The amendments we reported on previously, which remove the requirement to clear “small” M&A transactions with the Russian anti-monopoly authority (the “FAS”) after completion (the “Amendments”), were signed into law by the President on 28 December 2013 and came into effect on 30 January 2014.
The Amendments’ effect
Before the Amendments entered into force there were two types of merger control in Russia: (i) pre-transaction clearance (if the higher assets/turnover-based thresholds were hit), and (ii) post-completion notifications (for smaller transactions).
According to the Amendments, transactions that were subject to post-completion notifications are now exempt from merger clearance. This being said, the post-completion notification procedure may still apply in a limited number of cases (see our comment below on the application of article 31 of the Competition Law).
The main rationale behind the Amendments is to minimise the administrative burden (particularly in relation to medium enterprises) so that the FAS may focus on significant deals. The requirements for post-completion notifications proved to be ineffective; according to the FAS, conditional clearance was granted only in a very limited number of cases, while the level of administration (compared with pre-transaction clearance) was essentially the same.
The FAS has issued clarifications (available in Russian on the official FAS website) about whether transactions completed before the Amendments’ effective date are caught by the new rules and how intragroup transactions are affected.
Entry into force of the Amendments
Undertakings are still required to notify the competition authority of “small” transactions completed before 30 January 2014. However, if they fail to do so, they will not be held liable.
Clearance of intragroup transactions
Following the Amendments, certain intragroup transactions are expressly exempt from the merger control requirements of the Competition Law: these are transactions between legal entities/individuals that belong to the same “group of persons” under article 9(1)(1) of the Competition Law (i.e. a company and an individual/legal entity holding more than 50% of the voting shares or the participatory interest in that company). However, regarding intragroup transactions between parties being not under direct control arrangements, there is uncertainty as to whether the exemption applies.
To overcome the uncertainty, it may be advisable to rely on article 31 of the Competition Law, which remains in force and provides for a specific clearance procedure for intragroup transactions that would normally require pre-transaction approval. This specific procedure allows applicants to choose to make a prior disclosure of the group structure to the FAS and then further notify the FAS of the transaction once completed (rather than going through pre-transaction clearance). It can be anticipated that this intragroup procedure may become increasingly popular with market players undergoing internal restructuring.