1 Relevant Authorities and Legislation
1.1 Who is/are the relevant merger authority(ies)?
In the Republic of Croatia, the general relevant merger authority is the Croatian Competition Agency (hereinafter "the Agency"). It was established in 1997 and is responsible for assessing restrictive practices, abuses of market dominance and compatibility of concentrations with competition rules. At the same time, there are additional authorities who play an important role for mergers in the following specific sectors:
- the Croatian Financial Service Supervisory Agency (hereinafter "the CFSSA"), supervising acquisitions in thefollowing fields: investment funds, leasing and investment companies;
- the Croatian Post and Electronic Communications Agency, supervising mergers on the telecommunication market;
- the Electronic Media Agency, supervising mergers in the area of electronic media; and
- the Croatian National Bank, supervising mergers of banks.
1.2 What is the merger legislation?
Pursuant to Article 70 (2) of the Stabilisation and Association Agreement between the Republic of Croatia and the European Union (hereinafter "EU") and its Member States, competition law provisions of the EU are to be regarded as the basis for the interpretation and application of the Croatian competition law legislation. This creates a legal framework for the developments in Croatia in this field. Already since 1995 the Republic of Croatia is developing its legislation, concerning competition law in general and mergers in particular. Entering into force as of 1 October 2010, the Croatian Competition Act (Official Gazette no. 79/2009) (hereinafter CCA) became the main merger control legislation in the Republic of Croatia. Pursuant to its substantive and procedural provisions, it is introducing far-reaching changes to the Croatian competition law landscape, broadening the scope of the Agency's authority. Proceedings before the Agency are regulated pursuant to the General Administrative Proceedings Act (Official Gazette no. 47/09). For proceedings before the Administrative Court against decisions issued by the Agency, the Administrative Dispute Act (Official Gazette no. 20/10) applies. At the same time various legislation exists, which include provisions applicable to mergers, i.e. the Companies Act (Official Gazette nos. 111/93, 34/99, 52/00, 118/03, 107/07, 137/09, 152/11 and 111/12), the Capital Market Act (Official Gazette nos. 88/08, 46/08 and 74/09), the Act on Takeover of Joint Stock Companies (Official Gazette nos. 109/07, 36/09 and 108/12), the Labour Act (Official Gazette nos. 149/09, 61/11 and 82/12), the Civil Obligations Act (Official Gazette nos. 35/05 and 41/08) and the Electronic Communications Act (Official Gazette nos. 73/08, 90/11 and 125/11). Pursuant to Article 74 of the CCA, if legal gaps in the area regulated within the reach of the CCA arise, competition law provisions of the EU apply.
1.3 Is there any other relevant legislation for foreign mergers?
Croatian law does not discriminate between foreign and domestic investors. Still, some specifics do exist, i.e. all direct foreign investments should be reported to the Croatian National Bank within 30 days upon the completion of the transaction. This requirement is for statistical purposes only, which means that there is no clearance/approval requirement.
1.4 Is there any other relevant legislation for mergers in particular sectors?
Certain sectors which are considered as being "risky" are regulated separately. The relevant provisions are laid down in the:
- Credit Institutions Act (Official Gazette nos. 117/08, 74/09, 153/09 and 108/12);
- Media Act (Official Gazette nos. 59/04 and 84/11);
- Electronic Media Act (Official Gazette nos. 153/09 and 84/11); and
- Electronic Communication Act (Official Gazette nos. 73/08 and 90/11).
2 Transactions Caught by Merger Control Legislation
2.1 Which types of transaction are caught – in particular, how is the concept of "control" defined?
- Pursuant to Article 15 paras 1 and 3 of the CCA, the following types of transactions are caught:
- mergers or acquisitions of undertakings;
- the acquisition of control over one or more undertakings or a (substantial) part of an undertaking; and
- the establishment of a full-functional joint venture, i.e. a joint venture that will perform on a lasting basis all functions of an independent economic entity.
Article 15 para 2 CCA provides a definition of the concept of "control": An undertaking is deemed to control another undertaking if it, directly or indirectly, holds more than half of its shares, may exercise more than half of the voting rights, has the right to appoint more than half of the members of the management board, supervisory board or similar managing or supervising bodies, or in any other way is able to exercise decisive influence on the business of the "controlled" undertaking.
2.2 Can the acquisition of a minority shareholding amount to a "merger"?
Minority shareholding can be caught under merger control rules, in case such a stake entails one of the above described situations, meaning, the acquisition of a minority shareholding requires merger control approval in case the transaction confers on the acquirer de jure or de facto control over the target undertaking.
