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Trends and climate
How would you describe the current merger control climate, including any trends in particular industry sectors?
From 2011 to 2013 the Competition Agency conducted approximately 40 merger control proceedings. The most active industries include food and retail, media and electronic communications. Undertakings in Croatia are fully aware of competition law rules and progress is evident in the jurisdiction. First, in practice, there have been fewer mistakes in the filing of notifications (as well as fewer failures to notify), although the Competition Agency has on several occasions stressed the importance of strict adherence to merger control rules in the media sector. Second, in recent years the Competition Agency has acquired enough resources to deal with the most complex concentration assessment procedures. Two long-running but interesting merger procedures from 2014 (Agrokor/Mercator and Hrvatski Telekom/OT-Optima Telekom), which both resulted in a set of refined and long-term remedies concerning conditionally cleared concentrations, are clear examples of this.
Are there are any proposals to reform or amend the existing merger control regime?
There is no pending legislation or publicly announced legislative initiatives that would affect Croatian merger control rules.
Legislation, triggers and thresholds
Legislation and authority
What legislation applies to the control of mergers?
Since 1995 Croatia has been developing its national legislation governing competition law in general and mergers in particular. The Competition Act (Official Gazette 79/2009 and 80/2013), which entered into force on October 1 2010, is the main piece of national merger control legislation. In addition, several regulations govern certain aspects of merger control – for example:
- the Regulation on the Method and Criteria for Defining the Relevant Market (Official Gazette 9/2011);
- the Regulation on the Notification and Assessment of Concentrations (Official Gazette 38/2011); and
- the Regulation on the Criteria for Setting Fines (Official Gazette 129/2010 and 23/2015).
The Competition Agency has also issued the Interpretive Guidelines on the Assessment of Concentrations (available on the agency’s website), which represent a soft law source only.
Various other laws include provisions that are indirectly applicable to mergers – for example:
- the Companies Act (Official Gazette 111/1993, 34/1999, 52/2000, 118/2003, 107/2007, 137/2009, 152/2011, 111/2012 and 68/2013);
- the Capital Market Act (Official Gazette 88/2008, 46/2008 and 74/2009, 54/2013, 159/2013 and 18/2015);
- the Electronic Communications Act (Official Gazette 73/2008, 90/2011, 133/2012, 80/2013 and 71/2014);
- the Media Act (Official Gazette 59/2004, 84/2011 and 81/2013); and
- the Electronic Media Act (Official Gazette 153/2009, 84/2011, 94/2013 and 136/2013).
For proceedings before the agency, aside from the Competition Act, the General Administrative Procedure Act (Official Gazette 47/2009) and the Act on Misdemeanours (Official Gazette 107/2007, 39/2013 and 157/2013) apply; while the Administrative Disputes Act (Official Gazette 20/2010, 143/2012 and 152/2014) regulates the framework within which interested parties may challenge decisions rendered by the agency. The Act on Administrative Fees (Official Gazette 8/1996, 77/1996, 95/1997, 131/1997, 68/1998, 66/1999, 145/1999, 30/2000, 116/2000, 163/2003, 17/2004, 110/2004, 141/2004, 150/2005, 153/2005, 129/2006, 117/2007, 25/2008, 60/2008, 20/2010, 69/2010, 126/2011, 112/2012, 19/2013, 80/2013, 40/2014, 69/2014, 87/2014 and 94/2014) regulates filing costs, while the Act on Court Fees (Official Gazette 74/1995, 57/1996, 137/2002, 26/2003, 125/2011, 112/2012 and 157/2013) applies to court action costs.
Lastly, in July 2013 Croatia acceded to the European Union and therefore EU competition rules directly apply in the country.
What is the relevant authority?
The relevant merger authority is the Competition Agency. It has been active since 1997 and is responsible for assessing anti-competitive agreements, abuses of market dominance and compliance of concentrations with competition rules. The Croatian merger control system is superseded if EU Merger Regulation thresholds are met, in which case the relevant transaction is assessed by the European Commission.
Additional authorities play an important role in merger control in certain sectors, including:
- the Post and Electronic Communications Agency, which supervises mergers in the telecommunications market; and
- the Electronic Media Agency, which supervises mergers in the media sector.
