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Trends and climate

Trends

How would you describe the current merger control climate, including any trends in particular industry sectors?

The number of notifiable transactions in Spain is rising. According to its 2016 report, the Spanish National Markets and Competition Commission (NMCC) reviewed 104 concentrations that year, compared to 91 operations in 2015 and 84 in 2014. Of the operations notified during 2016, 50 were done by means of the ordinary notification form, with the rest being notified through the simplified procedure.

The most active sectors in 2016 were the following:

Industry

Number of notified operations

Manufacturing industry (includes repairs and installations)

33

Chemical and pharmaceutical

11

Information society

11

Health activities and social assistance

10

Commercial distribution

9

Energy

8

Construction and real estate activities

8

Reform

Are there are any proposals to reform or amend the existing merger control regime?

There are no proposals to reform or amend the existing merger control regime. However, the NMCC is considering some amendments that may lead to changes in the existing merger control regime.

Further, the EU institutions have taken the first steps towards a possible new merger regulation, which – if adopted – will surely engender amendments to the Spanish Competition Act. 

Legislation, triggers and thresholds

Legislation and authority

What legislation applies to the control of mergers?

Spanish merger control provisions are set out in Law 15/2007 on the Defence of Competition (the Spanish Competition Act). Additionally, the Regulation on the Defence of Competition (RDC), implemented by means of Royal Decree 261/2008, is also relevant as it expands on the provisions established in the Competition Act.

Furthermore, the competition authority issues communications and notices to help undertakings to assess certain issues connected to the Spanish merger control regime. For example, on October 21 2015 the National Markets and Competition Commission (NMCC) published a new version of the communication on simplified procedures. 

What is the relevant authority?

The relevant authority is the NMCC. It comprises a council and four directorates: the Competition Directorate, the Telecommunication and Audio Visual Directorate, the Energy Directorate and the Transport and Postal Services Directorate. The council comprises two chambers: the Competition Chamber, which focuses on the enforcement of competition law, and the Sectorial Supervisory Chamber, which is competent in regulatory matters. In March 2017 the Spanish government opened a public consultation to determine whether it is necessary to carry out another reorganisation with a view to virtually doing away with the NMCC by dividing it into two independent administrative authorities. One would be in charge of competition matters and the other of the regulated markets.

The council issues the decisions in merger control proceedings. The decisions are usually adopted by the Competition Chamber. However, when a given concentration can affect markets or activities subject to regulatory supervision, the decision must be issued by the whole council (both the Competition Chamber and the Sectorial Supervisory Chamber).

The Spanish Council of Ministers is also entitled to take some decisions with regard to some negative or conditional decisions in Phase II of the merger control procedure.

Transactions caught and thresholds

Under what circumstances is a transaction caught by the legislation?

If a transaction is considered an economic concentration, it will be caught by the legislation. An economic concentration is deemed to arise where, in regards to the whole or parts of one or more undertakings, a change of control on a lasting basis results from:

  • the merger of two or more previously independent undertakings;
  • the acquisition, by one or more undertakings, of control of the whole or parts of one or more other undertakings; or
  • the creation of a joint venture and, in general, the acquisition of joint control over one or a number of undertakings, when any of them carries out the functions of an independent autonomous entity on a permanent basis.

A company may acquire control over another due to agreements, rights or any other means that allow exercising a decisive influence over an undertaking and, specifically, by means of:

  • rights of property or use of all or part of the assets of an undertaking; or
  • agreements, rights or any other means that may afford a decisive influence over the composition, the deliberations or the decisions of the bodies of the undertaking.

Moreover, a company will have control over another if it meets the circumstances provided for in Article 42 of the Royal Decree dated August 22 1885, which introduced the Spanish Commercial Code. According to that provision, we can presume that a company has control over another when the first one fulfils one of the following conditions:

  • It owns more than half of the voting rights;
  • It has the power to appoint or dismiss more than half of the members of the board;
  • It owns more than half of the voting rights by means of shareholders agreements; or
  • It has used its votes to appoint the majority of the members of the governing body who hold office at the moment when the consolidated accounts have to be drawn up and during the two business years immediately preceding.

