This country-specific Q&A provides an overview of Merger Control laws and regulations applicable in Croatia.
The competition rules, including merger control rules in general, in Croatia are enforced by the Croatian Competition Agency (Agencija za zaštitu tržišnog natjecanja, Savska cesta 41, 10000 Zagreb, www.aztn.hr; hereinafter: the “Agency”). The Agency is an independent authority responsible to the Croatian parliament. The Council of the Agency is decision making body and is composed of five members. More details on the Agency and its activities can be found on its website at www. aztn.hr. The decisions of the Agency may be appealed before High Administrative Court of the Republic of Croatia. The decisions of the Agency are enforceable, and the appeal normally does not suspense the effect of the decision.
The competition law in Croatia is governed by the Competition Act, which entered into force on 1 October 2010 and were amended in 2013 and in April 2021 (Official Gazette 79/09, 80/13, 41/21; hereinafter: the “Competition Act”). In addition, EU merger control rules are directly applicable under conditions stated therein.
In addition to the Competition Act, the merger control is governed by the following by laws: (i) Regulation on Notification and Assessment of Concentrations Official Gazette 38/11); (ii) Regulation on the Definition of the Relevant Market (Official Gazette 9/11); and (iii) Regulation on the Method of Setting Fines (Official Gazette 129/10).
Finally, the Competition Act determines subsidiary application of the Act on General Administrative Procedure, Misdemeanors Act and the Administrative Disputes Act, while fees applicable to merger control issues are determined in accordance with the Act on Administrative Fees and Tariff.
Is notification compulsory or voluntary?
A notification is mandatory, if the following two conditions are met: (i) the transaction leads to a change of control (e.g. by acquisition of sole or joint control) or a change in the quality of control (e.g. from joint to sole control), and (i) the annual turnover thresholds set out in the Competition Act.
Is there a prohibition on completion or closing prior to clearance by the relevant authority? Are there possibilities for derogation or carve out?
Yes, the Competition Act imposes a “stand-still obligation” which prohibits the parties from closing a transaction prior to receiving clearance from the Agency. In exceptional cases, pursuant to the request of the undertakings involved, the Agency may allow implementation of certain actions even prior the clearance of the transaction.
The derogations or carve out mechanism are not expressly provided for in the Competition act and were never tested in the practice.
What types of transaction are notifiable or reviewable and what is the test for control?
Under the Competition Act, a concentration arises by change of control over an undertaking on a lasting basis. The control may be changed as a consequence of: (i) merger between previously independent undertakings (or parts thereof); or (ii) acquisition of direct or indirect control or the controlling influence over the undertakings (or parts thereof) by acquiring a majority shareholding or a majority of the voting rights, or by other means with the same effect (iii) establishing a full functioning joint venture (that will perform the activities of otherwise independent entities, on the long lasting basis).
An undertaking is deemed to control another undertaking, if it directly or indirectly, holds more than half of its shares, may exercise more than half of its voting rights, has the right to appoint more than half of the members of the manager board, supervisory board or similar managing or supervising bodies, or is able to exercise decisive influence on the business of the controlled undertaking in any way.
The Competition Act adopted the significant impediment to effective competition test (SIEC test), thus implying, that the Agency will more focus on effect based approach. Namely, the Competition Acts states that “…a concentration of undertakings which would significantly impede effective competition on the market, particularly if this impediment is a result of creation or strengthening of a dominant position of a party to the concentration represents a prohibited transaction.”
In which circumstances is an acquisition of a minority interest notifiable or reviewable
The acquisition of minority interest triggers the obligation to notify the merger if it, de facto or de iure, leads to creation of decisive influence (sole or joint, direct or indirect) of the acquired on the target.
What are the jurisdictional thresholds (turnover, assets, market share and/or local presence)? Are there different thresholds that apply to particular sectors?
A concentration must be notified if: (i) the combined worldwide turnover of all participating undertakings is at least HRK 1 billion (approx. EUR 134 million); and (ii) the aggregate turnover in Croatia of each of at least two of the participants is at least HRK 100 million (approx. EUR 13.4 million) in the financial year preceding the concentration. Where the concentration consists in the acquisition of only the part of one or more undertakings only the turnover generated by that part of the target shall be taken into account. Two or more such transactions that take place within a two-year period shall be deemed one concentration arising on the date of the last transaction.
Transaction in media sector are to be notified to the Agency regardless of the turnover achieved by the parties.
In addition, under certain conditions, transaction in the electronic communications, credit institutions and insurance sectors, are to be notified to the relevant authorities.
