Chapter Three of the Law on Protection of Competition (Official Gazette of the Republic of Macedonia No. 145/10, 136/11, 41/2014, 53/16, 83/18 and Official Gazette of the Republic of North Macedonia 208/24 and 16/25) (the Law) refers to the control of concentrations.

In this part, the Law:

-      defines what is considered a concentration;

-      defines the conditions that concentrations must meet in order to be subject to mandatory notification to the Commission for Protection of Competition (the Commission); and

-      defines the criteria on the basis of which concentrations are assessed, i.e. the criteria on the basis of which the Commission decides whether to approve or prohibit the concentration.

What is considered a concentration under the Law?

According to Article 12 of the Law, a concentration occurs with a change of control on a long-term basis.

A concentration, i.e. a change of control on a long-term basis, is considered as:

-      the merger of two or more previously independent enterprises or parts of enterprises; or

-      the acquisition of direct or indirect control over all or parts of one or more other enterprises by one or more persons already controlling at least one enterprise (including cases where a natural person who already controls another enterprise acquires control over an enterprise); or

-      the acquisition of direct or indirect control over all or parts of one or more enterprises by one or more enterprises (acquisition of joint control is also considered a concentration).

When an enterprise was under sole control of one person, and after the transaction that person continues to hold joint control with another, this is also considered a concentration. Similarly, when an enterprise was under joint control, and after the transaction one enterprise acquires sole control (including acquisition of control by a natural person who already controls one or more enterprises), this is also considered a concentration—even if the acquirer of sole control previously held joint control.

Means of acquiring control

Control may be acquired through the purchase of shares, stakes, increase of charter capital, purchase of part of the property, through contracts (e.g. the right to use all or part of the enterprise’s property or rights/contracts that allow decisive influence over the composition, voting, or decision-making of the enterprise’s bodies), or by other means prescribed by law.

The creation of a joint venture that, on a long-term basis, performs activities of an autonomous economic entity is also considered a concentration.

A concentration does not exist when:

1.    Banks, savings houses, and other financial institutions or insurance companies whose regular activities include legal transactions and trading in securities temporarily acquire securities with the intention of reselling them within one year of acquisition, provided that voting rights from such securities are not exercised with the aim of influencing the competitive behavior of the enterprise on the market;

2.    Control is exercised by a trustee in bankruptcy or liquidation proceedings;

3.    Investment funds acquire a capital interest in enterprises, provided that rights are exercised solely to maintain the full value of the investment and without influencing competitive behavior of enterprises in the market;

4.    Internal restructuring within a group of related enterprises takes place without a change in control. For example, increasing shares where control remains unchanged, or restructuring such as mergers of related enterprises, or when control is acquired by another enterprise within the same group. A concentration only occurs if the transaction leads to a change in the quality of control and thus is no longer a purely internal change.

Is notification to the Commission mandatory for every concentration?

Notification to the Commission is mandatory only if the participants in the concentration meet certain conditions.

According to Article 14 of the Law, notification must be submitted to the Comission if:

1.    The combined total annual revenue of all participating enterprises, achieved by selling goods and/or services worldwide, exceeds EUR 10 million in denar equivalent (including revenue generated in the RNM) in the business year preceding the concentration, with at least one participant registered in North Macedonia; and/or

2.    The combined total annual revenue of all participants in North Macedonia exceeds EUR 2.5 million in denar equivalent in the preceding business year; and/or

3.    The market share of one participant exceeds 40%, or the combined market share of participants in the concentration exceeds 60% in the preceding year.

How is turnover calculated to determine whether a concentration is subject to the obligation of notification?

According to Article 16 of the Law, for the purposes of applying Article 14 of the Law, total revenue consists of the amount generated from the sale of goods produced in the ordinary course of business of the enterprise, as well as amount from services that the enterprise provides in its regular operations, earned in the business year preceding the concentration, after deducting trade rebates (discounts), value-added tax, and other public charges directly related to revenue.

If one of the participants is a related enterprise, when calculating its total revenue, all enterprises connected in such a way shall be treated as one enterprise. (Total revenue includes the revenue of the enterprise acquiring control and all its parent and subsidiary enterprises and their parent and subsidiary enterprises; the total revenue of the enterprise over which control is acquired also includes the revenue of all its subsidiaries and their subsidiaries). If control is acquired by a natural person, total revenue includes the total revenue of the enterprises owned by the natural person and all subsidiaries of those enterprises.

When calculating the total revenue of related enterprises, the amount generated from sales of goods and/or provision of services between them are not taken into account.

In cases where the concentration concerns the acquisition of part or parts of the assets of one or more enterprises, regardless of whether these parts are formed as separate legal entities, in calculating the revenue generated by the enterprise selling those assets, only the revenue from the assets subject to acquisition is taken into account.

For banks, savings houses, and other financial institutions, total revenue is determined based on the total income generated from regular operations in the business year preceding the concentration.

For insurance companies, total revenue is determined based on the value of gross premiums earned by participants in the business year preceding the concentration.

Who has the obligation to submit notification of a concentration?

The acquirer of control submits the notification of concentration. In the case of acquiring joint control, the acquirers of joint control submit a joint notification. If the enterprise was under sole control of one person, and after the transaction that person continues to hold joint control with another person or persons, then all persons who will exercise joint control (including the one who previously had sole control) must submit a joint notification.

When is notification of concentration submitted?

The participants in the concentration are obliged to submit a notification to the Commission before its implementation, after concluding the merger agreement, share acquisition agreement, the announcement of a public takeover bid, etc., or after adopting an act which clearly shows the intention for the concentration to occur as well as its structure.

The concentration must not be implemented before the Commission adopts a decision approving it (confirming that the concentration complies with the Law).

How is notification of concentration submitted?

The notification of concentration is submitted in accordance with the Regulation on the Form and Content of the Notification of Concentration and the necessary documentation submitted together with the notification (Official Gazette of the Republic of Macedonia No. 44/12), also available on the Commission’s website www.kzk.gov.mk.

What if the concentration is implemented without notification?

If the concentration is implemented before submitting the notification and/or before the Commission adopts a decision approving it, the acquirer(s) of control will be fined up to 10% of the value of their total annual revenue, calculated in accordance with Article 16 of the Law.

Although the Law on Protection of Competition has, since 2005, established the obligation for enterprises to notify concentrations before implementation (provided that the legal conditions are met), in the past year the Commission has handled an increased number of cases, initiated proceedings, and imposed fines for unreported concentrations in which the participants were domestic enterprises. To avoid such violations of the Law in the future, due to enterprises’ insufficient awareness of this legal obligation, the Commission considers it useful, through this short notice, to remind enterprises of their statutory duties.

For each unreported concentration that should have been notified to the Commission, the Commission will continue to conduct misdemeanor proceedings and impose fines, which under the Law are quite strict—up to 10% of the revenue of the enterprise that was obliged to submit the notification (if the enterprise is part of a group, the fine is up to 10% of the group’s revenue).

For all additional information, the Commission for Protection of Competition remains at your disposal.

Contact:

Tel.: 02 3298 666

Email: kzk@kzk.gov.mk

valentina.nikolova@kzk.gov.mk