Do thresholds apply to determine when a transaction is caught by the legislation?

Yes. If either of the two following circumstances is present, then a concentration is subject to mandatory notification before the NMCC:

  • If due to the concentration, a market share equal to, or greater than, 30% is acquired or increased, in the relevant product or service market within the national territory or within a defined geographical market therein.

However, those economic concentrations in which, despite meeting the conditions above, the combined turnover in Spain of the acquiring company or the acquired assets in the last accounting year do not exceed €10 million shall be exempt from the control procedure, provided that the participants do not have an individual or combined market share equal to, or greater than, 50% in any of the affected markets within the national territory or within a defined geographic market therein.

  • If the combined turnover of all of the parties exceeds €240 million in Spain in the last accounting year, provided that at least two of the parties have an individual turnover in Spain greater than €60 million.

Out of 104 concentrations examined by the NMCC in 2006, 69 exceeded the market share threshold, 22 the turnover threshold and 13 surpassed both.

Informed guidance

Is it possible to seek informal guidance from the authority on a possible merger from either a jurisdictional or a substantive perspective?

Parties can obtain informal guidance from either a jurisdictional or a substantive perspective in the context of the pre-notification phase. While it is not mandatory, it is advisable to go through the pre-notification phase as it usually speeds up the process, lets the parties know beforehand any potential competition concerns, and the NMCC is less likely to stop the clock by formally requesting further information from the parties once the notification has been officially filed.

In 2016, 90% of the notification procedures commenced with pre-notification discussions.

Foreign-to-foreign 

Are foreign-to-foreign mergers caught by the regime? Is a ‘local impact’ test applicable under the legislation?

As any other concentration, foreign-to-foreign mergers are subject to the merger control regime if they meet either of the two thresholds set in the Competition Act (see above).

There is no formal ‘local impact test’. However, foreign-to-foreign mergers may benefit from the simplified procedure under some circumstances (see below).

What types of joint venture are caught by the legislation?

As mentioned before, in line with the EU merger control provisions and court decisions (essentially, the European Court of Justice’s decision of September 7 2017 in Austria Asphalt GmbH v Benderkartellanwalt), full-function joint ventures that perform on a lasting basis all the functions of an autonomous economic entity are within the scope of the Competition Act. Therefore, if they meet the thresholds set therein, these operations are also subject to the merger control regime.

Notification

Process and timing

Is the notification process voluntary or mandatory?

The notification process is mandatory. The obligation to notify rests on the party or parties that will have control over the company or assets after the transaction.

What timing requirements apply when filing a notification?

There are no timing requirements when filing a notification. However:

  • a concentration subject to mandatory notification must be filed (and cleared) prior to its execution; and
  • a concentration involving a public bid must be notified to the National Markets and Competition Commission (NMCC) within five working days of the submission of the authorisation request before the Securities Market National Commission.

What form should the notification take? What content is required?

The notifying party/parties must submit an official form before the NMCC. The official form is available as an annex to the RDC and requires similar information to that requested by the European Commission – namely:

  • information on the parties (contact details, business activities, turnover, etc);
  • information on the concentration (structure of the transaction, economic rationale, etc);
  • information on the markets (market shares, level of concentration, barriers to entry, supply and demand structure, distribution networks, etc); and
  • other aspects such as ancillary restraints, vertical concerns or efficiencies.

