The most relevant amendments Tonmerger control in the new Competition Act are the new de minimis market share notification threshold and modified turnover thresholds, which aim at exempting from notification transactions without significant effects in Portugal. The abolition of the current 7-day notification deadline (which was unnecessary and resulted in a number of incomplete notifications) is also a welcome change. In terms of substance, the new Competition Act aligns the substantive test with the Significant Impediment of Effective Competition (“SIEC”) test of the EC Merger Regulation, which also influences other amendments to the Act.
Jurisdictional thresholds
The new Act provides three alternative sets of thresholds for a concentration to be subject to mandatory filing:
- The turnover threshold is revised: The combined turnover in Portugal of the parties to the transaction in the preceding year must have exceeded €100 million (previously €150 million), and at least two of the merging parties must have achieved €5 million in Portugal in the same period (previously only € 2 million);
- The standard market share threshold is increased to 50% of the national market of a given good or service (in the former Act, the standard threshold was 30%); and
- New de minimis market share threshold, according to which the acquisition, creation or reinforcement of a share between 30% and 50% of the “national market” will be subject to mandatory filing only if at least two of the participating undertakings achieved individually in Portugal a turnover of at least €5 million in the previous financial year.
New substantive test and criteria of review
The dominance test of the former Competition Act is replaced with the Significant Impediment to Effective Competition (SIEC). This change aligns the standard of review in Portugal with EU law, and may affect the outcome of a small number of “unilateral effects” cases, notably where the elimination of important competition constraints would have harmful effects on competition, even if a dominant position of the merged entity cannot be established.
The New Act also adds two new criteria to be considered by the Authority in the substantive analysis of the transaction, in addition to the existing standard criteria common with EU law. The first allows for a limited “efficiency defence” and provides that the evolution of economic and technical progress that does not constitute an obstacle to competition must be taken into account, insofar as efficiencies benefitting consumers result from the transaction. The second is most controversial, as it requires the Authority to take into account the bargaining power of the merged entity towards its suppliers, in order to prevent the reinforcement of “the state of economic dependence” of the latter. By contrast, the criterion of “international competitiveness of the Portuguese economy”, which was never referred to in Authority’s case practice, no longer appears in the Competition Act.
Procedural rules
- Elimination of notification deadline, which was unnecessary, as the parties are prohibited from implementing the transaction before an express or tacit clearance decision is adopted by the Authority.
- Voluntary notification before execution of the relevant legal instruments is expressly permitted, if a “serious intention” can be demonstrated.
- A number of procedural deadlines are revised:
- No limit to deadline suspension from additional information requests (before there was a limit of 10 working days in Phase II).
- In phase II cases, the Authority must issue a statement of objections to merging and third parties within 75 working days from notification.
- Submission of commitments in both phases of the procedure stops the clock for 20 days.
- The decision deadline may be extended for up to 20 working days in phase II by initiative of the notifying party or its consent.
- Binding opinion from the media regulator (ERC) suspends the deadline.
- Deadlines for ex officio proceedings are aligned with standard deadlines.
- The introduction of substantial amendments to a notified merger restarts the clock.
- Access to the file of third parties will be limited, and allowed only in the period to submit initial observations in phase 1 and in the period of third party hearing (before a decision is adopted) in both phases of the procedure.
- Reduction of investigative powers. In merger control cases the Authority no longer has competence to conduct unannounced searches of the premises of merging parties (such powers were never used under the previous Act).
Exemptions
- Scope of bankruptcy exemption will be narrowed, as only acquisitions by an insolvency administrator within insolvency proceedings will be exempt from filing, in keeping with EU rules.
- Exemption of transitory acquisitions by financial institutions will also be more limited. As under EU rules, such transactions will only be exempted if securities are acquired with a view to its resale, the acquirer does not exercise the corresponding voting rights with a view to determine the competitive behaviour of the target, and if the disposal of the controlling interest occurs within 1 year (extension possible).
Other amendments
- Interrelated transactions. Two or more transactions within two years between the same parties will be considered a single transaction and subject to notification if combined they exceed the turnover thresholds.
- Suspension of all effects before clearance. The New Act clarifies that a transaction implemented before a clearance decision is adopted does not produce any legal effect.
- New standstill obligations. The new Act expressly requires that acquiring parties should suspend their voting rights in the acquired company. Conversely, the management of the acquired company is limited to “normal management” duties and is expressly barred from selling any of the company’s assets (apparently even if not related to the concentration under review).