How are turnover, assets and/or market shares valued or determined for the purposes of jurisdictional thresholds?
The jurisdictional thresholds are based on turnover. The turnover for the last financial year for which audited accounts are available is taken into account.
Is there a particular exchange rate required to be used to convert turnover and asset values?
The exchange rate of National Bank of Croatia should be used.
In which circumstances are joint ventures notifiable or reviewable (both new joint ventures and acquisitions of joint control over an existing business)?
Only full-function joint ventures are caught by the merger control rules. Full-function joint ventures are joint ventures that perform all functions of otherwise independent economic entities on a lasting basis.
Please note that full function joint ventures may be additionally assessed under the rules imposed for the assessment of anticompetitive agreements.
Are there any circumstances in which different stages of the same, overall transaction are separately notifiable or reviewable?
No. However, such obligation may de facto arise if the two or more transactions between the same undertakings are realized in the period of less than two years since such consecutive transactions are deemed as one concentration, occurring on the date of the last of such consecutive transactions. Thus, it may occur that only the last transaction in fact triggers notification obligation.
How do the thresholds apply to “foreign-to-foreign” mergers and transactions involving a target /joint venture with no nexus to the jurisdiction?
The Competition act does not regulate “foreign-to-foreign” transactions. However, general merger control rules apply, if the turnover thresholds are met (see answer under 6. above).
For voluntary filing regimes (only), are there any factors not related to competition that might influence the decision as to whether or not notify?
What is the substantive test applied by the relevant authority to assess whether or not to clear the merger, or to clear it subject to remedies? Are there different tests that apply to particular sectors?
The Agency applies effect based assessments under the significant impediment to effective competition test (SIEC). The Competition Act states expressly that “a concentration of undertakings which would significantly impede effective competition on the market, particularly if this impediment is a result of creation or strengthening of a dominant position of a party to the concentration represents a prohibited transaction.”
However, please note that, different or additional rules may apply when the concentration is assessed by other relevant authorities under the sector specific rules.
Are factors unrelated to competition relevant?
No, only the factors related to competition law are relevant for the assessment.
Are ancillary restraints covered by the authority’s clearance decision?
The merger control regime does not specifically regulate this issue. However, due to the fact that ancillary obligations would be contained in the decision and the fact that the Agency follows to the great extend the practice of the EU Commission, it may be concluded that the ancillary obligation would be covered by the decision in the manner regulated by the Commission notice on restrictions directly related and necessary to concentrations (2005/C 56/03) covers the details of this issue.
For mandatory filing regimes, is there a statutory deadline for notification of the transaction?
The notification has to be made after signing of the relevant agreement (or publication of the takeover bid), albeit before closing of the transaction.
What is the earliest time or stage in the transaction at which a notification can be made?
The notification has to be made after signing of the relevant agreement (or publication of the takeover bid). Exceptionally, the notification may be made prior to signing the agreement, if the notifying party proves, in good faith, an actual intent for conclusion of the relevant agreement or takeover bid.
Is it usual practice to engage in pre-notification discussions with the authority? If so, how long do these typically take?
Yes, it is even advisable to engage in pre-notification discussion with the authority. The duration to the large extend depends on the complexity of the relevant case. The officials of the Agency are statutorily obliged to maintain confidentiality of business secrets learned during their time in office (including during any pre-notification consultations). However, depending on all circumstances of the case, in particularly sensitive transactions it may be feasible to engage in discussions with the officials on a ‘no-name’ basis.
What is the basic timetable for the authority’s review?
The Agency shall decide whether to initiate a Phase II investigation within 30 days from the receipt of complete notification. If the Agency’s decision on commencement of a Phase II investigation is not issued within such 30-day period, the transaction shall be deemed approved by the Agency in the Phase I. If the transaction is not approved within Phase I, the Agency proceeds with substantive assessment in Phase II. The decision in Phase II shall be passed by the Agency within next 3 months from its commencement.
However, in practice is should be expected that this basic timetable may be prolonged.
Under what circumstances may the basic timetable be extended, reset or frozen?
The deadline for the Agency’s decision in Phase I starts only after the Agency issues the certificate that the notification has been completely submitted. Also, in Phase II, “clock is not ticking” in the time period from the delivery of Statement of objection by the Agency to parties till the parties’ submit its comments to the Agency (commonly 30 days).
Are there any circumstances in which the review timetable can be shortened?