However, the notifying party/parties may submit an official short form in cases that are less likely to give rise to competition concerns. In order to use this simplified procedure, one of the following requirements must be met:

  • None of the parties to the concentration is engaged in business activities in the same relevant product and geographic market, or in a market that is upstream or downstream of a market in which another party to the concentration is engaged;
  • The participation of the parties in the market, due to its negligible importance, is not capable of having a significant effect on competition. A participation of minor importance will be considered to exist when:
    • the parties do not have a combined market share of more than 15% in the same product or service market at a national level or in a geographic market therein, or if they do reach a combined market share of more than 15% but less than 30%, the increase in market share does not exceed 2%; and
    • the parties do not reach an individual or combined share of 25% in a product market that is upstream or downstream of a product market in which the other party to the concentration is active at a national level or in a geographical market defined therein;
  • A party is to acquire sole control of an undertaking over which it already has joint control; or
  • In the case of a joint venture, where it is not engaged and not expected to engage in activities in the national territory or if such activities are marginal. An activity will be considered as marginal in the Spanish market if its turnover does not exceed (or is not expected to exceed) €6 million.

The simplified procedure reduces the amount of information required mainly with regard to the market information. However, the Directorate for Investigation can request the notifying party/parties to file an ordinary form even if the concentration qualifies for a simplified procedure – for instance, in those cases where it is difficult to define the relevant markets, if one of the parties is an important patent holder or where at least two parties are present in closely related neighbouring markets.

Is there a pre-notification process before formal notification, and if so, what does this involve?

Yes. The parties can submit a draft filing form. There are no formal time requirements. However, depending on the transaction, it typically lasts between two and four weeks.

Pre-clearance implementation

Can a merger be implemented before clearance is obtained?

The parties cannot execute a concentration subject to mandatory notification before getting clearance from the NMCC.

Nevertheless, the Spanish Competition Act allows the parties to request a derogation from the suspension obligation. If the NMCC grants the derogation, it may impose certain conditions on the parties with a view to ensuring the efficacy of the decision. However, in practice the NMCC rarely grants such derogation.

Guidance from authorities 

What guidance is available from the authorities?

The NMCC provides both formal and informal guidance to undertakings.

Regarding formal guidance, a prior consultation mechanism is available for the parties. However, the NMCC will provide guidance only on whether the transaction is a ‘concentration’ according to the Competition Act or whether it meets the thresholds that trigger the obligation to notify the transaction. This consultation is confidential and the NMCC is not subject to any time restriction.

Parties can also request informal guidance on both jurisdictional and substantive issues in the context of the pre-notification phase (see above).

Fees

What fees are payable to the authority for filing a notification?

The notifying party or parties must pay a fee.

The fees are reviewed annually. The current filing fees for merger control proceedings are:

  • €5,502.15 when the aggregate turnover in Spain of all of the parties does not exceed €240 million;
  • €11,004.31 when the aggregate turnover in Spain of all of the parties exceeds €240 million but not €480 million; and
  • €22,008.62 when the aggregate turnover in Spain of all of the parties exceeds €480 million but not €3 billion.

A fixed amount of €43,944 is payable when the relevant turnover exceeds €3 billion and an additional €11,004.31 for each €3 billion in excess of that amount. The maximum payable fee is limited to €109,860.

For those concentrations that qualify for the simplified procedure, there is a fixed fee of €1,530.15.

Publicity and confidentiality

What provisions apply regarding publicity and confidentiality?

Publicity

Once the notifying party or parties has filed the notification form, the NMCC will publish information about the party/parties, the economic sector, the thresholds that have triggered the obligation to undergo the merger control procedure and the date of notification (www.cnmc.es/acuerdos-y-decisiones).

Furthermore, a non-confidential version of the decision will be published on the NMCC’s webpage.

Confidentiality

The NMCC can classify any documentation as confidential, either at its own or at the notifying party’s request. Parties will always have to submit a confidential and a non-confidential version jointly with a reasoned request explaining why they believe that certain information should remain undisclosed. 

Penalties

Are there any penalties for failing to notify a merger?

If the parties fail to notify a concentration subject to mandatory notification, the NMCC shall oblige them to notify within 20 working days. If the parties miss that deadline, the NMCC may:

  • decide to start the merger control proceedings investigation; and
  • impose penalties of €12,000 per day for each day that the parties delay notifying the concentration.