Transactions caught and thresholds
Under what circumstances is a transaction caught by the legislation?
Pursuant to Articles 15(1) and (3) of the Competition Act, the following transactions are covered:
- mergers and acquisitions of undertakings;
- the acquisition of control over one or more undertakings or a substantial part of an undertaking; and
- the establishment of a full-function joint venture (ie, a joint venture that will perform all the functions of an independent economic entity on a lasting basis).
Article 15(2) of the Competition Act defines the term ‘control’. An undertaking is deemed to control another undertaking if it directly or indirectly:
- holds more than half of its shares;
- exercises more than half of the voting rights;
- has the right to appoint more than half of the members of the management board, supervisory board or similar managing or supervising bodies; or
- exercises a decisive influence on the business of the controlled undertaking in any other way.
Do thresholds apply to determine when a transaction is caught by the legislation?
Thresholds are applied to determine when a transaction is caught by the merger control legislation. The Competition Agency must be notified of a concentration if at least one of the parties to the concentration has its seat and/or a branch office in Croatia and the following turnover thresholds are met:
- The combined worldwide turnover of all undertakings concerned was at least HRK1 billion (approximately €131 million) in the financial year preceding the concentration.
- The aggregate national turnover in Croatia of each of at least two undertakings concerned was at least HKR100 million (approximately €13.1 million) in the preceding financial year.
Notably, specific rules apply to mergers in the media sector. In particular, under Article 36 of the Media Act, the agency must be notified of all concentrations in the media sector, irrespective of the turnovers achieved by the parties to the concentration. Various other sector-specific rules exist – for example, electronic communications operators which are declared to have significant market power or those holding licences for the use of radio frequency spectrum, which are not covered by the merger control measures prescribed by the Competition Act, must notify the sector-specific regulator of any merger.
Is it possible to seek informal guidance from the authority on a possible merger from either a jurisdictional or a substantive perspective?
There is no statutory provision in the Competition Act that enables a party to a transaction to seek guidance from the authority on a possible merger. However, the parties to a transaction may enter into informal pre-notification talks with the Competition Agency, which may help to establish a clear framework for any related factual or legal issues.
Are foreign-to-foreign mergers caught by the regime? Is a ‘local impact’ test applicable under the legislation?
Foreign-to-foreign transactions are caught by the Competition Act if at least one of the parties to the concentration has its seat and/or a branch office in Croatia and the relevant turnover thresholds are met. An exception applies where the relevant concentration is to be assessed by the European Commission in accordance with EU Regulation 139/2004; in such cases, the Competition Agency need not be notified of foreign-to-foreign mergers.
Further, the Competition Act (as prescribed in Article 2) applies only to agreements and practices that may affect the Croatian market. Thus, in theory, the agency need not be notified of a concentration if it has no local impact, even if the turnover thresholds are met. However, this interpretation must be confirmed by the agency on a case-by-case basis, as the agency has published no guidance or official opinions on the assessment of a concentration’s local impact (ie, domestic effect).
What types of joint venture are caught by the legislation?
The creation of a joint venture is subject to merger control if it is intended to perform the functions of an independent economic unit on a lasting basis (ie, a full-function joint venture). However, where such a full-function joint venture has as its objective or effect the coordination of competitive behaviour among undertakings that remain independent, the transaction will constitute a concentration. In assessing such a concentration, the coordination criteria applicable to anti-competitive agreements will be applied.
Finally, cooperative joint ventures fall under the scope of the rules governing anti-competitive agreements.
Process and timing
Is the notification process voluntary or mandatory?
Where the jurisdictional thresholds are met, notification is mandatory.
What timing requirements apply when filing a notification?
The Competition Act does not stipulate a filing deadline. In principle, notification can be submitted as soon as the contract between the undertakings has been signed or after the public offer has been made (Article 19(3) of the Competition Act).
The Competition Act provides for the possibility to file a notification even before the contract has been signed, as long as a good-faith intention to enter into the transaction agreement can be successfully demonstrated (eg, if one party provides evidence of the proposed conclusion of the contract or announcement to issue a public offer).
What form should the notification take? What content is required?