The Competition Act does not envisage options for shortening the timetable, however close cooperation with the Agency may ensure that the process will run smoothly.
Which party is responsible for submitting the filing?
In case of acquisition of the sole control, an acquirer is responsible for notifying the transaction. In all other cases, the participating undertakings should submit the notification.
What information is required in the filing form?
A notification has to be submitted on the specific form and is expected that it sufficient level of details. The notification must contain the following information: a description of the transaction and legal basis for the transaction; strategic and economic reasons for the transaction; effects/benefits of the transaction; information on the participating undertakings (including the shareholding structure and their activities); financial data on the value of the transaction and turnovers of the participating undertakings; elaborate information on the relevant markets; market shares of the participating undertakings and their main competitors; distribution and supply channels (largest vendors/suppliers); information on obligation to notify/assess the transaction in other jurisdictions and the relevant status.
However, the Agency may request additional data/documents necessary for the appraisal of the transaction.
Which supporting documents, if any, must be filed with the authority?
Normally, supporting document include the following: the commercial registry excerpts for the participating undertakings, the agreement or other underlying document related to the transaction, annual financial reports and may include all available internal/external documents that may substantiate statements made in the notification (eg. studies, surveys, analyses and other reports prepared for or by the boards or shareholders of the participating undertakings and/or prepared by third parties.
Is there a filing fee?
The filing fee is set in the fixed amount of approx. EUR 970 for Phase I clearances and in the fixed amount of approx. EUR 13 800in case of Phase II proceedings. Lower fees are applied for transactions below the general notification threshold, but need to be notified to the Agency based on sector specific rules.
Is there a public announcement that a notification has been filed?
Yes, upon the submission of the notification, the Agency shall publish the notified transaction (and an invitation for the submission of comments and opinions) on its website.
Does the authority seek or invite the views of third parties?
Yes, upon the submission of the notification, the Agency shall publish an invitation for the submission of comments and opinions. Please note that publication is made on the Agency’s web-site. The 3rd parties are usually granted 10 to 15 days deadline for submission of comments and opinions.
What information may be published by the authority or made available to third parties?
In case of Phase I clearances, the Agency publishes only an announcement that the particular transaction has been cleared by the Agency. However, full text of decisions taken in Phase II are published. The Agency’s decisions sets in full detail all aspects of the transaction relevant for the Agency’s assessment (details of the parties, details of the transaction, economic and business rationale and effects, etc), without disclosing, the trade secrets of the parties.
Does the authority cooperate with antitrust authorities in other jurisdictions?
The Agency actively cooperators with member of the European Competition Network and the International Competition Network. The closest cooperation has been developed with the relevant authorities of EU Member states and the authorities of neighboring countries.
What kind of remedies are acceptable to the authority?
The Agency accepts behavioral and structural remedies.
What procedure applies in the event that remedies are required in order to secure clearance?
Should the Agency during the Phase II investigation decides that the envisaged transaction raises concerns, it will inform the relevant parties in the Statement of Objection. The parties may within the given deadline (30 days), pursuant to the issued Statement of Objection, propose remedies to address the stated concerns. However, the parties may also, if deem appropriate, propose the remedies in earlier stages of the process. The Agency may, fully or in part, reject the proposed remedies.
What are the penalties for failure to notify, late notification and breaches of a prohibition on closing?
An undertaking failing to notify a transaction may be exposed to a fine of up to 1 per cent of the aggregate annual turnover. In case a transaction is closed prior to its approval by the Agency, participating undertakings may be exposed to fines of up to 1 per cent of their respective aggregate annual turnover.
What are the penalties for incomplete or misleading information in the notification or in response to the authority’s questions?
If the incomplete or misleading information in the notification or response to the authority fines of up to 1 per cent of their respective aggregate annual turnover can be imposed.
Can the authority’s decision be appealed to a court?
The review of the authority’s decision is preformed by the High Administrative Court. The procedure is launched by the administrative claim within 30 days deadline and is conducted in accordance with the Act on Administrative dispute.
What are the recent trends in the approach of the relevant authority to enforcement, procedure and substantive assessment
The financial thresholds triggering obligation to notify are set at relatively high levels. However, the majority of mergers investigated by the Agency are approved (predominantly in Phase I). The practice shows that almost no transaction were forbidden by the Agency and rare Phase II cases.
Are there any future developments or planned reforms of the merger control regime in your jurisdiction?
Not at this point as the Competition Act has been amended in 2021 and no further amendments have been announced.
Estimated word count: 2833
Privacy & Cookies Policy