Q&A: merger notification and clearance in Spain

Notification and clearance timetable

What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?

Any project or transaction involving an economic concentration of undertakings caught by the Law No. 15/2007 on the Defence of Competition (the Competition Act) must be notified to the National Markets and Competition Commission (CNMC) prior to completion (ie, prior to putting the transaction into effect). There are no specific deadlines for filing as long as the transaction has not been put into effect.

However, with regard to Spanish public takeover bids (ie, those subject to authorisation by the Securities Market Commission (CNMV)), filings must be made before, or up to five days after, submitting the bid to the CNMV. Failure to notify within the five-day deadline may give rise to the imposition of fines of up to 1 per cent of the worldwide annual turnover of the undertakings concerned.

In addition, a 20-day deadline for filing is applicable only in cases where the CNMC requests parties for filing a transaction ex officio. Failure to notify within the deadline may give rise to the imposition of fines of up to 1 per cent of the annual worldwide turnover of the undertakings concerned. In addition, such filings do not benefit from the legal deadlines to which the CNMC is bound.

Which parties are responsible for filing and are filing fees required?

The offeror or acquirer is responsible for filing in the case of an acquisition. For mergers, or in the case of the acquisition of joint control (ie, joint ventures), the filing must be made jointly by the merging parties or by the parties acquiring joint control respectively.

The following filing fees for merger control proceedings are payable:

• €5,502.15 if the Spanish turnover of all the companies involved in the transaction does not exceed €240 million;
• €11,004.31 if the Spanish turnover of all the companies involved in the transaction exceeds €240 million but not €480 million;
• €22,008.62 if the Spanish turnover of all the companies involved in the transaction is higher than €480 million and does not exceed €3 billion; and
• a fixed amount of €43,944 if the Spanish turnover of all the companies involved in the transaction exceeds €3 billion, plus an additional €11,004.31 for each €3 billion exceeding the aforementioned turnover, up to a maximum of €109,860.

The filing fee for mergers notified under the abbreviated form procedure is €1,576.51. The fee must be paid in advance, and the notification form must have evidence of payment attached.

What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?

As a general rule, the notified transaction may not be put into effect before clearance from the CNMC has been obtained; however, the Competition Act provides for the possibility for the parties to request a derogation from this duty from the CNMC, which may allow the transaction to be implemented before clearance. In those cases, the transaction cannot benefit from the short-form notification and must be notified using the regular notification form. The CNMC will decide whether to grant the requested derogation in light of the specific circumstances of the case and the potential consequences of waiving the obligation to suspend.

The derogation can be made subject to certain obligations and conditions to guarantee the effectiveness of the CNMC’s final decision. If the transaction is purely foreign-to-foreign, where one of the parties does not make sales in Spain, this could be regarded as a reason to allow the early implementation of the transaction before clearance.

To date, such derogation has been granted in exceptional circumstances. For instance, in COPE/Vocento/PuntoRadio (C/0493/13), the CNMC conditionally allowed the parties, a week after a formal filing was carried out, to implement a temporary agreement on non-exclusive assignment of sports radio content. The transaction was subsequently cleared in Phase I with remedies.

In November 2016, in Daimler/Hailo/mytaxi/Negocio Hailo (C/0802/16), the CNMC allowed the parties to carve out Spain by partially lifting the suspension obligation; that is, it allowed the parties to close the deal on a global basis as long as the transaction was not implemented in Spain. This derogation was granted in exchange for a number of commitments submitted by Daimler and Hailo, which, prior to clearance of the transaction by the CNMC, guaranteed the commercial autonomy of the Spanish subsidiary of the target company.

Similarly to the EU Merger Regulation (EUMR), the Competition Act states that public takeover bids are not subject to the general suspension obligation, provided that certain conditions are met.

What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?

The Competition Act provides for a fine of up to 5 per cent of the worldwide turnover of the notifying party or parties in the financial year in which the merger took place if the transaction is put into effect before clearance. The amount of the fines imposed by the CNMC can vary depending on the particular features of the transaction.