The Regulation on Notification and Assessment of Concentration provides for two distinct forms of merger control notification, which closely follow the Short Form CO and Form CO at EU level.
The notification should be accompanied by:
- the original or a certified copy – or a certified translation, if the original official text is not in Croatian – of the document representing the legal grounds for the concentration. An apostille is required if no relevant bilateral agreement exists on the recognition of foreign certifications;
- the annual financial reports of the parties to the concentration for the financial year preceding the concentration (accompanied by a certified translation, if not in Croatian); and
- other information and documents required by the regulation, including copies of all analyses, reports, studies, surveys and any comparable documents prepared by or for any members of the board of directors or supervisory board, other persons exercising similar functions (or to whom such functions have been delegated or entrusted) or the shareholders’ meeting, for the purpose of assessing or analysing the concentration with respect to market share, competitive conditions, competitors (actual and potential), the rationale of the concentration, potential for sales growth or expansion into other product or geographic markets, and/or general market conditions.
In the case of media mergers, an additional document will be required – a decision of the Electronic Media Agency stating that, by implementing the notified concentration, no illegal concentration within the sense of the Electronic Media Act will arise.
In addition to the obligatory information and documents set out under the regulation, the Competition Agency may require additional information and documents.
Finally, the notifying party must inform the agency of any other jurisdictions in which the merger has also been filed.
Is there a pre-notification process before formal notification, and if so, what does this involve?
The legal framework provides for no informal or formal pre-notification process before the Competition Agency. Irrespective of this, in practice the agency is willing to meet parties before submission of a notification and discuss all open positions, which may involve material as well as procedural questions. The agency usually does not give a conclusive standpoint on any of the issues raised during such talks before the notification has been submitted.
Can a merger be implemented before clearance is obtained?
Under Croatian merger control rules, even partial implementation of a transaction is prohibited before obtaining formal clearance, pursuant to Article 19(5) of the Competition Act. However, pursuant to Article 19(6) of the act, the Competition Agency can allow the implementation of certain actions before clearance. Such derogation from the suspension clause requires a request to be submitted by the undertakings involved and subsequent approval by the agency, which will be granted only after all of the relevant facts have been reviewed.
Guidance from authorities
What guidance is available from the authorities?
The Competition Agency has published the Interpretive Guidelines on the Assessment of Concentrations, which constitute a soft law source. The agency has published no other information which might help parties to speed up the clearance process. However, parties to a transaction may enter into informal pre-notification talks with the agency, which could pave the way for a clear framework for possible notification. In addition, in its day-to-day work the agency relies on EU law and the examples of best practice published by the European Commission. Thus, parties may rely on the agency's past decisions as well as recent European Commission guidelines and decisional practice.
What fees are payable to the authority for filing a notification?
The filing fee may reach up to HRK10,000 (approximately €1,300) or HRK5,000 (approximately €650) for filings submitted under sector-specific laws. For filings approved in Phase I, the Competition Agency may charge up to HRK10,000 or HRK5,000 for filings approved under sector-specific laws. For filings approved in Phase II, the agency may charge up to HRK150,000 (approximately €19,700) or HRK15,000 (approximately €1,950) for filings approved under sector-specific laws.
Publicity and confidentiality
What provisions apply regarding publicity and confidentiality?
The Competition Act provides that employees of the Competition Agency must not disclose any information classified as a business secret, irrespective of how they know such information. The obligation of business secrecy will remain in effect for five years after the expiry of their engagement with the agency.
The term ‘business secret’, as prescribed by Article 53 of the Competition Act, applies to:
- all information which is defined as a business secret by law or other regulations;
- all information which is defined as a business secret by the notifying party, provided that such view is accepted by the agency; and
- all correspondence between the agency and the European Commission and between the agency and other international competition authorities and their networks.
Thus, information, documents and data submitted to the agency during the notification process is treated as confidential, provided that the notifying party explicitly requests protection of business secrets and demonstrates that the information in fact constitutes a business secret.