Further, failure to meet the 20-day deadline, or the five-day deadline when it comes to a public bid, is considered a minor infringement. Fines of up to 1% of the total turnover of the infringing party/parties in the preceding year may be imposed. And failure to notify a concentration prior to its execution (‘gun jumping’) is considered a serious infringement. Fines of up to 5% of the total turnover of the infringing party/parties in the preceding year may be imposed.

Procedure and test

Procedure and timetable

What procedures are followed by the authority?  What is the timetable for the merger investigation?

The merger control procedure may have two phases, plus an optional pre-notification phase.

Pre-notification phase

Pre-notification discussions with the National Markets and Competition Commission (NMCC) are advisable. Pre-notification discussions present a number of advantages as they serve to:

  • clarify jurisdictional issues;
  • learn of potential competition concerns at an early stage; and
  • ensure that the notification draft is complete and contains the necessary information for the NMCC to assess the concentration.

In order to benefit from these advantages fully, parties are encouraged to submit a draft filing form.

There are no formal time requirements. However, depending on the transaction, the phase typically lasts between two and four weeks. The pre-notification discussions remain confidential until the parties submit a formal notification.

Phase I 

Once a complete notification is received, the NMCC will open the merger control proceedings. The Directorate of Competition prepares a report and the Council of the NMCC issues a decision on the grounds of the report. 

Phase I lasts up to one month from the date of notification. However, the NMCC may stop the clock if it requests further information from the parties. The one-month period will resume once the information requested has been provided. This initial period may be further extended by 10 working days if the parties decide to offer commitments.

A concentration is considered to be approved if the NMCC does not issue a decision by the end of the period.

Phase II

If the Council of the NMCC considers that a concentration may hinder effective competition, it will refer the concentration for a Phase II investigation. Market tests are usually conducted and interested third parties will have access to the file and be entitled to submit their views on the impact of the concentration in the markets.

This phase is subject to a time limit of two months, extendible by 15 working days if the parties decide to offer remedies. The NMCC may also stop the clock by requesting further information from the notifying parties or from third parties.

The Spanish Council of Ministers may intervene in concentrations where the NMCC has issued a decision blocking the concentration or imposing commitments or conditions on the parties. The Ministry of Economy has 15 working days to refer the case to the Council of Ministers. If so, the Council of Ministers, on the grounds of general interest considerations and within one month, may uphold the decision issued by the NMCC or clear the concentration with or without conditions.

What obligations are imposed on the parties during the process?

The obligation to notify lies with the party or parties having control after the transaction.

The notifying party or parties is required:

  • not to execute the concentration until clearance is granted;
  • to co-operate with the NMCC by providing accurate and reliable information; and
  • to comply with the commitments or the conditions imposed by the NMCC.

What role can third parties play in the process?

Pursuant to Spanish public law, any third party that can prove a legitimate interest may apply to be deemed an interested third party in the merger control proceedings. However, the Spanish Competition Act and Regulation on the Defence of Competition recognise this right formally only during Phase II investigations and not before. Interested third parties may access the file and are entitled to submit their views on the impact of the concentration in the markets.

In addition, the NMCC may send third parties requests for information at any time during the control procedure. If these third parties fail to comply with the request, the Competition Act provides for a fine of up to 1% of the turnover and €12,000 per day for each day of delay in providing information.

Substantive test

What is the substantive test applied by the authority?

The applicable test for mergers consists of determining whether the transaction may impede the maintenance of effective competition in the relevant market(s), also known as ‘the substantial lessening of competition test’.

In this regard, the NMCC will focus mainly on market structure, market shares, actual and potential competitors, sources of supply, countervailing demand power, barriers to entry and efficiencies.  

Carve-outs

Does the legislation allow carve-out agreements in order to avoid delaying the global closing?

