Maxam's business by Sofisport
In its merger decision of 11 May 2021, Sofisport/Grupo Maxam,8 the CNMC authorised the acquisition of control by Sofisport SA of the hunting and sport shooting cartridges business and certain related assets of Maxam Holding, SL The CNMC considered the disappearance of the main and, in some cases, only independent supplier of components (gunpowder, primers and cases) used to manufacture non-metallic hunting and sport shooting cartridges in Spain and the EEA. Therefore, the transaction was cleared subject to commitments offered by Sofisport, notably (1) divestiture of assets to a competitor, Fiocchi Munizioni, SpA, enabling it to reinforce its production capacity; and (2) committing to temporarily supply Fiocchi with gunpowder for a maximum of three years and to guarantee the supply of gunpowder, primers and cases for the next five years to Spanish producers under conditions comparable with those that existed pre-merger.iii Unicaja/Liberbank merger
In its merger decision of 29 June 2021, Unicaja Banco/Liberbank,9 the CNMC cleared the takeover of Liberbank, SA by Unicaja Banco, SA subject to certain commitments. The CNMC identified a weakening of effective competition in retail banking at a provincial level, specifically in the province of Cáceres, where high concentration would ensue post-merger. The merger was approved subject to a commitment of keeping the offer of products by the merged entity under commercial conditions that are no worse than those offered by the resulting entity in the zip code areas where there is competition post-merger.iv Acquisition of Funespaña's business by Santa Lucía
This transaction consisted of Santa Lucía acquiring nearly all the assets of Funespaña, Mapfre Group's funeral plan provider. The CNMC cleared the merger in Phase II subject to commitments due to the monopoly position acquired in various municipalities.
The transaction was cleared on 7 September 202110 with the following commitments from Santa Lucía: (1) the CNMC will approve the wording of the response that the next of kin gets after the first call; (2) during the first year after the merger, the CNMC will oversee a sample of some first calls; and (3) the resulting entity will allow the entrance of a new competitor in Valdepeñas in three months. In addition, the CNMC's approval was on the condition of Mapfre erasing the partners' agreement's clause that foresaw Mapfre engaging the resulting entity's services and not being able to make any appointment in the resulting entity.
This was the first time the CNMC has carried out a surprise inspection in the framework of merger control.v Acquisition of Rekalde by Mémora
The CNMC cleared the acquisition of Rekalde by Mémora subject to commitments in Phase II.11 The transaction affected the markets of funeral services in the Basque Country and Navarre.
The CNMC cleared the acquisition subject to two conditions, namely Mémora divesting two of its funeral homes to equalise market shares in San Sebastián and divesting funeral facilities in three major cities.vi Creation of a JV between Boyacá and SGEL
This transaction entailed the creation of a JV between Boyacá and SGEL, respectively participating with 65 per cent and 35 per cent. The new entity would take over the businesses of the parties in the market of distribution of periodical publications and Boyacá's periodicals transport business.
The parties offered the following commitments to see the concentration cleared: (1) the JV would separate the businesses of national transport and wholesale distribution of periodical publications and (2) local transport structure sharing agreements would be under objective, transparent and non-discriminatory market conditions, among others. These commitments would be in force for three years. Furthermore, the CNMC cleared the creation of the JV by means of a decision of 11 May 202112 subject to the prohibition of worsening conditions with traditional points of sale and to expanding the commitments to the distribution of daily newspapers.
The merger control regimei Waiting periods and time frames
Pre-notification is customary and is advised when possible. Pre-notification is not subject to statutory deadlines. In most cases, two or three weeks should be allowed, although it can take longer if the transaction is complex from a competitive standpoint, or if the CNMC requires additional information to be included in the notification form.
The formal merger control investigation is divided into Phase I and Phase II proceedings. The majority of files are cleared in Phase I, whereas only a fraction are referred to Phase II in-depth analysis.
Phase I proceedings, in principle, last for one month, counted from the date a complete notification is filed with the CNMC. Where the notifying party submits commitments (this possibility exists during the 20-day period after the filing), the Phase I statutory maximum period is extended by 10 additional days.
