The merger control provisions in Spain are set out in the Spanish Competition Act and its Implementing Regulation.2 These provide the legal framework governing the merger control procedure and cover areas such as the concept of a merger, the relevant filing thresholds, applicable deadlines and the assessment criteria.
The rules applicable to merger control in Spain have undergone some modifications in 2013, although these are not related to the jurisdictional or material assessment but limited instead to the creation of a new authority combining previously existing regulators, as explained in the next section. In addition, two papers were published by the Spanish competition authority at the beginning of 2016 that have been consistently applied throughout 2016: the strategic plan and the action plan for 2016.
ii Merger control authority
On 4 June 2013, the Spanish Parliament adopted Act 3/2013 creating a new authority in charge of both competition and regulatory matters. As a result, the current authority in charge of the merger control procedure in Spain is the National Markets and Competition Commission (NMCC). On 7 October 2013, the NMCC became fully operational, following the publication of the relevant Ministerial Order of the Ministry of Economy. The NMCC merges the former competition authority, the National Competition Commission, with several sectoral regulators: the National Energy Commission, the Telecommunications Market Commission, the Railway Regulation Committee, the National Postal Commission, the Airport Economic Regulation Commission and the State Council of Audiovisual Media.
The NMCC comprises a Council and four directorates: the Competition Directorate; the Telecommunications and Audiovisual Directorate; the Energy Directorate; and the Transports and Postal Services Directorate.
The Council is a collective decision-making body composed of two chambers: the Competition Chamber, devoted solely to competition enforcement, and the Sectoral Supervisory Chamber, devoted to regulatory matters. Each chamber is composed of four Council members who will serve on a rotating basis, with the two chambers keeping each other informed about their activities. The Council can sit in plenary, attended by the members of both the Competition Chamber and the Regulatory Chamber, to decide on NMCC organisational issues and when there is a divergence between the Chambers. Likewise, when a given number of members of the Council so decide, a matter may be subject to plenary approval. Members of the Council are proposed by the Ministry of Economy and Competitiveness and appointed by the government.
The Competition Directorate is in charge of overall competition enforcement in all sectors, while the three regulatory directorates have investigative powers in their respective sectors. The structure and functioning of the directorates is decided by government regulation through the NMCC Statute.3
As required by the Spanish Constitution, the NMCC structure guarantees the functional separation between the competition enforcement and regulatory activities of the four directorates and the decision-making body, the Council.
Additionally, the Spanish Council of Ministers may intervene in certain exceptional circumstances. Such intervention is limited to those cases where the NMCC decides to prohibit a merger or to clear it subject to conditions. The intervention must be based on certain public interest criteria other than the protection of free competition; therefore, government intervention is limited to exceptional situations.
iii Transactions that require approval
As the Spanish Competition Act indicates, a merger shall be deemed to exist where a stable change in control takes place over the whole or part of one or more undertakings. This definition is modelled on the EU concept of merger and typically arises from:
- a the merger of two or more previously independent undertakings;
- b the acquisition by an undertaking of control of the whole or part of one or more undertakings; or
- c the creation of a joint venture and, in general, the acquisition of joint control of one or more undertakings, when they perform on a long-term basis the functions of an autonomous economic entity.
Control is defined as the possibility of exercising a decisive influence on an undertaking. Therefore, control may be based on contractual arrangements, on the acquisition of rights over shares or on any other means that, having regard to the considerations of fact or law involved, confer the possibility of exercising a decisive influence on an undertaking. In particular, the concept of control catches ownership as well as the right to use all or part of the assets of an undertaking, and also any means of controlling the composition or decisions of the relevant corporate bodies.
The obligation to file a merger with the NMCC arises when one of the following conditions is met:
- a the acquisition or increase of a market share equal to or higher than 30 per cent in a specific product or service in the national market or in a defined geographic market within it. Pursuant to a de minimis rule, this threshold is increased to 50 per cent if the acquired company’s turnover was below €10 million in the last financial year; or
- b the combined aggregate turnover in Spain of all the undertakings involved in the transaction exceeded €240 million in the last financial year, provided that at least two of the undertakings concerned achieve an individual turnover in Spain of at least €60 million.
