Consequences of withdrawal
Comment


During 2013 the Competition Agency dealt with several interesting but demanding merger control filings. As legal practice mirrors business dynamics, it was unsurprising that at the end of 2013, several filings were withdrawn – the most significant being that between Agrokor and Adris Group,(1) which had applied for merger control clearance regarding their newsstand chains.

Consequences of withdrawal

While at EU level changes to the merger review procedures have been adopted(2) to enhance proceedings, in Croatia the consequences of merger control withdrawals have been clarified – provoked by media speculation and a series of procedural actions.

At first the media reported that the agency would make a decision on and determine the effects of the Agrokor/Adris merger, even though the parties had expressly withdrawn the merger control notification. It was claimed that the agency might exercise its right to protect the public interest, issuing a merger control decision ex officio within a hypothetical framework. It was claimed that the agency should have such right particularly with regard to the fact that the parties had withdrawn the application just before the end of the assessment procedure (ie, at an advanced stage of Phase II of the merger control proceeding). Moreover, the agency itself stated that it had completed the assessment proceeding and the hearing, which meant that it was in a position to make a decision.

However, such conduct by the agency would have caused damage to the parties, because it could reasonably be concluded that a different business transaction might be planned in order to be approved under more lenient merger control criteria. Therefore, the agency stated that it would not issue a decision as there were no procedural conditions for continuing the proceedings and rendering a decision.

Specifically, the agency explained that before issuing a merger control decision to the parties under General Administrative Procedure Act (Official Gazette 47/09), the agency must accept withdrawal requests. In case of a withdrawal, the parties need not pay a significant administrative fee (which is charged after the completion of Phase II, but not if a decision rejecting the notification or suspending the proceedings is issued).

Thus, the question arises of whether the situation would be different if, for example, the parties had withdrawn the application immediately after submission, and thus officially before the agency had initiated proceedings (ie, at the opening of Phase I after receiving a complete merger notification). The answer appears to be negative. In a November 21 2013 decision the agency stated that under Article 58(1) of the Competition Act (Official Gazette 79/09 and 80/13) prescribes that in cases where there is no basis for the initiation of proceedings, the agency shall issue a decision. Therefore, if a party withdraws the notification in the course of Phase I or even before that (ie, before declaring completion of the merger notification), the case can be brought to an end only by means of a decision and in no other way (eg, by internal record on the case).(3)

The consequences of this are significant, although they may be perceived as minor procedural issues. First, the decision by which the agency terminates a proceeding will be available to the public, since the agency must publish all procedural decisions by which it ends proceedings on its website. Further, such a decision can be challenged before the High Administrative Court as the body that carries out judicial review of decisions. Hence, the party may file a lawsuit against such decision on termination of proceedings, thereby significantly postponing their finality.

Comment

Therefore, undertakings which notify a concentration should bear in mind that their intentions will certainly be disclosed publicly at a certain point after the notification, regardless of whether they are closely followed by a withdrawal. In addition, the parties may fully dispose of their right to withdraw the notification, even in the later stages of the proceedings – thus avoiding the possibility of an unfavourable decision.

For further information on this topic please contact Gabriele Wahl Cesarec or Mislav Bradvica at Wahl Cesarec & Partners in cooperation with schoenherr by telephone (+385 1 4813 244), fax (+385 1 4813 073) or email (g.wahlcesarec@schoenherr.eu or m.bradvica@schoenherr.eu). The Wahl Cesarec & Partners website can be accessed at www.schoenherr.eu.

Endnotes

(1) Competition Agency website, report available in Croatian only at www.aztn.hr/article/1471/obustavljena-ocjena-koncentracije-tiska-i-inovina.

(2) EU Implementing Regulation 1269/2013 amending EU Regulation 802/2004 implementing EU Regulation 139/2004 on the control of concentrations between undertakings.

(3) The agency also relied on Article 46 of the General Administrative Procedure Act, which provides that in case of withdrawal of the claim, the administrative body shall suspend the proceeding or reject the claim.