The maximum period for Phase II proceedings is two months, counted from the date the CNMC decides to open a Phase II review. The maximum period is extended for 15 additional days if commitments are submitted in Phase II (the notifying party can offer commitments up to 35 days after the start of Phase II proceedings).
In the event of Phase II decisions blocking or imposing obligations, the Minister of Economy is entitled to refer the case to the Council of Ministers within 15 days of the Phase II decision being issued. If referred to it, the Council of Ministers has one month to issue a final decision, which may confirm the Phase II CNMC decision or may authorise the merger, with or without conditions.
All maximum periods can be interrupted by the CNMC in regulated events such as formal information requests.ii Parties' ability to accelerate the review procedure, tender offers and hostile transactions
As discussed, in practice, pre-notification normally makes the review easier.
The merger cannot be closed prior to having gained the prerequisite merger clearance. It is possible to request a derogation from the suspension effect of the merger filing. This derogation is very rarely granted nowadays. In the past, the exception has been used in limited instances to enable quick closing of a merger in non-problematic geographical areas while enabling a Phase II review limited to problematic areas (e.g., in supermarket, gas station and other mergers with local geographical markets). As a general rule, in practice, the CNMC has a preference not to use this derogation procedure, as it entails considerable analysis; rather, where possible, the CNMC prefers to move towards quick merger clearance if the circumstances merit it.
Public offers can be launched including as condition for the validity the merger control clearance. The Competition Act enables launching of a public tender without having gained merger control, provided that the CNMC is notified of the merger within five days of the formal application for authorisation of the public tender with the Securities Exchange Commission and that the voting rights are not exercised except when required to preserve the value of an investment, with the authorisation of the CNMC.
Hostile public offers are rare in Spain. Past experience shows that hostile takeovers, particularly in strategic sectors, can be extremely complex. The hostile bid for Endesa launched by Gas Natural in the prior decade was not successful, and competing offers required intervention from the European Commission under Article 21 of the EC Merger Regulation. On that same transaction, the initial merger control authorisation gained by the first bidder (Gas Natural) was frozen by the Supreme Court on interim review.iii Third-party access to the file and rights to challenge mergers
Third-party access is expressly contemplated in the Competition Act in Phase II merger proceedings. Parties with a legitimate interest have the possibility to access the merger file and submit comments on the statement of objections and proposed commitments. These are normal dynamics in Phase II, where third parties have a relevant role and provide input that help shape the outcome of the merger proceedings.
The law does not foresee the possibility that interested parties have a role in Phase I. Phase I proceedings are confidential and the file cannot be accessed by third parties. However, as there is no express provision banning participation of third parties in Phase I merger proceedings, it is accepted, and has become quite standard, that third parties make representations and submissions to the CNMC regarding a merger also during Phase I merger proceedings. An example of this is the Helios/Quironsalud merger,13 where the participation of a third party in the proceedings was expressly discussed in the merger decision.
Indeed, the CNMC will listen to third parties' concerns and, if these have merit, the CNMC should be expected to raise the level of scrutiny of a given merger.
Third parties also play a role in reporting mergers that should have been filed for merger review but were not.14iv Resolution of authorities' competition concerns, appeals and judicial review
The CNMC should, at least in theory, solve most initial concerns in pre-notification. The CNMC will make use of formal information requests, stopping the clock when necessary. Once the proposed transaction has been formally filed, the CNMC might be keen, depending on the circumstances, to deal with any questions informally, without stopping the clock (particularly if the transaction has been pre-notified).
Merger decisions by the CNMC may be appealed within two months before the High Court. In instances where the Council of Ministers decides on the merger, the Supreme Court is competent to review the merger decision.v Effect of regulatory review
Mergers reviewed by the CNMC may be reviewed concurrently by other administrative agencies dealing, for instance, with regulatory and licensing issues. The potential friction and lack of coordination between the CNMC and sector regulators has been minimised in some instances in economic sectors where the CNMC also acts as a regulatory authority. In areas such as banking, where the regulator is not within the CNMC, merger review is suspended while the sector regulator completes its review.