2.3 Are joint ventures subject to merger control?
The creation of a joint venture is subject to merger control if the joint venture will be performing functions of an independent economic unit on a lasting basis.
2.4 What are the jurisdictional thresholds for application of merger control?
A concentration has to be notified to the Agency if (i) at least one of the parties to the concentration has its seat and/or branch office in the Republic of Croatia, and (ii) the following turnover thresholds are met:
- the combined worldwide turnover of all undertakings concerned is at least HRK 1 billion (about EUR 133 million) in the financial year preceding the concentration; and
- the aggregate national turnover in Croatia of each of at least two undertakings concerned is at least HKR 100 million (about EUR 13.3 million) in the preceding financial year.
2.5 Does merger control apply in the absence of a substantive overlap?
There is no direct relation between the merger control filing threshold and the substantive overlap. Upon receipt of a complete merger notification, the Agency decides whether a filing obligation exists, or if the notification shall be dismissed. If the turnover thresholds are met, a filing obligation exists irrespective of whether a transaction concern horizontal overlaps or vertical links between the parties.
2.6 In what circumstances is it likely that transactions between parties outside Croatia ("foreign-to-foreign transactions) would be caught by your merger control legislation?
Foreign-to-foreign transactions are caught by the CCA if the requirements set out in question 2.4 are met.
2.7 Please describe any mechanisms whereby the operation of the jurisdictional thresholds may be overridden by other provisions.
This depends on the nature of the operation, and is subject to special merger control provisions. Pursuant to Article 71 para 5 of the Credit Institutions Act, all concentrations in the banking sector require clearance from the Croatian National Bank, and all media mergers have to be notified to the Agency, irrespective of the turnover thresholds (pursuant to Article 36 Media Act), as well as any change in the shareholder structure of a Croatian electronic media (TV, radio broadcaster, provider of a media service, etc.), irrespective of whether it leads to a change in control and/or whether the turnover thresholds are met. Furthermore, telecommunication operators with significant market power and operators who have been granted licences to use radio frequencies at the level of the Republic of Croatia must notify Croatian Post and Electronic Communications Agency in writing of intention to merge with, or acquire, other telecommunication operator on the market, regardless of the requirements prescribed by the CCA.
2.8 Where a merger takes place in stages, what principles are applied in order to identify whether the various stages constitute a single transaction or a series of transactions?
Under the CCA, special provisions exist for mergers which take place in stages. Two or more transactions that are taking place between the same parties within a period of two years will be considered one single concentration that is realised on the day of the last transaction pursuant to Article 17 para 5 CCA.
3 Notification and its Impact on the Transaction Timetable
3.1 Where the jurisdictional thresholds are met, is notification compulsory and is there a deadline for notification?
Where the jurisdictional thresholds are met notification is compulsory. The CCA does not provide for a filing deadline. In principle, a notification can be submitted, as soon as the contract between the undertakings has been signed, or after the public offer has been made (Article 19 para 3 CCA). The CCA provides for the possibility to file the notification even before signing the contract, as long as an intention of good-faith to enter into the transaction agreement can be demonstrated.
3.2 Please describe any exceptions where, even though the jurisdictional thresholds are met, clearance is not required.
In cases where the jurisdictional thresholds are met, clearance for some case constellations is not required. These situations are as follows:
- group internal restructurings;
- banks, investment funds or insurance companies and other financial institutions that − in their ordinary course of business (which includes transactions and dealing with securities) − hold shares on a temporary basis for their own account or for the account of third parties, with a view to reselling them, provided that they do not exercise their voting rights in respect of those shares for the purpose of determining the competitive behaviour of that undertaking, but solely with a view to prepare the divestment of all, or part of the undertaking or its shares, and provided that they do not undertake any operation which may distort, restrict or prevent competition and carry out the divestment within one year following the acquisition. Even though no formal merger control filing has to be made, the parties to the concentration have to inform the Agency of such an exempted transaction; and
- the acquisition of control in the course of proceedings relating to bankruptcy, liquidation or winding up by an office-holder or administration officer according to the national Bankruptcy Act and the Companies Act.
3.3 Where a merger technically requires notification and clearance, what are the risks of not filing? Are there any formal sanctions?
