Relevant merger situations
The first step to determine whether a transaction is notifiable to the CMA is confirming whether it amounts to a “relevant merger situation”, which occurs when two or more enterprises cease to be distinct or are set to do so if certain arrangements are carried into effect.
The UK’s Enterprise Act 2002 broadly defines an enterprise as “any business activity carried out for gain or reward”, meaning profit is not a necessity. Additionally, an enterprise does not need to be a separate legal entity; a combination of assets enabling business activities, such as the transfer of employees and customer contracts, can qualify. However, the mere transfer of bare assets does not constitute an enterprise.
Once it is established that a situation involves enterprises, the next step is to determine if these enterprises cease to be distinct, which will generally occur if the enterprises are brought under common ownership or control. Control can be legal (de jure), or practical (de facto), where an entity influences a company’s policy or key business strategy, despite holding less than the majority of voting rights. Additionally, having “material influence” over a business is seen as a level of control that may give rise to a relevant merger situation in the UK. The analysis of whether a transaction gives rise to material influence is case specific, and there are no clear thresholds. However, an acquisition of share of voting rights over 25% raises a presumption of material influence through the ability to block special resolutions. Even below 25%, material influence may exist if factors such as voting patterns, special rights, or the shareholder’s status and experience enable decision-making influence. The CMA notes that board representation rights alone can suffice. Internal documents may also indicate material influence, including commercial agreements that make the target dependent on the acquirer, such as financial arrangements where a lender’s threats could influence policy or broader commercial agreements.
It is also important to note that UK merger control rules apply not only to new shareholders acquiring control but also to any change in the level of control by existing shareholders. A shift from a lower level of control (e.g., material influence) to a higher level (e.g., de facto control or a controlling interest) constitutes a relevant merger situation and may require notification, even if the shareholders remain unchanged.
Filing thresholds
Once a transaction is identified as a relevant merger situation, it must meet specific tests to be a notifiable transaction. The turnover test is satisfied if the target generates a turnover exceeding GBP 100 million, while the share of supply test is met if the undertakings concerned have overlapping activities and, post-merger, supply or acquire at least 25% of the goods or services in the UK. This test requires both parties to supply or acquire the same category of goods or services, indicating a horizontal overlap that increases their combined share of supply. In addition to the turnover and share of supply tests, a new hybrid test can trigger notification. This occurs if an enterprise supplies or acquires at least 33% of goods or services in the UK, has a UK turnover exceeding GBP 350 million, and another concerned enterprise has a UK nexus.
In theory, filing in the UK is voluntary, however the CMA is an aggressive enforcer and proactive engagement may be recommendable where the jurisdictional thresholds are met and there is sufficient UK nexus.
In terms of engaging with the CMA, businesses have three options; stay silent; submit a formal notification; or (fairly unique to the UK) submit an informal briefing paper to the CMA. The briefing paper outlines the proposed transaction and essentially invites the CMA to determine not to review the transaction – through advocacy that the transaction could not amount to a substantial lessening of competition (triggering the CMA’s statutory duty to review). If parties to a transaction determine not to proactively engage, the CMA can call-in a review (for up to four months from the point that facts about a merger are made known to the CMA, including if the transaction has closed). If a transaction has closed and the CMA calls-in for review, it typically asserts a hold-separate order, which essentially ring-fences and freezes integration of the UK business. These can be onerous. .
The review timeline will depend on the chosen approach. If formal engagement (via a full filing) is made, the Parties typically engage in “pre-notification” with the CMA, which essentially upfronts the review before formal notification is triggered and statutory review periods start to run. This pre-notification can easily take 3-4 months or even longer, depending on complexity of the case. The CMA has recently committed however to complete the pre-notification phase within 40 working days, against a current average of 65.
Like the European Union (outlined below), the review of transactions is structured in two phases. Phase I review is subject to a statutory review period of 40 working days (extendable if remedies are offered). Phase II (in-depth review) lasts 24 weeks, subject to an 8 weeks extension (or 11 weeks under certain limited exceptions). Again, final timing depends on the level of engagement required from the CMA and complexity of the case.
II. European Union
Enforcer
At the EU level, the competent authority to review so-called concentrations is the European Commission (“Commission”).
Concentrations
Under the EU Merger Regulation (“EUMR”), a concentration occurs when there is a lasting change of control resulting from either: (a) the merger of two or more previously independent (parts of) undertakings, or (b) the acquisition of direct or indirect control of (the whole or parts of one or more) undertakings by one or more undertakings or by one or more persons already controlling at least one other undertaking. The creation of full function joint ventures, which are those performing on a lasting basis all the functions of an autonomous economic entity, are also notifiable concentrations.
