TerraLex Cross-Border Guide to Pre-Merger Notification Guide

Yes. In addition to ordinary mandatory merger notification regime, i.e. which must not be implemented prior to receiving a respective merger control clearance, the Competition Council of the Republic of Lithuania (“Competition Council”) is also entitled to exercise ‘call-in’ powers by applying ex post concentration control. Indeed, Competition Council has the power to compel notification of below-threshold transactions at its own initiative on ex officio basis, i.e. even when the filing thresholds have not been triggered.

The decision to apply ex post concentration control may be adopted within a 12-month period commencing on the date of implementation of concentration.

It is possible to approach the Competition Council with the notification to reduce possible non-compliance risks or in case there is a risk that the Competition Council may initiate merger control procedure at its own initiative.

The following types of transactions are caught:

• two or more independent undertakings merge (e.g., one undertaking is merged into another undertaking); and
• acquisition of control, when one or more natural persons already exercising control over at least one undertaking, or one or more undertakings obtain control through: (i) joint establishment of a new undertaking (except when such new undertaking does not operate as an autonomous undertaking); or (ii) acquisition of all or part of the assets of the undertaking; or (iii) acquisition of shares or other securities or by contract or through other means which grant control over another undertaking.

The acquisition of assets or rights to use those assets triggers the duty to obtain merger control clearance if the turnover can be clearly attributed to the assets or part the assets.

The concept of “control” mirrors the concept of control under the EU Merger Regulation. “Control” means any rights arising from laws or transactions which entitle a legal or natural person to exert a decisive influence on the activity of an undertaking, including: (i) the right of ownership to all or part of the assets of the undertaking or the right to use all or part of the assets of the undertaking; (ii) other rights which permit exertion of a decisive influence on the decisions of the bodies of the undertaking or the composition of its personnel. The “decisive influence” is defined as the position which enables to implement decisions in relation to the economic activity of the controlled undertaking, the decisions of its bodies or the composition of its personnel.

There is an exception from the merger control rules in relation to some transactions concluded by financial institutions. The filing obligation does not arise when credit institutions, intermediaries of public trading in securities, collective investment undertakings or management companies managing them or insurance companies acquire 1/3 or more of shares in another enterprise with a view to transferring them, provided that they do not exercise the voting right conferred by the shares, and that any such transfer takes place within one year and, the information is submitted to the Competition Council within one month from the acquisition.

If the financial institutions which acquired 1/3 or more of shares in another enterprise decide not to comply with the conditions provided for in this paragraph, they must submit a notification of concentration in accordance with the general procedure.

The concentration shall be notified if the following turnover thresholds are satisfied:

• combined aggregate Lithuanian turnover of the undertakings concerned is more than €20 million; and
• the Lithuanian turnover of each of at least two undertakings concerned is more than €2 million.

The Lithuanian merger control regime will not apply if only one party to the concentration satisfies the turnover thresholds.

Only turnover generated in Lithuania is calculated for the purposes of the above thresholds. There is no distinction between undertakings registered in Lithuania and foreign undertakings. The turnover generated in Lithuania comprises of amounts received from the sale of products and provision of services in Lithuania.

The combined aggregate turnover is understood as the sum of the aggregate turnover of the undertakings participating in concentration. The undertakings participating in concentration are determined as stipulated below:

• in case of a merger, each merging undertaking shall be considered as an undertaking participating in the concentration;
• as a general rule, in case of an acquisition of another undertaking, all or part of the assets of the undertaking or a part of its shares, the buyer and the target shall be considered as undertakings participating in the concentration;
• as a general rule, in case of an acquisition of joint control in another undertaking, all or part of the assets of the undertaking or a part of its shares, each undertaking acquiring joint control and the target shall be considered as undertakings participating in the concentration;
• as a general rule, in case of an establishment of a joint venture by way of agreement, each of the parties to the agreement shall be considered as undertakings participating in the concentration.

The relevant turnover thresholds refer to all revenues of the group of companies to which the undertaking concerned belongs. However, where the acquisition involves part of the group, only the turnover of the part acquired will be included in the turnover calculation. Intra-group sales are excluded from the calculation of the group turnover.

Joint ventures are caught by the merger control rules if they involve acquisition of shares or assets the same way as in case of other market participants. The Competition Council follows the European Commission Jurisdictional Notice under Council Regulation (EC) No 139/2004 (Jurisdictional Notice), which means that only full function joint ventures are caught by the merger regime.

The transaction is notifiable whenever the turnover threshold criteria are met. This means that foreign-to-foreign transactions which satisfy the turnover thresholds are also caught by the merger control regime.

The information required in a merger notification are set by the Lithuanian Law on Competition and by requirements established by the Competition Council which are detailed in regulations and informal guidance, e.g., such as the form of merger notification, the merger notification template, memorandum on document submission to the Competition Council. The Lithuanian Law on Competition establishes that the following information must be included:

• the registration data of the parties to a concentration;
• the reasons and purposes of concentration;
• a description of the manner of concentration;
• the annual financial accounts of each undertaking participating in concentration for the last three years prior to concentration;
• the data on the enterprises owned by each undertaking participating in concentration or the controlling persons as well as data on the enterprises the holders of interests or member shares of which they are;
• the purchase and sale volumes of each undertaking participating in concentration for the last three years prior to concentration and evaluation of their market share in a relevant market;
• a list of the main competitors in the relevant markets of each undertaking participating in concentration.

