Clement Mifsud-Bonnici, Laura Spiteri and Chris Grech
In April, the Office for Competition within the Malta Competition and Consumer Affairs Authority (Malta NCA) published the government’s response to the public consultation on the proposed reforms to the Control of Concentration Regulations.
These changes which were proposed in January aim to significantly modernise merger control in Malta, with changes including a revised turnover test and the introduction of a call-in power (referred to here as ‘consultation’).
Revision of the turnover thresholds
Under the existing framework, a concentration (including a merger, acquisition of sole or joint control, or a takeover) that meets the jurisdictional test as set out in the regulations must be notified to and cleared by the Malta NCA before implementation.
The current test requires the notification of concentrations where the undertakings’ combined turnover in Malta exceeds €2.3 million, and each party to the transaction has a turnover in Malta equivalent to at least 10% of that combined figure in Malta.
The consultation proposes an upward revision of the turnover thresholds as follows:
• the aggregate combined turnover in Malta of the undertakings concerned must exceed €4,500,000; and
• each undertaking concerned must have a turnover in Malta equivalent to at least €800,000.
While stakeholders broadly supported the revision of the current turnover thresholds, views were expressed that the proposed thresholds remained low. The governement response confirms that this feedback was taken on board, with the Malta NCA now proposing the following thresholds:
• The aggregate combined turnover in Malta of the undertakings concerned must exceed €10,000,000; and
• Each of the undertakings concerned must have a turnover in Malta equivalent to at least €2,500,000.
“The proposed reforms are long overdue and highly anticipated”
The Malta NCA maintains that these revised turnover thresholds pursue two main objectives: they better reflect current economic conditions, while at the same time ensure that transactions which have a meaningful connection to Malta remain subject to review.
Call-in powers
While the upward increase of the turnover thresholds will allow the Malta NCA to focus on larger, more complicated concentrations, smaller transactions may still be subject to scrutiny due to the proposed introduction of a call-in power.
The consultation proposes empowering the Malta NCA to call-in below threshold concentrations which may have an effect on competition in any market for goods or services in Malta or any part of Malta. As originally proposed, this call-in power did not include any objective criteria or factors to be applied and considered by the Malta NCA in its exercise of this power.
As the feedback to the consultation notes, such a wide power risks creating legal uncertainty for investors given the broad discretion being afforded to the Malta NCA.
In response, the Malta NCA has refined its proposal. In this respect, the response clarifies that the call-in power will apply subject to there being a prima facie risk that a concentration may substantially lessen competition, and where the undertakings concerned have a minimum aggregate turnover in Malta of €5 million.
The inclusion of a minimum turnover threshold, which must be met to trigger the call-in power, is welcome. This is a somewhat objective criterion, but admittedly, it is not clear from the response whether any one undertaking’s turnover may trigger it. On the other hand, the prima facie standard is low and likely to be satisfied.
The Malta NCA also plans to introduce guidelines outlining the circumstances which may trigger a call-in. Clear guidelines will certainly be welcomed.
The response also introduces time limits within which the call-in power may be exercised, namely a three-month period from the relevant transaction trigger, as well as a 15-working day period from the receipt of sufficient information. This should reduce the uncertainty of deals being called in prior to closing.
Information requests by the Malta NCA
The consultation proposes a broad power to request information on planned concentrations.
The response narrows this concept of a ‘planned concentration’ to situations where an agreement has been concluded, a takeover bid announced, or control has been acquired. As is the case with requests for information issued by the Malta NCA, such requests must specify their legal basis, scope and a deadline by when submissions must be made.
The merger control reform is expected to come into force by the end of this year. The proposed reforms are long overdue and highly anticipated.
At this juncture, it is certainly positive that the Malta NCA has indicated its willingness to change some of its original proposals following the feedback received in the consultation.
Clement Mifsud-Bonnici is a partner, Laura Spiteri is an advocate and Chris Grech is an associate, all at Ganado Advocates.