If one of these alternative thresholds is met, filing is mandatory and the transaction may not be implemented until clearance has been obtained. A waiver of this suspension obligation is possible in theory, but unlikely in practice.
The filing must be made:
- a jointly by the parties participating in a merger, in the creation of a joint venture or in the acquisition of joint control over the whole or part of one or more undertakings; or
- b individually by the party that acquires exclusive control of the whole or part of one or more undertakings.
Consequences of lack of notification
The execution of a concentration before clearance is obtained (except when the suspension obligation has been waived by the authority) is a serious infringement of the Competition Act. The NMCC monitors the market to detect any infringements of the duty to notify mergers. The breaching of this duty may result in fines of up to 5 per cent of the total turnover achieved in the business year immediately preceding that of the imposition of the fine.
Failure to notify a transaction when required ex officio by the NMCC is considered a minor infringement. Fines in this case can be as high as 1 per cent of the total turnover of the infringer in the business year immediately preceding the year of the imposition of the fine.
A filing fee must be satisfied before the authority starts the analysis of the merger. The amount of the fee is updated annually and, according to the Spanish Budget Act in 2016, the amount is the same as it was in 2015:
- a €5,557.17 when the aggregate turnover in Spain of all participants does not exceed €240 million;
- b €11,114.35 when the aggregate turnover in Spain of all participants exceeds €240 million but not €480 million;
- c €22,228.08 when the aggregate turnover in Spain of all participants exceeds €480 million but not €3 billion;
- d a fixed amount of €44,383 when the relevant turnover exceeds €3 billion and an additional €11,114.35 for each €3 billion in excess of that amount. The maximum payable fee is capped at €110,958.60; and
- e a reduced fee of €1,545.45 for those mergers that qualify for the short-form filing procedure.
The filing will not be considered complete until the filing fee is satisfied, which implies that the applicable review periods will not start running.
II YEAR IN REVIEW
i Relevant cases
In November 2015, the NMCC cleared at Phase I of the merger control procedure, the acquisition by Euskaltel of sole control over the regional electronic communications and pay TV services provider R Cable. Both are regional companies that are active in the same markets in the north of Spain, however, the NMCC considered that this transaction did not give rise to any competition concerns due to the fact that the merger entity’s market share is low in the markets where there was some overlapping between the parties, and due to the limited presence of both operators in the relevant markets nationwide.
In addition, the NMCC took into account the existence of alternative operators in the same markets whose activities are present within the whole of the Spanish territory, which means that the competitive development would not be affected. In any case, the transaction was evaluated by the NMCC as an incentive for the merger entity to develop competitive nationwide strategies.
In September 2015, the NMCC authorised the acquisition of sole control by Pelayo over the assets of Agromutua dedicated to the agricultural insurance business. Both companies are active in the agricultural insurance market.
The NMCC thought that the transaction strengthened the presence of Pelayo in the Spanish agricultural insurance market where it would have a significant market share. However, in the NMCC’s opinion, the absence of significant entry barriers and the annual term of the agricultural insurance contracts allow for an effective competition among the operators of this market.
Considering the above, the transaction was cleared in Phase I without commitments.
In April 2015, the NMCC cleared the acquisition of sole control by Distribuidora Internacional de Alimentación SA (DIA) over certain assets of Eroski – specifically, 160 supermarkets located in Madrid, Andalucia, Castilla y León, Extremadura and Castilla La Mancha and previously operated as Caprabo, Eroski City and Eroski Center.
The authority considered that the transaction significantly strengthened the position of DIA to restrict the existing competition in certain regions. Therefore, the parties offered commitments to the NMCC to guarantee that the transaction was cleared in a Phase-I decision.