In the EU, control is defined as the ability to exercise decisive influence over an undertaking. Control can be acquired legally (e.g. by the acquisition of the majority of the target’s voting rights) or de facto (e.g., if the acquirer is likely to have a stable majority of the voting rights at future shareholder meetings, or if the target is economically dependent on the acquirer). Control can also be positive, referring to the power to decide over an undertaking’s strategic decisions (such as its budget, its business plan, the appointment and dismissal of its senior management, and its investments), or negative, referring to the power to veto strategic decisions. Control can be held solely by one undertaking (i.e., sole control), allowing it to independently determine strategic decisions, or jointly by multiple undertakings (i.e., joint control), where they each have veto rights on strategic decisions such that it creates a deadlock situation and they must reach agreements in determining the commercial policy of the joint venture.
Filing thresholds
Once a transaction is identified as a concentration, the next step is to determine if it meets the jurisdictional threshold for having an ‘EU dimension’. A concentration has an EU dimension if either of the following two tests is met:
- The combined aggregate worldwide turnover of all undertakings involved exceeds EUR 5 billion;, and the EU-wide turnover of each of at least two of the undertakings concerned exceeds EUR 250 million; unless each undertaking concerned achieves more than two-thirds of its EU-wide turnover within one and the same Member State.
- The combined worldwide turnover of all undertakings concerned exceeds EUR 2.5 billion; and their combined turnover in each of at least three Member States exceeds EUR 100 million; and in each of these Member States, the turnover of each of at least two undertakings concerned exceeds EUR 25 million; and the EU-wide turnover of each of at least two undertakings concerned exceeds EUR 100 million; unless each undertaking concerned achieves more than two-thirds of its EU-wide turnover within one and the same Member State.
Review process
If an EU filing is required, it eliminates the need to file in individual Member State, as the notification to the Commission serves as a one-stop-shop. However, under certain circumstances, the Commission may refer the transaction to National Competition Authorities (“NCAs”) and, conversely, NCAs may also refer cases notifiable at national level to the Commission. The notifying parties can also request a referral, one way or the other, under certain conditions.
The review of transactions is structured in two phases, which follow a pre-notification period (lasting from a couple of weeks to several months depending on the complexity of the case). The Phase I review is limited to 25 working days, or 35 working days if remedies are offered by the parties. The Phase II (in-depth review) review period lasts between 90 and 125 working days, depending on timetable extensions and the timing of remedies, and it can be even longer since (under certain conditions) the Commission can stop the clock while awaiting information from the notifying parties.
III. EU Member States
Out of the 27 EU Member States, 26 have their own national merger control regimes, with Luxembourg still being the only exception. While all regimes are similar to the EU one, some important specificities exist, such as the need to file for acquisitions of 25% or more of shares in Germany and Austria, even without acquisition of control. Additionally, while all regimes have turnover-based thresholds, some countries also count with additional thresholds, like a transaction value-based threshold in Germany and Austria, or market share-based thresholds in Spain and Portugal.
The multi-jurisdictional merger control filing analysis typically begins with a geographic turnover breakdown of the target from the last completed financial year, followed by a country-by-country analysis. Review timelines vary, but Phase I reviews are generally completed within 1-2 months after filing submission.
A. Austria
Enforcers
In Austria, the Federal Competition Authority (“FCA”) is the primary body responsible for reviewing mergers, together with the Federal Cartel Prosecutor (“FCP”) which determines whether to grant Phase I approval, or to request an in-depth Phase II review by the Cartel Court (Higher Regional Court Vienna).
Merger notification is mandatory in Austria if the relevant thresholds are met. However, concentrations falling under the jurisdiction of the European Commission pursuant to the EUMR are exempted from the notification requirement in EU member states, including Austria; this is known as the “one-stop-shop” principle.
Concentrations
If the transaction does not fall under the European Commission’s jurisdiction, the first step is to determine whether the type of transaction is notifiable in Austria. Transactions are notifiable if they involve any transfer of control, including (but not limited to) full mergers, acquisitions of majority shareholdings and acquisitions of controlling minority shareholdings. In Austria, control is defined as the ability to exercise decisive influence over an undertaking, following the same definition as under the EUMR. The establishment of new “full function” joint ventures is also notifiable as well as the acquisition of a 25% or greater shareholding or a 50% or greater shareholding (both in equity or voting rights), regardless of whether it confers control.
Filing thresholds
Once it is determined that the transaction is of a notifiable type, the next step is to assess whether it meets the jurisdictional thresholds for notification. In Austria, a concentration must be notified if:
- The combined worldwide turnover of all parties exceeds EUR 300 million; and
- the combined Austrian turnover of all parties exceeds EUR 30 million; and
- at least two parties each have worldwide turnover exceeding EUR 5 million; and
- at least two undertakings have Austrian turnover exceeding EUR 1 million.
