Legislation and jurisdictionRelevant legislation and regulators
What is the relevant legislation and who enforces it?
The Icelandic rules on merger control are set out in the Competition Act No. 44/2005 (the Act) and the Rules on the Notification of Mergers No. 684/2008.
Merger control is enforced exclusively by an independent administrative authority, the Competition Authority (CA). Decisions of the CA may be appealed to an independent administrative committee, the Competition Appeals Committee.Scope of legislation
What kinds of mergers are caught?
The definition of a merger under the Act is similar to the EU definition set out in the EU Merger Regulation 139/2004 (EUMR). It follows that a merger within the Act occurs where a change of control on a lasting basis results from:
- the merger of two or more previously independent undertakings or parts of undertakings;
- the takeover by one undertaking of another independent undertaking;
- the acquisition, by one or more persons already controlling at least one undertaking, or by one or more undertakings, whether by purchase of securities or assets, by contract or by any other means, of direct or indirect control of the whole or parts of one or more other undertakings; or
- the creation of a joint venture performing on a lasting basis all the functions of an autonomous economic entity.
What types of joint ventures are caught?
Joint ventures are handled in the same manner under the Act as under the EUMR. Accordingly, the creation of a joint venture performing on a lasting basis all the functions of an autonomous economic entity constitutes a merger within the meaning of the Act.
Is there a definition of ‘control’ and are minority and other interests less than control caught?
Yes, the concept of control is defined in the Act in a similar manner as in the EUMR. Accordingly, control under the Act stems from rights, contracts or any other means that, either separately or in combination and having regard to the consideration of fact or law involved, confer the possibility of exercising decisive influence on an undertaking, in particular by:
- ownership or the right to use all or part of the assets of an undertaking; or
- rights or contracts that confer decisive influence on the composition, voting or decisions of the organs of an undertaking.
Control is acquired by persons who are holders of rights or entitled to rights under the contracts concerned or while not being holders of such rights or entitled to rights under such contracts, have the option to exercise such rights. Customary minority rights do not constitute control and other interests that do not reach the standard of control are not subject to merger review.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 merger falls within the merger control regime if first, the combined aggregated annual turnover of the relevant undertakings is 2 billion kronur or more in Iceland and second, the annual turnover of at least two of the undertakings party to the merger is at least 200 million kronur in Iceland.
The turnover of a parent, subsidiary and other undertakings within the same group as the undertakings party to the merger shall be taken into account as well as the turnover of undertakings over which they have direct or indirect control.
These thresholds are cumulative and must accordingly both be met for a merger to be caught. If the CA believes a merger falling below these thresholds will substantially impede effective competition, it can bring the merger under the regime if the combined aggregated annual turnover of the relevant undertakings is over 1 billion kronur. This is executed by ordering the parties to the merger to notify it to the CA.
The aforementioned thresholds stipulated by the Act are currently under legislative review.
Under the Media Act No. 38/2011, all mergers involving at least one media service provider with an annual turnover of at least 100 million kronur in Iceland must be notified to the CA, notwithstanding the combined aggregated annual turnover of the relevant undertakings. The Media Act also provides that if the Media Commission believes that a merger that does not meet the relevant turnover threshold can substantially impede pluralism or diversity in the media, it may request that the CA demands a notification from the merging parties.
Is the filing mandatory or voluntary? If mandatory, do any exceptions exist?
If a merger meets the relevant turnover thresholds, it must be notified to the CA before the merger is executed. As explained above, the CA can bring a merger under the regime if the combined aggregated turnover of the relevant undertakings exceeds a certain threshold. If parties to a merger that does not meet the turnover thresholds inform the CA about the merger, the CA has 15 working days to decide whether it brings the merger under the regime in accordance with the above.
Do foreign-to-foreign mergers have to be notified and is there a local effects or nexus test?
If the relevant thresholds for turnover in Iceland are met, mergers (including foreign-to-foreign mergers) fall within the scope of the merger regime and must be notified. Hence, a local effects test is not applied.
Are there also rules on foreign investment, special sectors or other relevant approvals?
Under Act No. 34/1991 on Foreign Investment in Undertakings, certain types of foreign investment in Icelandic undertakings are subject to restrictions and must be notified to the Minister of Tourism, Industry and Innovation, as further described in the Act. This obligation to notify investments is limited to sectors where there are restrictions on foreign investment: the fisheries industry, the energy sector and the airline sector. However, the obligation to notify does not apply in the latter two industries where the investor is an individual or a legal entity resident or established in a member state in the European Economic Area under the EEA Agreement, member state of the European Free Trade Association or in the Faroe Islands.
According to the Electronic Communications Act No. 81/2003, mergers involving an electronic communications undertaking holding rights to use frequencies must be notified to the Post and Telecom Administration. The Post and Telecom Administration may under certain circumstances cancel rights to use frequencies, held by a party to such a merger, or chance the conditions to such rights.
Furthermore, Icelandic law contains restrictions to ownership of and the right to use real property, as well as ownership of companies that own real property, pursuant to Act No. 19/1966 on the Right of Ownership and Use of Real Property. The Act limits foreign persons’, resident outside the EEA area and the Faroe Islands, ownership of real property and real property companies in Iceland.
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2 July 2020