The commitments offered by the acquirer were limited to the divesture of three supermarkets located in the geographic areas where the competition would be restricted or affected as a result of the transaction.
Taminco/CEPSA Química assets7
In March 2015, the NMCC cleared the transaction in Phase I with commitments the acquisition of sole control by Eastman – through its subsidiary Taminco – of certain assets belonging to CEPSA Química related to its business in Spain dedicated to the production of methylamines and methylamine derivatives. The assets acquired included client contracts, intellectual property and know-how, and goodwill.
The NMCC considered that the transaction could suppose a potential closure of the relevant market by Taminco on the supply of trimethylamines. To secure clearance of the transaction in the first phase of the merger control procedure, Taminco committed to supply trimethylamine to Algry Química, SL for a period of four years.
ii NMCC statistics
The number of concentrations notified to the NMCC has increased during 2015 to 93 (a 10.7 per cent increase from the previous year), while 84 transactions were notified in 2014 and 59 in 2013. This was mainly due to the fact that the economic situation in Spain is improving.
From a qualitative standpoint, in 2015, 84 concentrations (92.3 per cent of the total) were cleared in Phase I without commitments. Three were in Phase I with commitments, and one was in Phase II with commitments. About half of the concentrations in 2015 were notified under the simplified proceeding that allows quick resolution of the notifications. Finally, on three occasions notifications were withdrawn after confirming there was no obligation to file the transaction, or due to a decision by the parties to withdraw their application (most notably the acquisition of control over Panrico by Bimbo to restructure the deal, a transaction that is still pending in Spain).
III THE MERGER CONTROL REGIME
i Merger control procedure
Filing a notification has a suspensory effect, which means that the parties cannot implement the merger before clearance is obtained, either through a positive decision from the NMCC or by administrative silence when the relevant periods have expired.8 A waiver of this obligation is possible in theory, and requires the NMCC to balance the specific circumstances of the case at hand and the potential consequences of waiving the suspension obligation. Furthermore, the derogation can be made subject to certain obligations and conditions to guarantee the effectiveness of the final decision that the NMCC may issue. In practice, however, the NMCC has not made use of this possibility, and there are no indications that this trend may change.
The merger control procedure in Spain is divided into two phases, plus an optional (albeit recommended) pre-notification phase. The second phase is reserved for those mergers that pose an identified risk to competition in the relevant markets and involves an in-depth investigation, as explained below. Finally, a consultation procedure is available to approach the authority before notification and establish whether a specific transaction qualifies as a notifiable concentration.
The NMCC may be informally approached to clarify formal or substantive issues of a specific transaction, and to discuss jurisdictional and other legal issues. These contacts serve to address issues such as the scope of the information to be submitted, and to prepare for the upcoming investigation by identifying key issues and possible competition concerns at an early stage.
Although not mandatory, the Spanish authority strongly encourages these pre-notification contacts, which, depending on the transaction, typically last between two and four weeks. For these contacts to be fruitful, all the relevant information should be provided to the authority, typically including the submission of a draft filing form. These contacts are kept secret by the authority until a formal filing is made.
Once a complete notification is received, the NMCC formalises the proceedings and prepares a report for the Council to issue a decision on the transaction. This phase lasts up to one month, although extensions may take place if commitments are offered (10 additional days) or if the authority issues requests for information to clarify or further investigate specific issues (the review period is suspended until a full reply is provided).
This first phase ends with a decision from the Council of the NMCC:
- a authorising the concentration;
- b subordinating clearance to the fulfilment of certain commitments proposed by the notifying party;
- c initiating the second phase of the procedure;
- d referring the merger to the European Commission when it is better positioned to assess the transaction; or
- e shelving the proceedings (e.g., if the notification thresholds are not met or if the parties abandon the transaction).
The transaction will be tacitly approved if the NMCC does not issue and notify its decision to the notifying party within the stipulated time frame (one month plus any extensions that may have occurred).