Carve-out agreements may avoid delaying the global closing only when, as a result of them, a given concentration is not subject to mandatory notification because the relevant thresholds are no longer met.

Test for joint ventures

Is a special substantive test applied for joint ventures?

No, joint ventures are analysed in the same way as other types of concentration. However, as well as under the EU Merger Regulation (139/2004), joint ventures are subject to merger control only if they are full-function joint ventures – that is, if they perform all the functions of an economic undertaking on a lasting basis. If a joint venture is not full-function, then the regulator will examine it as an agreement between undertakings (Article 1 of the Competition Act or Article 101 of the Treaty on the Functioning of the European Union).

Remedies

Potential outcomes

What are the potential outcomes of the merger investigation? Please include reference to potential remedies, conditions and undertakings.

The merger control procedure can end in any of ways outlined below.

In Phase I, the Council of the National Markets and Competition Commission (NMCC) may:

  • authorise the concentration;
  • subordinate the authorisation of the concentration to the fulfilment of commitments proposed by the parties;
  • refer the concentration for a Phase II investigation;
  • refer the case to the European Commission in the scenarios set by the EU Merger Regulation; or
  • end the merger control proceedings by determining that the concentration does not meet the relevant thresholds, or when the parties abandon the concentration.

If no decision is issued within the established timeframe, the concentration will be considered as tacitly authorised and may be executed by the parties.

In Phase II, the Council of the NMCC may:

  • authorise the concentration;
  • subordinate the authorisation of the concentration to the fulfilment of commitments proposed by the parties or conditions imposed on the parties;
  • prohibit the concentration; or
  • consider that the Spanish Competition Act is not applicable to the concentration at issue.

Here again, if no decision is issued within the established timeframe, the concentration is deemed to be tacitly authorised and may be executed by the parties.

If in Phase II a concentration is prohibited or is subject to the fulfilment of certain conditions, the Ministry of Economy can refer the case to the Council of Ministers, which must make a decision within one month. The Council of Ministers can either confirm the NMCC’s decision or authorise the transaction – with or without conditions. Should the Ministry for Economy not refer the case to the Council of Ministers within 15 working days, the NMCC’s decision will automatically be enforceable.

Parties may offer behavioural or structural commitments within 20 days of the start of Phase I or within 35 days of the beginning of Phase II. The time for the NMCC to decide will increase by 10 and 15 working days respectively.

In addition, where the concentration has been referred for a Phase II investigation, the Council of the NMCC may subordinate clearance to the fulfilment of certain conditions by the parties.

Appeals

Right of appeal

Is there a right of appeal?

There are different rights of appeal, depending on the stage of the procedure:

  • Decisions of the Competition Directorate are appealable to the Council of the National Markets and Competition Commission (NMCC). The timeframe given is 10 days from the date of notification of the decision.
  • Decisions by the Council of the NMCC are appealable before the National High Court within two months of the appellant being notified of the decision.
  • Judgments issued by the National High Court may be challenged before the Supreme Court within 30 days if there is a matter of significant legal interest. A significant legal interest is presumed with regard to judgments issued by the National High Court concerning decisions of regulatory bodies.

Moreover, a government’s decision – from the Council of Ministers or any other ministry – confirming or dismissing a previous decision by the NMCC, when applicable, may be directly appealed before the Supreme Court within two months of the day after the appellant is notified.

Do third parties have a right of appeal?

If a third party is able to prove a legitimate interest in the outcome of the appeal, it will have the right to challenge the decision of the Council of the NMCC.

Time limit

What is the time limit for any appeal?

Please see above.

Law stated date

Correct as of

Please state the date as of which the law stated here is accurate.

The Spanish Competition Act entered into force on September 1 2007. Its last review is dated May 27 2017 due to the implementation of the EU Damages Directive (2014/104/EU) . However, this amendment did not modify the Spanish merger control regime.

The Regulation on Defence of Competition came into force on March 18 2008 and its last amendment took place on September 1 2013.