The CNMC has taken action against a number of non-filed mergers and has imposed several fines in this regard over the past years. For example, in late 2019, the CNMC fined Grupo Nufri €12,800 for failure to notify the acquisition of Grupo Indulleida. The CNMC noted that the purchase agreement did not contain a condition precedent by which closing of the transaction was made conditional upon clearance (or tacit approval) of the transaction; however, in assessing the infringement, the CNMC took into account that:

• Grupo Nufri voluntarily notified the transaction as soon as they were aware of the breach of the standstill obligation (ie, only three months after closing);
• the breach of that obligation had no adverse effects and did not create an illicit benefit for Grupo Nufri; and
• the transaction posed no competition concerns, given that once the transaction was notified it was unconditionally cleared in Phase I.

Lastly, the infringing company benefited from a reduction of the proposed fine based on both the voluntary acknowledgement of the infringement and early payment of the fine.

While there were no fines for gun jumping during 2020, the CNMC has been actively pursuing potential infringements in this regard. In September 2020, and to our knowledge for the first time ever in the context of the review of a notified transaction, the CNMC carried out dawn raids at the premises of various funeral services undertakings for the alleged breach of the suspension obligation in connection with previous transactions, as well as the provision of misleading information.

In February 2021, the CNMC opened an investigation against Funespaña for allegedly having implemented the acquisition of Alianza Canaria without prior approval. The CNMC concluded that it had breached the standstill obligation and fined Funespaña €100,000.

Similarly, in April 2021, the CNMC opened an investigation against Albia for allegedly having implemented the acquisition of Tanatorios Móstoles and fined Albia €300,000 which is the highest gun-jumping fine under the Competition Act to date.

In May 2021, the CNMC opened another formal investigation in the context of DGTF/Parpública/TAP for a potential breach of the suspension obligation. The CNMC determined that DGTF (a public entity of the Republic of Portugal) had breached the standstill obligation when acquiring sole control over TAP airlines and fined DGTF €30,000; however, the infringing company benefited from a 40 per cent reduction of the proposed fine (€50,000) based on both the acknowledgement of the infringement and voluntary payment of the fine.

The increased enforcement efforts have continued in 2022, and as at the time of writing, the CNMC has already imposed one fine and opened three formal investigations for potential breach of the suspension obligation.

In February 2022, the CNMC opened a formal investigation against Luxida for allegedly having implemented the acquisition of Eléctrica Santa Clara without prior approval and fined Luxida €12,000. As in other recent cases, the infringing company benefited from a 40 per cent reduction of the proposed fine (€20,000), based on both its acknowledgment of the infringement and voluntary payment of the fine.

From March to April 2022, the CNMC opened two formal investigations against Albia, part of the Santa Lucía group, for allegedly having implemented the acquisition of Funeraria Tanatorio La Paz SL and Tanatorio de Marín SL without prior approval. Likewise, in March 2022, the CNMC opened another formal investigation against Funespaña, part of the Mapfre group, for allegedly having implemented the acquisition of Funeraria San Vicente SL without prior approval. As at the time of writing, the aforementioned acquisitions have now been filed and approved by the CNMC in Phase I without commitments, and the outcome of the gun-jumping investigations is pending.

Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?

Yes. The former National Competition Commission (CNC) initiated in 2011 for the first time an investigation for alleged gun jumping in the context of a foreign-to-foreign merger (ie, the parties did not have any relevant corporate presence in Spain). The acquisition by Dorf Ketal Chemicals (India) Private Limited of the titanates and zirconates business of EI DuPont de Nemours & Company was allegedly put into effect before it was authorised by the former CNC. The CNC fined Dorf Ketal Chemicals (India) Private Limited €35,400 (3 per cent of the parties’ turnover in Spain).