A business secret will be considered as such with particular regard to business information that has actual or potential economic and market value, whose disclosure or use could result in an economic advantage for other undertakings. In principle, the agency considers that the following information is not normally covered by the obligation of business secrecy in the sense of the Competition Act:
- information which is publicly available, including through specialised information services, or information which is common knowledge among specialists in the field;
- historical information, in particular information that is at least five years old, irrespective of whether such information has been considered a business secret;
- annual and statistical information – turnover is not normally considered a business secret, as it is published in the annual accounts or otherwise known to the market; and
- data and documentation on which the agency’s decision is based.
If the notifying party submits confidential documentation and data to the agency and fails to provide a copy of the relevant documentation containing no confidential information, the agency will – after it has sent a reminder thereof to the notifying party – assume that such documentation does not contain data covered by the obligation of business secrecy.
A short publication form must be submitted with each notification, based on which the agency will publish an online notice at the start of the respective merger proceeding. The published information includes the names of the companies involved, the industry sector and a brief description of the merger.
Are there any penalties for failing to notify a merger?
Undertakings which participate in the implementation of a prohibited concentration will be subject to a fine of up to 10% of their total turnover realised in the last year for which financial statements are available.
A fine of up to 1% of total turnover in the last year for which financial statements are available shall be imposed on a party if it:
- fails to submit the obligatory prior notification of a concentration to the Competition Agency;
- submits incorrect or misleading information to the agency during the concentration assessment proceedings; or
- implements a concentration before obtaining clearance.
The agency is authorised to file suit to declare null and void any act of the undertaking conducted before obtaining merger control approval or which contravenes the agency’s approval decision. In addition, the agency shall – ex officioand by means of a separate decision – propose all necessary measures, whether behavioural or structural, to restore efficient competition in the relevant market and set deadlines for their adoption where the concentration concerned has been implemented:
- contrary to the agency’s rejection of the concentration; or
- without the obligatory prior notification.
On the basis of such a decision, the agency may:
- order the shares or interest acquired to be transferred or divested;
- prohibit or restrict the exercise of voting rights related to the shares or interest in the parties to the concentration; or
- order cessation of the joint venture or any other form of control by which a prohibited concentration has been put into effect.
Procedure and test
Procedure and timetable
What procedures are followed by the authority? What is the timetable for the merger investigation?
The regulatory process is divided into two phases (Phase I and Phase II). Phase I starts on the day that the Competition Agency receives a complete filing and must be completed within 30 days. Following this 30-day period, the agency can issue a decision granting clearance or a decision to initiate Phase II. The concentration is deemed cleared if the agency does not issue a decision within 30 days of the initiation of Phase I.
Phase II may take up to three months, with a possible extension of up to another three months. Phase II concludes with the agency issuing a written decision either permitting (with or without conditions) or prohibiting the merger. The Competition Act provides that after the opening of Phase II, the agency must publish a notification of facts determined in the proceedings, allowing all parties to the concentration to submit their arguments and conduct an oral hearing before the final decision will be made.
What obligations are imposed on the parties during the process?
The Competition Agency may issue a written request to the parties to provide additional information, data and documentation and undertake other actions which it deems necessary to determine the facts of the case. Should the parties refuse to produce such additional information or fail to provide the requested information in time, the transaction may be deemed not to have been notified at all.
What role can third parties play in the process?
Third-party participation is mainly limited to the provision of necessary information to the Competition Agency.
Possible formal participation
Undertakings that are party to the concentration have the status of parties to the proceedings. It is not directly foreseen that third parties are entitled to participate formally in merger control proceedings.
However, if third parties can prove their legal interest, they may request that the agency accord them certain procedural rights within the proceedings. For instance, a party that has been allowed to take part in the proceedings may request to be examined as a witness. The agency’s decision on the status of a third party must be issued within 30 days of the filing date of the third party’s request. This decision may not be appealed, but may be contested by initiating an administrative dispute proceeding before the High Administrative Court.
Upon receipt of the complete notification, the agency will publish on its website a public request for all interested parties to submit their comments on the notified concentration within eight to 15 days. Further, the agency may at any time request from third parties any information which it deems necessary. A third party’s failure to comply with the agency’s request may result in a penalty ranging from HRK10,000 to HRK100,000 (approximately €1,300 to €13,100).
What is the substantive test applied by the authority?
The substantive test applied by the Competition Agency is whether the transaction results in a significant impediment to effective competition.
