Merger notification and clearance in Czech Republic

Notification and clearance timetable

What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?

A concentration cannot be implemented, neither before it is approved by the Office nor also before a clearance decision of the Office enters into force. The notifying party may file the notification as soon as the legally binding transaction documents have been signed. The notification may even be submitted prior to the signing of the relevant transaction documents, provided the parties have, in principle, agreed on the structure and timing of the concentration.

There are no specific sanctions for not filing a notifiable merger. Failure to file is seen by the Act as breach of the suspension clause. For the sanction for implementing a transaction prior to clearance, see question 12.

Which parties are responsible for filing and are filing fees required?

A notification has to be submitted:

• in case of a merger by the merging parties;
• in case of acquisition of sole control by the parties acquiring sole control;
• in case of acquisition of joint control by the parties acquiring joint control;
• in case of acquisition of an enterprise of another undertaking or a part thereof by the acquiring party or parties; and
• in the case of creation of a full-function joint venture, jointly by all undertakings participating in the creation of a full-function joint venture.

The notification is subject to payment of an administrative fee of 100,000 Czech koruna.

What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?

There is a deadline of 30 days from the date of opening the notification proceedings for the Office to assess a concentration within Phase I and decide:

• that the concentration does not constitute a concentration that must be notified pursuant to the Act;
• to clear the concentration; or
• to open Phase II of the investigation, because there are serious concerns that the concentration would significantly impede competition.

If the Office does not issue the decision according to the first two points above or does not open Phase II within the 30-day deadline, the concentration is deemed to be cleared.

The Phase II decision must be issued no later than five months from the date when the notification proceedings are opened. If the Office does not issue the decision within the given deadline, the concentration is deemed to be cleared.

If the notifying party proposes remedies, the respective deadline for Phase I or Phase II will be extended by another 15 days.

In case of a simplified procedure, the Office has to issue a decision within 20 days.

If the Office requires amendment of the notification by the notifying party, the Office’s time frame for issuing the decision is suspended.

In our experience, the Office typically issues the respective decision shortly before the deadline.

The concentration may not be implemented until it has been approved by an effective decision of the Office.

Pursuant to section 18(3) and (4) of the Act, the Office might grant an exemption from the standstill obligation on the request of the notifying party if the parties to the concentration or any third party runs the risk of suffering substantial damage or another serious detriment. The Office has 30 days from the receipt of the request to decide. The Office might also grant only partial exemption or grant the exemption subject to certain conditions.

A request for exemption from the standstill obligation is subject to payment of an administrative fee of 10,000 Czech koruna.

What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?

For closing the concentration before clearance, the Office may impose a fine of up to 10 million Czech koruna or 10 per cent of the net turnover of the undertakings that are in breach of the standstill obligation. The Office may further take measures that it considers necessary to restore effective competition on the relevant market, particularly a demerger obligation. There is also a risk that the respective transaction agreement will be deemed invalid. This question, however, is still not clear under Czech law.

In practice, the Office uses the right to impose a fine for breach of standstill clause. When setting the fine, it takes into account the circumstances of the breach, if the parties knew about the breach, as well as the length of the breach.

There has not been any recent case law on this issue. The last case where the Office imposed a fine of 5,383,000 Czech koruna for ‘gun-jumping’ was S104/2015 Bohemia Energy entity sro from 2016.

Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?

The same rules and sanctions for implementation of the notified concentration prior to clearance apply to foreign-to-foreign concentrations. To the best of our knowledge, there has been no such case so far.

What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?

The Act provides for a worldwide bar on closing. However, as already mentioned in question 11, the Office may grant an exception from the standstill clause.

Because the Office is obliged to assess negative effects of mergers only on markets within the Czech Republic, merging parties could be convicted by the Office for breach of the standstill obligation only if a merger closing before the adoption of the Office’s clearance decision has effect on markets within the Czech Republic. Therefore a ‘hold-separate agreement’ for the Czech part of a foreign transaction would probably not be seen as gun jumping.

Are there any special merger control rules applicable to public takeover bids?

The same rules and requirements apply to public takeover bids; however, pursuant to section 18(2) of the Act, the ban on closing does not apply to implementing a public offer to purchase or exchange stocks provided that the transaction was notified immediately and that the buyer does not exercise the voting rights arising from the acquired stocks.

What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?