In addition, on 31 July 2014, the CNMC fined Essilor International SA €5,065 for gun jumping in the context of the foreign-to-foreign acquisition of Polycore Optical Ltd. This amount represented 0.0001 per cent of Essilor’s worldwide turnover in 2013. The CNMC decided to impose a symbolic fine because there was an absence of bad faith; the company eventually notified the transaction, and it was cleared in Phase I unconditionally as no possible harm to competition law was identified.

What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?

In principle, there should be no reason for the Spanish authorities to object to a hold-separate arrangement if it means that the implemented transaction has no impact on the Spanish market. 

In November 2016, in Daimler/Hailo/mytaxi/Negocio Hailo (C/0802/16), the CNMC allowed the parties to carve out Spain by partially lifting the suspension obligation; that is, it allowed the parties to close the deal on a global basis as long as the transaction was not implemented in Spain. This derogation was granted in exchange for a number of commitments submitted by Daimler and Hailo, which, prior to clearance of the transaction by the CNMC, guaranteed the commercial autonomy of the Spanish subsidiary of the target company.

Are there any special merger control rules applicable to public takeover bids?

For public takeover bids under Spanish law, filings must be made before, or up to five days after, submitting the bid to the CNMV, and the bid will be conditional upon the outcome of the national merger control procedure; however, the Competition Act, in line with the EUMR, provides for the possibility to implement the public bid and acquire the shares before clearance has been obtained, provided that:

• the transaction is filed with the CNMC within five days of submitting the bid to the CNMV; and
• the acquirer does not exercise the voting rights attached to the securities acquired or does so only to maintain the full value of those investments and on the basis of a derogation granted by the CNMC.

What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?

Notification is made to the CNMC using an official form, which is attached as Annex II to Royal Decree No. 261/2008 (the Royal Decree)). For straightforward cases raising no issues, which are specifically listed in article 57 of the Royal Decree, a short form is available (Annex III to the Royal Decree). Notifications must be submitted in Spanish. The notifying party should indicate in its notification the data that are business secrets in order for such data to be treated as strictly confidential and provide a non-confidential version of the notification form.

The information required is similar to the information to be provided on the official forms for standard merger notifications (Form CO) under the EUMR (information on the parties, their turnover and business sectors, basic features of the transaction, details of ownership and control provisions, detailed market information, and the existence of cooperative and vertical aspects).

Notification is a time-consuming and cumbersome exercise. It must be complete, and the Competition Act does not provide for the possibility of obtaining waivers of any of the information requirements. The CNMC can reject notifications for incompleteness, or require more detailed information to be provided during the investigation. It sometimes requires the clock to be stopped pending receipt of the information, which can significantly increase the length of the review period.

The Competition Act introduced the possibility of short-form notification for straightforward cases that are unlikely to raise competition issues (similar to the Short Form CO under the EUMR). The short-form notification applies to concentrations when, among other things:

• there are no vertical or horizontal overlaps between the parties’ activities;
• the activities carried out by the parties in the markets affected by the transaction, because of their minor importance, are not capable of significantly affecting competition;
• there is a change from joint to sole control; or
• two or more undertakings acquire joint control over a joint venture, provided that the joint venture has no or minimal activity in Spain.

The 2012–2013 Annual Report of the former CNC stated that approximately 26 per cent of the merger control filings made in Spain during that period were short form. The proportion has since risen significantly, accounting for nearly 53 per cent of filings cleared during 2021.

There is no shorter timetable for clearance for notifications made under the short form; however, in practice, in straightforward cases, the CNMC tends to issue a decision prior to the expiry of the one-month deadline for Phase I.

Finally, submitting incomplete, incorrect, misleading or false information is subject to fines of up to 5 per cent of the total worldwide turnover of the infringing undertaking.

What are the typical steps and different phases of the investigation?

One month after filing, the CNMC must reach a Phase I decision, extendible by 10 working days if the parties submit commitments. Within this one-month period, the CNMC will carry out Phase I investigations, which will end with a non-binding report produced by the Competition Directorate. On the basis of the report, the Council will decide whether to clear the transaction, to clear the transaction subject to the commitments presented by the parties, to shelve the file or to open a Phase II investigation if the transaction could impede effective competition.