Closing a notifiable transaction before clearance is prohibited and may entail fines of up to 10% of the worldwide turnover of the implicated undertakings. From the ban on closing it follows that corporate and legal actions taken in violation of the suspension obligation are to be considered null and void.
3.4 Is it possible to carve out local completion of a merger to avoid delaying global completion?
Under Croatian merger control rules, the (even partial) implementation of a transaction is prohibited prior to obtaining formal clearance (Article 19 paras 5 and 6 CCA). It therefore might be difficult to justify local carve-outs before the Agency. At the same time, the CCA should only apply to facts that potentially impact competition in Croatia. This general principle provides for arguments that local carve-outs should be possible. Ultimately, the Agency has never commented officially on carve-outs so that parties should consider carefully whether they want to go ahead with closing before clearance in Croatia and carve-out the Croatian angle of the transaction.
Pursuant to Article 19 para 6, the Agency can allow the implementation of certain actions before the clearance. Such derogation from the suspension clause requires a request by the undertakings involved and a consequent approval by the Agency, which it will only grant after reviewing the facts at stake.
3.5 At what stage in the transaction timetable can the notification be filed?
As mentioned in question 3.1, the CCA does not provide for a specific filing deadline. The filing can be submitted as soon as the agreement between the undertakings is signed or after the public offer has been made. The notification can be submitted even before signing or publishing the bid, if the parties can prove a bona fide intention to enter into the transaction agreement.
3.6 What is the timeframe for scrutiny of the merger by the merger authority? What are the main stages in the regulatory process? Can the timeframe be suspended by the authority?
The regulatory process is divided into two phases (Phase I, Phase II). Phase I starts from the day the Agency receives a complete filing and has to be completed within 30 days. After these 30 days, the Agency can adopt a decision granting clearance or a decision to initiate Phase II. The concentration is deemed cleared if the Agency does not issue a decision within 30 days following the initiation of Phase I. Phase II may take 3 months, with the possibility of an extension by another 3 months. Phase II ends by the Agency adopting a written decision, either permitting (possibly without conditioning or with conditioning) or prohibiting the merger.
The CCA also provides that the Agency, after opening Phase II, is obliged to publish a Notification on Facts determined in the proceedings, allowing all parties to the concentration (and all other parties holding a legal interest in the result of the procedure) to submit their arguments and to conduct an oral hearing before the final decision will be made.
3.7 Is there any prohibition on completing the transaction before clearance is received or any compulsory waiting period has ended? What are the risks in completing before clearance is received?
Pursuant to Article 19 paras 5 and 6 CCA, completion of the transaction prior to the obtainment of the formal clearance is prohibited. In case of breaching the suspension obligation, the undertaking shall be fined up to 10% of the total annual turnover in the financial year preceding the year when the infringement was committed.
3.8 Where notification is required, is there a prescribed format?
The Regulation on notification and assessment of concentration (Official Gazette no. 38/11) (hereinafter "the Regulation") provides for two distinct forms of merger control notifications, which closely follow the Short Form CO and Form CO at EU level. The notification should be accompanied by:
- the original or a certified copy, or a certified translation (if the original official text is not written in Croatian) of the document representing the legal grounds for the concentration. An apostille is required if there is no bilateral agreement on the recognition of foreign certifications;
- annual financial reports for the parties to the concentration for the financial year preceding the concentration (if not in Croatian, accompanied by a certified translation); and
- other information and documents required by the Regulation: copies of all analyses, reports, studies, surveys, and any comparable documents prepared by or for any member(s) of the board of directors, or the supervisory board, or the other person(s) exercising similar functions (or to whom such functions have been delegated or entrusted), or the shareholders' meeting, for the purpose of assessing or analysing the concentration with respect to market shares, competitive conditions, competitors (actual and potential), the rationale of the concentration, potential for sales growth or expansion into other product or geographic markets, and/or general market conditions. Also, in the case of media mergers, an additional document will be required − a decision of the Electronic Media Agency − stating that by implementing the notified concentration no illegal concentration within the sense of the Electronic Media Act will arise.
In addition to the obligatory information and documents set out under the Regulation, the Agency may require additional information and documents, also beyond the list provided for in the Regulation.
3.9 Is there a short form or accelerated procedure for any types of mergers? Are there any informal ways in which the clearance timetable can be speeded up?
There is a short form for the notification, which permits an accelerated procedure before the Agency. The CCA sets out 4 constellations under which a short form filing can be submitted, as in the respective constellations it is very likely that the transaction will not have a negative effect on competition in the relevant market.