Other strategic considerations
Generally speaking, it is far better to pre-notify transactions if at all possible. The CNMC has in the past recommended pre-notification and it clearly dislikes transactions being notified for merger control without pre-notification. Furthermore, pre-notification enables discussion on a preliminary basis on many strategic issues, including the recurrent usage of the short-form filing, occasionally even in situations not expressly foreseen by the applicable regulation.
Another benefit of pre-notification is expected timing for approval. Even though, initially, pre-notification implies additional delay, in practice, the CNMC will reduce the time dedicated to the review and often issue speedier approval if pre-notification has taken place. In non-problematic cases, recent experience shows that the CNMC often grants approval within 10 to 20 days of filing.
It is possible to apply for formal guidance from the CNMC regarding whether or not a change of control arises as a result of the projected merger and the merger thresholds are met. One issue here is the lack of a binding deadline for the CNMC to act on a request for formal guidance, an area that might change in the future.
Merger control is an important tool and the CNMC has, in the past, vigorously investigated and pursued gun-jumping or closing of reportable transactions without having obtained the necessary merger clearance. The CNMC has recently made it clear that it is ready to use its powers to punish individual directors and managers for competition breaches (which has hitherto not materialised in any actual fines to individuals in situations of gun-jumping, a situation that might change). Likewise, new legislation that entered into force recently arguably makes it possible to exclude from public tender those companies that have been condemned for gun-jumping. Specifically, the CNMC has initiated proceedings against Nufri, Sociedad Agraria de Transformación for having closed the acquisition of Grupo Idulleida before gaining merger clearance.15
Outlook and conclusions
The current CNMC is the result of the integration of Spain's main national regulatory authorities in various network industries and regulated sectors into the Competition Authority in 2013 (see Section I). The integration was criticised at the time. In the medium to longer term, it cannot be ruled out that a future legal reform will again separate the national regulatory authorities from the Competition Authority. This possibility has been discussed, although there does not currently appear to be momentum for it.
The CNMC is well aware that the formal guidance procedure enabling it to give clarity on the reportability of a merger is impaired by the lack of a binding deadline. This may perhaps change by dealing with the matter in the new legislation that will possibly be introduced to revert to the previous model of separation between competition enforcer and sector regulators.
The current economic crisis has triggered considerable financial difficulty for many companies in a country where tourism and transportation-related activities are very important to the economy. In this regard, the failing firm defence is acknowledged and may well apply to concentrations in the current circumstances, provided that it can be substantiated and evidenced appropriately. In the past, the CNMC has invoked the failing firm defence in restrictive circumstances only, and has avoided its use in temporary crisis situations (e.g., the Antena 3/La Sexta merger).16 However, the CNMC continues to be sceptical of this line of defence, even in the current climate.
Another area that overlaps with merger control, and that is directly related to concentrations, is that of foreign direct investment (FDI) screening. In April 2020, the government introduced a new FDI screening regime, which is very broad in scope and which, like merger control, requires clearance prior to the closing of an acquisition, under penalty of fines of up to the consideration of the transaction. The FDI regime has been reformed several times since its inception in April 2020. At the time of writing, there is a draft implementing regulation for the FDI law that should provide greater detail as to its scope and procedures. However, this remains a draft, implying that the FDI regime poses serious issues of interpretation, pending the approval of the definitive text of the implementing regulation; therefore, careful advice is required.
In conclusion, no radical changes are, in principle, to be expected in the merger control arena in Spain, with the qualification of the limited changes likely to arise (primarily but perhaps not exclusively) at the institutional enforcement level if the CNMC goes back to its previous form (with the competition and regulatory authorities separated again). The CNMC or its successor is likely to continue to enforce competition policy vigorously, including merger control laws. Going forward, it cannot be ruled out, perhaps, that the CNMC will include individuals in fines for gun-jumping, in line with the trend in antitrust enforcement cases, and might also increase the amount of fines, in line with the apparent trend at European Commission level and in neighbouring countries such as France.