During Phase I investigations, if the CNMC considers the notification incomplete and requires additional information, the one-month period may be interrupted and will start running again when the additional information is submitted. Experience shows that it is very useful (and customary in practice) to enter into pre-notification discussions and agree a draft notification form with the CNMC prior to formal submission to avoid unnecessary delays and tackle any technical discussions from day one.

In practice, while straightforward transactions (mainly short-form notifications) may be (and in practice are generally) cleared prior to the expiry of the one-month deadline for Phase I, the increased scrutiny of the authority is also leading to protracted review periods in transactions subject to the ordinary form. The possibility to stop the clock to request further information from either the merging parties or third parties extends the actual review period beyond the statutory one-month deadline for Phase I.

Recent examples include Nomar/Argenta y Cifre, Henry Schein/Casa Schmidt – Activos, Flutter/Stars and SIX/BME, cleared in 2020. In 2021, this trend gained momentum, and a number of transactions unconditionally cleared in Phase I have been subject to lengthier reviews, exceeding the one-month statutory deadline, such as Ned Suministro GLP/Activos Cepsa, Auxquimia/Budenheim, Goodgrower/Vithas, AkzoNobel Coatings/Industrias Titan, Bimbo/Siro Medina, Allmed/Texpol, Masmovil/Euskaltel, Turnitin/Ouriginal, Westinghouse Electric Spain/Tecnatom or Global Layer Genetics/European Layer Distribution/Novogen/Verbeek.

There is a possibility of clearing a transaction during Phase I through commitments or undertakings presented by the parties. Recent precedents show the positive impact upon the timing of choosing to offer Phase I remedies where potentially required. In 2018, the ServiRed/Sistema 4B/EURO 6000, BP/Petrocorner and Talleres Alegría/Duro Felguera Rail transactions, in which Phase I remedies were offered, were cleared in approximately two months from formal filing.

More recently, in 2019, the MIH Food Delivery Holdings/Just Eat transaction, also subject to remedies, was cleared in Phase I in less than one month from formal filing. Likewise, in 2020, Areas/Autogrill was cleared in Phase I with remedies about one month after formal filing; however, it is reasonable to assume that some of those deals entailed lengthy pre-notification contacts.

On the other hand, the possibility to stop the clock to request information from third parties may also affect the actual duration of the review period, which may be extended well beyond the statutory deadline. Recent examples include Pigments/Negocio Ferro and Grupo Bimbo/Fábrica de Paterna de Siro in 2020, both cleared approximately six months from formal filing, and CaixaBank/Bankia and Enoplastic/Sparflex in 2021, cleared approximately four and five months from formal filing respectively.

The basic period for Phase II investigations is two months, extendible by 15 working days where the parties submit commitments. In Phase II, the CNMC normally requests comments from interested third parties, although the CNMC is increasingly conducting such requests in Phase I investigations. The merging parties may also request a hearing with the CNMC.

If the CNMC decides to clear the transaction unconditionally, the decision puts an end to the Phase II investigation, and thus the government cannot further intervene in the merger review process regarding the transaction.

Despite the statutory periods mentioned above, in practice, Phase II cases have taken much longer for clearance because of the possibility to stop the clock in case additional information is required. For instance, and as examples of Phase II case duration, Schibsted/Milanuncios was cleared in seven months, Telefónica/DTS was cleared in six months, and JCDecaux/CEMUSA was cleared in five months (time periods calculated from filing).

More recent examples show longer review periods in practice. In 2019, Quirón/Clínica Santa Cristina was cleared approximately nine months from filing. Further, in September 2020, the CNMC cleared Çimsa/Activos Cemex subject to commitments almost 15 months after filing.

