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Under what circumstances is a transaction caught by merger control legislation?
The merger control rules apply to a transaction if it results in a concentration. The following types of transaction are considered to be concentrations:
- Previously independent undertakings (or parts of those undertakings) merge within the meaning of the Commercial Code.
- An undertaking acquires control of the whole or a part of another undertaking, or of several undertakings or parts thereof.
- Undertakings jointly acquire control of the whole or a part of another undertaking, or of several undertakings or parts thereof.
- A natural person that already controls at least one undertaking acquires control of the whole or a part of another undertaking, or of several undertakings or parts thereof.
- Several natural persons that already control at least one undertaking jointly acquire control of the whole or a part of another undertaking, or of several undertakings or parts thereof.
In essence, for there to be a concentration, a change of control is required. ‘Control’ is defined in the Competition Act as the opportunity for one undertaking (or natural person) or several undertakings (or natural persons) jointly to exercise direct or indirect influence on another undertaking through purchasing shares or on the basis of a transaction or the articles of association, or by any other means, which may consist of a right to:
- exercise significant influence on the composition, voting or decision making of the management body of the other undertaking; or
- use or dispose of all or a significant proportion of the assets of the other undertaking.
Intra-group restructuring does not result in a concentration because the ultimate controlling party remains the same.
Do thresholds apply to determine when a transaction is caught by the legislation?
Yes. A concentration is subject to control and must be notified if, during the preceding financial year:
- the aggregate turnover in Estonia of all parties to the concentration exceeded €6 million; and
- the aggregate turnover in Estonia of at least two parties to the concentration exceeded €2 million.
‘Turnover in Estonia’ means turnover accruing from the sale of goods to purchasers located in Estonia. Direct sales into Estonia are sufficient to trigger concentration control.
As is clear from the jurisdictional thresholds, at least two parties to the concentration must have sufficient turnover in Estonia. Thus, a single party’s sales, assets or market share cannot trigger the merger control procedures.
The parties to the concentration are:
- the merging undertaking or an undertaking whose share is being merged;
- the undertaking(s) or natural person(s) which acquires or which jointly acquire control of another undertaking or undertakings (or parts thereof); and
- the undertaking or a part thereof which is subject to the acquisition of control (ie, the target).
Where a joint venture is created, only the parents of the joint venture are considered to be parties to the concentration.
When calculating the turnover of the parties to the concentration:
- in the case of the acquirer, the turnover of the acquiring undertaking and all of its group companies should be taken into account; and
- in the case of the target, only the turnover of the target and undertakings controlled by it should be considered.
The turnover of the parties to the concentration does not include turnover that is generated from sales of goods and services between undertakings that belong to the same group.
There are two ‘two-year’ rules:
- If the same persons or undertakings have acquired control over the target through multiple transactions over a period of two years, such transactions will be deemed to be a single concentration and the turnovers of all parts of the target must be included in calculating the overall turnover.
- If, within the preceding two years, the acquirer or an undertaking belonging to the same group has acquired control of undertakings that operate within the same economic sector in Estonia, the turnover of the target must include the turnovers of the targets acquired within the preceding two years.
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