Legislation and jurisdiction

Relevant legislation and regulators

What is the relevant legislation and who enforces it?

In the Czech Republic, merger control is primarily regulated in sections 12 to 19 of the Czech Competition Act No. 143/2001 (the Act).

The merger regulation in the Act is implemented in Decree No. 294/2016, which primarily provides for the form of a merger notification and specification of the documents required for a merger filing.

Soft law of the Czech competition authority is also relevant to merger control but is not binding. The Czech competition authority has so far published the following soft law concerning merger control:

  • notice on requirements of the proposal to approve the concentration;
  • notice on pre-notification contacts;
  • notice on the calculation of turnover;
  • notice on the concept of a concentration;
  • notice on the concept of parties to the concentration;
  • notice on the implementation of a concentration prior to the approval;
  • notice on the competition defence for undertakings in economic difficulties; and
  • notice on simplified procedure.

 

The authority responsible for enforcing merger control legislation is the Czech competition authority – the Office for the Protection of Competition (the Office).

Scope of legislation

What kinds of mergers are caught?

Pursuant to section 12 of the Act, the following types of transactions are subject to the notification obligation:

  • the merger of two or more independent undertakings;
  • the acquisition by one or more persons already controlling at least one undertaking, or by one or more undertakings, of direct or indirect control over another undertaking or its part either by acquisition of shares or ownership interest or by an agreement or in a public auction or by any other means; and
  • the establishment of a full-function joint venture.

 

The following transactions are not covered by the merger control rules:

  1. the temporal acquisition of shares by a bank in an undertaking by setting off its claims against the undertaking, if the acquisition is made in the context of a restructuring process for a period not exceeding one year;
  2. the temporal acquisition not exceeding a period of one year by an investment undertaking of shares in another undertaking only for the purpose of their sale, provided that the investment undertaking does not exercise its voting right to influence the competitive conduct of the controlled undertaking; and
  3. the transfer of certain powers of statutory bodies of an undertaking to third parties pursuant to special legislation, particularly to a liquidator or an insolvency administrator.

 

The Office can extend the deadline of one year in (1) and (2) under certain conditions.

What types of joint ventures are caught?

The merger control rules apply to the formation of a joint venture performing on a lasting basis all functions of an autonomous economic entity. Pursuant to section 12(6) of the Act, pertinent coordinative aspects of a full-function joint venture are assessed pursuant to the provisions of the Act regulating prohibited agreements.

Is there a definition of ‘control’ and are minority and other interests less than control caught?

In section 12(4), the Act defines ‘control’ as the possibility to exercise decisive influence over another undertaking, in particular by:

  • ownership or the right to use an enterprise of the controlled undertaking or a part thereof; or
  • rights or other legal facts that confer decisive influence on the composition, voting or decision of the bodies of the controlled undertaking.

 

The Act does not stipulate a fixed shareholding threshold or any specific board and management representation, the meeting of which would constitute control. The Office always assesses the actual situation.

Not only the acquisition of control but also the change in quality of control is deemed a concentration within the meaning of the Act.

Thresholds, triggers and approvals

What are the jurisdictional thresholds for notification and are there circumstances in which transactions falling below these thresholds may be investigated?

A concentration is subject to approval by the Office if:

  • the aggregate net turnover of all parties to the concentration in the last completed accounting period within the market of the Czech Republic exceeds 1.5 billion Czech koruna, and the aggregate net turnover of each of at least two of the parties to the concentration for the last completed accounting period within the market of the Czech Republic exceeds 250 million Czech koruna; or
  • the aggregate net turnover of:
    • at least one undertaking being party to the merger (consolidation);
    • an enterprise or its part being acquired;
    • an undertaking whose control is being acquired; or
    • at least one of the undertakings creating a concentrative joint venture, for the last completed accounting period within the market of the Czech Republic, exceeds 1.5 billion Czech koruna, and the aggregate worldwide net turnover of the other party to the concentration for the last completed accounting period exceeds 1.5 billion Czech koruna.

 

Aggregate net turnover is composed of the net turnover of:

  • all parties to the concentration;
  • all persons that will control the parties to the concentration and persons that will be controlled by the parties to the concentration after completion of the concentration;
  • all persons controlled by the same person that will control the parties to the concentration after completion of the concentration; and
  • all persons jointly controlled by two or more persons referred to in the previous items.

 

For the purpose of calculating the turnover, the turnover resulting from the sale of products between the parties to the concentration and those persons listed above in respect of the calculation of the net turnover shall not be taken into account.

If only part of an undertaking is subject to the concentration, only that portion of the turnover achieved by this part shall be taken into account when calculating the turnover.

The rules for the calculation of turnover of banks also apply to the calculation of turnover of credit and other financial institutions, with the exception of insurance companies. For banks, the net turnover is understood as the sum of the incomes, particularly interest incomes, incomes from securities, incomes from participating interest, incomes from charges and commissions and incomes from financial operations. For insurance undertakings, the net turnover should be understood as the total sum of premiums written resulting from all concluded insurance contracts.

Is the filing mandatory or voluntary? If mandatory, do any exceptions exist?

If a transaction constitutes a concentration within the meaning of the Act and exceeds the notification thresholds, filing is mandatory. No exemptions from the notification obligation apply.

Do foreign-to-foreign mergers have to be notified and is there a local effects or nexus test?

No special rules apply to foreign-to-foreign mergers. No local effects tests nor any kind of nexus test exist. Therefore, if a foreign-to-foreign transaction constitutes a concentration within the meaning of the Act and exceeds the notification thresholds stipulated by the Act, filing the transaction is mandatory.

Are there also rules on foreign investment, special sectors or other relevant approvals?

No. There are no special rules in respect of foreign investment or special sectors. There are only special rules for certain temporal transactions involving banks or investment undertakings as well as liquidation and insolvency situations. According to other special legislation, transactions in sectors such as banking may further require special approval from regulatory bodies other than the Office.

Law stated date

Correct on

Give the date on which the information above is accurate.

24 April 2020.