In the same fashion, in 2021, Mooring & Port Services/Cemesa Amarres de Barcelona was cleared approximately nine months from filing, Boyacá/SGEL/JV was cleared approximately 10 months from filing, and Mémora/Rekalde/Irache was cleared approximately nine months from filing.

In this regard, it is also worth noting the Santa Lucía/Funespaña transaction, which was cleared approximately 21 months from filing; however, this long review period should be regarded as an exception rather than a trend considering the atypical circumstances surrounding the case, including, among other things:

• the suspension of the legal deadlines during the state of emergency declared as a result of the covid-19 pandemic;
• the intervention of a number of interested third parties;
• inspections carried out in a number of companies operating in the sector (funeral services), including the parties to the transaction; and
• the accumulation of a number of closely related transactions to the review of the deal.

In cases where the CNMC decides either to prohibit the transaction or to clear it subject to commitments or conditions, the Ministry of the Economy may ask the government to decide whether to confirm the CNMC’s decision or clear it, subject or not to commitments or conditions. In the second case, the government’s decision must be based on certain specified public interest criteria other than competition.

In those cases, the Ministry of the Economy has 15 days to decide whether to ask the government to intervene. If it does, the government has one month to decide on the transaction. The intervention of the government in merger control proceedings is informally known as Phase III.

In practice, the government tends not to intervene in merger control proceedings. The Antena 3/La Sexta case (2012) is the only ‘Phase III case’ in Spain to date. The transaction was notified after the Telecinco/Cuatro merger, which had already reduced the number of private free-to-air television broadcasters from four to three; the Antena 3/La Sexta merger would leave only two such operators.

The former CNC imposed conditions that were more severe than the remedies the former CNC had accepted in Telecinco/Cuatro. The Ministry of the Economy decided to refer the case to the government, arguing that the decision concerned ‘reasons of general interest related to the guarantee of an adequate maintenance of sector-based regulation and the promotion of research and technological development’.

The government softened the conditions originally imposed by the former CNC and declared that the conditions should be in ‘line with those [conditions applied to other operators] in the sector’. The merger was finally approved eight months after the first notification to the former CNC.

What is the statutory timetable for clearance? Can it be speeded up?

During Phase I, the CNMC must reach a decision within one month of formal filing, extendible by 10 working days if commitments are submitted; however, during this phase of the investigation, there is scope for contact with the authorities, particularly if they require additional information, either formally (which ‘stops the clock’) or informally.

Although not statutorily provided and institutionalised as in an EUMR context, the Competition Directorate can also request information from third parties as a sort of ‘market test’. This market testing has been occurring with increasingly frequency by the CNMC in recent times.

Given the statutory deadlines provided for in the Competition Act for third parties to respond, if a market test takes place, the review period is extended in practice up to approximately two-and-a-half months from formal filing. Recent examples include Just Eat/Canary and Mémora/Montero in 2019; Nomar/Argenta y Cifre, Henry Schein/Casa Schmidt – Activos, Flutter/Stars and SIX/BME in 2020; and AkzoNobel Coatings/Industrias Titan, Masmovil/Euskaltel and Westinghouse Electric Spain/Tecnatom in 2021.

For straightforward cases raising no issues, the CNMC tends to issue a decision prior to the expiry of the one-month deadline for Phase I. The average timeline for a decision to be delivered by the CNMC is approximately 20 days, provided that no market test takes place, and there are no commitments submitted by notifying parties that need to be assessed. Recent experience shows that in short-form cases, clearance can be obtained in less than 10 working days, although this ultimately depends on the CNMC’s workload at the time of filing.

Phase II investigations can last between two (basic period) and more than six months (owing to the possibility to ‘stop the clock’ if additional information is required). During the Phase II investigation, the law provides for requests for information to interested third parties, although the CNMC is increasingly making such requests in Phase I investigations, and the possibility for the merging parties to request a hearing before the CNMC.

Although there is no possibility to speed up the review process, engaging early on in pre-notification discussions with the CNMC and offering commitments at an early stage of the process, if required, can ultimately have a positive impact on timing.