The notification must be made on a notification form prescribed by Decree No. 294/2016. It can be downloaded at www.uohs.cz. The notification form must be filed in Czech.

The Decree also specifies the documents that must accompany the filed notification. It is necessary to submit to the Office either the original documents or their authenticated copies. If any document is in a foreign language, it must be translated into Czech by an authorised translator. Long documents such as annual reports and consolidated financial statements do not have to be translated into Czech, if the originals provided to the Office are in English or German. The Office may also decide on a case-by-case basis that parts of the agreements establishing the notified concentration or relevant studies and analysis, which are not necessary for the assessment of the notified concentration, do not need to be translated into Czech if the originals provided to the Office are in English or German. Detailed information is set out in the Office’s notice on requirements of the proposal to approve the concentration.

The level of detail required in the preparation of a filing depends on the circumstances of the concentration. If there is no overlap in the activities of the parties to the concentration or their aggregate market share is below 15 per cent in case of a horizontal concentration or the market share of any party to the concentration is below 25 per cent in case of a vertical concentration, it is not necessary to fill in parts 6 and 7 of the notification form.

The Act also foresees a simplified procedure for certain types of concentrations, which allows the parties to the concentration to provide less information and fewer supporting documents. The simplified notification of the concentration may be filed when:

• none of the undertakings involved is operating in the same relevant market, or their combined share in such a market does not exceed 15 per cent, and at the same time none of the undertakings concerned is operating in a market vertically connected to the relevant market in which another undertaking operates, or their share in every such market does not exceed 25 per cent; or
• the undertaking acquires exclusive control over the joint venture in which it has participated in joint control so far.

Detailed information and requirements concerning the simplified procedure are set out in the Office’s notice on the simplified procedure.

The sanction for not supplying full, correct and true business information is a fine of up to 300,000 Czech koruna or 1 per cent of net turnover achieved in the last accounting period.

What are the typical steps and different phases of the investigation?

The Office recommends the notifying party to have pre-notification contacts with it prior to filing the notification, details of which are described in the Office’s notice on pre-notification contacts.

Clearance procedure could be divided into two phases. The Office initiates Phase I after its receipt of the notification by parties to the concentration. Specifically, upon receipt of the notification, the Office publishes a short summary of the notification on its website (www.uohs.cz) as well as in the Commercial Gazette. In case of a simplified procedure, the summary is published only on the website. The summary contains the names of the parties, a brief description of the type of concentration and the business sector concerned. Third parties are invited to provide their pertinent objections by a set deadline, usually five days.

The Office informs the notifying party in writing about the opening of the investigation, which constitutes Phase I. The Office within the Phase I assesses whether the concentration falls within the scope of the Act and whether the concentration would significantly impede competition. In the event that the concentration might raise serious doubts of significant impediment of competition, the Office opens Phase II, otherwise the concentration is cleared. If the Office needs clarifications, further information or documents, it shall approach the notifying party in writing. In such a case, the Office’s time frame for issuing the decision is suspended.

The parties to the concentration can offer remedies to the Office either prior to the notification or at any time in the course of the investigation; however, at the latest within 15 days from obtaining the statement of objections.

If the Office intends to open Phase II, it shall inform the notifying party about this in writing in the course of Phase I.

Prior to issuing the decision, the Office will invite the notifying party to make itself acquainted with information and documents contained in the administrative file, which will be the basis for its decision.

What is the statutory timetable for clearance? Can it be speeded up?

The Office has 30 days from the date of opening the notification proceedings to assess a concentration within Phase I and decide:

• that the concentration does not constitute a concentration that must be notified pursuant to the Act;
• to clear the concentration; or
• to open Phase II of the investigation, because there are serious concerns that the concentration would significantly impede competition.

If the Office does not issue the decision according to the first two points above or does not open Phase II within the 30-day deadline, the concentration is deemed to be cleared.

The Phase II decision must be issued no later than five months from the date when the notification proceedings are opened. If the Office does not issue the decision within the given deadline, the concentration is deemed to be cleared.

If the notifying party proposes remedies, the respective deadline for Phase I or Phase II will be extended by another 15 days.

In case of a simplified procedure, the Office has to issue a decision within 20 days.

If the Office requires amendment of the notification by the notifying party, the Office’s time frame for issuing the decision is suspended.

In our experience, the Office typically issues the respective decision shortly before the deadline. There is no other possibility for speeding up the proceedings besides using the simplified procedure.