This second phase is reserved for mergers that pose an identified risk to competition in the sense that effective competition could be impeded in one or more relevant markets in Spain. By its very nature, this second phase involves an in-depth investigation during which market tests are conducted.
Once this phase is initiated, the NMCC issues a report detailing the identified competition risks and specifically describing the possible restrictions to competition (theory of harm). Third parties may access the file and submit their views on the transaction.
The possible outcomes of this phase are authorisation of the concentration, with or without commitments proposed by the parties or conditions imposed by the authority; prohibition of the concentration; or shelving of the proceedings in the cases set out in the Competition Act.
The basic duration of this second-phase review is two months, extendible if commitments are offered (15 additional days) or if the authority issues information requests to clarify or further investigate specific issues (the review period is suspended until a full reply is provided).
Under the public interest criteria, the Spanish Council of Ministers has the option to intervene in mergers provided that the NMCC has prohibited the transaction or has imposed commitments or conditions. The Ministry of Economy may decide (within 15 days) to ask the government to intervene. Should the government intervene, it will have one additional month to decide on the transaction. This is informally known as the third phase of the merger control procedure. The government’s review may confirm the NMCC’s decision, or authorise the transaction with or without commitments or conditions.
ii Filing forms
The annexes to the Implementing Regulation set out the requirements of both the ordinary and short-filing forms. These filing forms are similar to the EU Form CO and Short Form CO.9 In both cases, the notifying party is required to produce copies of the relevant agreements, annual reports and internal documents prepared for the purposes of analysing the transaction.
The ordinary filing form requires detailed information on the parties (contact details, turnover, areas of activity, etc.), on the transaction (type of merger, structure of control, economic rationale, etc.), on the market (market shares, barriers to entry, market structure and distribution networks, information on research and development activities and expenditure, etc.), as well as other elements such as ancillary restraints, and the existence of cooperative and vertical aspects or efficiencies.
The abbreviated or short-filing form reduces the amount of information required mainly in respect of the relevant markets.10 The short-filing form is reserved for those cases that are less likely to pose competition concerns. In particular, one of the following requirements must be met:
- a the parties are not active in the same geographical and product markets or in upstream or downstream markets (no horizontal or vertical overlaps);
- b the transaction is not capable of significantly affecting competition (measured in terms of market shares and overlaps);
- c a party acquires sole control over one or more undertakings over which it already had joint control; or
- d the case is an acquisition of joint control where the company does not carry out nor plans to carry out activities in Spain, or those activities are only marginal.
Although time periods are not modified, the simplified analysis to be performed by the NMCC allows the parties to produce less information mainly concerning the relevant markets (competitors’ market shares, barriers to entry or, more generally, the market structure (offer and demand) are not discussed in this filing form). The filing fee is reduced to €1,545.45 and, in practice, pre-notification contacts and the duration of Phase I tend to be shorter.
iii Ancillary restraints
Ancillary restraints that are directly linked to and essential for implementing the merger are covered by the clearance decision issued by the NMCC. Contrary to the approach followed by the European Commission, Spanish merger control decisions expressly deal with ancillary restraints, and the filing forms (both the ordinary and short form) include a section on ancillary restraints.
iv Third-party access to the file and rights to challenge mergers
There are no specific rules regarding the intervention of third parties in merger control proceedings. However, in accordance with general Spanish procedural rules, any natural or legal person who may be affected by the transaction may apply to be considered as an interested party in the merger control procedure. It is possible to claim a role as an interested party as soon as the second phase of the procedure is opened, but not before.
Within 10 days of receiving the request, the NMCC will evaluate if there is a legitimate right or interest and will make its decision on accepting or rejecting the request. Interested parties may access the file and submit their views and allegations on the transaction.