On the other hand, the Agency did not publish information on any informal way which would speed up the clearance timetable or prioritise merger cases. However, parties to a transaction may enter into pre-notification talks with the CCA which could secure a clear framework for possible bordering factual or legal issues.
3.10 Who is responsible for making the notification and are there any filing fees?
Responsibility for filing rests with the acquirer(s) in case of the acquisition of control. In all other cases, the obligation to notify rests with all undertakings concerned, separately.
The filing fee may amount to up to HRK 10,000 (approx. EUR 1,400) or up to HRK 5,000 (approx. EUR 700) for filings submitted under sector-specific laws.
For filings approved in Phase I, the Agency may charge a fee of up to HRK 10,000 (approx. EUR 1,400) or a fee of up to HRK 5,000 (approx. EUR 700) for filings approved under sector-specific laws. For filings approved in Phase II, the Agency may charge a fee of up to HRK 150,000 (approx. EUR 20,500) or HRK 15,000 (approx. EUR 2,000) for filings approved under sector-specific laws.
3.11 What impact, if any, do rules governing a public offer for a listed business have on the merger control clearance process in such cases?
The Agency will dismiss prior notification of concentration or suspend the procedure, if it has already started, if there are no legal requirements for initiating the procedure or its continuation, such as a valid legal ground of a concentration. Therefore, rules which govern a public offer are of relevance throughout the clearance process.
3.12 Will the notification be published?
The notification will not be published, but information that the notification has been submitted will be revealed. Following the receipt of a complete notification of concentration, the Agency shall publish a request for information on its webpage, aimed at all interested parties who may respond to this request in writing. Also, summary decisions assessing the compatibility of concentrations and imposed measures will be published in the Official Gazette and on the webpage of the Agency.
4 Substantive Assessment of the Merger and Outcome of the Process
4.1 What is the substantive test against which a merger will be assessed?
The substantive test applied by the Agency is whether the transaction results in a "significant impediment of effective competition". The Agency takes into consideration possible proand anti-competitive effects caused by the concentration, it appraises the structure of the relevant market, the market share, the position of the undertakings concerned and their competitors, and the effects of the concentration on other undertakings, etc. The Agency takes into account in particular the impact of the transaction on consumer welfare and assesses whether the concentration will contribute to a decrease in prices of goods and/or services, an improvement in the distribution of goods, etc.
4.2 To what extent are efficiency considerations taken into account?
Regulation on notification and assessment of concentrations in Article 9 makes it possible for the undertakings to submit data on the overall market context and possible efficiencies. The Agency will take into account efficiency considerations, if consumer benefit will be shown as a final result of a merger.
4.3 Are non-competition issues taken into account in assessing the merger?
Media diversity is a criterion which underlies the provisions of the Media Act and the Electronic Media Act related to concentration specified sectors. However, general competition rules do not address this question.
4.4 What is the scope for the involvement of third parties (or complainants) in the regulatory scrutiny process?
Third parties are entitled to participate in the regulatory scrutiny process on condition they are able to prove a legal interest in the outcome of the process. In Phase II of the regulatory procedure, the Agency, after receipt of the complete notification, publishes a public request to all interested parties to submit their comments on the notified concentration within 8 to 15 days.
4.5 What information gathering powers does the regulator enjoy in relation to the scrutiny of a merger?
The parties to the concentration are obliged to submit to the Agency the documentation they consider to be relevant. The Agency may request from undertakings concerned, as well as other third parties, all the information which it deems necessary. In addition, the Agency will also hold an oral hearing in order to enable the undertakings concerned to provide new facts or commitment proposals aimed at removing negative effects of the concentration.
4.6 During the regulatory process, what provision is there for the protection of commercially sensitive information?
The notifying party is obliged to clearly mark any data in the filing that may be considered confidential. The same applies to accompanying and other documents and evidence submitted by the notifying party or other undertakings.
A list of different general categories of data, and information that will be considered a business secret, is included in Article 53 CCA. According to this Article, the members of the Agency are obliged to keep all information and documents classified and, as such, confidential.
5 The End of the Process: Remedies, Appeals and Enforcement
5.1 How does the regulatory process end?
The concentration is deemed cleared if the Agency does not issue a decision and publishes it on its webpage within 30 days following the initiation of Phase I. In this Phase, the Agency may also issue an express clearance decision. In Phase II, the Agency may, by decision, approve the transaction conditionally or unconditionally, or prohibit the concentration.
