Amendments to the Norwegian merger control regime: from a cumbersome obstacle in international transactions to a more aligned regime

December 2013 | EXPERT BRIEFING | MERGERS & ACQUISITIONS

financierworldwide.com

In many international transactions, notification of a merger or acquisition and approval by the Norwegian Competition Authority (NCA) has been required because of very low turnover thresholds in the Norwegian Merger Control Regime – often where no such approval has been required in other jurisdictions, or at least in few other jurisdictions. Hence, the parties to a contemplated transaction have had to await clearance from Norwegian authorities in order to complete and proceed with the transaction. This would be the case even for foreign-to-foreign transactions and transactions where the parties only have a minor impact on markets in Norway, or no impact on Norwegian markets at all. Although most filings are cleared after 15 working days, an approval could potentially take up to 115 working days if the NCA finds that the merger causes concerns for competition in relevant markets in Norway.

As a result, Norwegian merger control has been an obstacle and a cause of delay in international transactions involving companies with sales in Norwegian markets even when such sales are very low.

The reason for this is that in the current regime the turnover thresholds triggering an obligation to notify mergers or acquisitions to the NCA have been substantially lower than in most other jurisdictions with a merger review system. Indeed, transactions where at least one of the parties has annual turnover exceeding NOK 20m in Norway (approximately €2.7m) and where both parties have an aggregate turnover exceeding NOK 50m in Norway (approximately €6.7m) the notification of the merger or acquisition is required under the current Norwegian merger control regime.

After an ongoing revision of the Norwegian Competition Act, the filing thresholds will now be significantly raised in order to bring the Norwegian merger review more in line with, among others, the other Nordic jurisdictions. Following the revision, a concentration will only be subject to merger notification if the combined aggregate Norwegian turnover of the undertakings concerned is more than NOK 1bn (approximately €125m), and at least two undertakings concerned each have a Norwegian turnover exceeding NOK 100m (approximately €12.5m).

Although raising the thresholds will be a significant improvement, still, even after the revision, the new thresholds are lower than in most other jurisdictions.

Also, for concentrations below the new filing thresholds, the NCA may on a case-by-case basisrequire a party to a concentration to notify the concentration where particular grounds exist for doing so. The rationale is that the NCA shall have competence to intervene when a merger below thresholds might cause constraints on competition in narrowly defined and local markets. The NCA has stated it will actively monitor markets and use its competence to require parties to notify transactions that are also below turnover thresholds on a case-by-case basis.

The risk of an intervention from the NCA will now to a greater extent lie with the buyer – as opposed to the current system where the risk, because of the low thresholds combined with a standstill obligation, normally will lie with the seller. Hence, if the parties consider there is a risk that the NCA may intervene in a transaction, there might be a need to adjust current SPA ‘standard’ formulations.

In order to provide some predictability for the parties, the competence of the NCA to order the parties of a transaction below the filing thresholds to submit a notification, is subject to a time-limit. The NCA has to order the parties to submit a notification within three months of the parties entering into a ‘final agreement’. An agreement is considered final when there is a binding agreement between the parties and any necessary corporate approvals (e.g., from the board of directors or the general assembly) have been given.

A party and other participants in a concentration may also submit a notification voluntarily for transactions below the thresholds. A voluntary filing might bring clarification if the parties have concerns about the compatibility of the transaction.

Also, the new merger regulation contains provisions for a ‘simplified procedure’ (similar to the Short Form CO procedure in the EU) in certain cases where the impact on competition in the market is expected to be insignificant. The rules on simplified procedures are to be elaborated in a Regulation which has not yet been adopted. In a draft regulation it has been suggested that simplified notification can be used for the following transactions, among others: (i) where there is no overlap between the parties; (ii) where the combined market share of the parties in overlap markets is below 15 percent; (iii) for vertical transactions where market shares are below 25 percent; and (iv) for certain joint ventures. Accordingly, the draft regulation is not aligned with the EU Commission’s proposal to make more transactions subject to the simplified procedure under the EU Merger Regulation. It has also been debated whether pure foreign-to-foreign-transactions (i.e., transactions where the parties achieve turnover in Norway but have no physical presence, such as a subsidiary in Norway) should also be able to profit from a simplified procedure. However, the draft regulation does not include foreign-to-foreign transactions in the group of transactions that can benefit from a simplified procedure.

Some other procedural rules related to the merger review have also been amended with the purpose of simplifying the merger review process. Furthermore, the timetable is to be reduced with 15 working days to allow for a speedier merger review process.

The new merger control regime will certainly be a welcome change for companies present in Norwegian markets planning to proceed with mergers and acquisitions, as the number of transactions that will be subject to a filing obligation will be significantly lower. Indeed, the new turnover thresholds are expected to reduce the number of notifications considerably, at approximately 70 percent. For mergers and acquisitions exceeding the thresholds and therefore still requiring a notification, the merger review process will on the whole be speedier, more flexible and less extensive.

The amendments to the Norwegian merger control regime will enter into force on 1 January 2014. The amended Act does not contain any transitional provisions for merger notification. Based on several requests, the NCA has recently issued a statement of interpretation, stating that for transactions signed before 1 January 2014 but implemented after the new filing thresholds enter into force, the new thresholds will apply. Consequently, parties signing a transaction in 2013, but where the parties have agreed to await the implement of the transaction until 2014, do not need to notify the NCA unless the new higher turnover thresholds are met.

Kristin Hjelmaas Valla and Henrik Svane are partners, and Mari Holen Christensen is an associate, at Kvale. Ms Hjelmaas Valla can be contacted on +47 2247 9714 or by email: khv@kvale.no. Mr Svane can be contacted on +47 2247 9757 or by email: hs@kvale.no. Ms Christensen can be contacted on +47 2247 9785 or by email: mhc@kvale.no.

Kristin Hjelmaas Valla, Henrik Svane and Mari Holen Christensen

Kvale