While formal merger control processes can only be initiated by the notifying party, the NMCC may request filing in those cases it identifies as transactions that meet the relevant notification threshold. Similarly, any third party may file a complaint with the NMCC informing the authority of a specific transaction for the authority to investigate if a filing was indeed required.
v Appeals and judicial review
The NMCC’s decisions in merger procedures are administrative decisions subject to judicial appeal. These can be filed before the Spanish National Court within two months from the date on which the decision was notified. Rulings by this Court are subject to appeal before the Spanish Supreme Court. However, a decision by the government confirming or dismissing a previous decision by the NMCC, when applicable, may be directly appealed to the Supreme Court.
IV OTHER STRATEGIC CONSIDERATIONS
In January 2016, the NMCC published its strategic plan, which identifies the sectors that will be under special surveillance by the NMCC in the coming year:
- a digital economy: to monitor the adaptation of the new business models to the competition regulations;
- b closed professions: the NMCC considers these necessary to implement new initiatives (as lectures, seminars, etc.) to eliminate common practices clearly contrary to the competition regulations;
- c IP rights: in 2016 it is expected that the NMCC will collaborate with the Spanish IP Commission in order to decide the applicable tariffs for the use of IP rights;
- d financial sector: the NMCC plans to elaborate a report about the fees for the withdrawal of cash through credit cards imposed by certain financial entities; and
- e agricultural sector: the authority wants to closely monitor the application of competition regulations in some specific sectors such as, for example, the sugar sector.
In the strategic plan, the NMCC also stated its intention to continue its collaboration with the competition authorities belonging to the different Spanish autonomous regions through the subscription of agreements, to achieve greater coordination, training of staff and the creation of a work group in order to work jointly on closed professions issues.
Likewise, the Authority will strengthen its international activity by organising the International Competition Network Workshop on Cartels next October in Madrid, participating within the work groups of the European Competition Network, promoting cooperation with the Ibero-American Competition Authorities and actively participating in diverse international forums such as the OCDE and UNCTAD.
V OUTLOOK and CONCLUSIONS
The establishment of effective merger control procedures has become a major economic policy concern, as some mergers can significantly alter the structure of the markets in a manner that is contrary to the maintenance of effective competition in Spain.
According to the NMCC’s Action Plan, in 2016 the authority expects to exercise its control duty over concentrations in the food markets and some relevant transactions in the energy markets due to the disinvestment process carried out by the oil companies as a result of the significant fall in international crude prices.
Finally, in November 2015, the NMCC announced the issuance of a new communication on the simplified merger control notification that takes into account the integration of the competition authority and the Spanish regulatory bodies. As a result, this communication simplifies those merger control notifications to be filed in relation to regulated sectors.
1 Joaquín Hervada is a senior associate and Emilio Carrandi is an associate at DLA Piper.
2 Spanish Act 15/2007, of 3 July 2007, on the Defence of Competition and Royal Decree 261/2008, of 22 February 2008, approving the Implementing Regulation.
3 Royal Decree 657/2013, 30 August, which approves the by-laws of the NMCC.
4 Case C/0707/15.
5 Cases C/0683/15.
6 Case C/0634/15.
7 Case C/0643/15.
8 Public takeover bids are an exception to this suspension obligation in the sense that bids for shares launched in a stock market authorised by the National Securities Commission can be executed provided that the transaction is filed with the NMCC within five days of the presentation of the application for authorisation of the bid to the National Securities Commission (if this has not been previously done) and, additionally, the acquirer refrains from exercising the voting rights attached to the securities acquired or only does so to maintain the full value of its investment and on the basis of a derogation granted by the NMCC.
9 Included as annexes to Commission Regulation (EC) No. 802/2004 implementing Council Regulation (EC) No. 139/2004.
10 At the end of 2011, the Spanish competition authority issued a guidance paper on short-form filings. These guidelines explain which mergers qualify for the short-form notification procedure and also identify certain transactions that, despite meeting the short-form criteria, must always be notified using the ordinary full-form notification. This is the case for transactions where the notifying party has requested the NMCC to lift the suspension obligation.