- Merger Control Regime, relevant legislation and enforcing Authorities
Protection of competition when it comes to a country’s economic market is one of the most important issues that need to be regulated accordingly. In Albania such protection is granted and regulated by the Albanian Competition Authority (ACA) through the implementation of Law “On the Protection of Competition”. The established framework for the protection of competition in Albania is modelled after the EU competition legislation, in an attempt to harmonize the former with EU “Acquis Communautaire”.
Any natural persons, be they foreign or domestic, any legal entities, be they public or private, who engage in commercial activity within the territory of Albania and provided that the activity they conduct has a measurable impact of the national market, shall be considered as undertakings. However, depending on the particular sector a merger may be conducted in, other institutions may be included for potential collaboration such as follows:
- Audiovisual Media Authority, regarding mergers in the audiovisual broadcasting sector, is responsible for granting prior approval if changes in ownership are foreseen.
- Authority of Financial Supervision, regarding mergers in the insurance/reinsurance company sector, is responsible for granting approval if changes in ownership are foreseen.
- Authority of Electronic and Postal Communication, regarding mergers in the telecommunication sector, is responsible for granting approval for changes regarding the licensee are foreseen.
- Central Bank of Albania, responsible for the banking sector, also including nonbanking financial institutions, has the authority to approve or decline any 10 % minimum transfer of a bank’s share capital, or any other percentage that could result in strengthening a shareholder’s influence in management or policies of the bank or nonbanking financial institution.
ACA, for upholding its transparency and considering all potential future transactions, has made available on its website all its publications including notices and guidelines which help assist the interpretation of a number of key issues under the Merger Control, as well as a number of “Best Practices”, like “Guideline on the evaluation of non-horizontal and conglomerate agreements”, “Guideline on dominant position”, “Guideline on limitations regarding concentrations”, “Guideline on evaluation of horizontal agreements”, “Temporary measures for restoring competition in the rental market of agro-food products in the city of Tirana”, “Recommendations for the increase of competition regarding airline services in Albania”.
These and other notices, decisions and guidelines constitute in all potential future transactions very important reading material which are all available in the ACA’s website.
- Concentration, Control and Joint Ventures
There are three specific cases when a merger may result in a concentration, which arises when a change in control of a company is identified as a result of:
- The merger or two or more independent undertakings or parts of undertakings;
- The acquisition, by one or more persons already controlling at least one undertaking, or by one or more undertakings, whether by purchase of shares or assets, by contract or by any other means, of direct or indirect control of the whole or parts or more other undertakings;
- Direct or indirect control over one or more undertaking or part of the latter.
However, for one of the merging companies to obtain control, the ownership of the majority of the shares with the voting rights is not the only way. Control in and of itself is constituted by rights, contracts or any other means which separately or cumulatively cast a decisive influence on the undertaking. Such control may come as a result of the existence of the right to use all or part of the assets of the undertaking, and/or the holding of the rights or contracts which result in controlling the decision making bodies of the undertaking, hence no minimum percentages regarding control are specified in the Competition Law since the evaluation of a potential control situation is to be conducted on a case to case basis.
Not only mergers are subject of the competition law but also Joint Ventures so long as these JVs are established between two are more independent undertakings for a long lasting period of time and exercise full economic functions within the Albanian market, where they are to be considered as concentrations.
- Definition of “Control”, MCR, Notification and Review Process
Control means the possibility of exercising “decisive influence” over an undertaking on the basis of rights, contracts or other means. When outright legal control is not acquired (e.g. through the acquisition of shares with the majority of the voting rights), ACA will consider whether the acquirer can still exercise legal or de facto control over the undertaking through special rights attached to shares or contained in shareholder agreements, board representation, ownership and use of assets and related commercial issues, such as patent holding.
Another point to be considered is that not all mergers that take place within the territory of Albania are thoroughly screened so long as these mergers do not condition the competition in a respective market. In the event of such mergers, the ACA conducts a more expedited control procedure when:
- the merger at hand does not exceed 10 % of the respective market where the merging parties conduct their business and are actual or potential competitors; or when
- the merger at hand does not exceed 15 % of the respective market, where the merging parties conduct their business and are not actual or potential competitors.
