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Legislation, triggers and thresholds
Legislation and authority
What legislation applies to the control of mergers?
Spanish merger control provisions are set out in Law 15/2007 on the Defence of Competition (the Spanish Competition Act). Additionally, the Regulation on the Defence of Competition, implemented by means of Royal Decree 261/2008, is also relevant as it expands on the provisions established in the Competition Act.
Furthermore, the competition authority issues communications and notices to help undertakings to assess certain issues connected to the Spanish merger control regime. For example, on 21 October 2015 the National Markets and Competition Commission (NMCC) published a new version of the communication on simplified procedures.
What is the relevant authority?
The relevant authority is the NMCC. It comprises a council and four directorates: the Competition Directorate, the Telecommunication and Audio Visual Directorate, the Energy Directorate and the Transport and Postal Services Directorate. The council comprises two chambers: the Competition Chamber, which focuses on the enforcement of competition law, and the Sectorial Supervisory Chamber, which is competent in regulatory matters. In March 2017 the Spanish government opened a public consultation to determine whether it is necessary to carry out another reorganisation with a view to virtually doing away with the NMCC by dividing it into two independent administrative authorities. One would be in charge of competition matters and the other of the regulated markets.
The council issues the decisions in merger control proceedings. The decisions are usually adopted by the Competition Chamber. However, when a given concentration can affect markets or activities subject to regulatory supervision, the decision must be issued by the whole council (both the Competition Chamber and the Sectorial Supervisory Chamber).
The Spanish Council of Ministers is also entitled to take some decisions with regard to some negative or conditional decisions in Phase II of the merger control procedure.
Transactions caught and thresholds
Under what circumstances is a transaction caught by the legislation?
If a transaction is considered an economic concentration, it will be caught by the legislation. An economic concentration is deemed to arise where, in regards to the whole or parts of one or more undertakings, a change of control on a lasting basis results from:
- the merger of two or more previously independent undertakings;
- the acquisition, by one or more undertakings, of control of the whole or parts of one or more other undertakings; or
- the creation of a joint venture and, in general, the acquisition of joint control over one or a number of undertakings, when any of them carries out the functions of an independent autonomous entity on a permanent basis.
A company may acquire control over another due to agreements, rights or any other means that allow exercising a decisive influence over an undertaking and, specifically, by means of:
- rights of property or use of all or part of the assets of an undertaking; or
- agreements, rights or any other means that may afford a decisive influence over the composition, the deliberations or the decisions of the bodies of the undertaking.
Moreover, a company will have control over another if it meets the circumstances provided for in Article 42 of the Royal Decree dated 22 August 1885, which introduced the Spanish Commercial Code. According to that provision, we can presume that a company has control over another when the first one fulfils one of the following conditions:
- It owns more than half of the voting rights;
- It has the power to appoint or dismiss more than half of the members of the board;
- It owns more than half of the voting rights by means of shareholders agreements; or
- It has used its votes to appoint the majority of the members of the governing body who hold office at the moment when the consolidated accounts have to be drawn up and during the two business years immediately preceding.
Do thresholds apply to determine when a transaction is caught by the legislation?
Yes. If either of the two following circumstances is present, then a concentration is subject to mandatory notification before the NMCC:
- If due to the concentration, a market share equal to, or greater than, 30% is acquired or increased, in the relevant product or service market within the national territory or within a defined geographical market therein.
However, those economic concentrations in which, despite meeting the conditions above, the combined turnover in Spain of the acquiring company or the acquired assets in the last accounting year do not exceed €10 million shall be exempt from the control procedure, provided that the participants do not have an individual or combined market share equal to, or greater than, 50% in any of the affected markets within the national territory or within a defined geographic market therein.
- If the combined turnover of all of the parties exceeds €240 million in Spain in the last accounting year, provided that at least two of the parties have an individual turnover in Spain greater than €60 million.
Out of 94 concentrations examined by the NMCC in 2017, 66% were notified for exceeding the market share threshold; 25% for exceeding the turnover threshold; and approximately 10% surpassed both.
Is it possible to seek informal guidance from the authority on a possible merger from either a jurisdictional or a substantive perspective?
Parties can obtain informal guidance from either a jurisdictional or a substantive perspective in the context of the pre-notification phase. While it is not mandatory, it is advisable to go through the pre-notification phase as it usually speeds up the process, lets the parties know beforehand any potential competition concerns, and the NMCC is less likely to stop the clock by formally requesting further information from the parties once the notification has been officially filed.
In 2017 more than 90% of the notification procedures commenced with pre-notification discussions.
Are foreign-to-foreign mergers caught by the regime? Is a ‘local impact’ test applicable under the legislation?
As any other concentration, foreign-to-foreign mergers are subject to the merger control regime if they meet either of the two thresholds set in the Competition Act (see above).
There is no formal ‘local impact test’. However, foreign-to-foreign mergers may benefit from the simplified procedure under some circumstances (see below).
What types of joint venture are caught by the legislation?
As mentioned before, in line with the EU merger control provisions and court decisions (essentially, the European Court of Justice’s decision of 7 September 2017 in Austria Asphalt GmbH v Benderkartellanwalt), full-function joint ventures that perform on a lasting basis all the functions of an autonomous economic entity are within the scope of the Competition Act. Therefore, if they meet the thresholds set therein, these operations are also subject to the merger control regime.
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