Unless:
- Only one party had Austrian turnover of EUR 5 million or more; and
- the combined worldwide turnover of all other parties was EUR 30 million or less.
Beyond the traditional turnover-based criteria, Austria has implemented a transaction value threshold to capture significant deals that might not meet the standard turnover requirements. A transaction must be notified if:
- The combined worldwide turnover of all parties exceeds EUR 300 million; and
- the combined Austrian turnover of all parties exceeds EUR 15 million; and
- the value of the consideration of the merger exceeds EUR 200 million; and
- the target company has substantial domestic operations.
The “value of the consideration” encompasses all assets and other monetary benefits that the seller receives from the acquirer in connection with the transaction. Determining whether the target is active in Austria to a significant extent involves assessing factors such as current market activities, turnover, and the presence of a physical location within Austria.
For mergers that occur in the media sector, a special turnover calculation must be applied. Depending on the status of the undertakings concerned, (e.g., newspaper, publisher) the respective turnover must be multiplied by a factor of 200 or 20 when assessing whether it meets the turnover thresholds.
Review process
Once a transaction is notified, the FCA conducts an initial assessment (Phase I) within one month. If no concerns arise, the transaction is typically cleared at the end of this period. However, if potential competition issues are identified, the FCA may initiate an in-depth investigation (Phase II), during which the Cartel Court has up to five months to examine the transaction thoroughly. Then, the court will decide to either clear the transaction, possibly with conditions, or prohibit it.
Failure to notify a transaction is considered an infringement of the prohibition on implementation before clearance. In addition to nullifying the underlying transactional agreements, the Cartel Court, upon request of the FCA and/or the FCP, may impose fines on the undertakings concerned.
B. Germany
Enforcer
In Germany, the Federal Cartel Office (“FCO”) is the competent authority for reviewing concentrations. Transactions that are notifiable and meet the jurisdictional thresholds must be notified to the FCO for review. However, the one-stop-shop principle is applicable, meaning that concentrations falling under the jurisdiction of the European Commission pursuant to the EUMR are exempted from the notification requirement in Germany.
Concentrations
Transactions are notifiable if they involve any acquisition of control or competitively significant influence, acquisitions of substantial parts of the assets of another business as well as acquisitions of capital or voting rights exceeding 25%/50%. Control is interpreted in the same way as under the EUMR, namely the ability to decisively influence strategic business policy decisions or the composition of the supervisory or administrative boards of the target undertaking. Additionally, if a transaction results in two parents or more each holding at least 25% they are considered to form a joint venture which also constitutes a concentration.
Filing thresholds
Once it is determined that the transaction is of a notifiable type, the next step is to assess whether it meets the jurisdictional thresholds for notification. In Germany, a concentration must be notified if:
- The combined worldwide turnover of the undertakings involved exceeds EUR 500 million; and
- one undertaking has German turnover exceeding EUR 50 million; and
- one undertaking has German turnover exceeding EUR 17.50 million.
Like Austria, Germany has implemented a transaction value threshold to capture significant deals that might not meet the standard turnover requirements. Under the transaction value threshold, a transaction must be notified if:
- The combined worldwide turnover of the undertakings involved exceeds EUR 500 million; and
in Germany:
- the turnover of at least one undertaking concerned exceeds EUR 50 million; and
- neither the turnover of the target nor the turnover of another undertaking concerned exceeds EUR 17.50 million; and
- the value of the consideration received for the concentration is EUR 400 million or more; and
- the target is active to an appreciable extent in Germany.
Determining whether the target has "significant activities in Germany" involves assessing factors such as current market activities, turnover, and the presence of a physical location within Germany. For digital markets, significant activities may also be assessed based on user numbers or other engagement metrics.
In January 2022, the FCO, jointly with Austria’s FCA, updated the “Guidance on Transaction Value Thresholds”, clarifying the authorities’ approach to the transaction value threshold.
Review process
Once a transaction is notified, the FCO conducts an initial assessment (Phase I) within one month. If no concerns arise, the transaction is typically cleared at the end of this period. However, if potential competition issues are identified, the FCO may initiate an in-depth investigation (Phase II), which can extend the review period by up to four additional months. Then, the FCO will decide to either clear the transaction, possibly with conditions, or prohibit it.
Implementing a notifiable transaction without prior clearance from the FCO is prohibited and can lead to significant penalties. The FCO may impose fines of up to 10% of the undertaking's total turnover for such infringements. Additionally, the underlying transactional agreements may be deemed void under civil law.