When a merger is planned to take place, the submission of a notification by the undertakings to the ACA is mandatory if the below listed scenarios apply:
- the combined worldwide turnover is of more than 7 billion ALL, whereas the domestic turnover, of at least one of the undertakings, is at least 200 million ALL;
- the combined domestic turnover is of more than 400 million ALL, whereas the domestic turnover, of at least one of the undertakings, is at least 200 million ALL.
Despite the revenue factor and the market space an undertaking takes up there are also other circumstances when ACA may decide to partake in evaluation even though the above listed thresholds are not met. There are times when a concentration, even though it takes up less than 50% of the market and does not constitute a dominant position may create future competition problems. Such case may apply if:
- the undertakings part of the concentration may be important inventors in the market and may hold various patents,
- one of the undertakings may control 50 % of the market before the concentration took place,
- one of the undertakings of the concentration may be identified as a “maverick” company,
- the undertakings may be part of a vertical concentration between a producer and a distributor which may raise competition issues in both the production and distribution market place.
However, there are times when a merger, due to its cross-border nature, may be subject to notification in no less than three different Member States. Under such circumstance, to avoid a procedural overwhelming, MCR has created a “one-stop-shop” system where undertaking parties may file their application only once and the merger may be assessed through a single procedure, duly conducted by the Commission. As any other rule that offers exceptions, so does the MCR. There are two identifiable scenarios when a cross-border merger is not to be assessed by the Commission, but by the Member State’s Competition Authority:
- if the undertakings have more than two-thirds of their annual European turnover in one or the same country;
- if the merger at hand raises national concerns beyond the normal competition issues, such as national defense, free and diverse media expression, compliance with financial institutions’ regulations.
So for the cross-border merger to be assessed by ACA both point “a” and “b” above shall be applicable in Albania.
Depending on the complexity of the merger, more than one transaction may be required to finalize such merger. In that event, when a transaction takes place in various stages, the law requires the series of these transactions to take place within a 2 year period, starting from the date of the last transaction, shall be assessed as a single transaction. Also, it is necessary to assess if such transactions are unitary in nature, whether any of the transaction grants direct or indirect economical control over the activities of the other undertaking.
After the conclusion of a merger agreement, the acquisition of a controlling interest or the announcement of the public offer, within 30 days of such action, the merger must be notified to the ACA. Failure to do so shall constitute an infringement of the Competition Law and the undertakings shall be subject to fines up to 1 % of their annual turnover of the previous financial year. The parties responsible for filing such notification are the undertakings, part of the merger, or the merging party which acquires a controlling interest in one or more other undertakings, or the undertaking that is offering to acquire another undertaking during a public offer acquisition, or in the event of a JV, the party responsible for filing such notification is the undertaking that has the control of the JV.
After receiving the notification, ACA commences its examination to conclude if the merger/acquisition may cast a significant restriction on the competition in the market, or if there is grounds for the merger to result in a dominant position. The assessment procedures are held in two phases:
i. Phase I or Preliminary Proceedings: this phase is applied when the merger at hand does not show any signs it may lessen the market competition. Such phase is concluded by the ACA within a two month period, and if no issues arise, it is concluded with the granting of the approval.
If under the course of the Preliminary Proceedings, the ACA may stumble into issues that may result in infringing the Competition Law, then ACA initiates investigations, or if the parties agree to undergo certain changes, the merger may be concluded under certain conditions. If the parties choose to apply the last scenario, then they are granted an additional 1 month period to present the ACA with their proposed changes so that the merger may not result in infringement of the Competition Law, and if such commitment is accepted by the ACA, the merging parties shall have two additional weeks to implement the proposed changes. If within two months after the termination of the two week additional period, ACA has not issued an approval, the latter shall be considered to be granted.
ii. Phase II or In-depth investigation stage: during this phase the ACA thoroughly investigates the case and the potential effects on the market competition. Within three months from the commencement of such investigation, the ACA issues its final decision, granting or denying approval. As explained hereinabove, if the merging parties, within two months from the commencement of the investigation, offer to make certain changes so that the effects on the competition may lessen, the deadline of this phase may be extended up to one more month.
However, if for any reason, the merging parties fail to correctly notify the ACA, the below listed scenarios may apply:
- the undertaking accountable for late filing, the submission of incorrect, misleading or incomplete information or failure to notify the ACA, is held liable under a non-serious infringement charge, where it may be subject to fines up to 1% of the aggregate turnover of the previous financial year.