The time limit for compiling a merger notification depends on the particular case. Typically, the gathering of necessary information takes from three weeks to several months. Additional time is also required if the notifying party elects to enter into pre-notification contacts with the Competition Council.

Yes. The merger participants may ask the Competition Council to exempt them from the obligation to submit particular information or documents, if such information or documents are not necessary for the examination of the merger. The Lithuanian regulation on merger control proceedings stipulate that this exemption may only be applied if obtaining of such information or documents is objectively impossible or burdensome. The Competition Council has a discretion to decide whether the request for exempting certain data is justified. If it is not, the filing is considered incomplete.

Yes. The fee is €19,300 for the examination of the merger notification. €6,400 fee is charged for the examination of request to execute separate merger actions.

There is no statutory deadline for filing a notification, however, the parties may not close the transaction before a merger clearance is obtained. The filing may be made when there are actions demonstrating a clear intent of the parties to enter into a notifiable transaction (in practice, the Competition Council in specific circumstances accept that such intent is demonstrated for example, based on memorandum of understanding, letter of intent), however, if there are changes to the facts stated in the merger notification, such changes must be notified to the Competition Council and it may change the official start of merger proceedings to the date when the Competition Council receives information about changes to the facts stated in the merger notification.

The Lithuanian Law on Competition prohibits completion of a notifiable transaction prior to the date when merger clearance is granted by the Competition Council.

The Lithuanian merger control regime provides for two phases of merger review, Phase I and Phase II (in-depth investigation). Within Phase I, the Competition Council has one month from the date when a complete notification has been received, to adopt one of the following decisions: (i) clear the merger unconditionally, (ii) clear the merger subject to commitments, (iii) prohibit the merger, or (iv) open an in-depth investigation (Phase II).

The notification is deemed to be filed on the date when the Competition Council receives a “complete” filing. The Competition Council has seven business days from the date of the submission to request additional information if it considers the merger filing to be incomplete.

If the Competition Council decides to open Phase II, it has to render a final decision within four months from the date of the filing.

The vast majority of mergers are cleared in Phase I, that is, within a month from the date when the Competition Council receives a “complete” filing. However, practical time periods necessary to “clear” the transaction and achieve the Competition Council finding that the filing is deemed to be “complete” depends on the complexity of the case and vary from one month to a year.

The Competition Council may impose a penalty on in the amount of up to 10% of the undertaking’s turnover in the previous financial year for completing a notifiable transaction without the respective clearance from the Competition Council. The payment of the penalty does not release the penalized parties from their obligations to comply with the decisions of the Competition Council or the duty to obtain merger clearance for the notifiable transaction.

The Competition Council has the power to request a merger filing for a transaction which did not trigger notification thresholds, and which was completed within twelve months if the transaction is likely to create or strengthen a dominant position or significantly impede competition on the relevant market.

Other than that, the Competition Act does not provide for a waiting period or for a post-closing challenge.

If the transaction is not notifiable but could be subject to post-merger notification, the parties may ask the Competition Council to initiate the merger control proceedings or confirm that the Competition Council that it will not require a post-merger notification.

The notifiable mergers are reviewed by the Competition Council, which renders its decisions independent from political or other external influence and directions. The Competition Council is authorized to monitor compliance with the merger control rules. In this capacity, it has a power to initiate investigations, impose penalties for failure to notify a notifiable merger, impose conditions on merger clearance, prohibit mergers, require a post-merger notification, and file claims in court.

After receiving a merger notification, the Competition Council publishes on its website the fact and the date of the merger filing, the names of the parties involved and a short summary about the economic activities of the undertakings (incl. associated undertakings) participating in the concentration.

If the Competition Council decides to consider commitments proposed by the parties, it would publish on its website a call for interested parties to submit their opinions regarding the draft commitments.

The final decision of the Competition Council is published on its website and in the official publication. Notifying parties should indicate in the merger notification the information which is confidential and provide a justification for the request to grant this information the confidential status. The confidential information is omitted from the publication and not revealed to third parties if they are granted access to the file.

Mergers are likely to be reviewed in Phase II and could be subject to commitment decisions or be prohibited if the parties involved have significant market shares in the same or related markets.

Making use of pre-notification meetings with the Competition Council and cooperating with the authority once the filing is made may ensure a swifter reviewing process. If the Competition Council considers the merger “problematic,” notifying parties should propose commitments that would address potential competition concerns.

Certain transactions are subject to Lithuanian foreign direct investment screening rules.

Mergers in regulated sectors may be subject to specific rules imposed by the regulatory authorities. This is the case, for example, in financial markets where additional requirements are enforced by the Bank of Lithuania.