The agency considers the possible pro and anti-competitive effects that may arise from the concentration and appraises (among other things):
- the structure of the relevant market;
- market share;
- the positions of the undertakings concerned and those of their competitors; and
- the effects of the concentration on other undertakings.
The agency particularly considers the impact of the transaction on consumer welfare and assesses whether the concentration will contribute to a fall in the price of goods and services or an improvement in the distribution of goods.
The agency may also take efficiency considerations into account if the final result of the merger is shown to yield consumer benefits.
Does the legislation allow carve-out agreements in order to avoid delaying the global closing?
Under the Competition Act, the execution of a transaction is prohibited before formal clearance has been granted. Thus, it might be difficult to justify local carve-outs before the Competition Agency. However, the Competition Act applies only to transactions that potentially affect competition in Croatia. This general principle elicits arguments that local carve-outs should be possible. Ultimately, the agency has never commented officially on carve-outs, so parties should consider carefully whether they wish to proceed with closing before receiving clearance in Croatia and carve out the Croatian angle of the transaction.
The agency may allow the implementation of certain actions before clearance has been granted. Such derogation from the suspension clause requires a request to be made by the undertakings involved and subsequent approval by the agency, which it will grant only after reviewing all of the facts at stake.
Test for joint ventures
Is a special substantive test applied for joint ventures?
A joint venture that is intended to perform the functions of an independent economic unit on a lasting basis and which has as its object or effect the coordination of undertakings that remain independent will constitute a concentration; coordination will be assessed in light of the criteria applicable to anti-competitive agreements.
What are the potential outcomes of the merger investigation? Please include reference to potential remedies, conditions and undertakings.
Throughout the assessment process, the Competition Agency may reject the notification if it determines that there are no legal requirements for the initiation of proceedings or that the notified concentration does not fall within the scope of the Competition Act, in which case the agency will issue a special procedural decision stating as such.
Phase I starts on the date that the agency receives a complete filing and must be completed within 30 days. The concentration is deemed cleared if the agency does not issue a decision within 30 days of the initiation of Phase I. In this phase, the agency may also issue an express clearance decision.
In Phase II, the agency may approve the transaction conditionally or unconditionally, or prohibit the concentration, as follows:
- Unconditional clearance – if the agency finds that a concentration complies with the Competition Act, it will issue a decision declaring as such.
- Conditional clearance – the agency may impose remedies (additional obligations and conditions) intended to ensure that the concentration complies with the Competition Act.
- Prohibition of merger – if the agency finds that the concentration does not comply with the Competition Act, it will issue a decision declaring as such.
Remedies and conditions
If in the course of the assessment proceedings, the agency finds that the concentration in question may be deemed compliant only after necessary obligations and conditions have been fulfilled, it will inform the notifying party without delay. The notifying party must then – within 30 days of receipt of this notice – propose adequate remedies (whether behavioural or structural) and other conditions in order to address the negative effects of the concentration concerned. Although negotiating remedies is not explicitly envisaged in the regulatory framework, there is the implied possibility to interact with the agency over the expected content of a remedy.
Remedies may be proposed by the notifying party as early as possible in the notification process. The agency may accept the remedies proposed by the party in their entirety or partially if it establishes that the measures concerned are adequate to alleviate competition concerns arising from the notified merger. If the agency does not accept or only partially accepts the proposed remedies, it is authorised to define and impose other behavioural or structural remedies suitable to restore effective competition in the market.
In general, remedies must entirely eliminate competition concerns and be capable of effective implementation.
Right of appeal
Is there a right of appeal?
There is a right to initiate court proceedings before the High Administrative Court against substantive decisions of the Competition Agency and some procedural decisions.
Do third parties have a right of appeal?
Interpretation of the Administrative Disputes Act leads to the conclusion that third parties can initiate proceedings before the High Administrative Court against the decisions of the Competition Agency, provided that they can successfully demonstrate their legal interest.
What is the time limit for any appeal?
Parties may file suit against a decision of the Competition Agency before the High Administrative Court within 30 days of issuance of the relevant decision.
Law stated date
Correct as of
Please state the date as of which the law stated here is accurate.
This section is up to date as of May 15 2015.