- the undertaking that does not file its notification and whose merger resulted in concentration that visibly restricts the competition, is held liable under a serious infringement charge, where it may be subject to fines up to 10% of the aggregate turnover of the previous financial year.
For the undertakings to avoid being held liable for any of the two above listed scenarios, the ACA provides a standard filing form or a notification, where the latter must include; detailed information on the undertakings, the domestic and/or worldwide turnovers, current market shares, information on the form of concentration whether it’s a merger, acquisition and so on, information on the controlling interest, information on the product and the market to be affected by the concentration; where all the provided information shall be backed up the undertakings legal and financial documents and studies of the market. It is important to comply with the filing requirement since if the undertakings implement their merger without being granted approval by the ACA, such transaction shall be considered void and may also reverse the transaction.
- Collaboration of ACA with Domestic and Foreign Authorities
Anytime the local or state government bodies are drafting legislation which may lead to:
- Quantity limitations in market entrance and trade;
- Establishment of exclusive and/or special rights in areas, undertakings or specific products;
- Establishment of same practices in pricing and sale conditions;
They request ACA’s thorough evaluation and opinion if such pieces of legislation are to be entered into force.
As disclosed in the beginning of the article, depending on the type of market an undertaking conducts its activity in other domestic authorities may be consulted by ACA in regard to the evaluation process.
Through bi/multilateral agreements, or even specific requests, ACA may submit its data and/or sets of documents to the responsible body of the European Commission, or other countries’ Competition Authorities, which are all under the obligation of protecting the trade secrets of the case at hand.
By the request of foreign Competition Authorities, ACA may conduct investigations. However such request can be denied if it may endanger the independence, security, fundamental economic interests or public order in the Republic of Albania.
In the event that two or more Competition Authorities have accepted a request or have begun investigating on their initiative, may act as a basis for the other Competition Authorities for suspending the investigation process or for denying the request.
- Customers, Competitors, Commercial Information and Publicity
There may be a time when an undertaking, while exercising its economic activity, may raise competition concerns, where the latter can be identified by ACA itself, or any other concerned party, be they a customer or a competitor, who submit with their Complaint Form with ACA. Raised concerns may vary from limitations, distortions and/or disruption of competition. The third parties raising the competition concern, may choose to remain anonymous, however, in each of the Complaint Forms, a detailed description of the concern at hand is required, available potential proof included.
If ACA assesses the complaint to be grounded, initiates a preliminary investigation during which tries to gather as much information to conclude whether action is to be taken against the undertaking. If during such preliminary investigation, ACA concludes that there are grounds for the complaint, an in-depth investigation is initiated. During the latter, ACA can request submission of various documentation, even documents containing trade secrets.
Upon receipt of the complaint, ACA has 15 days to submit its response to the complaining parties. If the case on which the complaint was made has been investigated, a copy of the Investigation Report, where all confidential information and information regarding trade secrets have been blacked out, is sent to the complainant, by also specifying a time limit for the latter to prepare a written reply presenting its opinion on the matter. However, there are also times when the complainant in its written reply asks for a hearing session with the ACA, where the complainant or other interested third parties in the matter at hand and the undertaking involved can all present their side of the facts before the ACA proceeds with making its final decision. Such hearing are closed to the public and the parties may even be heard separately if sensible information regarding trade secrets and confidential information is to be disclosed by the undertaking.
ACA, upon the decision on initiating an investigation, be it preliminary or in-depth, duly informs the public of such decision by publishing the latter, inviting so other potential interested third parties to contribute to the investigation. However, ACA is fully responsible for protecting the trade secrets and excluding from disclosing such information in its preliminary or final published decision.
- Objection of the ACA’s Decisions
Any decision of the ACA that the undertakings do not agree with and leads the undertaking to, may be challenged before the Administrative Court of Tirana within 30 days from the notification of such decision, where depending on the complexity of the matter the juridical review of the case may last up to 5 or six months. If such decision is to be challenged in front of the Administrative Court of Appeal, the proceedings may take up to 3 years, this comes as a result of a low number of judges and a high number of cases which end up overwhelming the Court of Appeal, so the 3 years in reality are not proceedings per se, but waiting for the case to finally be heard.