5.2 Where competition problems are identified, is it possible to negotiate "remedies" which are acceptable to the parties?
If the Agency considers that the concentration in question may be declared compatible only subject to remedies, it shall without delay inform the notifying party or parties thereof. The notifying party is then obliged to submit the proposal of possible commitments (whether behavioural or structural remedies) to the Agency in order to alleviate the competition concerns identified by the Agency. The time limit for submitting the remedy proposal shall be set by the Agency and shall not exceed 30 days. Though negotiating remedies is not explicitly foreseen, there is certainly the possibility to interact with the Agency over the expected content of a remedy.
5.3 To what extent have remedies been imposed in foreign-to-foreign mergers?
The Agency has never imposed remedies in foreign-to-foreign merger cases. It needs to be emphasised that foreign-to foreign mergers are only caught by the CCA if requirements set out in the answer to question 2.4 are met.
5.4 At what stage in the process can the negotiation of remedies be commenced? Please describe any relevant procedural steps and deadlines.
Parties can propose remedies at any stage in the merger control proceedings, even together with the notification. If the parties do not propose remedies pro-actively and competition concerns arise, the Agency will set a time limit for the parties to come up with remedy suggestions (see question 5.2 above).
If the Agency accepts these proposed remedies, it shall publish its decision on its website, inviting all interested parties to submit their objections. Such objections should be submitted within 20 days of the publishing of the decision on the website.
5.5 If a divestment remedy is required, does the merger authority have a standard approach to the terms and conditions to be applied to the divestment?
The divestment of one or more business activities performed by the parties to the concentration is a structural remedy. The Agency prescribes short deadlines for its execution. Additional terms and conditions can be introduced, but this is dealt with on a case-by-case basis.
5.6 Can the parties complete the merger before the remedies have been complied with?
According to the CCA, the parties are permitted to proceed with the implementation of the concentration from the day of the obtainment of the decision from the Agency, declaring the proposed transaction permitted, but subject to conditionality.
5.7 How are any negotiated remedies enforced?
First and foremost, not complying with remedies can entail fines of up to 10% of the total turnover of the undertakings concerned for the preceding financial year. In addition, depending on the nature of the remedy, it might be necessary to obtain prior approval by the Agency for certain steps (e.g. if closing of the notified transaction is subject to divesting a certain business to a suitable third party upfront). Thereby, the Agency safeguards adherence to any negotiated remedies.
5.8 Will a clearance decision cover ancillary restrictions?
The Croatian merger control regime does not provide for special rules on ancillary restraints. However, the Agency follows the respective practice at EU level. Hence, restrictions on the parties, in line with the EU Commission notice on ancillary restraints, should be permissible in Croatia.
5.9 Can a decision on merger clearance be appealed?
There is no right to appeal against decisions issued by the Agency, but according to the Administrative Dispute Act (ADA), the parties involved in the procedure have the right to initiate an administrative procedure within 30 days of receipt of the decision.
5.10 What is the time limit for any appeal?
Against the decisions of the Agency which establish the infringements of the CCA no appeal is allowed, but the injured party may bring a claim before the Administrative Court within 30 days of receipt of the decision. The same applies to procedural orders issued by the Agency, unless otherwise prescribed by the CCA.
5.11 Is there a time limit for enforcement of merger control legislation?
According to Article 71 CCA, the limitation period is five years from the last day of the infringement. This period is interrupted by every action taken by the Agency; nevertheless, there is also an absolute time limit of 10 years after the infringement.
6.1 To what extent does the merger authority in Croatia liaise with those in other jurisdictions?
The Agency cooperates with international competition authorities as well as with international organisations and institutions, in particular with the Commission of the EU. At the same time, it is concluding cooperation agreements with several national authorities of EU Member States and neighbouring non-EU countries. These cooperation agreements have as their essential aim the deepening of cooperation between the different authorities.
6.2 Are there any proposals for reform of the merger control regime in Croatia?
In May 2012, the Agency decided to file an initiative to the Ministry of Economy, as the legislative holder, in order to provoke the amendment of the CCA. The said decision has been publicly reasoned as a need of the Agency to obtain broader regulatory powers with the date of the EU accession. The influence of possible amendments on the merger control regime is unknown, but it is not expected to be substantial. Furthermore, the Agency will take over authority regarding concentrations in the banking and financial sector from the date of accession to the EU.
6.3 Please identify the date as at which your answers are up to date.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.